[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 3026 Introduced in Senate (IS)]







107th CONGRESS
  2d Session
                                S. 3026

   To amend chapter 1 of title 9, United States Code, to provide for 
              greater fairness in the arbitration process.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            October 1, 2002

 Mr. Sessions introduced the following bill; which was read twice and 
               referred to the Committee on the Judiciary

_______________________________________________________________________

                                 A BILL


 
   To amend chapter 1 of title 9, United States Code, to provide for 
              greater fairness in the arbitration process.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Arbitration Fairness Act of 2002''.

SEC. 2. ELECTION OF ARBITRATION.

    (a) Fair Disclosure.--In order to be binding on the parties, a 
contract containing an arbitration clause shall--
            (1) have a printed heading in bold, capital letters 
        entitled ``arbitration clause'', which heading shall be printed 
        in letters not smaller than \1/2\ inch in height;
            (2) explicitly state whether participation within the 
        arbitration program is mandatory or optional;
            (3) identify a source that a consumer or employee can 
        contact for additional information on costs and fees and on all 
        forms and procedures necessary for effective participation in 
        the arbitration program; and
            (4) provide notice that all parties retain the right to 
        resolve a dispute in a small claims court, if such dispute 
        falls within the jurisdiction of that court and the claim is 
        for less than or equal to $50,000 in total damages.
    (b) Procedural Rights.--If a contract provides for the use of 
arbitration to resolve a dispute arising out of or relating to the 
contract, each party to the contract shall be afforded the following 
rights, in addition to any rights provided by the contract:
            (1) Competence and neutrality of arbitrator and 
        administrative process.--
                    (A) In general.--Each party to the dispute 
                (referred to in this section as a ``party'') shall be 
                entitled to a competent, neutral arbitrator and an 
                independent, neutral administration of the dispute.
                    (B) Arbitrator.--Each party shall have an equal 
                voice in the selection of the arbitrator, who--
                            (i) shall comply with the Code of Ethics 
                        for Arbitrators in Commercial Disputes of the 
                        American Arbitration Association and the State 
                        bar association of which the arbitrator is a 
                        member;
                            (ii) shall have no personal or financial 
                        interest in the results of the proceedings in 
                        which the arbitrator is appointed and shall 
                        have no relation to the underlying dispute or 
                        to the parties or their counsel that may create 
                        an appearance of bias; and
                            (iii) prior to accepting appointment, shall 
                        disclose all information that might be relevant 
                        to neutrality, including service as an 
                        arbitrator or mediator in any past or pending 
                        case involving any of the parties or their 
                        representatives, or that may prevent a prompt 
                        hearing.
                    (C) Administration.--The arbitration shall be 
                administered by an independent, neutral alternative 
                dispute resolution organization to ensure fairness and 
                neutrality and prevent ex parte communication between 
                parties and the arbitrator. The arbitrator shall have 
                reasonable discretion to conduct the proceeding in 
                consideration of the specific type of industry 
                involved.
            (2) Applicable law.--In resolving a dispute, the 
        arbitrator--
                    (A) shall be governed by the same substantive law 
                that would apply under conflict of laws principles 
                applicable in a court of the forum in which the party 
                that is not drafter of the contract resided at the time 
                the contract was entered into; and
                    (B) shall be empowered to grant whatever relief 
                would be available in court under law or equity.
            (3) Representation.--Each party shall have the right to be 
        represented by an attorney, or other representative as 
        permitted by State law, at their own expense.
            (4) Hearing.--
                    (A) In general.--Each party shall be entitled to a 
                fair arbitration hearing (referred to in this section 
                as a ``hearing'') with adequate notice and an 
                opportunity to be heard.
                    (B) Electronic or telephonic means.--Subject to 
                subparagraph (C), in order to reduce cost, the 
                arbitrator may hold a hearing by electronic or 
                telephonic means or by a submission of documents.
                    (C) Face-to-face meeting.--Each party shall have 
                the right to require a face-to-face hearing, which 
                hearing shall be held at a location that is reasonably 
                convenient for the party who did not draft the contract 
                unless in the interest of fairness the arbitrator 
                determines otherwise, in which case the arbitrator 
                shall use the process described in section 1391 of 
                title 28, United States Code, to determine the venue 
                for the hearing.
            (5) Evidence.--With respect to any hearing--
                    (A) each party shall have the right to present 
                evidence at the hearing and, for this purpose, each 
                party shall grant access to all information reasonably 
                relevant to the dispute to the other parties, subject 
                to any applicable privilege or other limitation on 
                discovery under applicable State law;
                    (B) consistent with the expedited nature of 
                arbitration, relevant and necessary prehearing 
