July 29, 2008

Hon. Patrick J. Leahy, Chair
Hon. Arlen Specter, Ranking Member
Senate Committee on the Judiciary
United States Senate
Washington, D.C. 20510

Hon. John Conyers, Jr., Chair
Hon. Lamar S. Smith, Ranking Member
House Committee on the Judiciary
United States House of Representatives
Washington, D.C. 20515

Dear Chairman Leahy, Chairman Conyers, Ranking Member Specter and Ranking Member Smith:

We are pleased to share with you The Arbitration Debate Trap: How Opponents of Corporate Accountability Distort the Debate on Arbitration, a comprehensive study issued today by Public Citizen that reveals that two major papers underwritten by the U.S. Chamber Institute for Legal Reform (“Chamber Institute”) present a grossly inaccurate view of the empirical evidence on binding mandatory arbitration.

Public Citizen has long objected the use of pre-dispute binding mandatory arbitration, a method by which businesses force individuals to submit all disputes to private arbitration companies instead of litigating in court.  These arrangements, which are increasingly common, set up a severe conflict of interest by enabling businesses to choose the arbitration firms that resolve their disputes with customers or employees.

In September 2007, Public Citizen published The Arbitration Trap: How Credit Card Companies Ensnare Consumers, a study which shows that individual consumers had lost approximately 94 percent of arbitrations administered by the National Arbitration Forum.  The study also highlights several injustices wrought by binding mandatory arbitration.

Six months later, the Chamber Institute issued a response authored by Catholic University Law Professor Peter B. Rutledge entitled Arbitration – A Good Deal for Consumers: A Response to Public Citizen.  With financial support from the Chamber Institute, Rutledge also published a law review article entitled Whither Arbitration? which purports to review the academic literature on arbitration.  These “Chamber Papers” attempt to thwart legislative action to curtail forced arbitration. The enclosed study is our response.

We reviewed the research cited in the Chamber Papers as well as studies that the Chamber Papers fail to address. This evidence overwhelmingly shows that individuals fare far worse in arbitration than court. The vast majority of available data show individuals winning at lower rates, receiving lower average awards, and receiving lower median awards in arbitration. Perhaps most surprising, this conclusion holds firm even if one looks only at the studies that Rutledge’s law review article cites to contrast results in arbitration with those of court proceedings.

We hope these findings will assist you as you and your colleagues consider how to address the growing concerns over binding mandatory arbitration, including the Fairness in Nursing Home Arbitration Act of 2008 (H.R. 6126 and S. 2838), the Automobile Arbitration Fairness Act of 2008 (H.R. 5312), and the Arbitration Fairness Act of 2007 (S. 1782 and H.R. 3010).  We urge you to express strong support for these important legislative solutions.
 
We would welcome an opportunity to discuss binding mandatory arbitration in more detail with you or your staff.  Please do not hesitate to contact me or Graham Steele on this or any other issue of mutual interest. 

Best regards,
  
David J. Arkush
Director
Public Citizen’s Congress Watch Division

cc: Members of the House Judiciary Committee
Members of the Senate Judiciary Committee