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Thursday, July 16, 2015

CFPB Timetable for Possibly Regulating Arbitration

Ballard Spahr's Bureau Director Richard Cordray said that the CFPB was “moving ahead” with rulemaking efforts that would address pre-dispute arbitration agreements in consumer financial products or services and “in due course” the CFPB would convene “a small business review panel as the first step” in the rulemaking process.

Sunday, July 12, 2015

Arbitration Fairness Act of 2015

The Arbitration Fairness Act would prohibit pre-dispute arbitration agreements in a range of consumer, employment and other contracts. It has been introduced in Congress over many years and again in 2015. Plaintiffs' lawyer Jere Beasley discusses.

Saturday, June 20, 2015

Uber Arbitration Agreement Held Unconscionable

Uber was sued by its drivers and sought to compel arbitration of that suit. A California federal court refused to enforce the delegation clause (which said questions concerning the enforce-ability of the arbitration clause would be resolved by the arbitrator) and then held the arbitration clause substantively unconscionable because: it eliminates plaintiffs’ right to bring certain claims in any forum; has an impermissible fee-shifting clause; and “permits Uber to litigate the claims most valuable to it in court . . . while requiring its drivers to arbitrate those claims. . .they are most likely to bring against Uber,”

Monday, April 6, 2015

Employment Arbitration Growing to Defeat Class Actions

The Wall Street Journal reports "The percentage of companies using arbitration clauses to preclude class-action claims soared to 43% last year from 16% in 2012, according to a survey of nearly 350 companies conducted by management-side law firm Carlton Fields Jorden Burt LLP." "Lawyers agree that a 2011 Supreme Court case, AT&T Mobility v. Concepcion, gave employers confidence that courts would uphold class-action waivers." The Wall St. Journal suggests the arbitral class waivers are lowering employers' litigation costs: "Class-action suits from workers cost employers $462.8 million in 2014, down from $598.9 million in 2011." The Journal article also suggests one issue in many of these cases is whether the employees are in fact employees are actually independent contractors. One lawyer for employees/contractors, Shannon Liss-Riordan, "is trying to wear down Arise by bringing claim after claim from different contractors. An arbitrator in Texas ruled in favor of one Arise worker in February, awarding her full damages and requiring Arise to pay her legal fees. Ms. Liss-Riordan hopes the company will decide facing dozens of individual cases is no longer
in its interests."

Thursday, March 19, 2015

NYTimes Accuses Arbitration of Screwing the Troops

As the Times puts it:

Sergeant Beard had no redress in court: His lawsuit against the auto lender was thrown out because of a clause in his contract that forced any dispute into mandatory arbitration, a private system for resolving complaints where the courtroom rules of evidence do not apply. In the cloistered legal universe of mandatory arbitration, the companies sometimes pick the arbiters, and the results, which cannot be appealed, are almost never made public.

Strange that the article says "arbiter" rather than "arbitrator." More substantively, what would be the plus of evidence rules? What stops a party from making his or her arbitration award public? What example does the article give of "companies sometimes pick the arbiters"?

Indian Tribes Aid Payday Lenders' Arbitration Escape From Bankruptcy Court

Several Indian tribes have formed tribal lending entities (TLE) that lend over the Internet to consumers nationwide, usually on terms that are unlawful under the internal laws of the states where the borrowers reside, according to a well-written piece by Hilary B. Miller in Business Law Today.

While states may be powerless to regulate TLEs, the Consumer Financial Protection Bureau has asserted publicly that it has authority to regulate tribal payday lending, according to Miller.

TLEs will certainly argue that they should not fall within the ambit of the Act. Specifically, TLEs will argue, inter alia, that because Congress did not expressly include tribes within the definition of "covered person," tribes should be excluded (possibly because their sovereignty should permit the tribes alone to determine whether and on what terms tribes and their "arms" may lend to others). Alternatively, they may argue a fortiori that tribes are "states" within the meaning of Section 1002(27) of the Act and thus are co-sovereigns with whom supervision is to be coordinated, rather than against whom the Act is to be applied.

The relevance of this to arbitration is that the CFPB has the power to regulate, or even ban, arbitration clauses in consumer financial services contracts.

The Fourth Circuit recently enforced an arbitration clause by a TLE, despite the borrower's bankruptcy.

The Loan Agreement provided, however, that it was "governed by the Indian Commerce Clause of the Constitution of the United States of America and the laws of the Cheyenne River Sioux Tribe" and that "no United States state or federal law applies to this Agreement."

