Arbitration

Authorized by a ninety-plus-year-old federal law, arbitration is a procedure used to resolve common disputes and avoid costly and time-consuming 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 bread and butter of plaintiffs' lawyers. The lawyers often pocket millions of dollars in fees, while the class members they represent get little in 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 years. Arbitration eases the burden on the overcrowded court system. And arbitration reduces the costs of legal fees for both parties.

Little wonder, then, that plaintiffs' lawyers want to eliminate arbitration. Their aim is to maximize litigation and legal fees by bundling claims that would have gone to arbitration into lucrative class action lawsuits.

Eliminating arbitration may help plaintiffs' lawyers' bottom line, but it would hurt those seeking redress through our legal system. Eliminating arbitration would lengthen the legal 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 would be ineligible for class actions. Many cannot be bundled into a class action because the facts are not in common. Eliminating arbitration would leave these individuals without legal recourse. And even for those cases that are eligible, many disputes now settled through arbitration are small-dollar claims that typically cost more to litigate than they are worth. They usually will not be taken on a contingency fee basis by plaintiffs' lawyers.

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 also attempted to curtail the practice in the courts. However, 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.

At the same time, the Consumer Financial Protection Bureau released its anti-arbitration study in March 2015, as mandated by the Dodd-Frank Act, and is now preparing a rulemaking. The agency’s findings could determine whether arbitration clauses will be upheld in consumer financial agreements. In addition, the 2010 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.

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 Arbitration

Study Finds CFPB Anti-Arbitration Rule Will Cost Consumers

October 02, 2017 | News and Blog

The Office of the Comptroller of the Currency released a study finding that lenders may charge up to 25% more for credit after factoring in the cost of class action litigation stemming from the CFPB's anti-arbitration rule, reports the ABA Banking Journal. Read More »

"CFPB's Richard Cordray wants to replace arbitration with a broken class-action system"

September 19, 2017 | News and Blog

Institute for Legal Reform President Lisa A. Rickard penned an op-ed this morning in the Washington Examiner, calling for passage of the Fairness in Class Action Litigation Act (FICALA) after the Consumer Financial Protection Bureau issued its anti-arbitration rule. Read More »

In the News Today - September 6, 2017

September 06, 2017 | News and Blog

California on brink of letting customers sue banks: The California legislature yesterday approved a bill that would allow judges to override arbitration clauses in cases "where a bank commits fraud using customers' personal information." Gov. Jerry Brown is expected to sign it. Read More »

Chamber Noted As Leader in Arbitration Fight

August 24, 2017 | News and Blog

As the battle over arbitration rumbles on into the fall, the U.S. Chamber of Commerce and the Institute for Legal Reform were noted as leading the fight, in a story in POLITICO. Read More »

In the News Today - August 9, 2017

August 08, 2017 | News and Blog

In a 2-1 decision, the U.S. Court of Appeals for the Fifth Circuit shot down a National Labor Relations Board ruling that would have forced Convergys Corp. to get rid of arbitration agreements. Read More »

New ILR Report Says Asbestos Docket Rules Tilt Field Toward Plaintiffs

August 08, 2017 | News and Blog

As a Manhattan appeals court prepares to hear a challenge against a new case management order for New York City's asbestos docket, the U.S. Chamber of Commerce's tort reform arm has waded into the fight, arguing in a new report that the changes will tip the scales in plaintiffs' favor, writes the New York Law Journal. Read More »

In the News Today - August 8, 2017

August 08, 2017 | News and Blog

In another shot fired at the CFPB, the Republican staff of the House Financial Services Committee says there is sufficient evidence to hold Director Richard Cordray in contempt of Congress for failing to comply with a committee subpoena for records dealing with the agency's arbitration rule. Read More »

Senator Cotton Lays Out Plan For Stopping the CFPB Rule at ILR Event

July 20, 2017 | News and Blog

On Wednesday, the U.S. Chamber Institute for Legal Reform and the U.S. Chamber's Center for Capital Markets Competitiveness held a panel discussion on the CFPB's final anti-arbitration rule, implications for the business community, and a variety of next steps. Senator Tom Cotton headlined the event. Read More »

The CFPB's Arbitration Rule Showdown Continues

July 19, 2017 | News and Blog

The acting head of the Office of the Comptroller of the Currency, Keith Noreika, has asked CFPB director Richard Cordray to delay allowing the CFPB's arbitration rule to go into effect, writes the National Law Journal. The rule is slated to be published in the Federal Register today. Read More »

Key Securities Regulator "Urges Companies to Pursue Mandatory Arbitration Clauses"

July 18, 2017 | News and Blog

Michael Piwowar, a key U.S. securities regulator, voiced support for possibly allowing companies to include language in their initial public offering paperwork that would require shareholders to resolve claims through arbitration, writes Reuters. Read More »

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