Thread: Arbitration "Fairness" Act.

Ok, I was just reading about the Arbitration Fairness Act, which is currently pending in Congress, and I've gotta admit, I've got a few beefs with what the bill purports to do.

Here is the text of the bill:

Bill Text - 111th Congress (2009-2010) - THOMAS (Library of Congress)

Here are some of the beefs that I have with this bill.

(1) The Federal Arbitration Act (now enacted as chapter 1 of title 9 of the United States Code) was intended to apply to disputes between commercial entities of generally similar sophistication and bargaining power.

How do you suppose? Section 2 says that an arbitration agreement is valid, irrevocable, and enforceable, save for such grounds as exist at law or equity for the revocation of any contract.

Contracts are not routinely rescinded when the parties have unequal bargaining power. Heck, if that happened, commerce would screech to a halt.

They must often give up their rights as a condition of having a job, getting necessary medical care, buying a car, opening a bank account, getting a credit card, and the like.

Ok, I can sort of understand necessities like jobs, medical care, a car, and a bank account... but credit cards?

The fact that credit cards are a purely 100% luxury item should in and of itself give consumers the "bargaining power" they need (if they do in fact need some) for an arbitration clause to be enforceable.

Often times, they are not even aware that they have given up their rights.

That's their fault for not reading the contract. All people are supposed to read the contracts before they sign them, and if you don't read it, that's your fault.

Findings #4 through #7 are actually valid concerns. However, this bill seems quite over broad and under inclusive. It wipes out certain types of contractual relationship, across the board, rather than deciding them on a case by case basis, and not including other types of contracts where arbitration might potentially be abused.

Here are my suggestions on how to make arbitration more "fair."

1. According to a statistic I've read, 93.7% of arbitrations are finished without the other party even responding. Ok, fair enough. Pass an amendment to Section 4 of the Federal Arbitration Act.

Section 4 deals with orders to compel arbitration. Instead of allowing a party to simply proceed with arbitration without the other party involved, pass an amendment to Section 4 that says that "Arbitration may not proceed unless all parties to the arbitration either participate, or a court order to compel their participation made pursuant to this section is violated. Any arbitration that takes place, in whole or in part, in violation of this subsection, the award may be vacated on the grounds that the arbitrator failed to postpone the hearing upon sufficient cause shown."

Problem solved. Next issue.

Finding #5 of this bill says that there is no reasonable judicial review of arbitrator's decisions. Well, instead of banning pre-dispute arbitration agreements in certain types of contracts, without regard to each case in its own right, how about creating additional methods of judicial review?

Pass an amendment to 9 U.S.C. § 10(a) which adds the following to the list of grounds to vacate the arbitration award:

(5) Where the award is completely irrational or demonstrates a manifest disregard for the law or facts pertinent to the case.

(6) Where the award violates a strong public policy.

(7) Any other grounds upon which parties contractually agree that an award may be vacated.

The seventh grounds for vacation is made in response to Hall Street Associates, LLC v. Mattel, Inc.

In response to Finding #4 of that bill, how about amending 9 U.S.C. § 10(a)(2) so that "repeat business" can constitute circumstantial evidence of arbitrator bias? How about that, hmmmmm?

The bottom line is this: Arbitration, when used properly, is a very good alternative to litigation, in much the same way as small claims court, when applicable, is a generally favored alternative to regular courts. Just because arbitration has been misused does not mean that we should ban arbitration; we need only ban the misuse of arbitration.

I think it's fantastic that they're trying to change this. Mandatory arbitration clauses are ridiculous, and they should be gotten rid of.

Originally Posted by molten_dragon

I think it's fantastic that they're trying to change this. Mandatory arbitration clauses are ridiculous, and they should be gotten rid of.

Why are they ridiculous?

If you don't want to agree to arbitration, don't sign the contract. Plain and simple.

