Multi-Industry Letter Opposing the Onslaught of Anti-Arbitration Bills and Provisions That Have Been Introduced in this Congress
May 1, 2008
TO THE MEMBERS OF THE UNITED STATES CONGRESS:
The undersigned organizations strongly oppose the onslaught of anti-arbitration bills and provisions that have been introduced in this Congress. Even though arbitration has been used to amicably resolve disputes for more than 80 years, those who wish to dismantle the arbitration system are attempting to effectively abolish all pre-dispute arbitration by using anecdotes and a handful of poorly designed or inaccurate studies to validate their unfounded claim that the system is broken.
In fact, arbitration is an efficient, effective, and less expensive means of resolving disputes for consumers, employers, investors, employees and franchisees, in addition to the many businesses that use the same system to resolve business disputes. For example, the California Dispute Resolution Institute, part of the University of San Francisco's Leo T. McCarthy Center for Public Service and the Common Good, found that consumers prevailed more than 70 percent of the time in arbitration. Moreover, their disputes were resolved in an average of 100 days, significantly shorter than the lengthy litigation process which takes, on average, two years.
In addition, the American public recognizes that the legislative attack on arbitration is bad policy. A recent bipartisan poll conducted for the U.S. Chamber of Commerce's Institute for Legal Reform, found that 82 percent prefer arbitration to litigation as a means to settle disputes, and 71 percent of likely voters oppose efforts by Congress to remove arbitration agreements from consumer contracts.
Despite this public opposition to congressional action against arbitration, opponents have adopted a multi-faceted strategy aimed at eliminating pre-dispute arbitration clauses. Not only are they attacking arbitration broadly with S. 1782 and H.R. 3010, the "Arbitration Fairness Act," but they are also discreetly advocating for the simultaneous enactment of multiple unwarranted, industry-specific anti-arbitration bills and provisions.
Examples of these industry-specific bills and provisions include:
- H.R. 5312, the "Automobile Arbitration Fairness Act of 2008," which would
prohibit pre-dispute arbitration provisions in motor vehicle sale or lease contracts;
- S. 2838, the "Fairness in Nursing Home Arbitration Act," which would prohibit
pre-dispute arbitration in nursing homes and other long term care settings;
- S. 2452, the "Home Ownership Preservation and Protection Act of 2007," which
would, among other things, prohibit arbitration in the context of home mortgages;
- S. 2554 and H.R. 5129, the "Civil Rights Act of 2008," which would, among
other things, deem arbitration clauses between an employer and an employee
- H.R. 3915, the "Mortgage Reform and Anti-Predatory Lending Act of 2007,"
which would prohibit pre-dispute arbitration clauses in residential mortgages and
has been passed by the House;
- H.R. 1519, the "American Homebuyers Protection Act" which would prohibit
pre-dispute arbitration clauses in a contract for the sale of a home;
- H.R. 1443, "The Consumer Fairness Act of 2007," which would treat consumer
arbitration agreements as an unfair and deceptive trade practice and would
declare such provisions unenforceable;
- H.R. 2061, the "Predatory Mortgage Lending Practices Reduction Act," which
includes the same broad language as H.R. 1443;
- S. 221, "The Fair Contracts for Growers Act" which would prohibit pre-dispute
arbitration clauses in contracts between meatpackers and meat producers; and
- H.R. 3393, the "Reservist Access to Justice Act of 2007," which would, among
other things, prohibit the use of arbitration in employment-related disputes
between reservists serving in the uniformed services and their employers.
If successful, these legislative efforts would retroactively declare unenforceable potentially millions of provisions for the orderly and economical resolution of disputes. Opponents of pre-dispute arbitration have neglected to realize that, if enacted, these provisions will actually limit the realistic opportunity for an average consumer, employee, and investor to obtain a remedy if a dispute arises. Evidence shows that arbitration can be very useful in the context of low-value claims. Studies show that plaintiffs' lawyers are reluctant to take cases involving relatively small claims because they seek larger potential attorneys' fees than would likely result from these cases. According to one survey, plaintiffs' employment lawyers said they would not take a case unless it was worth at least $60,000, on average. Therefore, without the option of arbitration, consumers would be faced with two choices—to try to navigate the legal system on their own, or to abandon their claim. The only real beneficiaries of these anti-arbitration provisions and bills would be class action lawyers who would benefit from both the rare blockbuster claim and the possibility of bringing more class action lawsuits—lawsuits that provide little benefit to class members while ensuring large payouts to class action attorneys.
These attacks on arbitration are unnecessary and would undermine a system that has benefited consumers, employees, and businesses for decades, and on which many of them now rely. Accordingly, we strongly urge you to oppose any anti-arbitration legislation or provision.
American Bankers Association
American Financial Services Association
American Health Care Association
American Insurance Association
American International Automobile
American Meat Institute
Alliance of Automobile Manufacturers
Consumer Banker Association
International Franchise Association
National Association of Homebuilders
National Association of Manufacturers
National Center for Assisted Living
National Retail Federation
Securities Industry and Financial Markets Association
The Council for Employment Law Equity
The Institute for a Drug-Free Workplace
U.S. Chamber of Commerce
U.S. Chamber Institute for Legal Reform