Bill Would Ban Forced ADR

Alternative Dispute Resolution

Posted Aug 6, 2007, 01:42 pm CDT
By Debra Cassens Weiss

Two Democratic lawmakers have introduced legislation that would bar enforcement of some mandatory arbitration agreements.

The Arbitration Fairness Act would bar mandatory arbitration agreements involving employment, consumer rights, franchises or civil rights, according to a press release. Agreements to arbitrate in these areas could be made after a dispute arises, but not before. The law is designed to prevent consumers from being forced into arbitration.

One of the sponsors, Sen. Russ Feingold, D-Wis., says mandatory arbitration is being used “to deprive ordinary citizens in employment, consumer, and franchise disputes of their constitutional right to use the civil justice system.”

The other sponsor, U.S. Rep. Hank Johnson. D-Ga., told Financial Week that mandatory arbitration of investor disputes has become an “albatross” for investors.

Some mandatory arbitration critics say the need for legislation is more acute following the consolidation of the security industry’s arbitration forums, the Wall Street Journal (sub. req.) reports.

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Posted by Harold E. Moore - 10 months, 3 weeks, 6 days, 6 hours, 14 minutes ago

Be careful treading in the Labor and Employment area. Labor arbitration is well established in the Collective Brgaining Area. Employment arbitration is often the only afforadable option for an employee. Few lawyers will take Employment cases, thus leaving employees to pro bono or government agencies. Commercial arbitration needs to be addressed
Posted by Robert L. Arrington - 10 months, 3 weeks, 6 days, 6 hours, 13 minutes ago

While it is true that the NASD rules are not well suited to the arbitration of employment disputes, the current rules provide that is to be done only by post dispute agreement anyhow.

The sponsors of the bill are, alas, woefully ignorant of the rules adopted by the American Arbitration Association for the arbitration of employment disputes, and of the numerous judicial decisions that refuse to enforce arbitration agreements unless they provide for discovery, the availablity of complete relief, administration by a neutral provider, and all of the things the press release says are missing from arbitration plans.

I fear this legislation is being driven by plaintiffs’ lawyers who are miffed at not getting their claims before a jury.

It’s really too bad when the emperor not only wears no clothes, but is so openly and obscenely naked as to be embarrassing.
Posted by Jack M. Marden - 10 months, 3 weeks, 6 days, 5 hours, 36 minutes ago

There should be careful consideration regarding the costs of such legislation. The creditors will undoubtedly add these on or will deny credit. In most cases, arbitration is in the consumers best interest rather than litigation.
Posted by Tyler - 10 months, 3 weeks, 6 days, 5 hours, 5 minutes ago

I think this is great. Consumers especially are forced to sign away their rights through these mandatory ADR clauses because they don’t understand what they are doing. Even if they did, there are no other options available to them. Try to find a contract for sale of a home without a mandatory arbitration clause. Then when something goes wrong -like their house starts sinking- they have no real recourse.
Posted by Valerie Dunbar Jones - 10 months, 3 weeks, 6 days, 4 hours, 50 minutes ago

I strongly agree that consumers have no idea what they are signing away with arbitration clauses. Arbitration is expensive, unpredictable and permits odious results contrary to settled law. It incentivizes unconscionable behavior by powerful parties. A great lawyer I once knew succinctly described it as “a cramdown.” However, onerous choice of law/choice of forum clauses can have a similar effect. I’m hopeful that this legislation will succeed.
Posted by Bjorn Vijayanagar - 10 months, 3 weeks, 6 days, 4 hours, 47 minutes ago

Form what I understand of this proposed legislation it only eliminates the MANDATORY arbitration agreements; arbitration is still possible. If the employee or consumer still wishes to use arbitration, the option is there. This legislation would only ensure that a party to a dispute has the option to litigate if that is what they want. I agree that often times arbitration is the only affordable option for dispute resolution, but they shouldn’t be compelled to do so. It’s about time some of the consumer’s/employee’s rights were returned.
Posted by Zach Biesanz - 10 months, 3 weeks, 6 days, 4 hours, 16 minutes ago

This legislation seeks in part to address a major problem with arbitration: arbitrators are private firms with an economic incentive to decide favorably for their repeat customers. A large firm that uses arbitration frequently and gets a series of unfavorable results from a given arbitrator will choose a different arbitrator. An arbitrator knows this and wants to retain the large firm’s business. The arbitrator also knows that any given consumer in front of it may well be in the only arbitration of that consumer’s life.

