Arbitration

  • April 3, 2017
    Guest Post

    by Alexandra D. Lahav, Professor of Law at the University of Connecticut and Author of In Praise of Litigation

    The Senate Judiciary Committee is considering a bill – passed along partisan lines in the House – that threatens the way Americans have enforced the law for seventy five years. The bill is called the Fairness in Class Action Litigation Act (FICALA) and its results are likely to strike a major blow against class actions and aggregate litigation. 

    The recent hearings on Supreme Court nominee Neil Gorsuch highlighted the threat that current lawmakers pose to the administrative state – the apparatus that has, since the New Deal, allowed the executive to pass regulations that support our voting rights, clean air and water, workplace safety and more. But in the discussions one thing seems to have been missing: a major way that regulations are enforced in the United States is by individuals and groups bringing lawsuits. Congress has enabled these lawsuits by creating private rights of action in areas as diverse as employment discrimination and internet privacy.

    For the last thirty years, the Supreme Court has been eroding these regulations by creating barriers to suit: forced arbitration has been repeatedly upheld (even when it goes against state contract law), requirements for bringing a claim have increased and collective actions are harder to certify. If most of the enforcement of the law is left up to us, through the courts, the process of shutting the courthouse door also means that regulations will not be enforced. Now Congress is taking its turn to shut the courthouse door.

  • March 23, 2017
    Guest Post

    by Imre S. Szalai, Judge John D. Wessel Distinguished Professor of Social Justice, Loyola University New Orleans College of Law

    During Judge Neil M. Gorsuch’s Senate confirmation hearings, Sen. Al Franken (D-MN) asked Judge Gorsuch about his reaction to the eye-opening New York Times series on forced arbitration. (The Times series – Beware the Fine Print, can be found here, here, and here.)  Judge Gorsuch replied, “[The series] made me think about a little bit of history.”  Unfortunately, Judge Gorsuch’s understanding of history is flawed. 

    Gorsuch described the main federal statute governing arbitration, the Federal Arbitration Act, as follows: “What it [the statute] did was to favor arbitration. Congress expressed a preference that people should arbitrate their disputes. It made a judgment, policy judgment, in favor of arbitration because it’s quicker, cheaper, and easier for people.”

    Judge Gorsuch’s statements demonstrate a lack of understanding of the history of arbitration law in America. When enacting the Federal Arbitration Act during the 1920s, Congress never expressed a preference in favor of arbitration. I challenge Judge Gorsuch to explain the basis for his perception of such a Congressional preference. He will not find such a Congressional preference in the history or text of the statute. Congress never expressed a preference for people to arbitrate their disputes instead of litigating their disputes in court; Congress never expressed a preference in favor of arbitration. Instead of expressing a preference in favor of arbitration, Congress simply recognized in the Federal Arbitration Act that if merchants willingly agreed to arbitrate, a court would recognize and enforce their mutual promise to arbitrate. In other words, the Federal Arbitration Act reflects a policy-neutral view regarding arbitration. If parties agree to arbitrate, they will arbitrate. But if parties choose to litigate, they will litigate.  In enacting the FAA, Congress made no value judgment in favor of arbitration over litigation, or that one system of dispute resolution is superior to another system. In enacting the Federal Arbitration Act, Congress was simply recognizing the right and freedom of parties to choose for themselves whatever system of dispute resolution they desired. 

  • November 14, 2016
    Guest Post

    by Arthur Bryant, Chairman, Public Justice

    While everyone waits to see how the election changes the Supreme Court, one thing is clear: workers’ rights hang in the balance. The Court is soon going to have to decide whether employers can use mandatory arbitration clauses in employment contracts to ban—and eliminate—workers’ collective and class actions.

    Four cases now up for review raise that question. All involve employees claiming they were cheated out of overtime pay—and employers arguing they cannot be sued because mandatory arbitration clauses in their employment agreements prohibit collective and class actions.

    Two federal circuits held employers can ban those actions. Two ruled they cannot. If the Court does not review any of these decisions, more are on the way. Suits raising the question are pending in five more federal courts of appeal.

    The four cases now before the Court show the arguments and the issues.

    In National Labor Relations Board v. Murphy Oil USA, Inc., the NLRB says the Fifth Circuit made an enormous mistake when it held the employer could use its mandatory arbitration clause to bar all workers at over 1,000 stores in 21 states from pursuing collective actions against it under the Fair Labor Standards Act and class actions in federal and state court. The clause says each worker has to proceed individually and alone.

    The NLRB insists that violates section 7 of the National Labor Relations Act, which gives employees “the right to…engage in…concerted activities for the purpose of…mutual aid and protection.” The Supreme Court previously said these “concerted activities” include actions pursued in “administrative and judicial forums.” Because the NLRB is charged with enforcing America’s labor laws, its interpretation is entitled to substantial deference. That interpretation stresses the importance of what is at stake: “the right to engage in collective action – including collective legal action – is the core substantive statutory right protected by the NLRA and the foundation on which the Act and Federal labor policy rest.”

  • November 10, 2016
    Guest Post

    by Karla Gilbride, Cartwright-Baron Staff Attorney at Public Justice

    In the aftermath of Tuesday’s surprising election results, several key themes seem to be emerging: a large segment of the population is frustrated with the status quo and is demanding change and people from across the political spectrum are concerned about the divisiveness of the campaign and are looking for ways to come together. In the spirit of moving forward on a bipartisan basis, I suggest that the time is right for Congress to take action to curtail forced arbitration provisions.

    Forced arbitration provisions are those “agreements” that we all make when we purchase products or download software or apps, usually found in the small print on product packaging or in the Terms of Service we accept during the download process. These provisions deprive consumers of the right to sue a corporation in court if a dispute later arises about the product or service and they usually also ban consumers from joining together with similarly affected people to bring class actions.

    The vast majority of consumers across the political spectrum find these provisions unfair. In a 2015 study, the Pew Charitable Trust found that 95 percent of consumers surveyed wanted to be able to pursue a dispute against their bank in court and nearly 90 percent of consumers (including 93 percent of Republicans) wanted the right to participate in a class action.

    And based on what they have had to say in their recent opinions, some federal judges find forced arbitration unfair too. But just like the consumers who accept these ripoff clauses as a condition of obtaining basic goods and services, the judges do not feel they have any choice but to enforce them—that is, until Congress steps in and changes the law.

  • October 19, 2016

    by Caroline Fredrickson

    From First Lady Michelle Obama’s speech in New Hampshire to accusations by Fox News’ Gretchen Carlson against Roger Ailes, sexual harassment and sexual assault have been dominating the headlines for months. 

    Also in the news has been the topic of forced arbitration agreements that limit victims’ ability to have their day in court. Very much a part of the Wells Fargo scandal has been the bank’s argument that it shouldn't have to face its clients at trial.

    These two stories actually have more in common than is often mentioned. First, of course, Fox tried to shut down Carlson’s suit by saying her contract’s arbitration clause prevented her from using that public forum. Few realize how common it is for women and men who allege harassment at work to be shunted into a secretive process that often prioritizes the interests of the employer.

    As I described in my book, Under the Bus: How Working Women Are Being Run Over, while many Americans may think that they can always bring a lawsuit if their employer violates the law, for almost a third of nonunion workers (or approximately 36 million people) that is no longer true. Using a new weapon to undermine workers’ rights, more and more companies are forcing prospective and current employees to sign away their right to sue in order to get hired or to avoid being fired and to agree that all disputes will be resolved in private arbitration, rather than in normal courts.