Earlier this week, the Senate Judiciary Committee held a hearing on mandatory binding arbitration clauses, those fun bits of contractual language that take away your right to sue a company and force you into a resolution process that is heavily weighted in the company’s favor. The hearing was chaired by Senator Al Franken of Minnesota, who earlier this year introduced the proposed Arbitration Fairness Act, and so he obviously has a thing or two to say on the topic.
Sen. Franken has a history of demanding straightforward answers where none appear to be forthcoming, and this latest hearing was no exception.
While a number of expert witnesses spoke to the necessity of a bill that could give consumers back some of the rights stripped away by recent Supreme Court decisions in favor of binding arbitration, one witness near the end of the hearing, a professor from the University of Georgia School of Law, spoke against the legislation.
Starting at around the 1:55 mark in the above video, Franken cites the professor’s own previous statements that certain arbitrators can, by the decisions they make in resolving disputes, develop pro-business reputations with the goal of being used more frequently and earning more fees.
The Senator then asked the professor what he would say to a woman who was unable to have her gender-discrimination case heard in court because of a binding arbitration agreement.
The obviously nervous professor seemed to confound and anger the Senator with his response: “I think what I would say is that, if you believed you were wronged… There are various ways in which that relief can be obtained: through litigation –”
“Whoa whoa whoa, no,” Franken interrupted. “If you have a mandatory pre-dispute arbitration clause, no they can’t! In fact, that’s what this whole hearing is about! You just summed up the entire hearing — She cant’ go to court!”
“I understand, Senator,” replied the prof.
“So why did you say she could go to court?” Franken fired back. “Isn’t that what this is all about? Isn’t that what we’ve been doing for the last two and a half hours?”
The professor tried to explain that “there are ways under current law that that arbitration clause could be challenged, and we will attempt to see if that clause could be challenged.”
The Senator sought to clarify the question he had posed to the professor:
“I asked you what you what to say to a woman who brought a gender-discrimination suit to an arbitrator — she’s a doctor; no women had been promoted in that practice, and she felt it was gender discrimination — and she goes in and the [arbitrator] in his office has folder after folder with the name of the hospital [on them]. She felt like the guy didn’t hear her.
“I asked you what you’d say to her. First thing you said to her is, ‘Well, I’d go to court.’ You go to court? Well no, you can’t go to court. Then the next thing you said was ‘We’ll go to arbitration’… I told you she went to arbitration, and she felt that this guy, that the fix was in.
“And you yourself said in 2004 that arbitrators do this to get business. They develop reputations as friendly to industry. You said it! This is you; I read you back your own quote.
“What would you tell her? The fix is in, lady… The fix is in, and that’s not our system of justice.”
“I can understand that from her perspective, that result would be disappointing,” answered the professor. “What I’m saying… is that there are instances in which the civil litigation system leaves people disappointed too.”
He then attempted to downplay the impact of arbitration clauses in the credit card market by citing a chart in the recent Consumer Financial Protection Bureau study of forced arbitration that found these clauses in only 17% of credit card contracts.
“My question is… what percent do those 17% have of the market?” countered Franken.
“They have a large portion of the market,” responded the professor.
“What percent would you say?” asked the Senator, beginning to sound annoyed. “Don’t you think that’s relevant?”
After more hemming/hawing, it comes out that these 17% of contracts represent a whopping 94-98% of the credit card market.
Apparently tired of hearing from the professor, Franken chastised him for what he seemed to have regarded as disingenuous testimony.
“So you made the point in your testimony that we need to compare apples to apples and oranges to oranges, and then you say that the CFPB report proves the point you’ve been trying to make today, and use as your evidence that only 17% of credit card companies use these mandatory arbitration [clauses], without having the honesty, really, to say that — apples to apples, oranges to oranges — 94 to 98 percent of the market is that way…
“When you talk about empirical evidence, and sound empirical evidence, it has to be done by objective people.”
Again, you can watch the whole hearing above, or you can fast-forward to around 1:55 to see the section described here.