[Senate Hearing 110-783]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 110-783
 
    COURTING BIG BUSINESS: THE SUPREME COURT'S RECENT DECISIONS ON 
         CORPORATE MISCONDUCT AND LAWS REGULATING CORPORATIONS 

=======================================================================

                                HEARING

                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 23, 2008

                               __________

                          Serial No. J-110-108

                               __________

         Printed for the use of the Committee on the Judiciary

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48-144 PDF                       WASHINGTON : 2008 

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                       COMMITTEE ON THE JUDICIARY

                  PATRICK J. LEAHY, Vermont, Chairman
EDWARD M. KENNEDY, Massachusetts     ARLEN SPECTER, Pennsylvania
JOSEPH R. BIDEN, Jr., Delaware       ORRIN G. HATCH, Utah
HERB KOHL, Wisconsin                 CHARLES E. GRASSLEY, Iowa
DIANNE FEINSTEIN, California         JON KYL, Arizona
RUSSELL D. FEINGOLD, Wisconsin       JEFF SESSIONS, Alabama
CHARLES E. SCHUMER, New York         LINDSEY GRAHAM, South Carolina
RICHARD J. DURBIN, Illinois          JOHN CORNYN, Texas
BENJAMIN L. CARDIN, Maryland         SAM BROWNBACK, Kansas
SHELDON WHITEHOUSE, Rhode Island     TOM COBURN, Oklahoma
            Bruce A. Cohen, Chief Counsel and Staff Director
           Stephanie A. Middleton, Republican Staff Director
              Nicholas A. Rossi, Republican Chief Counsel




































                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Cornyn, Hon. John, a U.S. Senator from the State of Texas, 
  prepared statement.............................................    44
Durbin, Hon. Richard J., a U.S. Senator from the State of 
  Illinois, prepared statement...................................    46
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont.     1
    prepared statement...........................................    61
Specter, Hon. Arlen, a U.S. Senator from the State of 
  Pennsylvania...................................................     3

                               WITNESSES

Bartholet, Elizabeth, Morris Wasserstein Professor of Law, 
  Harvard Law School, Cambridge, Massachusetts...................     7
Millett, Patricia Ann, Partner, Akin Gump Strauss Hauer & Feld 
  LLP, Washington D.C............................................    10
Schultz, Osa M., Cordova, Alaska.................................     4

                         QUESTIONS AND ANSWERS

Responses of Elizabeth Bartholet to questions submitted by 
  Senators Specter and Kohl......................................    21
Responses of Patricia Ann Millett to questions submitted by 
  Senator Specter................................................    24

