Alternative Dispute Resolution (ADR)/Arbitration

Alternative Dispute Resolution (ADR) refers to methods and processes of resolving claims without litigation, such as arbitration, mediation, and small claims procedures. ADR can be formal or informal and provides a method to avoid the expense and inefficiency of litigation.

ADR is widely used in the U.S., where empirical studies demonstrate that it is cheaper, faster, and often offers more compensation for the consumer. There are also well-established ADR procedures in many of the EU member states and in other countries around the world.

Arbitration

Arbitration, a form of ADR, is formally authorized by a ninety-plus-year-old U.S. federal law, the Federal Arbitration Act. Arbitration is a procedure used to resolve common disputes and avoid costly and time-consuming courtroom litigation. In arbitration, an independent third party, the arbitrator, reviews the facts and circumstances of the dispute, applies the appropriate legal standard, and issues a ruling to resolve the conflict. For nearly a century, arbitration has reduced the cost of lawsuits for businesses and consumers alike. But now arbitration is under attack by plaintiffs’ lawyers, who see it as a barrier to the expansion of lucrative class action lawsuits.

Class action lawsuits are the Holy Grail for plaintiffs' lawyers, who often pocket millions of dollars in fees, while the class members they represent get little or nothing of the final settlements.  read more...

For many, arbitration is the better way to go. Arbitration produces faster resolutions—typically in a matter of months, as opposed to class actions, which often last years. Arbitration reduces backlogs in our courts a the costs of legal fees for both sides in a dispute.

Given the lucrative nature of litigating class actions, it is not surprising that plaintiffs' lawyers want to eliminate arbitration with an aim towards maximizing litigation and their legal fees. Eliminating arbitration may help plaintiffs' lawyers' bottom line, but it would hurt those seeking timely, efficient, and fair redress through our civil justice system. Eliminating arbitration would lengthen the legal resolution process and channel more money into the hands of trial lawyers rather than individuals seeking compensation.

Moreover, the vast majority of claims resolved through arbitration are not even eligible for class action consideration. The facts in these cases are very individualized and rarely have enough in common to meet class certification standards. Eliminating arbitration would effectively leave consumers with these types of claims without legal recourse, since most of these disputes are over a relatively low dollar amount and would typically cost more to litigate than they are worth. Furthermore, plaintiffs’ lawyers rarely take such small dollar claims.

In other words, if plaintiffs' lawyers succeed in eliminating arbitration, it will drive up the cost of litigation, increase the workload of courts, and leave millions of Americans with very limited opportunities for restitution.

Preserving Arbitration

Legislative measures to limit the use of arbitration have largely been unsuccessful. For example, multiple bills and amendments that would have banned arbitration have been proposed and blocked since the early-2000s. These include the Arbitration Fairness Act (prohibiting arbitration in all consumer and employment agreements) and the Consumer Mobile Fairness Act (prohibiting arbitration in cell phone contracts).

With little success in Congress, arbitration opponents have worked to curtail the practice through the courts and federal regulatory agencies. Fortunately, the U.S. Supreme Court, in the recent cases of AT&T Mobility v. Concepcion (2011) and American Express Co. v. Italian Colors Restaurant (2013), has upheld the legal enforceability of arbitration under the Federal Arbitration Act.

However, the Consumer Financial Protection Bureau (CFPB) released its anti-arbitration study in March 2015, as mandated by the Dodd-Frank Act. Subsequent to the study, on May 5, 2016, the CFPB issued a proposed rulemaking on arbitration clauses that would inhibit consumers from filing or participating in class action litigation. The rule would also mandate reporting to the CFPB of arbitration claims and awards. This dangerous rule proposal was open for public comment and now awaits agency action. In addition, the Dodd-Frank Act authorizes the SEC to prohibit or restrict arbitration requirements for both broker-dealers and investment advisers, but the agency has yet to take action on the issue. Other agencies such as the Department of Labor, the Department of Health and Human Services, and the Department of Education have also proposed or finalized their own anti-arbitration and pro-class action litigation rules in recent months.

Due to the clear advantages of arbitration over litigation in any number of situations, and the need to preserve this important dispute resolution process, ILR has established the Coalition to Preserve Arbitration. The Coalition's membership is varied and broad. AT&T is one member of the Coalition and has provided legal and technical support on an in-kind basis in connection with our arbitration-related activities. This disclosure is being made to comply with the requirements of the Lobbying Disclosure Act of 1995, as amended by the Honest Leadership and Open Government Act of 2007.