I do not mean to say that all arbitration firms behave this way, only that the incentives are there and they are weighted heavily against the little guy.
Posted by Marty Olinick - 10 months, 3 weeks, 6 days, 4 hours, 12 minutes ago

This is a very important bill. Consumers and employees MUST be allowed to have equal bargaining positions with business. Forced anything is COERSION! More bills like this need to be enacted!!!!
I applaud Sen. Feingold!
Posted by Robert L. Arrington - 10 months, 3 weeks, 6 days, 3 hours, 26 minutes ago

I don’t think there is any evidence that neutrals picked from panels like the AAA favor “repeat customer”.

Nor is there any evidence that consumers fare any worse in arbitration than they do in small claims courts. In fact, because arbitration awards are not leviable, going through the process gives the consumer more time to negotiate a workout, and arrange for obtaining bankruptcy relief.
Posted by deborah s alexander - 10 months, 3 weeks, 6 days, 2 hours, 8 minutes ago

Commenter #9 appears to be speaking off the top of his head as his comments are untrue. I recommend searches on this before claiming a lack of evidence. The past few years are rife with longitudinal studies by non-profits. For several years before changing fields I followed the evolution of those studies as well as legal cases [where the’ “unconscionability” defense only recently began to make headway]. There is also a magnificent “open letter” out there recently [last 2 yrs or so] authored by a federal civil judge on contribution of mandatory arbitration to the death of the court system. For those interested - do your google/lexis and law review searches. Evidence supports statements made by commenters #4, #7 and #8.
Also note that arbitration clauses had become the provision of choice in which to insert anti-class-action clauses. NJ and some Third Circuit cases going up against the pro-arbitration slant are also of interest.
Posted by GLSlovacek - 10 months, 3 weeks, 5 days, 23 hours, 30 minutes ago

This legilation bears careful consdieration, since it may help curb abuses in the credit card industry where aggressivve collectors utilize “arbitration” in such a manner as to coerce the ordinary consumer into either an unconscionable settlement sor, due to how the arbitrations are handled, allowing the creditor an easier way to obtain an enforcrable judgment. Certain “national” collection attorneys have even given seminars to credit card companies, etc. on how to use arbitration as a tool of “hardball” collection practice!
Posted by Lu Ann Trevino - 10 months, 3 weeks, 5 days, 19 hours, 43 minutes ago

Forced arbitration also makes it nearly impossible to mount countrclaims against credit card companies which have violated the Fair Debt Collection Practices Act.
Posted by Sven Johanson - 10 months, 3 weeks, 5 days, 15 hours, 54 minutes ago

Good or bad, what good is ADR when one is forced to arbitrate in New York City or wherever and you live 500 miles away? My experience is that I cannot even obtain medical attention without signing an ADR. What can you do when every service provider insists on an ADR?. Try to open a brokerage account without signing an ADR.
Posted by Michael Sabin - 10 months, 3 weeks, 5 days, 9 hours, 45 minutes ago

The issue is strongly related to class litigation. Consumer protection, employment / civil rights issues are frequently litigated as class actions, and recently many boilerplate contracts include mandatory ADR clauses which also effectively prevent class litigation.
Posted by Richard Lopardo - 10 months, 3 weeks, 5 days, 2 hours, 30 minutes ago

NASD arbitration is criminal , in our case we had an award of zero in a case where the offender confessed and explained how he defrauded the victims we have no written decision so the arbitrators can take your life from you and not answer to anyone and they are protected from any review.(whats wrong with this picture?) equal protection under the law?
Posted by Robert P. Baker - 10 months, 3 weeks, 4 days, 3 hours, 20 minutes ago

There is no justification for mandatory ADR of class or representative actions. Many industries such as car leasing and sales, home loans, and sales etc. that exert a major impact over the lives of millions of Americans have resorted to mandatory ADR provisions in their contracts of adhesion. Even the consumers who understand all of the ramifications of these provisions have no choice as the clauses are universal. Therefore class litigation is apt in these situations. A consumer should certainly have the right to access the court system to remedy the problem and not be denied access to our judiciary in order to share in the fruits of our economy. So too, a large corporation which makes its profit in a given state should not be able to insulate itself from the judiciary of that state which is their to redress grievances broiught by its ciitizens. Could any consumer possibly require Mercedes or Chase to sign a mandatory ADR provision in order to sell it a product. The whole thing is grossly unfair and absurd.

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