House Passes Bill to Ban Consumer and Employment Pre-Dispute Arbitration Agreements

The U.S. House of Representatives approved the Forced Arbitration Injustice Repeal (FAIR) Act, 225-186, last Friday, September 20, 2019. The FAIR Act would amend the Federal Arbitration Act to state that “no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to an employment dispute, consumer dispute, or civil rights dispute.” In effect, this act bans adhesive arbitration agreements in many employment and consumer transactions.  The act would also invalidate similar current arbitration agreements for disputes that arise after the law goes into effect. 

The White House has issued a statement opposing the passage of the FAIR Act. Alan Kaplinsky writes "The Senate currently consists of 51 Republicans, 47 Democrats, and 2 independents who caucus with the Democrats.  Given that there are at least two Republican Senators who would likely support the FAIR Act (Senators Graham and Kennedy), there could be enough votes in the Senate to pass the FAIR Act.  For that reason,  it is comforting to know that President Trump would veto the FAIR Act.  Should he do so, it is very doubtful that there would be enough votes in the Senate to override the veto."

Opposition to the FAIR Act by Jennifer Braceras in The Hill. Support for it in HuffPo and Vox

Kentucky Revives Enforceability of Employment Arbitration

Kentucky's governor recently signed a bill enabling employers to require an employee or person seeking employment to execute an agreement for arbitration as a condition or precondition of employment. This legislation overrules the Kentucky Supreme Court decision in Northern Kentucky Area Development District v. Danielle Snyder which relied on a Kentucky statute forbidding any “employer [from requiring] as a condition or precondition of employment that any employee or person seeking employment waive, arbitrate, or otherwise diminish any existing or future claim, right, or benefit to which the employee or person seeking employment would otherwise be entitled.” KSA 336.700(2). The Kentucky Supreme Court ruled the Federal Arbitration Act (FAA) did not preempt the Kentucky statute because, instead of targeting arbitration specifically, the  KSA 336.700(2) “is a law that prohibits employers from firing or failing to hire on the condition that the employee or prospective employee waive all existing rights that employee would otherwise have against the employer.”

Uber Class-Waiver Arbitration Agreement Unenforceable

The First Circuit recently held that an arbitration clause contained in the online contract of the ride sharing app, Uber Technologies, Inc., is unenforceable under Massachusetts law. Cullinane v. Uber Technologies, Inc., No. 16-2023 (1st Cir. June 25, 2018).

In this case, plaintiffs, Uber riders, filed a class action in Massachusetts state court, challenging certain fees Uber charged as violations of state consumer protection laws. Uber removed the case to federal court and moved to compel arbitration based on an arbitration clause in Uber’s Terms of Service. In order to use the Uber app, the customers had to register for an Uber account and to agree to the company’s Terms of Service & Privacy Policy. The Terms of Service included an arbitration clause which required customers to resolve any disputes with Uber through binding arbitration and also contained a class action waiver. The district court granted Uber’s motion to compel arbitration and dismissed the lawsuit. The plaintiffs appealled to the First Circuit.

As Jeanne Kohler of Carlton Fields writes, the First Circuit found that Uber had not reasonably communicated its Terms of Service, including the mandatory arbitration clause, to its customers because the link to the Terms was not sufficiently conspicuous. The Court noted that Uber did not use a common method of conspicuously informing online app users of its terms by requiring users to click a box stating that they agree to the terms before continuing to the next screen. Instead, Uber displayed, on an enrollment screen, a rectangular box with the language “Terms of Service,” which customers were not required to click in order to review the contract. The Court noted that Uber’s terms were not conspicuously disclosed to its users because the link was not designed in a way that most users associate with hyperlinks and thus did not have the appearance of a hyperlink. Further, the hyperlink box was not sufficiently distinct from the rest of the screen, which had other links in bold with similarly sized font that were “more noticeable.”

Article Defending Some of the Supreme Court's Controversial Arbitration Decisions

A Short Defense of Southland, Casarotto, and Other Long-Controversial Arbitration Decisions, was just published in the Loyola Consumer Law Review.

The abstract follows:

Scalding criticism of Supreme Court arbitration decisions appeared in the 1990’s and is now widespread. Over twenty years ago, the Supreme Court held that pre-dispute arbitration clauses in adhesion contracts are generally enforceable. Thoughtful scholars then feared threats to consumers' and employees' rights, and today similarly warn that the Court’s recent arbitration decisions “will provide companies with free rein to commit fraud, torts, discrimination, and other harmful acts without fear of being sued.” Professors are not the only sources of strong language opposing the Court’s arbitration decisions. Under the heading “Forced Arbitration Destroys Individual Rights,” a 2015 federal court decision declares: “Today, forced arbitration bestrides the legal landscape like a colossus, effectively stamping out the individual’s statutory rights wherever inconvenient to the businesses which impose them. What is striking is that, other than the majority of the Supreme Court, whose questionable jurisprudence erected this legal monolith, no one thinks they got it right.”

