The Arbitration Fairness Act Is In The House

The Arbitration Fairness Act, which will ban binding mandatory arbitration clauses from consumer, employment, and franchise contracts, was reintroduced in the House yesterday.

Rep. Hank Johnson, the original sponsor of the bill, was joined by 36 other House members and will likely get more support in the coming months.

Arbitration is a form of alternative dispute resolution where, instead of going to court, parties agree to make their case to an arbitrator, using fewer rules and a simpler procedure than typically found in litigation. The arbitrator’s decision is usually binding on the parties.

Binding mandatory arbitration is the same as the above, except consumers are required to use arbitration (and forbidden from going to court) as part of doing business with the company. Most consumer contracts for credit cards, cars, homes, utilities, insurance, and even employment have clauses requiring binding arbitration, and preventing a consumer from suing if the company hurts him or her. The arbitrators are usually biased towards the company, which picks which arbitrator to use-and often pays the arbitrator’s fees (unlike courts, which are funded by taxpayers).

Why do we support the Arbitration Fairness Act? In short, because mandatory binding arbitration is patently unfair to consumers. It is a joke of justice; a fake tribunal where injured consumers will almost always lose to corporations at the hands of a biased arbitrator.

For more information, check out our posts on arbitration, or our recent choose your own adventure through the arbitration process.

(Photos: spi516, navets, and superbomba)

Comments

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  1. starrion says:

    Woohoo

    Time to dial up the CongressCritters!

  2. Ibanez720 says:

    Is it just me or does a binding mandatory arbitration create a direct violation of constitutional law? I.E. you will not be able to have a fair trial.

    • Torgonius wants an edit button says:

      @Ibanez720:
      It’s not a violation of your rights if you agree, beforehand, to give them up, which is the meat of the issue with arbitration clauses. If you want the house, car, shiny object, etc., you need to agree to a contract, almost always the one supplied by the vendor, and almost always slanted in their favor.

      • Ibanez720 says:

        @torgonius: Do you or anyone know if binding mandatory arbitrations have been taking before a high court? I am curious as to the outcome.

      • headcase says:

        @torgonius: (Apologies in advance for stating the obvious) The problem being that in industries with only a few big players, all of them have arbitration clauses, so you’re screwed.

    • SergioDingo says:

      @Ibanez720:

      You’re thinking about the 7th amendment which states “In suits at common law, where the value in controversy shall exceed 20 dollars, the right of trial by jury shal be preserved, and no fact tried by a jury, shall be otherwise reexamined in any court of the united states, then according to the rules of common law.

      I’m not a constitutional scholar, but contract law is different from common law, so the constitution probably does not apply to arbitration.

  3. portus says:

    Ibanez720: I think you sign your rights [to a trial, etc] away when you agree to their terms [including mandatory binding arbitration].

  4. MalcoveMagnesia says:

    Don’t expect an easy passage: corporate lobbyists are certain to blitz the House Office Building on this issue.

  5. Closed captioning provided by Homerjay says:

    Arbitrizzle in the hizzle!

  6. TheDustball says:

    I’m not one to point out typos, but I noticed some mistakes in the title.

    I believe it should read:
    The Arbitration Fairness Act Is In Da House!!! Holla!!!

  7. Snarkysnake says:

    I am calling out my congressman (Nathan Deal-R-Georgia) right here: Vote for this bill or I will vote for someone else in your next primary and general election. Don’t try to jive me and tell me that this bill will increase my taxes or throw grandma on the street. Vote for this bill. If arbitration is so damn fair,let it be optional,not mandatory. I will watch you and your vote on this and will not be snookered by attempts to “make the bill better” and kill it.Vote for this bill.

    (BTW I will call and write his office on Monday with this same message)

    • HeartBurnKid, creepy morbid freak says:

      @Snarkysnake: I will do the same with my representative (Kevin McCarthy-R-California). This bill MUST pass!

    • Anonymous says:

      Binding arbitration is optional in the sense that you have a choice between goods and services you purchase. If you don’t like it, choose a competitor’s product that doesn’t include it as part of the buyer-seller arrangement.

      • T Axel Jones says:

        @OgdenDexamenus: Please direct us to a listing of companies which do not include it as part of their agreement. I would gladly utilize their product/services rather than the alternative.

  8. everfade says:

    Being the pessimist that I am, I highly doubt it will pass because that would be good for consumers. And we can’t have that.

  9. NotATool says:

    Waiting for the FUD from the National Association of Arbiters (or whatever the hell they call themselves):

    “Your taxes will go through the roof as the court system becomes clogged with cases that used to go to abritration.”

    You heard it here first.

    • TechnoDestructo says:

      @NotATool:

      Either that or cases will die down as companies get kicked in the junk until they stop doing things that get them taken to arbitration.

  10. lakecountrydave says:

    I just emailed both of my Senators and my Congressman encouraging them to vote in favor of this legislation. Of coarse in the case of Congressman Sensenbrenner it was a complete waste of time.

  11. Razorgirl says:

    Hey, I’m fine with contracts requiring people to attempt a resolution through arbitration before a case will be heard in court. I just disagree with mandatory ‘binding arbitration’. Keep an arbitration clause as a way to try to reduce the number of cases entering the court system, but by all means leave the option to pursue other means of satisfaction when arbitration doesn’t satisfy the dispute.

  12. georgi55 says:

    Will this invalidate already signed arbitrations especially with employers?

  13. t-r0y says:

    They’re (Representatives) finally doing something constructive?

  14. Hotscot says:

    The clause should also state that any arbitration service must be independent. I would argue that currently because it’s clearly biased, that true arbitration does not exist.

  15. tankertodd says:

    So in court do I need to hire a lawyer? If so then doesn’t this hurt me more? I suspect trial lawyers are pushing this one.

  16. valor77 says:

    There is a down side. This bill will no doubt increase lawsuits (frivolous and otherwise), which could skyrocket the price of goods. Too many times consumers want all the advantages, even when it ends up hurting them in the end. If you don’t want arbitration, choose a different product.

  17. darkryd says:

    Here’s for hoping.

  18. Anonymous says:

    Ibanez – It was actually the supreme court in the 1980s that opened up arbitration to consumer and employment contracts. Prior to that they were restricted to business to business contracts.

    Also it seems that courts are upholding arbitration results in most of the cases. Seems a law like this may be the only way to turn the tide…

  19. Anonymous says:

    Your readers will find this case of mandatory arbitration in a franchise instructive.

    After the 6th Circuit ruled that the matter should not have gone to Arbitration, the AAA would not repay the fees paid to the arbitrator who made the wrong call on jurisdiction.

    http://www.bluemaumau.org/6978/aaa_rejects_coffee_beanery_franchisees_request_arbitration_expenses#comment-77357