Introductory Statement on S. 931
Mr. President, today I will introduce the Arbitration Fairness Act of 2007. Just as its name suggests, the Arbitration Fairness Act is designed to return fairness to the arbitration system. This bill is not an anti-arbitration bill. If…
Mr. President, today I will introduce the Arbitration Fairness Act of 2007. Just as its name suggests, the Arbitration Fairness Act is designed to return fairness to the arbitration system. This bill is not an anti-arbitration bill. If anything, it is pro- arbitration. I firmly believe that this bill will strengthen the arbitration system by returning arbitration to a more equitable design that reflects the intent of the original arbitration legislation, the Federal Arbitration Act.
President Calvin Coolidge signed the Federal Arbitration Act, FAA, into law on February 12, 1925. Congress passed the FAA to make arbitration an enforceable alternative to the civil courts. Even as early as the 1920's,
there were concerns about the efficiency of the civil court system and a desire to allow a speedier alternative. The intent of the FAA, as expressed in a 1923 hearing before a Subcommittee of the Senate Judiciary Committee, was ``to enable business men to settle their disputes expeditiously and economically.'' In a later hearing on the FAA, it was clarified that the legislation was not intended to apply to the employment contracts of those businesses. This distinction is important because it illustrates that, while arbitration was something that the FAA's original sponsors wanted to promote, they were also careful to make clear that they didn't intend for arbitration to become a weapon to be wielded by the powerful against those with less financial and negotiating power.
Since the FAA's enactment, the use of arbitration has grown exponentially. Arbitration certainly has advantages. It can be a fair and efficient way to settle disputes. I strongly support voluntary, alternative dispute resolution methods, and I believe we ought to encourage their use. But I also believe that arbitration is a fair way to settle disputes between consumers and lenders only when it is entered into knowingly and voluntarily by both parties to the dispute after the dispute has arisen. Otherwise arbitration can be used as a weapon by the stronger party against the weaker party.
One of the most fundamental principles of our justice system is the constitutional right to take a dispute to court. Indeed, all Americans have the right in civil and criminal cases to a trial by jury. The right to a jury trial in civil cases in Federal court is contained in the Seventh Amendment to the Constitution. Many States provide a similar right to a jury trial in civil matters filed in state court.
I have been concerned for many years that mandatory arbitration clauses are slowly eroding the legal protections that should be available to all Americans. A large and growing number of corporations now require millions of consumers and employees to sign contracts that include mandatory arbitration clauses. Most of these individuals have little or no meaningful opportunity to negotiate the terms of their contracts and so find themselves having to choose either to accept a mandatory arbitration clause or to forgo securing employment or needed goods and services. Incredibly, mandatory arbitration clauses have been used to prevent individuals from trying to vindicate their civil rights under statutes specifically passed by Congress to protect them.
There is a range of ways in which mandatory arbitration can be particularly hostile to individuals attempting to assert their rights. For example, the administrative fees--both to gain access to the arbitration forum and to pay for the ongoing services of the arbitrator or arbitrators--can be so high as to act as a de facto bar for many individuals who have a claim that requires resolution. In addition, arbitration generally lacks discovery proceedings and other civil due process protections.
Furthermore, there is no meaningful judicial review of arbitrators' decisions. Under mandatory, binding arbitration, even if a party believes that the arbitrator did not consider all the facts or follow the law, the party cannot file a suit in court. The only basis for challenging a binding arbitration decision is fairly narrow: if there is reason to believe that the arbitrator committed actual fraud, or was biased, corrupt, or guilty of misconduct, or exceeded his or her powers. Because mandatory, binding arbitration is so conclusive, it is a credible means of dispute resolution only when all parties understand the full ramifications of agreeing to it.
Unfortunately, in a variety of contexts--employment agreements, credit card agreements, HMO contracts, securities broker contracts, and other consumer and franchise agreements--mandatory arbitration is fast becoming the rule, rather than the exception. The practice of forcing employees to use arbitration has been on the rise since the Supreme Court's Circuit City decision in 2001. Unless Congress acts, the protections it has provided through law for American workers, investors, and consumers, will slowly become irrelevant.
The Arbitration Fairness Act of 2009, which I am happy to say has already been introduced in the House by Rep. Hank Johnson, reinstates the FAA's original intent by requiring that agreements to arbitrate employment, consumer, franchise, or civil rights disputes be made after the dispute has arisen. The bill does not prohibit arbitration. What it does do is prevent a party with greater bargaining power from forcing individuals into arbitration through a contractual provision. It will ensure that citizens once again have a true choice between arbitration and the traditional civil court system.
I should note that the bill includes two notable changes from versions that have been introduced in previous Congresses. First, the bill creates a new Chapter 4 of Title 9, separating the new provisions concerning arbitration of consumer, employment, franchise, and civil rights disputes from the Federal Arbitration Act. This should give some comfort to those who are concerned that the bill might have an unintended effect on business to business arbitration.
Second, the bill reverses the Supreme Court's April 2009 decision in 14 Park Plaza v. Pyett. In that case, the Court held that arbitration provisions included in collective bargaining agreements can have the effect of preventing employees from pursuing employment discrimination claims in court. Unions have never believed this was the case. The decision once again expands the reach of arbitration, making less effective statutes specifically intended by Congress to protect workers. Therefore, the bill provides that it generally does not apply to arbitration provisions contained in collective bargaining agreements, except that such provisions may not waive employees' rights to take constitutional or statutory claims to court.
In our system of Government, Congress and state legislatures pass laws and the courts are available to citizens to make sure those laws are enforced. But the rule of law means little if the only forum available to those who believe they have been wronged is an alternative, unaccountable system where the law passed by the legislature does not necessarily apply. This legislation both protects Americans from exploitation and strengthens a valuable alternative method of dispute resolution. These are both worthy ends, and I hope that my colleagues in the Senate will join me in working to pass this important bill.
Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.