How do you suppose? Section 2 says that an arbitration agreement is valid, irrevocable, and enforceable, save for such grounds as exist at law or equity for the revocation of any contract.

Contracts are not routinely rescinded when the parties have unequal bargaining power. Heck, if that happened, commerce would screech to a halt.

contracts are often rescinded - it happens all the time - and because of unequal bargaining power the lesser person or entity doesn't often get fair treatment. . . the most common practice is for things to settle via negotiation - not litigation - ergo: the person with less negotiation umph gets the underhand. However - mandatory arbitration just sidesteps even that much and pushes everything straight to the companies preferred arbitration company or system - which tend to favor the company and this results in unjustly settled disputes that, if abled to go to court, might fair the other way.

Ok, I can sort of understand necessities like jobs, medical care, a car, and a bank account... but credit cards?

The fact that credit cards are a purely 100% luxury item should in and of itself give consumers the "bargaining power" they need (if they do in fact need some) for an arbitration clause to be enforceable.

Credit cards can often be required and necessary if expenses are to be made out of pocket for the business - to be reimbursed later.

My husband's military: has a special military credit card through a traditoinal credit card company and he can charge *to* it freely - and the military, at some point, will reimburse him by paying off the balance. This often raises issues - all too often when he has to go out of town/country the cost of traveling expenses comes into disputs. OR (usually) they fail to reimburse in a timely fashion which can negatively affect my husband's credit-rating.

And - when they fail to reimburse in full or on time - his card might be shut off which, since he travels frequently per military orders - can create a huge hassle if they order him off to Canada to find someone and they haven't footed the bill from when they sent him to Haiti.

That's their fault for not reading the contract. All people are supposed to read the contracts before they sign them, and if you don't read it, that's your fault.

I read all my contracts fully - which tends to piss people off - and in a few instances it was as if I stabbed them in the back when I questioned clauses. However, I have the ability to interpret their legal mumbo jumbo - most people would have to hire a lawyer because legal jargon is VERY obtuse.

I guarantee you most people don't know what arbitration is - so it being mandatory? Neh. And since these requirements are becomming more and more common in employment contracts it really does unfairly rob someone of their rights to counter issues that arrise via employment. There is no employment bargaining these days: employers opt for 'take it or leave it' - and sometimes you don't have options: you MUST take it.

The bottom line is this: Arbitration, when used properly, is a very good alternative to litigation, in much the same way as small claims court, when applicable, is a generally favored alternative to regular courts. Just because arbitration has been misused does not mean that we should ban arbitration; we need only ban the misuse of arbitration.

Arbitration is general - yes.

But MANDATORY arbitration: no. Mandatory arbitration DOES treat all infractions the *same way* regardless of the situation and circumstances - noting is considered 'case by case'

Originally Posted by middleagedgamer

Why are they ridiculous?

If you don't want to agree to arbitration, don't sign the contract. Plain and simple.

In many cases there's not much of a choice about signing the contract. When an entire industry adopts arbitration laws, you're kind of stuck like chuck.

Originally Posted by Aunt Spiker

contracts are often rescinded - it happens all the time - and because of unequal bargaining power the lesser person or entity doesn't often get fair treatment. . . the most common practice is for things to settle via negotiation - not litigation - ergo: the person with less negotiation umph gets the underhand.

Can you show me some examples?

However - mandatory arbitration just sidesteps even that much and pushes everything straight to the companies preferred arbitration company or system - which tend to favor the company and this results in unjustly settled disputes that, if abled to go to court, might fair the other way.

My suggestion settles that.

The current bill says "You can't do this." My alternative says "If you do this, you have to do it this way."

Credit cards can often be required and necessary if expenses are to be made out of pocket for the business - to be reimbursed later.

You do not have the right to own a business. It's a luxury.

My husband's military: has a special military credit card through a traditoinal credit card company and he can charge *to* it freely - and the military, at some point, will reimburse him by paying off the balance. This often raises issues - all too often when he has to go out of town/country the cost of traveling expenses comes into disputs. OR (usually) they fail to reimburse in a timely fashion which can negatively affect my husband's credit-rating.

