Update: An Influx of Arbitration Legislation

By Tamia Sutherland

The passage and March 3 signing of H.R. 4445, Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 has inspired the introduction of more than 170 bills involving arbitration.

Sen. Lindsey Graham, R., S.C., called H.R. 4445 the most significant workplace reform since the Occupational Safety and Health Act of 1970, and said he is open to further arbitration law changes, on a bipartisan basis. Lindsay Wise and Jess Bravin, Senate Approves Bill Barring Forced Arbitration in Sexual-Assault, Harassment Claims, Wall Street Journal (Feb. 10)(available at https://on.wsj.com/38tmR3Q).

Of the current arbitration-related proposals, there are some duplicates with House and Senate introductions. Still, many facets of arbitration, in and out of government, are covered by the bills.

Activity on some is possible this year.

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In an April 6 Securities Arbitration Alert blog post, George Friedman, Publisher & Editor-in-Chief, discussed Congress and the rise in arbitration legislation:

The recent pace of legislative activity prompted us to look up how many bills have been introduced in the 117th Congress that in some way, shape, or form, refer to arbitration.

search we conducted using the non-partisan www.govtrack.us Website shows that 171 bills have been introduced so far that contain the term “arbitration” or “arbitrate” – 106 in the House and 65 in the Senate.

Not all bills are anti-arbitration, although the majority would amend the Federal Arbitration Act, other federal laws, or both, to curb pre-dispute arbitration agreement use. Democrats introduced all but four bills.

The Securities Arbitration Alert post can be found here.

A few days after the passage of H.R. 4445, the U.S. Senate Committee on Banking, Housing, and Urban Affairs held a March 8 hearing on arbitration’s effects on consumers’ financial services contracts. The purpose was to introduce another arbitration bill.

Chairman Sherrod Brown, D., Ohio, presided over the hearing, and in his opening statement said that:

Big companies should not decide on behalf of Americans how they should pursue justice. Consumers–not corporations–should be able to decide whether they want to go through the public court system, through mediation, or through arbitration. . . . That’s why I introduced the Arbitration Fairness for Consumers Act last week with 21 cosponsors in the Senate, many of whom serve on this Committee.”

The Arbitration Fairness for Consumers Act would prohibit arbitration clauses in consumer financial products by amending the Consumer Financial Protection Act of 2010. Chairman Brown explained that the bill “gives consumers the right to decide how they want to pursue justice.” Brown’s website lists this press release and one-pager regarding the bill.

Following the opening statement, Ranking Member Patrick J. Toomey, R., Pa., provided background on Congressional attempts at arbitration restrictions in consumers’ financial services contracts:

In 2017, the CFPB issued a rule that would’ve banned these agreements for consumer financial products. However, Congress overturned this rule under the Congressional Review Act. Since then, Democrats have introduced bills that would undo Congress’ sensible decision.

Then, witnesses representing consumer interest groups Public Justice and Public Citizen, and the business-backed U.S. Chamber of Commerce, provided opposing testimony regarding the regulation of arbitration clauses in consumers’ financial services contracts.

In addition, law professors Todd J. Zywicki and Myriam Gilles from, respectively, Arlington, Va.’s George Mason University Antonin Scalia School of Law and Yeshiva University’s Benjamin N. Cardozo School of Law in New York also provided expert testimony, with Zywicki anti-legislation and Gilles strongly supporting the proposal.

A video of the March 8 hearing and the witness statements are available here. Since its introduction, no further action has occurred on the Arbitration Fairness for Consumers Act.

There’s more. The Forced Arbitration Injustice Repeal (FAIR) Act of 2022, a broad bill that would void all pre-dispute mandatory arbitration agreements in employment, antitrust, consumer, and civil rights passed the House by a 222-209 vote on March 17. That vote’s margin is much narrower than the 335-97 vote the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act received in the House in February.

The FAIR Act passed the House despite strong opposition. Two reports from the Institute for Legal Reform, a U.S. Chamber of Commerce unit that lobbies for tort reform on behalf of businesses and has long opposed arbitration restrictions, concluded that consumers and workers typically do better in arbitration. A November 2020 Institute for Legal Reform report is available here, updated from 2019, and an even more recent November 2021 update is available here.

Consumer organizations, on the other hand, were elated. Following the FAIR Act’s passage Lisa Gilbert, executive vice president of Public Citizen, noted:

“…Today, in an important step forward, the House passed the FAIR Act, a measure that would end the tricks and traps that are endemic in form contracts, including those you enter by clicking ‘I agree’ on the internet.

