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.

All Results for Arbitration

International Court Rules In Favor of Chevron, Against Ecuador

January 25, 2016 | Insights

The District Court of The Hague ruled in favor of Chevron by rejecting Ecuador's attempts to "nullify arbitral rulings handed down against the country in connection" with a $9.5 billion judgement against Chevron. Read More »

The New York Times Doesn't Like Arbitration, But It Really Likes Plaintiffs' Lawyers

January 07, 2016 | Insights

The New York Times launched another attack on arbitration just before the holidays. Like the other installments, this piece uses selected anecdotes to support a preconceived story line: reflexive hostility to arbitration and blind faith in the benefits of class actions and the plaintiffs' lawyers who bring them. (We are not alone in criticizing the Times for reporting-by-anecdote: former Obama press secretary Jay Carney explained how the Times constructed a false picture of Amazon's workplace; a USA Today columnist documented another example; as did a former Times reporter-and former Washington Post publisher Donald Graham.) Read More »

In the News Today - January 6, 2016

January 06, 2016 | Insights

‘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 | Insights

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 | Insights

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 | Insights

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 | Insights

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 | Insights

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 | Insights

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 | Insights

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 »

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