And - when they fail to reimburse in full or on time - his card might be shut off which, since he travels frequently per military orders - can create a huge hassle if they order him off to Canada to find someone and they haven't footed the bill from when they sent him to Haiti.

Any potential arbitration issues will then be between the credit card company and the military, not your husband. Your husband does not have a direct interest (he has an interest; don't get me wrong, but not a direct one, any more so than an employee of a corporation has a "direct" interest in their employer's debts).

I read all my contracts fully - which tends to piss people off - and in a few instances it was as if I stabbed them in the back when I questioned clauses.

If they pressure you into signing without reading, that is a grounds upon which any contract can be revoked, and thus falls under Section 2.

However, I have the ability to interpret their legal mumbo jumbo - most people would have to hire a lawyer because legal jargon is VERY obtuse.

Correction: Most people would have to either hire a lawyer, or do some legal research of their own. The basics are usually available for free on the Internet.

I guarantee you most people don't know what arbitration is - so it being mandatory?

Stupidity is not the other party's fault.

And since these requirements are becomming more and more common in employment contracts it really does unfairly rob someone of their rights to counter issues that arrise via employment.

No, that's just what it's become; that's not what it is.

Arbitration clauses merely require a person to air their legal grievances elsewhere. They aren't being cut off from justice completely; they just have to seek it from a place other than the courts.

If that were the case, the Federal Arbitration Act would probably be unconstitutional as a violation of due process.

My suggestions allow arbitration to be fairer, without actually getting rid of arbitration altogether.

Mandatory arbitration DOES treat all infractions the *same way* regardless of the situation and circumstances - noting is considered 'case by case'

So if the arbitrator was bribed into making a particular ruling, that should receive the same treatment in a motion to vacate as if the award were entered completely legitimately?

Is that what you're saying?

Originally Posted by molten_dragon

In many cases there's not much of a choice about signing the contract. When an entire industry adopts arbitration laws, you're kind of stuck like chuck.

I don't know, man. Search hard enough, and you're bound to find SOMEONE willing to not make you go to arbitration.

In fact, I've even tried to negotiate post-dispute arbitration with employers who I was suing for discrimination, and they even refused to arbitrate with me!

Especially when it comes to buying things like cars... you have bargaining power when buying a car! Car dealers routinely get talked into lowering their prices. It's one of the few industries where haggling is still alive and well, even in the present day, and even with the common consumer.

Originally Posted by middleagedgamer

I don't know, man. Search hard enough, and you're bound to find SOMEONE willing to not make you go to arbitration.

In fact, I've even tried to negotiate post-dispute arbitration with employers who I was suing for discrimination, and they even refused to arbitrate with me!

Especially when it comes to buying things like cars... you have bargaining power when buying a car! Car dealers routinely get talked into lowering their prices. It's one of the few industries where haggling is still alive and well, even in the present day, and even with the common consumer.

"search hard enough"

Much easier to just do away with mandatory arbitration clauses - my rights are best persued in the legal arena not in a private-businesses arbitration arena.

Originally Posted by Aunt Spiker

"search hard enough"

Much easier to just do away with mandatory arbitration clauses - my rights are best persued in the legal arena not in a private-businesses arbitration arena.

Your rights aren't the only rights in existence.

Your rights must be weighed against others' rights.

And that includes the right to contract.

Originally Posted by middleagedgamer

Your rights aren't the only rights in existence.

Your rights must be weighed against others' rights.

And that includes the right to contract.

Mandatory arbitratoin isn't to protect anyone's *rights* - it's to protect the businesses deemed bottom line and publicity issues. . .things of that nature. It's a self-preservation process - as are most contracts, really . . preserving THEIR interests - not YOURS.

Or don't you consider people having a personal CHOICE to go to court if something arrises to be a right?