                depositions shall be available to each party at the 
                direction of the arbitrator; and
                    (C) the arbitrator shall--
                            (i) make reasonable efforts to maintain the 
                        privacy of the hearing to the extent permitted 
                        by applicable State law; and
                            (ii) consider appropriate claims of 
                        privilege and confidentiality in addressing 
                        evidentiary issues.
            (6) Cross examination.--Each party shall have the right to 
        cross examine witnesses presented by the other parties at a 
        hearing.
            (7) Record of proceeding.--Any party seeking a stenographic 
        record of a hearing shall make arrangements directly with a 
        stenographer and shall notify the other parties of these 
        arrangements not less than 3 days in advance of the hearing. 
        The requesting party or parties shall pay the costs of 
        obtaining the record. If the transcript is agreed by the 
        parties, or determined by the arbitrator to be the official 
        record of the proceeding, it shall be provided to the 
        arbitrator and made available to the other parties for 
        inspection, at a date, time, and place determined by the 
        arbitrator.
            (8) Timely resolution.--Upon submission of a complaint by 
        the claimant, the respondent shall have 30 days to file an 
        answer. Thereafter, the arbitrator shall direct each party to 
        file documents and to provide evidence in a timely manner so 
        that the hearing may be held not later than 90 days after the 
        filing of the answer. In extraordinary circumstances, including 
        multiparty, multidistrict, or complex litigation, the 
        arbitrator may grant a limited extension of these time limits 
        to a party, or the parties may agree to an extension. The 
        arbitrator shall notify each party of its decision not later 
        than 30 days after the hearing.
            (9) Written decision.--The arbitrator shall provide each 
        party with a written explanation of the factual and legal basis 
        for the decision. This written decision shall describe the 
        application of an identified contract term, statute, or legal 
        precedent. The decision of the arbitrator shall be final and 
        binding, subject only to the review provisions in subsection 
        (d).
            (10) Expenses.--The arbitrator or independent arbitration 
        administration organization, as applicable, shall have the 
        authority to--
                    (A) provide for reimbursement of arbitration fees 
                to the claimant, in whole or in part, as part of the 
                remedy in accordance with applicable law or in the 
                interests of justice; and
                    (B) waive, defer, or reduce any fee or charge due 
                from the claimant in the event of extreme hardship.
            (11) Small claims opt out.--
                    (A) In general.--Each party shall have the right to 
                opt out of binding arbitration and into the small 
                claims court for the forum, if such court has 
                jurisdiction over the claim. For purposes of this 
                paragraph, no court with jurisdiction to hear claims in 
                excess of $50,000 shall be considered to be a small 
                claims court.
                    (B) Exception.--Where a complaint in small claims 
                court is subsequently amended to exceed the lesser of 
                the jurisdictional amount or a claim for $50,000 in 
                total damages, the small claims court exemption of this 
                paragraph shall not apply and the parties are required 
                to arbitrate.
    (c) Denial of Rights.--
            (1) Denial of rights by party misconduct.--
                    (A) In general.--At any time during an arbitration 
                proceeding, any party may file a motion with the 
                arbitrator asserting that the other party has deprived 
                the movant of 1 or more rights granted by this section 
                and seeking relief.
                    (B) Award by arbitrator.--If the arbitrator 
                determines that the movant has been deprived of a right 
                granted by this section by the other party, the 
                arbitrator shall award the movant a monetary amount, 
                which shall not exceed the reasonable expenses incurred 
                by the movant in filing the motion, including 
                attorneys' fees, unless the arbitrator finds that--
                            (i) the motion was filed without the 
                        movant's first making a good faith effort to 
                        obtain discovery or the realization of another 
                        right granted by this section;
                            (ii) the opposing party's nondisclosure, 
                        failure to respond, response, or objection was 
                        substantially justified; or
                            (iii) the circumstances otherwise make an 
                        award of expenses unjust.
            (2) Denial of rights by arbitrator.--A losing party in an 
        arbitration may file a petition in the district court of the 
        United States in the forum in which the party that did not 
        draft the contract resided at the time the contract was entered 
        into to assert that the arbitrator violated 1 or more of the 
        rights granted to the party by this section and to seek relief. 
        In order to grant the petition, the court must find clear and 
        convincing evidence that 1 or more actions or omissions of the 
        arbitrator resulted in a deprivation of a right of the 
        petitioner under this section that was not harmless. If such a 
        finding is made, the court shall order a rehearing before a new 
        arbitrator selected in the same manner as the original 
        arbitrator as the exclusive judicial remedy provided by this 
        section.
    (d) Effective Date.--This section shall apply to any contract 
entered into after the date that is 6 months after the date of 
enactment of this Act.

SEC. 3. LIMITATION ON CLAIMS.

    Except as otherwise expressly provided in this Act, nothing in this 
Act may be construed to be the basis for any claim in law or equity.
                                 <all>