From this alleged consensus of “No one thinks they got it right,” this Article dissents in significant part. While I have long opposed Supreme Court decisions on arbitration law’s separability doctrine and judicial review of arbitration awards, and would reduce adhesive arbitration agreements’ impact on class actions, I continue to sympathize with some of the Court’s long-controversial arbitration decisions.

I choose the word “sympathize” because I believe much of the criticism of the Court’s arbitration decisions does not sufficiently weigh the difficult position the Court was in when deciding those cases. The FAA was enacted in the 1920’s before the landmark federalism case of Erie v. Tompkins, the New Deal’s expansion of the Commerce Clause and thus of federal power to preempt state law, the growth of federal employment and consumer law in the 1960’s and 1970’s, and the ensuing explosion of class actions. Each of these enormous changes to our nation’s legal landscape conflicted with the premises underlying the FAA. While Congress could have amended the FAA to accommodate and be more consistent with these enormous changes, it did not. So, reconciling an old statute with a half century of law in tension with that statute’s premises became the Court’s task.

The Courts’ critics generally argue that the drafters and adopters of the FAA did not intend for it to: (1) preempt state law or (2) cover consumer and employment arbitration agreements. This Article responds to those arguments.

The Centrist Case for Enforcing Adhesive Arbitration Agreements

My latest article, The Centrist Case for Enforcing Adhesive Arbitration Agreements, was just published at 23 Harvard Negotiation Law Review 29 (2017)

The Abstract:

"The Politics of Arbitration Law and Centrist Proposals for Reform", 53 Harvard J. on Legislation 711 (2016), explained how issues surrounding consumer, and other adhesive,  arbitration agreements became divisive along predictable political lines (progressive vs. conservative) and proposed an intermediate (centrist) position to resolve those issues. However, "The Politics of Arbitration Law" did not argue the case for this centrist position. It left those arguments for two more articles: (1) "The Centrist Case against Current (Conservative) Arbitration Law", 68 Florida Law Review 1227 (2016), which argued against the overly-conservative parts of current arbitration law; and (2) this Article, which argues against progressive proposals to repeal, not only the overly-conservative parts of current arbitration law, but also the parts of current arbitration law that should be retained. While progressives would prohibit enforcement of individuals’ adhesive arbitration agreements, this Article argues that such agreements generally should be enforced.

Adhesive Arbitration Agreement with Consumer Already Litigating?

The U.S. Court of Appeals for the 11th Circuit refused to enforce an adhesive arbitration agreement between a bank and a consumer customer already suing that bank.

The Dasher v. RBC Bank (11th Cir. Feb. 13, 2018) plaintiffs alleged the bank had processed debit card transactions in such a way that it would increase overdraft charges. When the suit was brought, the bank had no arbitration agreement with plaintiffs, but during the case the bank sent customers an amended customer agreement that included an arbitration provision. By continuing to use their bank accounts, the customers arguably assented to the amended customer agreement. But the 11th Circuit said that was overridden by the fact that, as Liz Kramer puts it, "Through counsel, the named plaintiff [customer] was fighting the motion to arbitrate in the courts."

Kramer's Arbitration Nation blog goes on to say: "This is an important decision for many reasons.  First, it offers future courts an alternative argument to  “waiver” in situations like this one.... Second, it offers an important reminder to defendants that courts do not take kindly to repeated motions to compel arbitration based on evolving arbitration agreements." 

Nursing Home Arbitration Soon to End?

A new federal rule bars any nursing home that receives federal funding from requiring that its residents resolve any disputes in arbitration, instead of court. Many nursing homes receive Medicare and Medicaid funding so the rule will affect nursing homes with 1.5 million residents, according to the NY Times.

The rule is by the Department of Health & Human Services Centers for Medicare & Medicaid Services.

While nursing home arbitration agreements tend to raise all the issues raised by other adhesive agreements--plus more due to the importance of the contract compared to, say, a cellphone's--they are nevertheless agreements.