Research

The Trial Lawyer Underground: Covertly Lobbying the Executive Branch

September 30, 2015 | This report highlights examples of the quiet and effective influence the American Association for Justice, the organization that lobbies on behalf of the plaintiffs' bar, exerts within the Executive Branch.

All Results for Alternative Dispute Resolution (ADR)/Arbitration

In the News Today - January 6, 2016

January 06, 2016 | News and Blog

‘The Judge Who Shoots Down Merger Lawsuits': The Wall Street Journal profiles Delaware Chancery Vice Chancellor J. Travis Laster, a "notoriously tough judge who has shown thinning patience" with disclosure-only merger lawsuits, which are thus being filed in decreasing numbers in the state. (Wall Street Journal) Read More »

WSJ: SCOTUS Ruling in DirecTV Case a "Policy Victory Against Trial Lawyers"

December 15, 2015 | News and Blog

The U.S. Supreme Court yesterday ruled in favor of DirectTV in DirectTV Inc. v. Imburgia, "backing the satellite television provider's efforts to enforce arbitration agreements signed by its customers in California," reports Reuters. Read More »

Judge Rules More California Drivers Can Join Class Action Against Uber

December 10, 2015 | News and Blog

A federal judge has ruled that additional Uber drivers in California can join the class action against the company even if they didn't opt out of an arbitration clause in their contracts. Uber said it will appeal the ruling. Read More »

Report Shows Benefits of Arbitration in Long-Term Health Care Industry

November 23, 2015 | News and Blog

Claims against long-term health care facilities "resolved under arbitration agreements have a 7% lower cost and are finalized three months earlier than claims resolved without arbitration." Read More »

Rickard Hits NY Times' "One Sided View of Arbitration and Class Action Lawsuits"

November 16, 2015 | News and Blog

In a New York Times letter to the editor, ILR President Lisa A. Rickard writes that the paper's recent three-part anti-arbitration report was "a one-sided view of arbitration and class-action lawsuits that parrots the plaintiffs' lawyers' talking points." Read More »

In the News Today - November 11, 2015

November 11, 2015 | News and Blog

Editorial Rips Schneiderman's Exxon ‘Climate Change' Investigation: "Engaging in scientific research and public advocacy shouldn't be crimes in a free country. Using the criminal law to shame and encumber companies that do so is a dangerous arrogation of power." (Bloomberg View Editorial) Read More »

In the News Today - November 10, 2015

November 10, 2015 | News and Blog

FACT Act 'forces Graham to choose a side': Sen. Lindsey Graham's office says that he "continues to review this legislation" but wouldn't say whether he supports or opposes the FACT Act. According to opensecrets.org, the American Association of Justice "contributed $27,500 to his campaign committee and leadership PAC during the period 2011-2016." (Palmetto Business Daily) Read More »

In The News Today - November 9, 2015

November 09, 2015 | News and Blog

New York AG Eric Schneiderman's investigation into Exxon Mobil's research and public statements on climate change "marks a dangerous new escalation of the left's attempt to stamp out all disagreement on global-warming science and policy," writes the Wall Street Journal editorial board. Read More »

New York Times Part 2: Arbitration Responsible for All of the World's Ills (Well, Just About All)

November 04, 2015 | News and Blog

It's clear that the New York Times is out to try and prove that arbitration is bad for consumers. Its "special report" doesn't come close to making that case. Read More »

In the News Today - November 4, 2015

November 04, 2015 | News and Blog

In a column entitled, "Arbitration is Everywhere and Not All Bad", Yale Law Professor Stephen L. Carter takes issue with several key points of the New York Times' recent three-part anti-arbitration report. For example, he writes the Times failed to mention an analysis of Consumer Financial Protection Bureau data by professors Jason Scott Johnston of the University of Virginia School of Law and Todd Zywicki of the Mercatus Center at George Mason University. That analysis found "consumers fare better in single arbitration settlements (not awards) than in class-action settlements." (Bloomberg View) Read More »

  • bulletClick to Narrow Your Results
  • 2017 Legal Reform Summit Recap