Proposed Legislation Aims to Curb Mandatory Clauses in Contracts
The ongoing Democratic-led battle against the rise of mandatory arbitration agreements has gained momentum in the last week despite the efforts of business groups to defend their use.  Last week, the House of Representatives' Judiciary Subcommittee on Commercial and Administrative Law approved three arbitration-related bills, including one - the Arbitration Fairness Act - that would ban pre-dispute mandatory arbitration outright. The other two bills would ban such agreements in contracts dealing with nursing homes and automobile sales. Meanwhile, the Senate Judiciary Committee, which is due to consider its own legislation concerning nursing home arbitration, will hear testimony later this week from a former arbitrator who is now a bitter critic of the system.

LAW PRACTICE   
Arbitration Bills Making Progress in Congress
Proposed Legislation Aims to Curb Mandatory Clauses in Contracts

Jul. 22, 2008
By Lawrence Hurley
Daily Journal Staff Writer
This article appears on Page 1

      WASHINGTON - The ongoing Democratic-led battle against the rise of mandatory arbitration agreements has gained momentum in the last week despite the efforts of business groups to defend their use.

Last week, the House of Representatives' Judiciary Subcommittee on Commercial and Administrative Law approved three arbitration-related bills, including one - the Arbitration Fairness Act - that would ban pre-dispute mandatory arbitration outright.

The other two bills would ban such agreements in contracts dealing with nursing homes and automobile sales.

Meanwhile, the Senate Judiciary Committee, which is due to consider its own legislation concerning nursing home arbitration, will hear testimony later this week from a former arbitrator who is now a bitter critic of the system.

The business community, led by the U.S. Chamber of Commerce, has attempted to fight back. It released a survey last week that, it claims, shows that arbitrators treat consumers much more fairly than opponents of the practice say. Other groups supportive of arbitration include the Financial Services Roundtable and the American Insurance Association.

Democrats, who control both the House of Representatives and the Senate, don't appear to be listening.

But with Congress due to recess for its summer break at the end of the month and an election looming in November, there may not be time for the legislation to pass both the Senate and House this year.

Los Angeles Democrat Rep. Linda Sanchez, who chairs the judiciary subcommittee that voted on the bills last week, said in an interview Monday she is hoping to gather more support as the legislation moves forward to a possible vote before the full Judiciary Committee.

Lawmakers are becoming increasingly aware that consumers lose out when "parties of unequal bargaining power" face off outside a courtroom, she said.

"When arbitration is not voluntary, consumers are getting the short end of the stick," Sanchez said.

She stressed that the Arbitration Fairness Act would still allow consumers to enter into voluntary arbitration agreements.
     
F. Paul Bland Jr., an attorney with Washington, D.C., -based public interest law firm Public Justice, said he is slightly surprised that the arbitration bills appear to be gaining some momentum.

Most supporters were assuming there would be little movement this year and were planning to push hard next year, especially if Sen. Barack Obama, D-Ill, wins the presidential election in November, he noted.

Obama has been critical of mandatory arbitration agreements in the past.     

But following last week's subcommittee vote, Bland thinks the nursing home bill could pass Congress this year.

"The conventional wisdom is that the nursing home bill is by far the most likely to pass," he said.

That's because of headline-grabbing allegations that some nursing homes forced drugged or disabled elderly people to sign arbitration agreements before granting them care, Bland added.
     
The nursing home industry defends its use of the arbitration process.

In testimony before the Senate last month on behalf of the National Center for Assisted Living, Kelley Rice-Schild, who runs a nursing home in Florida, blamed trial lawyers for spreading "anecdotes and misinformation" about the way the system works.

"The notion that family members are threatened into signing the arbitration agreement is simply untrue," Rice-Schild added.

At a Senate hearing this week, Elizabeth Bartholet, a professor at Harvard Law School and a former mediator, will provide further ammunition for supporters of the legislation.

She worked as a part-time arbitrator for three decades for such groups as the National Arbitration Forum and JAMS.

Bartholet is set to testify about her experiences at the National Arbitration Forum, a company that specializes in credit card arbitration. It is currently a co-defendant in a lawsuit brought by San Francisco City Attorney Dennis Herrera alleging that the firm improperly favors corporate defendants.

Bartholet reached the same conclusion.

Between 2003 and 2004 she decided 19 credit card-related cases, 18 of which came out in favor of the credit card company.

But after ruling in favor of the consumer in a March 2004 case, she only ruled on four more cases. Bartholet will testify that she was "prevented from deciding" 11 other cases that she was assigned. In seven of those, she was removed "based on the credit card company's objection," she wrote in her testimony.

This led her to conclude that the process was "systematically biased in favor of credit card companies," according to her written testimony submitted in anticipation of the hearing.

In response, the National Arbitration Forum noted in a statement that Bartholet's "perceptions and speculation are simply belied by the facts."

The company maintains that Bartholet stopped taking cases because of concerns she had with certain procedures she had to follow.

The U.S. Chamber's Institute for Legal Reform responded to the recent wave of attacks on arbitration by commissioning a study of the National Arbitration Forum's cases in California.

A report by consumer group Public Citizen on the same cases, which it argued showed a bias towards the credit card companies, led to the San Francisco lawsuit.

But the Chamber's survey, carried out by Navigant Consulting, reached the opposite conclusion. It found that in 34,000 California debt collection cases, consumers prevailed 32.1 percent of the time. In addition the report found that consumers fare worse when facing debt collection lawsuits than they do in arbitration.

"The data is increasingly clear," said the institute's director, Lisa Rickard. "For most consumers, arbitration is a better way to resolve disputes than being forced into court."

David Arkush, of Public Citizen, dismissed the new report as "meaningless" because the majority of cases it counts as victories for consumers were dismissed "before an arbitrator was even appointed."

Public Citizen's report found that out of 18,075 cases between 2003 and 2007 that went to arbitration, consumers won 30 or only 0.17 percent of the time.
     
This e-mail address is being protected from spam bots, you need JavaScript enabled to view it