Arbitration Fairness Act of 2007

Arbitration Fairness Act of 2007

Why the Bill Matters

  • It would prevent enforcement of pre-dispute arbitration agreements involving employment, consumer or franchise disputes, disputes arising under civil rights statutes, and contracts and transactions between parties of unequal bargaining power.
      
  • It would require that courts, not arbitrators, decide under federal law any challenges to the validity or enforceability of arbitration agreements.

Binding Mandatory Arbitration: Judge, Jury and Executioner

  • Millions of Americans have been forced to surrender their right to a public jury trial and to accept a private, secret and biased justice system to settle disputes with a wide variety of industries and professionals. Users of cell phones and credit cards, automobile buyers, homebuyers, nursing home residents, medical patients, investors with Wall Street brokerage houses and many others must agree – as a condition of purchasing the goods and services – to use binding mandatory arbitration (BMA) to settle future disputes. Consumers have no choice. They either agree to arbitration or forego the service or purchase.
  • The businesses that force BMA upon their customers decide which arbitration firms will handle their disputes and those firms pick the arbitrators in the absence of agreement by the parties. The arbitration firms market their services to corporations and then depend on the corporations for continuing business. The corporations expect favorable results.
  • Arbitration is expensive. In Alabama, a homeowner took a termite company to arbitration over serious insect damage. He paid $24,000 (excluding attorney fees) for the arbitration and the termite company paid $18,000. Another homeowner not bound by a BMA contract sued the same termite company over the same issue. The lawsuit (excluding attorney fees) cost less than $600. In both cases, the homeowners prevailed and won nearly identical monetary awards.
  • There are no requirements that restrict who can be an arbitrator.
  • With rare exceptions, arbitration decisions are not subject to court review on their merits. Courts have ruled that “wacky” and “silly” decisions can be upheld. Even decisions that cause “substantial injustice” are allowed to stand.
  • Limited public information shows the bias of BMA: 

- In California, National Arbitration Forum arbitrators handled more than 19,000 disputes involving credit card holders. The card holders prevailed only 4 percent of the time. The companies won 94 percent of the time.

- In 16,056 of the 19,000 cases, the arbitrator based a decision solely on documents provided by the company. Consumers won two times; the companies won 16,054 times.

- In 2,019 cases where the arbitrator actually held a hearing, the consumer prevailed in only1.4 percent of the cases.

- Documents filed in an Alabama court case show that NAF arbitrators decided in favor of the consumer 87 times and in favor of First USA Bank 19,610 (99.6 percent) times.

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