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Arbitration

We believe that the escalating use of mandatory, pre-dispute arbitration clauses in consumer and employment contracts is undermining the ability of consumers and employees to vindicate basic rights through the civil justice system. The private arbitration system is often costly and is selected by businesses because it will be difficult for employees and consumers to prevail. See Public Citizen Report, The Costs of Arbitration (2002). Through its lobbying arm, Congress Watch, Public Citizen has sought to attack the problem through Congress and the state legislatures.

Public Citizen Litigation Group has argued two significant arbitration cases in the Supreme Court and has participated in several others. In Barrentine v. Arkansas-Best Freight System, 450 U.S. 728 (1981), the Supreme Court agreed with our argument that a union contract arbitration clause did not preempt employees' right to sue with regard to a statutory claim under the Fair Labor Standards Act. In Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681 (1996), we argued in favor of the allowing states to refuse to enforce obscure arbitration clauses buried in form agreements. Unfortunately, the Court held that the Federal Arbitration Act preempted state protections. Most recently, we have provided assistance to counsel for the respondents (Trial Lawyers for Public Justice) in Buckeye Check Cashing v. Cardegna, a case concerning the enforceability of arbitration clauses in illegal contracts that is now pending before the Court.

Important Arbitration Decisions

• Green Tree Financial Corp. v. Bazzle (2003)
• Pacificare Health Systems, Inc. v. Book (2003)
• Equal Employment Opportunity Commission v. Waffle House, Inc. (2002)
• Green Tree Financial Corp. v. Randolph, 531 U.S. 79 (2000)
• Circuit City Stores, Inc. v. Adams (2001)
• Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991)
• Mitsubishi Motors v. Soler Chrysler-Plymouth, 473 U.S. 614 (1985)
• Southland Corp. v. Keating, 465 U.S. 1 (1984)
• Prima Paint Corp. v. Flood & Conklin Mfg., 388 U.S. 395 (1967)

John Hancock Life Ins. Co. v. Patten, No. 06-49

In this case, the U.S. Court of Appeals for the Fourth Circuit held that an arbitrator had "manifestly disregarded the law" when he dismissed a plaintiff's claim of wrongful termination and employment discrimination because he thought that the arbitration contained a time limit for bringing such claims when it clearly did not. The defendants (John Hancock Life Insurance Co. and some of its subsidiaries) have now asked the Supreme Court to take the case, arguing that arbitration awards should not be overturned when an arbitrator deliberately ignores the law, even though the courts of appeals have allowed such review of arbitration awards for half a century. PCLG is assisting counsel for the plaintiff in opposing John Hancock's request that the Supreme Court hear the case.

• Respondent's Brief in Opposition (9/15/2006)

"How to Arbitrate A Class Action - Or Not"

One of the most controversial class action issues today is whether arbitration clauses in consumer and employment agreements should preclude class actions. A recent ABA program moderated by Scott Nelson of Public Citizen Litigation Group addressed how courts and arbitration organizations have dealt with class arbitration, and the closely related topic of whether arbitration clauses that contain class action waivers are enforceable. Free audio of the program is now available online.

Ryan's Family Steak Houses v. Walker (U.S. Supreme Court)

In this case currently pending before the Supreme Court, the U.S. Court of Appeals for the Sixth Circuit held that an arbitration clause used in all Ryan's Steak Family Houses employment contracts was unenforceable under Tennessee law on a number of grounds, including unconscionability, lack of mutuality, and structural bias. The arbitration clause would require Ryan's employees to arbitrate their disputes through EDSI, a for-profit dispute resolution service that receives 42% of its income from fees paid by Ryan's for arbitration services. We filed a brief in opposition to certiorari.

• Brief In Opposition (10/2005)

CIM Insurance v. Armettia Peach (U.S. Supreme Court)

When Armettia Peach bought a car in 2002, she signed a contract with the car dealership to purchase an "extended protection plan" through CIM Insurance. She later sued CIM alleging that the contract was a CIM form contract that contained mispresentations in violation of state consumer fraud statutes. CIM moved to compel arbitration, relying on an arbitration clause in Ms. Peach's contract with the dealership. The Illinois courts rejected CIM's attempt to compel arbitration because CIM was not a signatory to the contract. The question presented is whether a non-signatory to a consumer contract, when sued by a signatory for conduct related to the contract, can compel arbitration on an agency or equitable estoppel theory. We filed a brief in opposition to certiorari and the petition is currently pending before the Court.

• Brief in Opposition (5/2005)

Faber v. Menard (8th Circuit)

In Faber v. Menard, we represented an employee who argued that he cannot be forced to arbitrate his Age Discrimination in Employment Act (ADEA) claim under an arbitration agreement that forces him to bear his costs and attorneys' fees in arbitration, and thus denies him his statutory right under the ADEA to be reimbursed for those costs and fees were he to prevail in litigation.

• Brief of Appellee (11/2003)

Pacificare Health Systems v. Jeffrey Book (U.S. Supreme Court)

In Pacificare, the question presented was whether a court may compel arbitration of a plaintiff’s RICO claims under a valid arbitration agreement even if that agreement does not allow an arbitrator to award punitive damages, leaving to the arbitrator in the first instance the decision of what remedies are available to the RICO plaintiff in arbitration.

• Brief of Public Citizen As Amicus Curiae

Green Tree Financial Corp. v. Randolph (U.S. Supreme Court)

The question in this case was whether an arbitration agreement that does not mention arbitration costs and fees may be held unenforceable on the grounds that it fails to affirmatively protect a party from steep arbitration costs. Unfortunately, the Court held that an agreement's silence with respect to such matters does not render the agreement unenforceable.

• Brief of Public Citizen As Amicus Curiae

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