The Loan Agreement also provided that any disputes relating to it were to be resolved by arbitration, "which shall be conducted by the Cheyenne River Sioux Tribal Nation by an authorized representative" (emphasis added), and it gave Moses the right to designate either the American Arbitration Association or JAMS "to administer the arbitration" in accordance with its rules and procedures "to the extent that those rules and procedures do not contradict either the law of the Cheyenne River Sioux Tribe or the express terms of this Agreement to arbitrate." ... Courts that have considered loan agreements similar to the one at issue here have found that the Cheyenne River Sioux Tribe has no laws or facilities for arbitration and that the arbitration procedure specified is a "sham from stem to stern." 

One judge wrote "I do not hesitate to observe the odiousness of CashCall's apparent practice of using tribal arbitration agreements to prey on financially distressed consumers, while shielding itself from state actions to enforce consumer protection laws."

Moses v. Cashcall  is a complex case because it involves tension between the Federal Arbitration Act and the Bankruptcy Code, as well as issues of tribal sovereignty. Courts often find that the FAA yields to bankruptcy when the claim in question is a "core" bankruptcy matter but the arbitration agreement is enforced with respect to non-core claims.

The complexity of this case Moses v. Cashcall, is suggested by the fact that no pair of the three circuit judges agreed with each other. One judge wanted to enforce the arbitration clause with respect to both claims, another judge wanted to enforce the arbitration clause with respect to neither claim, and the third judge wanted to enforce the arbitration clause with respect to the non-core claim but not the core claim, which ends up being the ruling of the court.

So the “who decides?” issues include both whether to send the core and non-core claim to different adjudicators and whether a claim that could be sent to functioning arbitration should not be sent to Cheyenne River Sioux arbitration because as Judge Niemeyer wrote, “the Cheyenne River Sioux Tribe does not authorize arbitration and consequently has no authorized arbitrators or consumer dispute rules.”


Tuesday, March 10, 2015

CFPB Study of Consumer Arbitration

Today, the Consumer Financial Protection Bureau released a study indicating that arbitration agreements restrict consumers’ relief for disputes with financial service providers by limiting class actions. The report found that, "in the consumer finance markets studied, very few consumers individually seek relief through arbitration or the federal courts, while millions of consumers are eligible for relief each year through class action settlements."

Other findings:

"in the credit card market, card issuers representing more than half of all credit card debt have arbitration clauses"

"Consumers filed roughly 600 arbitration cases and 1,200 individual federal lawsuits per year on average in the markets studied"

"it is rare for a company to try to force an individual lawsuit into arbitration but common for arbitration clauses to be invoked to block class actions"

"The CFPB found no statistically significant evidence that the companies that eliminated their arbitration clauses increased their prices or reduced access to credit relative to those that made no change in their use of arbitration clauses"

Saturday, March 7, 2015

New Regulations on Consumer Arbitration Agreements

The Consumer Financial Protection Bureau is expected to announce new policies on consumer arbitration this Tuesday March 11.

The Washington Post writes "The CFPB’s report, ordered under the Dodd-Frank Wall Street Reform and Consumer Protection Act, is widely expected to lead to new rules limiting how companies can use mandatory arbitration clauses, consumer advocates say. The timing of the release of the report was confirmed by people familiar with the matter who spoke on condition of anonymity because the research has not yet been made public."

Friday, February 13, 2015

Religious Arbitration

Arbitration's Counter-Narrative: The Religious Arbitration Paradigm by Pepperdine Law Professor Michael Helfand argues that religious arbitration "holds the hope of unlocking the transformative potential of arbitration, enabling parties to employ arbitration not simply as an expedient venue for resolving disputes, but as an alternative forum that can breathe life into mutually shared values." That is because in religious arbitration parties "select religious authorities to resolve disputes in accordance with religious law. And, as a result, these forms of arbitration are embraced not solely as a utilitarian mechanism to resolve a dispute, but because they enable parties to resolve a dispute in accordance with shared religious principles and values."

I agree and see this as an example, a particularly powerful example, of privatizing law, i.e., parties opting out of the law provided by government and using privately-created law. I have written that this privatizing potential of arbitration is widespread and believe it occurs outside just religious arbitration.

Wednesday, January 7, 2015

New Mexico Court Declines to Enforce Consumer Arbitration Clause

The New Mexico Court of Appeals decision is linked and praised by Paul Bland of Public Justice who points out that the arbitration clause carved-out (for litigation, rather than arbitration) claims likely to be brought by the business drafting the clause.

Saturday, November 22, 2014

Are Adhesive Arbitration Agreements are "Corporate America's Oily Trick"?

Salon Magazine says yes.  I take a more positive view of them.  Salon says:

These hidden forced arbitration clauses lurk behind many of the most brutal injustices facing consumers and workers.  For example, a court in Texas recently held that a woman who washed dishes at a fast food restaurant could not sue in court for damages from personal injuries she sustained on the job.  The problem had nothing to do with her argument that she’d been treated unfairly; the problem was that her employee handbook had contained a forced arbitration agreement that dictated that her claims were to be decided by a private arbitrator.

