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.
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.(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.
Contracts are not routinely rescinded when the parties have unequal bargaining power. Heck, if that happened, commerce would screech to a halt.
Ok, I can sort of understand necessities like jobs, medical care, a car, and a bank account... but credit cards?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.
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.
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.Often times, they are not even aware that they have given up their rights.
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:
The seventh grounds for vacation is made in response to Hall Street Associates, LLC v. Mattel, Inc.(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.
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.