Hundreds of millions of contracts contain forced arbitration provisions and class-action waivers, denying consumers and workers the ability to file lawsuits in court and preventing them from joining with other similarly situated people to sue together…Today, the House finally stated: No more.”

Gilbert’s full statement is available here.

The FAIR Act was introduced by longtime mandatory arbitration opponent Hank Johnson, D., Ga., who has introduced this legislation in the past. For a discussion of the act’s September 2019 House passage–it later stalled in the Senate–and the controversy over the Institute for Legal Reform’s original 2019 arbitration report, is available at Andrew Garcia, The Fairness Agenda: Arbitration Legislation Advances in the Wake of a Critical Report , 37 Alternatives 157 (November 2019) (available at https://bit.ly/3LSoG93).

The House Committee on the Judiciary published this press release following last month’s passage of the FAIR act.  There has been no action yet on the Senate version, which is before the Judiciary Committee.

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Other arbitration bills have attracted attention, and could gain traction in the wake of H.R. 4445’s passage and signing.  They include:

  • The Justice for Servicemembers Act,
  • Fairness in Nursing Home Arbitration Act, and
  • The Investor Choice Act.

The Justice for Servicemembers Act aims to amend Title 9 of the U.S. Code—the Federal Arbitration Act—to prohibit pre-dispute agreements that require arbitration of certain disputes arising from claims of servicemembers and veterans.  The disputes are claims brought under chapter 43 of U.S.C. Title 38 relating to employment and reemployment rights of members of the uniformed services, and under the Servicemembers Civil Relief Act (50 U.S.C. 3901–4043).

The Fairness in Nursing Home Arbitration Act was introduced to amend titles XVIII and XIX of the Social Security Act “to prohibit skilled nursing facilities and nursing facilities from using pre-dispute arbitration agreements with respect to residents of those facilities under the Medicare and Medicaid programs, and for other purposes.”

The Investor Choice Act attempts to amend the Securities Exchange Act of 1934 to prohibit mandatory pre-dispute arbitration in investment adviser agreements.

Also, H.R. 5974, the Veterans and Consumers Fair Credit Act, was introduced in both the House and Senate to amend the Truth in Lending Act to extend to all consumers the consumer credit protections provided to U.S. Armed Forces members and their dependents under title 10 of the U.S. Code. The bill garnered a joint letter in support signed by 188 civil rights, community, consumer, faith, housing, labor, legal services, senior rights, small business, veterans’ organizations, and academics representing all 50 states and the District of Columbia. Some of the signatories include Main Street Alliance, Minority Veterans of America, the NAACP, National Fair Housing Alliance, and Public Citizen. The joint letter is available at the website of Public Justice, a Washington nonprofit law consumer- and employee-side law firm, here.

Many of these proposals are riding H.R. 4445’s coattails and have the potential to be framed as an extension of the bill ahead of the midterm elections.

For more background information on H.R. 4445, and how it restricts arbitration use for certain employment matters, see Tamia Sutherland & Russ Bleemer, Senate Sends Bill Restricting Arbitration for Workplace Sexual Assault Victims for Biden’s Signature, CPR Speaks (Feb. 10) (available here).

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The author, a second-year law student at the Howard University School of Law, in Washington, D.C., is a CPR 2021-22 intern.

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House Reintroduces a Proposal to Restrict Arbitration at a ‘Justice Restored’ Hearing

By Mark Kantor

On Thursday, Feb. 11, the U.S. House of Representatives Judiciary Committee’s Subcommittee on Antitrust, Commercial and Administrative Law held a hearing, “Justice Restored: Ending Forced Arbitration and Protecting Fundamental Rights.” 

This hearing was held in connection with the same-day reintroduction of the “Forced Arbitration Injustice Repeal Act” or the “FAIR Act” (See press release here).  That proposed act, co-sponsored by 155 House Members, would ban mandatory pre-dispute arbitration agreements in cases of employment, consumer, antitrust and civil rights disputes. 

In the previous Congress, the FAIR Act passed the House by a 225-to-186 vote, with virtually all Democrats and a number of Republicans in support.  The U.S. Senate, however, then controlled by the Republicans, did not take up the legislation.  The FAIR Act thus died at the end of term in that Congress, to be revived as a proposal in the current Congress that convened last month.

