Arbitration Fairness Act of 2015 (AFA): An Overly Simplistic Approach?

The Arbitration Fairness Act of 2015 (AFA), recently introduced by Senator Al Franken and Representative Hank Johnson, would amend the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. (FAA), to eliminate mandatory, pre-dispute arbitration clauses in employment, antitrust or civil rights matters—as well as all nearly all consumer contracts, for such things as cars, credit cards and cell phones. Allowing parties to agree to arbitration only after a dispute has arisen, the AFA would apply to “any dispute or claim that arises on or after” the date of AFA’s passing. The legislation would also give federal courts—instead of arbitrators—the authority to rule on an agreement’s validity and enforceability.

This is not the first legislative effort to narrow the use of pre-dispute arbitration agreements; somewhat similar bills were introduced in 2011 and then again in 2013, but neither made it out of committee. While some are applauding this step towards banning what they refer to as “forced” arbitration, others have expressed concerns that requiring parties to agree to arbitration only after a dispute has already arisen might take away the parties’ critical ability to utilize  arbitration preventatively, planning for it in order to avoid disputes in the first place. Others question the wisdom of transferring these responsibilities away from arbitrators and to an already beleaguered court system. Finally, while the AFA does not expressly prohibit businesses from entering into pre-dispute arbitration agreements with other businesses, some question the  effect this might have on the enforceability of arbitration  in business contexts where there is potential consumer application.

Institute for Conflict Prevention & Resolution (CPR) President & CEO Noah Hanft observed that, “Just as with litigation, there are circumstances where arbitration may be abused. But, if practiced properly and thoughtfully, as it should be, arbitration remains a  more effective, efficient and less costly way to resolve certain disputes—a result from which consumers can clearly benefit as well.”

Hanft concluded, “Care must be taken that any legislation aimed at protecting abuses in the use of arbitration not be  overly simplistic or condemn a practice that has brought real benefits in a multitude of circumstances around the world. Even advocates of tort reform that decry litigation abuses  don’t propose sweeping bans on certain types of litigation.”

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