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

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.

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?

New Rules for Consumer Arbitration

The American Arbitration Association announces its new Consumer Arbitration Rules for cases filed on or after September 1, 2014.

Ninth Circuit Refuses to Enforce Agreement Narrowing Grounds for Vacating Arbitration Award

"In the Hall Street decision in 2008, SCOTUS held that parties could not contractually enlarge Section 10 of the Federal Arbitration Act by agreeing that a court could vacate the arbitration award for reasons not found in that section.  This week, the Ninth Circuit held that parties also cannot contractually restrict Section 10 by providing for 'binding, non-appealable arbitration,'” explains Liz Kramer in one of her characteristically good analyses.  "This decision is important in that it protects consumers and other parties without negotiating power from arbitration agreements that write out even the minimal appeal bases in Section 10."

The Ninth Circuit opinion in In re Wal-Mart Wage and Hour Employment Practices Litig., __ F.3d __, 2013 WL 6605350 (9th Cir. Dec. 17, 2013) is here.  CPR's commentary by Bette Shifman is here.

I wonder if parties can get around this ruling to some extent (and in effect narrow some of the grounds for vacatur) by agreeing to arbitrate pursuant to the law of a state with arbitration law that has narrower grounds for vacatur than FAA section 10.  See the California supreme court's Cable Connections case and the Texas supreme court's Nafta Traders case.

Consumer Arbitration Soon to be Regulated by Federal Agency?

Consumer Arbitration Soon to be Regulated by Federal Agency?

The Consumer Financial Protection Bureau released the preliminary results of its study on arbitration in consumer financial transactions such as checking accounts, credit cards and payday loans. Allison Frankel at Reuters says: 

 According to CFPB, exceedingly few consumers actually bring arbitration claims when they have a dispute with their credit card company, bank or payday lender. Tens of millions of consumers are subject to mandatory arbitration for disputes involving financial products and services, CFPB estimated, yet only 1,241 cases involving these products were filed with the American Arbitration Association between 2010 and 2012. Of those, according to CFPB chairman Richard Cordray, about 900 were filed by consumers. (The rest were initiated by banks and lenders.) CFPB offered some caveats, including the lack of data from JAMS Inc, which also hears consumer arbitrations, albeit far fewer than AAA. But the bureau isn’t exactly going out on a limb when it concludes that the evidence shows arbitration doesn’t provide any recovery to the overwhelming majority of consumers of financial products, especially those with small dollar claims. “Plainly, the number of arbitrations was low relative to the total populations using these products,” the report said, in a notable understatement.

A leading defender of such consumer arbitration, Alan Kaplinsky, says "The CFPB seems to be setting the stage for a rulemaking which will likely not be favorable to the industry".  For his updates see here.  A good analysis of the credit card aspect of this is here by Fred Williams. 

My views on the broader topic are here.
 

Social Networking Users Routinely Agree to Arbitrate

Suffolk University Law Professor  Michael Rustad writes here that users of social network sites "around the world are required to agree to predispute mandatory arbitration as a condition of joining social networking communities. Consumers who enter into “clickwrap” or “browsewrap” terms of service agreements waive their right to a jury trial, discovery, and appeal, without reasonable notice that they are waiving these important rights." 

For my views on the enforceability of these and other consumer arbitration clauses, see The Case for Enforcing Adhesive Arbitration Agreements

Consumer and Employment Arbitration Law in Comparative Perspective: The Importance of the Civil Jury

This article argues that much of what makes civil litigation in the United States materially different from civil litigation elsewhere in the world can plausibly be traced back to the jury. By contrast, enforcement of consumer and employment arbitration agreements affects only a few categories of cases and, within those categories, affects only those cases in which an enforceable arbitration agreement has been formed. The civil jury is a mountain; enforcement of consumer and employment arbitration agreements is a molehill. Those who value uniformity across nations and seek to bring U.S. law into the international mainstream should be far more troubled by the civil jury than by enforcement of consumer and employment arbitration agreements. Bringing the United States into the mainstream on the civil jury might even bring it into the mainstream on arbitration. It may not be a coincidence that the only nation with the civil jury is the only nation that enforces consumer and employment arbitration agreements.

Consumer Arbitration as Exceptional Consumer Law

Consumer Arbitration as Exceptional Consumer Law.  This article (part of a symposium on arbitration held by the McGeorge School of Law) defends the contractual approach to arbitration law.