This sort of thing makes me wonder: (1) Could she bring her claim in arbitration or does "could not sue in court" mean for some reason "could not bring her claim at all"? (2) If she could bring her claim in arbitration, did she, and to what result?

Friday, November 21, 2014

15 State Attorney Generals Criticize "Mandatory" Consumer Arbitration


“Mandatory pre-dispute arbitration is procedurally unfair to consumers, and jeopardizes one of the fundamental rights of Americans; the right to be heard and seek judicial redress for our claims,” the Attorneys General wrote to Consumer Financial Protection Bureau Director Richard Cordray, himself a former Ohio Attorney General. “These contractual requirements are neither voluntary nor readily understandable for most consumers.  Often consumers do not recognize the significance of these provisions, if they are aware of them at all. “

The following states’ AGs signed onto the letter: California, Connecticut, Delaware, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts New Mexico, New York, Oregon, Rhode Island, Vermont and Washington. 
Any Republicans among them?
 

Tuesday, October 21, 2014

Precedent and Lawmaking in International Arbitration

International Arbitrators as Lawmakers by Rahim Moloo and Brian King.

The abstract:

Arbitration scholars and practitioners have, for many years, spilled much ink debating the role of arbitrators as lawmakers. The debate has tended to center on two questions involving the role of precedent. First, should arbitrators treat prior arbitral decisions as a form of precedent, and, if so, to what degree should they rely on them? Second, to what extent should arbitrators view themselves as precedent-makers: Is their role limited to deciding strictly the dispute that is before them, or should they take into account the potential impact of their decision on future awards? Coloring the debate on both questions have been concerns about the implications of the answers for the legitimacy of the international arbitration "regime" as a whole.

The debate has assumed more urgency in certain fields of international arbitration, such as investment treaty arbitration, where the recent availability of an abundance of public awards has spurred much interest within the international legal community. As discussed in this article, this development is unsurprising given that the publicity of awards is, in itself, one of the critical prerequisites to the possibility of viewing arbitrators as lawmakers.

While this Article will touch upon some of the issues highlighted above, its focus is different. We begin from the standpoint that regardless of whether, normatively speaking, one believes that arbitrators should perform a lawmaking function, the fact is that they do. Arbitrators regularly cite to prior awards, appear to consider themselves cabined by them to some extent, and demonstrate concern about the impact that the awards they render may have on the development of the law. Parties, for their part, pepper their pleadings with references to past awards where they are available, seeking to convince the panel to follow or distinguish what tribunals have done before. Given the reality on the ground, it seems appropriate to shift the inquiry from the whether to the when and the what. What kind of law do arbitrators make, and when do they do so? Is the process of arbitral lawmaking legitimate, and are all awards created equal as far as precedential value is concerned? These are the questions that this Article seeks to address.

Saturday, October 18, 2014

Oil & Gas Investment Arbitrations

The Environment, Energy and Natural Resources Center of the University of Houston Law Center invitation to a conference October 31, 2014:

The oil & gas industry is one of the key feeders of transnational disputes. As a sector, the oil & gas industry is responsible by far for the most significant element by volume and claim value in investment arbitrations. This traditional role of the oil & gas industry as the bellwether of international disputes will only continue to grow in light of growing resource needs. This potential is reflected in the significant increase in oil & gas investments over the last 10 years. This conference addresses the cutting edge issues faced by the industry in the current market and political conditions focusing on the next wave of significant disputes faced by the industry. Discussion of these developments will provide counsel with insight into the current positions of leading players in the field.



Wednesday, October 15, 2014

Inherent and Implied Powers of Arbitrators

Loyola Chicago Law Professor Margaret L. Moses writes in her abstract:     

The powers of arbitrators are generally based on the provisions of an arbitration clause agreed to by the parties to an arbitration, including any arbitral rules chosen to govern the arbitration. However, because these short clauses cannot set forth every kind of power that an arbitrator may need in the course of an arbitration, he may have to call on inherent or implied powers. This article sets forth a framework for understanding what is meant by inherent powers and implied powers of arbitrators. The distinction is important, but many commentators and courts use the terms interchangeably. Basically implied powers are those that can be implied or discerned from a textual provision, either in the clause adopted by the parties, or in the arbitral rules chosen by the parties, or in the applicable arbitration law. Inherent powers are those that an arbitrator may need to call on when novel situations occur for which there is no specific rule or authority. In all cases, but particularly with respect to inherent powers, an arbitrator must act with caution not to overstep proper authority and thereby endanger the enforcement of an arbitral award.