Written by Paul Bland
On October 25, 2007, the House Judiciary Committee’s Subcommittee on Commercial and Administrative Law held its second hearing on H.R. 3010, Rep. Hank Johnson’s Arbitration Fairness Act. (This Subcommittee has jurisdiction over the bill.) H.R. 3010
would ban the use of pre-dispute binding mandatory arbitration in
consumer, employment, franchise and medical contracts. (The first
hearing was held on June 12th. I testified at it, and my testimony and
a transcript of the hearing can be found on the Public Justice website.)
Three members of the Subcommittee attended the hearing. The first is Subcommittee Chairwoman Linda T. Sanchez.
Rep. Sanchez has not yet co-sponsored the bill, but she spoke very
sympathetically towards the situation of consumers and employees who
have been treated poorly in mandatory arbitration systems. It also
can’t be understated that Rep. Sanchez showed that she has put a lot of
time into understanding the details of the issue, and she (along with
her staff) have obviously put a great deal of work into interviewing
and locating witnesses and giving both sides an opportunity to develop
an extensive record. The second is Rep. Johnson, the
sponsor of the bill, who is a courtly freshman representative from
Georgia and a powerful orator. The third member was Ranking
Subcommittee member Chris Cannon, who is a huge and
uncritical fan of mandatory arbitration. In the course of carrying the
water of the Chamber of Commerce on the issue, Rep. Cannon’s duties
apparently include trying to craft personal attacks on anyone who comes
forward with an individual story of having been abused by mandatory
arbitration.
There were two panels. On the first panel:
Laura MacCleery, Director of Public Citizen’s Congress Watch Division, who spoke about Public Citizen’s report ("The Arbitration Trap: How Credit Card Companies Ensnare Consumers") summarizing more than 34,000 arbitrations
handled by the National Arbitration Forum in California, and who also
spoke in some detail about the problem of arbitration clauses that ban
class actions. I have written in several forums that our law firm’s
experience (interviewing hundreds of consumers, and dozens of consumer
lawyers, strongly supports the conclusions of Public Citizen’s
groundbreaking report). Laura spoke with fervor and energy, and was
very articulate. Rep. Cannon tried to get her to admit that Public
Citizen’s report is very limited in scope, but Laura pointed out
(correctly) that it covered EVERY SINGLE case that the National
Arbitration Forum reported handling in California over a period of
several years.
Richard Naimark, Senior Vice President of the American Arbitration Association. He spoke about AAA’s Due Process Protocols,
and steps that AAA has taken to try to make arbitration more fair. As
the lead Republican/Chamber witness opposing the bill, Naimark was an
excellent choice, because AAA’s conduct compares favorably with that of
the National Arbitration Forum. Nonetheless, Chairwoman Sanchez asked
Naimark some hard questions about how it was that the AAA had decided
that health care cases such as medical malpractice cases were too
important to be the subject of binding pre-dispute arbitration clauses,
but that employment civil rights and consumer protection cases were not
sufficiently important. Naimark responded that medical cases were
qualitatively different, but Rep. Sanchez was not appeased. She pressed
him and noted that civil rights and consumer cases seemed very
important to her as well. One notable element of Mr. Naimark’s
testimony was that he openly acknowledged the case law setting forth
the incredibly narrow scope of judicial review of arbitrators’
decisions, and he accepted the statement that arbitrators’ decisions
are not subject to meaningful judicial review. (Naimark’s honesty on
this point is not uniform in the industry. The NAF’s Executive
Director, by contrast, has repeatedly publicly tried to pretend that
this huge body of published case law does not apply to the NAF.)
Former Georgia Governor Roy Barnes,
who is now an attorney for consumers, spoke about the way arbitration
clauses are used to protect pay day lenders, even when their actions
are criminal. He described how the payday lending industry operates
with passion and energy, and then spoke about how the U.S. Supreme
Court’s decision in Buckeye Check Cashing v. Cardegna
leaves to arbitrators the question of whether a contract violates a
state’s criminal law. In the course of questioning, even Rep. Cannon
appeared to agree with Governor Barnes that the Buckeye case presents a
ridiculous rule of law that Congress should address.
The final witness was Ken Connor,
a lifelong Republican activist and movement conservative, with close
ties to former Florida Governor Jeb Bush (he was Bush’s attorney in the
Terry Schiavo case, for example) and a former head of the Family
Research Council. In his private practice, Mr. Connor represents
victims of malpractice and abuse in nursing homes, and spoke for
several minutes about horrific cases of abuse that he’s encountered in
nursing homes (detailed descriptions of bruises, people left in their
own urine, etc.). He moved on to describe how arbitration clauses are
pushed on people who are vulnerable when they are in no position to say
"no," and explained how arbitrators (who tend to be attorneys for other
nursing homes) tend to rule for the nursing homes and rig the system in
favor of the homes.
