Russ Feingold: In the News

Washington, D.C. - U.S. Senator Russ Feingold (D-WI) is reintroducing legislation to protect the right of Americans to have their day in court. The bill would make pre-dispute agreements requiring arbitration for any employment, consumer, franchise, or civil rights disputes unenforceable. The bill does not prohibit arbitration, but rather prevents a party with greater bargaining power from forcing individuals into arbitration through a contractual provision and ensures that citizens have a true choice between arbitration and the traditional civil court system. Similar legislation, H.R. 1020, was previously introduced in the House of Representatives by Rep. Hank Johnson (D-GA). Like Johnson’s bill, Feingold’s legislation does not generally apply to collective bargaining agreements, but it includes a new provision to reverse a recent Supreme Court ruling (14 Penn Plaza v. Pyett) that arbitration provisions contained in such agreements can waive an employee’s right to enforce employment discrimination laws in court.

A large and growing number of corporations now require millions of consumers and employees to sign contracts that include mandatory arbitration clauses. Most of these individuals have little or no meaningful opportunity to negotiate the terms of their contracts and find themselves having to choose either to accept a mandatory arbitration clause or to forgo securing employment or needed goods and services. Feingold and Johnson joined consumer and employee advocates at an event today where results of a poll were released showing strong support for the legislation and strong opposition to forced arbitration.

"Americans are sick and tired of a system that so strongly favors big corporations over consumers and in this case robs them of their constitutional right to their day in court," Feingold said. "Americans are often given no choice but to give up their rights if they want to sign credit card agreements, cell phone contracts, job applications or other basic contracts. It's time for Congress to side with consumers and employees and end this practice of forced arbitration, which stacks the deck against the people Congress is supposed to represent."

“This is not an anti-business bill, but a pro-consumer bill,” said Johnson. “One of our indelible rights is the right of a jury trial. Guaranteed by the Constitution, this right has been gradually ceded by citizens every day as they purchase a new cell phone, buy a home, place a loved one in a nursing home, or accept a new job. Once used as a tool for businesses to solve their disputes, arbitration agreements have found their way into employment, consumer, franchise and medical contracts.”

The results of the poll, conducted by Lake Research Partners, were unveiled today at a press conference in Washington, D.C., organized by the Fair Arbitration Now Coalition, which represents consumers, employees, homeowners and franchise holders. The groups range from Public Citizen, the National Association of Consumer Advocates, the National Employment Lawyers Association and the American Association for Justice to the National Consumer Voice for Long-Term Care, Home Owners for Better Building and the Leadership Conference on Civil Rights.

“The Arbitration Fairness Act does not seek to eliminate arbitration and other forms of alternative dispute resolution agreed to voluntarily after a dispute arises,” groups wrote last month in a letter to lawmakers. “Its sole aim is to end the unscrupulous business practice of forcing consumers and employees into biased arbitrations by binding them long before any disputes arise.”

During a press conference announcing the legislation, Feingold and Johnson were joined by two people who were the victims of tragedies compounded by forced arbitration. Jamie Leigh Jones of Houston, Texas was raped by co-workers while working for a Halliburton subsidiary in Iraq. Her company said she couldn’t go to court because the employment agreement she signed required her claims to be settled through arbitration. Burlington, Wisconsin resident David Kurth lost his father as a result of poor care at a nursing home. When the family tried to sue, the nursing home claimed the paperwork a family member signed when the father was admitted required the matter to go to arbitration.

The poll conducted by Lake Research Partners and unveiled at the event showed:

Six in 10 likely voters support the Arbitration Fairness Act – including majorities of Democrats, Republicans and Independents;
59 percent of likely voters oppose the use of mandatory binding arbitration clauses in employment and consumer contracts;
Two-thirds of respondents cannot remember ever reading about a forced arbitration provision buried in the fine print of employment terms or agreement for goods and services; and,
More than 70 percent of respondents believe they could take their employer or a corporation to court in the event of a dispute, unaware they could be subjected to mandatory binding arbitration.

The Arbitration Fairness Act of 2009

When Congress enacted the Federal Arbitration Act (“FAA”), its goal was to allow an alternative forum for parties on equal footing to resolve their disputes. Yet a series of court decisions has moved the law away from its original intent and opened the door for forced arbitration to be used to deprive ordinary citizens in employment, consumer, franchise, and civil rights disputes of their constitutional right to use the civil justice system.

A large and growing number of corporations now require millions of consumers and employees to sign contracts that include mandatory arbitration clauses. Most of these individuals have little or no meaningful opportunity to negotiate the terms of their contracts and so find themselves having to choose either to accept a mandatory arbitration clause or to forgo securing employment or needed goods and services. Incredibly, mandatory arbitration clauses also apply when individuals are trying to vindicate their civil rights under statutes specifically passed by Congress to protect them.

Although arbitration can be a fair and efficient way to resolve a dispute when both parties choose it after the dispute arises, there are a range of ways in which arbitration can be particularly hostile to individuals attempting to assert their rights. For example, high administrative fees, a lack of discovery proceedings and other civil due process protections, and no meaningful judicial review of arbitrators’ decisions can all act as barriers to the fair and just resolution of an individual’s claim. When arbitration is required rather than voluntarily chosen, the likelihood that these problems will occur and that arbitrators will favor repeat corporate players over individual claimants is increased.

Although some states have tried to address this problem through consumer protection laws, courts have interpreted the FAA as trumping those state laws. In the current legal environment, consumers and employees have little recourse when faced with a mandatory arbitration system that is tilted in favor of large corporate interests. Contrary to the intent of the FAA, ordinary citizens are being forced into arbitration against their wishes.

The Arbitration Fairness Act of 2009, introduced in the Senate by Sen. Russ Feingold (D-WI), reflects the FAA’s original intent by requiring that agreements to arbitrate employment, consumer, franchise, or civil rights disputes be made after the dispute has arisen. The Act does not prohibit arbitration, but it will prevent a party with greater bargaining power from forcing individuals into arbitration through a contractual provision. It will ensure that citizens have a true choice between arbitration and the traditional civil court system. The Act does not apply to collective bargaining agreements, except that it reverses the Supreme Court’s April 2009 decision in 14 Penn Plaza v. Pyett, to make clear that such agreements may not waive employees’ rights to take federal and state statutory or constitutional claims to court.

A coalition of consumer, labor, and employment rights groups supports the measure. Included in the coalition are Consumers Union, Consumer Federation of American, Public Citizen, National Consumer Coalition for Nursing Home Reform, the AFL-CIO, SEIU, American Association for Justice, National Employment Lawyers Association, and National Association of Consumer Advocates.