The Times unfortunately perpetuates its distorted coverage of arbitration by implying that arbitration necessarily "stymie[s] the families of nursing home residents from getting justice." One would need to know arbitrators' rulings in particular cases, and know the facts and law of the cases, to develop an informed view of the extent to which justice was done in those cases. Same with cases ruled on by judges and juries in court.  

Trump's Adhesive Arbitration Agreement

Trump campaign's contract with its volunteers includes an arbitration clause. Nicely summarized by former Temple University Law Professor, David Post.

Chamber of Commerce Pushes Back Against CFPB on Arbitration

Today's NY Times reports:

The U.S. Chamber of Commerce and others have said the [CFPB]’s findings do not support its proposed rules. “By ignoring its own data that clearly shows major deficiencies with court-based litigation and disregards the real-world advantages of arbitration, the C.F.P.B. has demonstrated its bias for trial lawyers over average Americans,” Mr. Webb, of the chamber’s Institute for Legal Reform, said.

Considerable sums of money are at stake. Late last month, the bond-rating firm Moody’s Investors Service warned that if enacted, the bureau’s proposed rule might leave companies more vulnerable to class actions that could “force changes to company practices that cut into revenues” or “draw regulatory scrutiny.”

Separately, the NY Times writes "the Justice Department issued a proposal to protect military service members from arbitration requirements. Earlier this month, Senator Al Franken, Democrat of Minnesota and a longtime opponent of arbitration, renewed his push for Congress to pass a bill he introduced this year that would prevent companies from requiring employees to go to arbitration."

The Politics of Arbitration Law and Centrist Proposals for Reform

The Politics of Arbitration Law and Centrist Proposals for Reform is a new paper of mine, just posted. I welcome comments and suggestions to ware@ku.edu

The abstract:

Arbitration law in the United States is far more controversial when applied to individuals than to businesses. While enforcement of arbitration agreements between businesses sometimes raises legal issues that divide courts, those issues tend to interest only scholars, lawyers, and other specialists in the field of arbitration. In contrast, enforcement of arbitration agreements between a business and an individual (such as a consumer or employee) raises legal issues that interest many members of Congress and various interest groups — all of whom have taken positions on significant proposals for law reform. The Consumer Financial Protection Bureau has extensively researched and reported on consumer arbitration agreements and is expected to issue a rule regulating, or even prohibiting, such agreements.

This Article both explains how issues surrounding consumer and other adhesive arbitration agreements became divisive along predictable political lines and introduces a framework to understand and compare various positions on them. This new framework arrays on a continuum five positions on the level of consent the law should require before enforcing an arbitration agreement against an individual. Progressives generally would require higher levels of consent than arbitration law currently requires, while conservatives generally defend current arbitration law’s low standards of consent.

This Article proposes an intermediate (or centrist) position. It joins progressives in rejecting conservative-supported anomalies that enforce adhesive arbitration agreements more broadly than other adhesion contracts on the three important topics: contract-law defenses, correcting legally-erroneous decisions, and class actions. Once these anomalies are fixed though, adhesive arbitration agreements should — contrary to progressives — be as generally enforceable as other adhesion contracts. In other words, this Article joins conservatives in defending general enforcement of adhesive arbitration agreements under contract law’s standards of consent. The Article briefly concludes with the language of a rule the CFPB could adopt to enact into law the reforms advocated in this Article

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.

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?

Former Labor Secretary Robert Reich Against Adhesive Arbitration

Former Labor Secretary Robert Reich is against arbitration clauses in adhesion contracts, which he calls "forced arbitration."  His video is sponsored by Alliance for Justice whose website provides no authority for its potentially-misleading assertions like "one study found that arbitrators rule for companies over consumers 94 percent of the time."

Agreeing to Arbitrate When you Download a Coupon

General Mills pushes arbitration in striking ways

Today's New York Times says “the maker of cereals like Cheerios and Chex … has quietly added language to its website to alert consumers that they give up their right to sue the company if they download coupons, ‘join’ it in online communities like Facebook, enter a company-sponsored sweepstakes or contest or interact with it in a variety of other ways.”  A fascinating case about assent to contract terms will arise when someone challenges a this website language: “Please note we also have new Legal Terms which require all disputes related to the purchase or use of any General Mills product or service to be resolved through binding arbitration.”

Mass Arbitration and Democratic Legitimacy

Mass Arbitration and Democratic Legitimacy 

This very well written article by UC Davis Law Professor David Horton reviews Margaret Jane Radin’s "dazzling new book, Boilerplate."

Horton's Essay argues that Radin’s democratic degradation thesis is particularly compelling in the context of consumer and employment arbitration.