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

CFPB Anti-Arbitration Rule Will Mean 1,200 More Class Actions, $100 Million in Legal Fees Per Year

August 24, 2016 | News and Blog

The Consumer Financial Protection Bureau's (CFPB) anti-arbitration rule will mean "at least 1,200 additional class actions a year" filed against many of the 53,000 businesses covered by the rule, "costing more than $100 million a year in legal fees," writes Forbes' Daniel Fisher, citing a CFPB report. Read More »

With the Help of the Feds, Plaintiffs' Bar Zeroes in on For-Profit Colleges

July 28, 2016 | News and Blog

The plaintiffs' bar is nothing if not enterprising, and it may already have trained its eyes on its next litigation target: For-profit colleges and universities. Read More »

Uber Successful in Getting Added to Lawsuit Against CEO; Could Force Case into Arbitration

June 21, 2016 | News and Blog

Uber succeeded in getting a federal judge to add the company as a defendant in an antitrust lawsuit against CEO Travis Kalanik over the company's surge pricing practices. By making Uber a "necessary party" to the suit, it becomes more likely that the case will head to arbitration. Read More »

In the News Today - June 7, 2016

June 07, 2016 | News and Blog

John Crane Inc. has filed lawsuits against at least two asbestos firms under the Racketeer Influenced and Corrupt Organizations (RICO) Act over evidence uncovered during the Garlock Sealing Technologies bankruptcy proceeding. Read More »

House Panel Rips CFPB Anti-Arbitration Proposal

May 19, 2016 | News and Blog

A House Financial Services Subcommittee hearing yesterday "questioned whether the Consumer Financial Protection Bureau (CFPB) overstepped its bounds" with its proposed anti-arbitration rule. Read More »

WSJ Editorial Rips CFPB for Misreporting Arbitration Study

May 18, 2016 | News and Blog

The Wall Street Journal rips the Consumer Financial Protection Bureau (CFPB) for misreporting the results of the agency's own study in its bid to outlaw consumer arbitration. Read More »

Manhattan Institute's Copland Blasts CFPB's Anti-Arbitration Rule as a 'Sop to Trial Lawyers'

May 09, 2016 | News and Blog

Writing in National Review, The Manhattan Institute's James Copland cites the Consumer Financial Protection Bureau's (CFPB) own study in lambasting the bureau's newly proposed anti-arbitration rules. Read More »

CFPB's Anti-Arbitration Rule Will Protect Plaintiffs' Lawyers over Consumers

May 05, 2016 | News and Blog

The Consumer Financial Protection Bureau (CFPB) will announce a new rule today to prohibit companies "from including mandatory arbitration clauses in financial contracts that deny consumers the right to join class action lawsuits," reports The Hill. Read More »

In the News Today - April 28, 2016

April 28, 2016 | News and Blog

NJ Legal Reform Group Provides Defense of Consumer Arbitration: "The biggest opponents of arbitration are plaintiffs' attorneys, who make their living in the courtroom. These attorneys are running a smear campaign against arbitration because they know that having a faster and cheaper process for resolving disputes will cut into their bottom line." Read More »

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