The hearing was chaired by Rep. Hank Johnson, D., Ga., a leading FAIR Act sponsor.  Johnson strongly supported prohibiting such pre-dispute arbitration agreements.  In addition to employment, consumer, antitrust and civil rights disputes, Johnson also criticized the impact of mandatory arbitration on small business disputes with large businesses.

After Johnson’s opening statement, Ranking Minority Member Rep. Ken Buck, R., Colo., made his own opening remarks.  Buck opposed the FAIR Act’s general ban on pre-dispute arbitration clauses, arguing that arbitration is a fair system. 

It is very interesting to note that he did, however, offer support for reviewing coverage of sexual predation claims in arbitration and “doing away with the secrecy provisions in contracts” when workplace predatory conduct exists–“those are two issues I want to make sure we distinguish in the employment context.  . . .” 

Buck stated his particular interest in hearing the testimony from Gretchen Carlson, the former Fox News anchor who made public her story of sexual harassment and filed suit against her boss at Fox News.  Other Republican members raised the prospect of excluding “sex and race discrimination” from mandatory arbitration and for overriding class action waivers for a “pattern of behavior” by a “bad actor” rather than individual claims. 

That focus on employment discrimination/harassment claims and overriding related confidentiality provisions may signal a possible path for narrower bipartisan legislation.  A narrower approach may arise if, as many anticipate, the broader approach of the FAIR Act fails again in the Senate for lack of the 60 cloture votes necessary to overcome a filibuster or a Senate decision to eliminate the filibuster.  

Four witnesses testified at the hearing:

  • Gretchen Carlson, Journalist, Author, and Advocate
  • Myriam Gilles, Paul R. Verkuil Chair in Public Law, Benjamin N. Cardozo School of Law
  • G. Roger King, Senior Labor and Employment Counsel, The HR Policy Association
  • Jacob Weiss, Founder and President, OJ Commerce

Carlson spoke about the adverse impact of “forced arbitration” on her sexual harassment claims, as well as the barrier federal arbitration law poses to implementation of local State laws seeking to move similar claims out of arbitration.

Gilles spoke more broadly in opposition to mandatory arbitration in employment, consumer, antitrust, civil rights and small business/big business disputes, areas of her scholarship for many years. 

Weiss spoke in criticism of Amazon’s arbitration policy in contracts with its small business counterparties.  Notably, Weiss was discussing a category of B-to-B commercial claims where there is an imbalance of bargaining power, not claims involving individuals.

King testified in support of positive aspects of arbitration, the inclusion of due process rights for claimants based on procedures adopted by U.S. arbitral institutions, and reform of class action procedures.  Like Rep. Buck, he contended that concerns about confidentiality and nondisclosure agreements can be addressed separately from arbitration.

Readers should note that other legislation has also been introduced in the new Congress focusing among other matters on banning pre-dispute mandatory arbitration clauses in employment arrangements.  The most notable legislation in that respect is the proposed Protecting the Right to Organize Act.  Among as many as 50 pro-employee proposals in the PRO Act, it would prohibit employers from using mandatory arbitration agreements with employees.

Senate control has shifted to the Democrats in this Congress, even though by the narrowest of margins.  We can therefore anticipate hearings and committee activity in both the House and the Senate for these legislative proposals.  In each case, though, the fundamental political calculus in the U.S. Congress will be driven by the role of the Senate’s filibuster.

A video of the hearing, statements from House Members, witness written testimony and statements from interested parties can be found here.

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Mark Kantor is a member of CPR-DR’s Panels of Distinguished Neutrals. Until he retired from Milbank, Tweed, Hadley & McCloy, he was a partner in the firm’s Corporate and Project Finance Groups. He currently serves as an arbitrator and mediator. He teaches as an Adjunct Professor at the Georgetown University Law Center (Recipient, Fahy Award for Outstanding Adjunct Professor). He also is Editor-in-Chief of the online journal Transnational Dispute Management. He has contributed frequently to CPR Speaks, and this post originally was circulated to a private list serv and adapted with the author’s permission.

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For more from author Mark Kantor, join CPR’s Employment Disputes Committee and Government & ADR Task Force for a free public online panel discussion on Feb. 24 on labor and employment ADR under the Biden Administration. Kantor and other experts will discuss how the current composition of the Supreme Court, the new Democratic majority in Congress, and the new leadership of the NRLB and EEOC will affect arbitration and mediation of U.S. labor and employment disputes.  For a list of Kantor’s co-panelists and registration information, please visit the CPR website at https://bit.ly/3nV4fgf.

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