                       SUBMISSIONS FOR THE RECORD

Alaska Community Action on Toxics (ACAT), Pamela K. Miller, 
  Executive Director, Anchorage, Alaska, letter..................    30
Bartholet, Elizabeth, Morris Wasserstein Professor of Law, 
  Harvard Law School, Cambridge, Massachusetts, statement........    36
Cooper, Gwen, Fort Collins, Colorado, letter.....................    43
Exxon Valdez, maps...............................................    49
Goldman, Alvin L., Professor Emeritus College of Law, University 
  of Kentucky, Lexington, Kentucky, letter.......................    51
Henley, Phyllis, letter..........................................    53
Hopkins, Jack, Cordova, Alaska, letter...........................    54
Kendall, Douglas, Founder and President, and Elizabeth Wydra, 
  Chief Counsel, Constitutional Accountability Center, 
  Washington, D.C., letter.......................................    55
Kopchak, Rj, Commercial Herring Fisherman, Cordova, Alaska, 
  letter and attachments.........................................    58
Lynch, Mary B., Dixon, New Mexico, letter........................    69
Merritt, Leander, letter.........................................    75
Millett, Patricia Ann, Partner, Akin Gump Strauss Hauer & Feld 
  LLP, Washington D.C., statement................................    76
Mullins, Sheelagh, Cordova, Alaska, letter.......................    88
Munro, Mark, Homer, Alaska, letter...............................    90
National Senior Citizens Law Center, Simon Lazarus, Public Policy 
  Counsel, Washington, D.C., letter..............................    91
Ott, Riki, PhD, Cordova, Alaska, letter..........................    96
Pacheco, Janda, letter...........................................   100
Rackley, Davis C., Silverdale, Washington, letter................   101
Rosier, Amy, Consumer Protection, Washington, D.C., statement....   102
Samuels, Jocelyn, Vice President for Education & Employment, 
  National Womens Law Center, Washington, D.C., statement........   113
Schultz, Osa, Cordova, Alaska, statement and attachments.........   116
Smith, Steve, Cordova, Alaska, letter............................   162
Solmonese, Joe, President, Human Rights Campaign, Washington, 
  D.C., statement................................................   164
van den Broek, Rochelle, Executive Director, Cordova District 
  Fishermen United, Cordova, Alaska, letter......................   169
Veale, Zed, Flagstaff, Arizona, letter...........................   172
Vlasoff, Travis, Native Village of Tatitlek, Tatitlek, Alaska, 
  statement......................................................   173
United Fishermen of Alaska, Mark Vinsel, Executive Director, 
  Juneau, Alaska, letter.........................................   175
Wills, Andrew, Old Inlet Bookshop, Mermaid Cafe & B&B, Homer, 
  Alaska, letter.................................................   177
Young, Donna, Fairfax, Iowa, letter..............................   179


    COURTING BIG BUSINESS: THE SUPREME COURT'S RECENT DECISIONS ON 
         CORPORATE MISCONDUCT AND LAWS REGULATING CORPORATIONS

                              ----------                              


                        WEDNESDAY, JULY 23, 2008

                                       U.S. Senate,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:08 a.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Patrick J. 
Leahy, Chairman of the Committee, presiding.
    Present: Senators Leahy, Whitehouse, Specter, and Cornyn.

OPENING STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM 
                      THE STATE OF VERMONT

