New England Biz Law Update
Advocates and opponents of a bill seeking to ban mandatory binding arbitration clauses in most contracts – bolstered by recent studies they say prove their positions – are amplifying their calls on Congress to act in favor or against the stalled measure.
The U.S. Chamber of Commerce, boosted by a recent poll it says demonstrates Americans do not want pre-dispute arbitration agreements to be nullified, are urging lawmakers to reject the “Arbitration Fairness Act” (S. 1782 and H.R. 3010), filed in the House and Senate last summer.
But lawmakers who sponsored the bicameral bill – Sen. Russ Feingold, D-Wis. and Rep. Hank Johnson, D-Ga. – say the legislation is needed because of the increasing use of “fine print” mandatory arbitration agreements they believe take enforcement options away from many consumers, employees and others.
Such agreements are in employment agreements, as well as in a host of consumer contracts such as cell phone service agreements and credit card contracts. Lawmakers say consumers often don’t realize they are signing away their rights to sue in court.
But the Chamber said its study shows consumers favor arbitration.
“Arbitration is a process that for more than 80 years has helped millions of Americans settle disputes fairly, quickly, and inexpensively without having to file a lawsuit or navigate the court system,” said U.S. Chamber Institute for Legal Reform President Lisa A. Rickard. “The sweeping and radical legislation on Capitol Hill would change all of that.”
The study details
The study was conducted in December 2007 for the Chamber’s Institute for Legal Reform by Bill McInturff of Public Opinion Strategies and Joel Benenson of Benenson Strategy Group.
It shows that 71 percent of likely voters in the 2008 election oppose the “Arbitration Fairness Act.” Further, the study found that 82 percent would prefer arbitration as a means of settling a dispute over going to court.
Rickard said the findings are important, particularly because post-dispute arbitration isn’t generally a viable option since large companies have the resources to battle disputes in court and are less likely to agree to arbitrate once a dispute arises.
“Let’s face it, once you are in a disagreement either you or the other party believe they are in the right and will not agree to arbitrate,” Rickard said.
McInturff, a pollster of the study, said the terms used to explain the legislation to the individuals who were polled were carefully chosen to create a “reasonably neutral description.” The study questioned people across party lines.
The study found that the respondents were not concerned that the use of the mandatory arbitration process would be unfair.
“The notion of arbitration starts off on very solid footing with the American public,” McInturff said. “It does give a yellow to red stop sign for Congress to look at some of this data and take into consideration the public’s satisfaction with the current process.”
Other data
Proponents of the measure to restrict binding arbitration agreements point to other data, including a recent study by Michael LeRoy, a professor at the University of Illinois College of Law.
The LeRoy study shows employment arbitration awards in favor of employees are reversed at a higher rate than awards that come down in favor of employers.
American Association for Justice CEO Jon Haber blasted the Chamber’s study and call to Congress as a way to protect businesses interests at the cost of undermining the civil justice rights of consumers.
“The U.S. Chamber is protecting corporations that bury mandatory arbitration clauses in fine print while destroying the civil justice system,” Haber said. “U.S. Chamber and its corporate financers are lobbying to keep abusive, binding mandatory arbitration clauses as the status quo. Just ask Jamie Leigh Jones what she thinks of the status quo.”
Jones, who previously worked for a former subsidiary of Halliburton, recently testified before Congress that the company required her to arbitrate under a mandatory arbitration agreement after she was drugged and raped by a fellow employee while working in Iraq.
“These are the types of corporations [the] U.S. Chamber is trying to protect,” Haber said.
So far both the House and Senate versions of the bills – which are identical – have not been acted upon since being introduced in August 2007.
But other critics of the bill say that it has stalled because lawmakers have taken a good look at the measure and they may not like that they see.
“Since the proposed Act was introduced, policymakers are starting to learn about the benefits of arbitration,” said Mark Fellows, Legal Counsel and Manager of Legal Research and Education at Forthright on behalf of the National Arbitration Forum. “While arbitration is being threatened, court systems that are chronically short of funding are being pinched even more. Analysis of court budgets shows that private arbitration saves taxpayers, on average, thousands of dollars for each civil dispute that is resolved outside of court.”
