1.This Act may be cited as the
Arbitration Fairness Act of
2007
.
2.The Congress finds the following:
(1)The Federal
Arbitration Act (now enacted as chapter 1 of title 9 of the United States Code)
was intended to apply to disputes between commercial entities of generally
similar sophistication and bargaining power.
(2)A
series of United States Supreme Court decisions have changed the meaning of the
Act so that it now extends to disputes between parties of greatly disparate
economic power, such as consumer disputes and employment disputes. As a result,
a large and rapidly growing number of corporations are requiring millions of
consumers and employees to give up their right to have disputes resolved by a
judge or jury, and instead submit their claims to binding arbitration.
(3)Most consumers and
employees have little or no meaningful option whether to submit their claims to
arbitration. Few people realize, or understand the importance of the
deliberately fine print that strips them of rights; and because entire
industries are adopting these clauses, people increasingly have no choice but
to accept them. They must often give up their rights as a condition of having a
job, getting necessary medical care, buying a car, opening a bank account,
getting a credit card, and the like. Often times, they are not even aware that
they have given up their rights.
(4)Private arbitration
companies are sometimes under great pressure to devise systems that favor the
corporate repeat players who decide whether those companies will receive their
lucrative business.
(5)Mandatory
arbitration undermines the development of public law for civil rights and
consumer rights, because there is no meaningful judicial review of arbitrators’
decisions. With the knowledge that their rulings will not be seriously examined
by a court applying current law, arbitrators enjoy near complete freedom to
ignore the law and even their own rules.
(6)Mandatory
arbitration is a poor system for protecting civil rights and consumer rights
because it is not transparent. While the American civil justice system features
publicly accountable decision makers who generally issue written decisions that
are widely available to the public, arbitration offers none of these
features.
(7)Many corporations add to their arbitration
clauses unfair provisions that deliberately tilt the systems against
individuals, including provisions that strip individuals of substantive
statutory rights, ban class actions, and force people to arbitrate their claims
hundreds of miles from their homes. While some courts have been protective of
individuals, too many courts have upheld even egregiously unfair mandatory
arbitration clauses in deference to a supposed Federal policy favoring
arbitration over the constitutional rights of individuals.
3.Section 1 of title 9, United States Code, is
amended—
(1)by
amending the heading to read as follows:
;
(2)by inserting
before Maritime
the following:
As used in
this
chapter—;
(3)by striking Maritime
transactions
and inserting the following:
(1)maritime
transactions
;
;
(4)by striking
commerce
and inserting the following:
(2)commerce
;
(5)by striking
, but nothing
and all that follows through the period at the
end, and inserting a semicolon; and
(6)by adding at the
end the following:
(3)employment dispute
, as
herein defined, means a dispute between an employer and employee arising out of
the relationship of employer and employee as defined by the Fair Labor
Standards Act;
(4)consumer dispute
, as herein
defined, means a dispute between a person other than an organization who seeks
or acquires real or personal property, services, money, or credit for personal,
family, or household purposes and the seller or provider of such property,
services, money, or credit;
(5)franchise dispute
, as herein
defined, means a dispute between a franchisor and franchisee arising out of or
relating to contract or agreement by which—
(A)a franchisee is
granted the right to engage in the business of offering, selling, or
distributing goods or services under a marketing plan or system prescribed in
substantial part by a franchisor;
(B)the operation of
the franchisee’s business pursuant to such plan or system is substantially
associated with the franchisor's trademark, service mark, trade name, logotype,
advertising, or other commercial symbol designating the franchisor or its
affiliate; and
(C)the franchisee is
required to pay, directly or indirectly, a franchise fee; and
(6)pre-dispute arbitration
agreement
, as herein defined, means any agreement to arbitrate disputes
that had not yet arisen at the time of the making of the
agreement.
.
4.Validity and
enforceabilitySection 2 of
title 9, United States Code, is amended—
(1)by
amending the heading to read as follows:
2.Validity and
enforceability
,
(2)by inserting
(a)
before A written
;
(3)by striking
, save
and all that follows through contract
, and
inserting to the same extent as contracts generally, except as otherwise
provided in this title
; and
(4)by adding at the
end the following:
(b)No predispute
arbitration agreement shall be valid or enforceable if it requires arbitration
of—
(1)an employment,
consumer, or franchise dispute; or
(2)a dispute arising
under any statute intended to protect civil rights or to regulate contracts or
transactions between parties of unequal bargaining power.
(c)An issue as to
whether this chapter applies to an arbitration agreement shall be determined by
Federal law. Except as otherwise provided in this chapter, the validity or
enforceability of an agreement to arbitrate shall be determined by the court,
rather than the arbitrator, irrespective of whether the party resisting
arbitration challenges the arbitration agreement specifically or in conjunction
with other terms of the contract containing such agreement.
(d)Nothing in this chapter shall apply to any
arbitration provision in a collective bargaining
agreement.
.
5.This Act, and the
amendments made by this Act, shall take effect on the date of the enactment of
this Act and shall apply with respect to any dispute or claim that arises on or
after such date.