On the second panel:
Deborah Williams, a Maryland woman (and another
lifelong Republican) who, along with her partner Richard Welshan, had a
franchise with the Coffee Beanery, which cheated her in a variety of
ways. Despite a finding by the Maryland Attorney General that the
Coffee Beanery committed fraud, she was forced by the American
Arbitration Association to arbitrate her claims in Michigan (500 miles
from her home), spent more than $100,000 on arbitration fees to the
AAA. For all of her pains, the arbitrator disagreed with the Maryland
Attorney General and entered a large award against her. The arbitrator
also entered a "loser pays" attorneys’ fee award against her, requiring
Ms. Williams and her partner to pay the Coffee Beanery’s attorneys’
fees. In the low point of the hearing, Rep. Cannon essentially tried to
get Ms. Williams to agree that all of her problems were her fault for
not researching the Coffee Beanery on the internet and discovering in
advance that they were defrauding people. Ms. Williams described the
various steps that she had taken to do due diligence about the Coffee
Beanery prior to becoming a franchisee, but Rep. Cannon persisted in
trying to get her to say that her problems were all her own fault.
Cathy Ventrell-Monsees, a civil rights lawyer who
testified on behalf of the National Employment Lawyers Association, who
passionately spoke in some detail about how employees often find
arbitration rigged against them. She gave several illustrations —
Halliburton has won every case arbitrated against it by an employee,
for example. She also spoke about the high costs of arbitration to
employees.
Professor Peter Rutlege
of Catholic University’s law school, who used to work on behalf of
major banks at the law firm of Wilmer Cutler & Pickering, and has
filed various amicus briefs in support of mandatory arbitration,
appeared on behalf of the Chamber of Commerce. Picking and choosing
among the limited empirical record, he insisted that the best data shows that arbitration is better for consumers, and called for further research into the matter.
The final witness was Theodore Eppenstein
of New York, a securities lawyer who argued that securities arbitrators
not only rule for brokers more often than investors compared to court,
but also in smaller awards. He recommended that the bill be amended to
make it more explicit that pre-dispute binding arbitration is banned in
securities cases. He refuted some of Professor Rutledge’s statements
about the empirical record.
It was a very powerful day of testimony.
By the way, there are now 36 co-sponsors of the AFA, up from 29 last
week, with three Republican co-sponsors. They are all listed below.
- Rep Baldwin, Tammy [WI-2] – 10/16/2007
- Rep Barrow, John [GA-12] – 7/12/2007
- Rep Brady, Robert A. [PA-1] – 10/3/2007
- Rep Braley, Bruce L. [IA-1] – 7/12/2007
- Rep Capuano, Michael E. [MA-8] – 10/16/2007
- Rep Cleaver, Emanuel [MO-5] – 10/22/2007
- Rep Cohen, Steve [TN-9] – 7/12/2007
- Rep Cummings, Elijah E. [MD-7] – 7/12/2007
- Rep Davis, Danny K. [IL-7] – 7/30/2007
- Rep DeFazio, Peter A. [OR-4] – 10/16/2007
- Rep Doggett, Lloyd [TX-25] – 10/16/2007
- Rep Doolittle, John T. [CA-4] – 10/3/2007
- Rep Ellison, Keith [MN-5] – 7/12/2007
- Rep Fattah, Chaka [PA-2] – 10/16/2007
- Rep Filner, Bob [CA-51] – 10/16/2007
- Rep Frank, Barney [MA-4] – 8/3/2007
- Rep Gonzalez, Charles A. [TX-20] – 7/12/2007
- Rep Green, Al [TX-9] – 10/16/2007
- Rep Green, Gene [TX-29] – 10/22/2007
- Rep Grijalva, Raul M. [AZ-7] – 9/7/2007
- Rep Jackson-Lee, Sheila [TX-18] – 10/24/2007
- Rep Kucinich, Dennis J. [OH-10] – 7/30/2007
- Rep LaTourette, Steven C. [OH-14] – 10/24/2007
- Rep Lewis, John [GA-5] – 7/12/2007
- Rep Lynch, Stephen F. [MA-9] – 10/24/2007
- Rep McGovern, James P. [MA-3] – 10/16/2007
- Rep Nadler, Jerrold [NY-8] – 10/16/2007
- Rep Pallone, Frank, Jr. [NJ-6] – 10/16/2007
- Rep Payne, Donald M. [NJ-10] – 10/16/2007
- Rep Sarbanes, John P. [MD-3] – 10/3/2007
- Rep Schakowsky, Janice D. [IL-9] – 7/12/2007
- Rep Solis, Hilda L. [CA-32] – 10/16/2007
- Rep Stark, Fortney Pete [CA-13] – 10/24/2007
- Rep Sutton, Betty [OH-13] – 7/30/2007
- Rep Tierney, John F. [MA-6] – 10/22/2007
- Rep Wasserman Schultz, Debbie [FL-20] – 9/7/2007
Originally posted here.
On October 25, 2007, the House Judiciary Committee’s Subcommittee on Commercial and Administrative Law held its second hearing on H.R. 3010, Rep. Hank Johnson’s Arbitration Fairness Act. (This Subcommittee has jurisdiction over the bill.) H.R. 3010
Laura MacCleery, Director of Public Citizen’s Congress Watch Division, who spoke about Public Citizen’s report ("The Arbitration Trap: How Credit Card Companies Ensnare Consumers") summarizing more than 34,000 arbitrations