    Chairman Leahy. Good morning, and I apologize for the 
delay. I am delighted to have Senator Specter, who is one of 
the most senior members of this Committee, a former prosecutor 
here; and Senator Whitehouse, who is a former Attorney General 
and former Federal district attorney.
    This is our second hearing in as many months to highlight 
how the Supreme Court's decisions affect Americans' everyday 
lives. We see the economy worsening; Americans are struggling 
to put food on the table and gas in their cars, and money, if 
at all possible, in their retirement funds. And I think most 
Americans are not aware of some of the decisions that have come 
down by the Supreme Court that, instead of protecting them from 
financial injuries, they have done just the opposite.
    At last month's hearing, I noted the tragic decision in 
Lilly Ledbetter's pay discrimination case. The Supreme Court 
overturned her jury verdict. They created a bizarre 
interpretation of our civil rights laws. Basically, her 
employer, who had discriminated against her for years, kept 
that hidden--and she did not find out about it until after she 
had left the employment. She sued to recover payments for the 
discrimination, but as many you know, it was a case where male 
employees for lesser work were paid considerably more. She sued 
and, of course, got a recovery in court, and the Supreme Court 
overturned that, saying, well, you sued too late. Of course, 
the fact that it had been hidden was why she was so late. It 
basically was saying to employers, go ahead and discriminate, 
just as long as you make sure you keep it hidden so they cannot 
do it--which is not what was ever intended by the Congress nor 
in the years of interpreting these cases.
    Now we are going to look at a few others where big 
businesses have been rewarded. In the Stoneridge case, the 
Supreme Court held that pension funds and other investors in 
companies ruined by fraudulent managers, like Enron, cannot 
recoup the money they lost from those who knowingly facilitated 
the fraud. They are sending a signal, Now, look, don't go rob 
banks because they can go to jail for that; just defraud people 
because they cannot recover from you. And that leaves everyday 
Americans with no place to go.
    More than a decade ago, the Exxon Valdez was run aground by 
a drunk captain, somebody with a history of drinking problems, 
leading to one of the worst environmental disasters to reach 
American shores. And the tragedy of it was that it was a 
totally preventable environmental disaster. A jury determined 
that Exxon Mobil knowingly and repeatedly allowed a relapsed 
alcoholic to operate a ship filled with oil through the Prince 
William Sound. They found that for destroying the livelihood of 
thousands of Americans, they should be punished by paying at 
least a small fraction of its annual profits.
    Exxon Mobil paid millions to fight that, all the way up to 
the Supreme Court. It paid off for them. The Supreme Court 
protected them, read into the Constitution a protection for 
corporations that simply does not exist in its text or its 
intent. A very activist Supreme Court helping out Exxon Mobil.
    In his powerful dissent, Justice Stevens concluded ``that 
Congress, rather than this Court, should make the empirical 
judgments'' contained in the Court's decision that slashed the 
jury award by $2 billion. Incidentally, that is just one-tenth 
of 1 percent of Exxon Mobil's revenue in a year. It is the 
equivalent to an ordinary American who may have created a 
terrible disaster in a town, and they say, well, here, we are 
going to give you a $5 parking ticket. It is about the same 
thing. And if Congress had wanted to cap punitive damages for 
disasters that impact thousands of Americans, of course, we 
could have done so. We did not, specifically did not. This is 
another line of cases where the Supreme Court has misconstrued 
congressional intent.
    Then the Supreme Court has eroded the role of civil juries 
and shielded corporations from accountability through 
arbitration decisions. When we passed the Federal Arbitration 
Act, it was thought to provide sophisticated business interests 
an alternative venue to resolve their disputes. It was not 
intended to preempt State law or be a hammer for corporations 
to use against individual customers. It was never intended to 
be used for employment cases, but that is what they are trying 
to do, and large corporations have benefited from these 
expansive rulings, and they have inserted binding mandatory 
arbitration clauses in nearly every contract they draft. As a 
result, millions of Americans are being found to have somehow 
waived their constitutionally guaranteed Seventh Amendment 
right to a jury trial, oftentimes either because they had no 
choice or without even knowing it.
    There are no juries of one's peers in the arbitration 
industry. There is no appellate review. There is no 
transparency, and some would argue no justice.
    A jury found for the victims of the Exxon Valdez disaster. 
A jury found for Lilly Ledbetter. But the Supreme Court 
displaced those judgments with their own. In so doing, it has 
removed the compensation initially awarded to these victims, 
and it prevents other victims from redress.
    Worse than that, by doing this they do not deter 
corporations from the kind of conduct that created this in the 
first place. And the significant financial consequences is a 
deterrent that corporations tend to understand, and that has 
been taken off the table.
    So I look forward to the testimony of our witnesses and 
thank them for traveling to be with us today. I know many came 
from Alaska, and I note that several others affected by the 
Exxon Valdez disaster came here today, and I appreciate your 
coming here.
    Senator Specter.

STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM THE STATE 
                        OF PENNSYLVANIA

    Senator Specter. Thank you, Mr. Chairman. I think it is 
very useful for this Committee to take the congressional lead 
in commenting on Supreme Court decisions, and that is 
especially true where we are dealing with matters which we can 
change by legislation.
    The commentators have a great many opinions. Jeffrey Rosen 
has written in the New York Times that the Supreme Court has 
taken a turn favoring big business. Linda Greenhouse has 
written another article in the New York Times saying that while 
big business has pointed to some victories in some cases, their 
decision for older workers was a turnabout and a surprise. And 
even where you have the Valdez case involving punitive damages, 
you have the Supreme Court saying that it is not the exclusive 
remedy where preemption is a very big issue with the arguments 
being made that the Federal Government has preempted the field 
from state action.
    But I would like to see the Congress move ahead on the 
Ledbetter case. Senator Leahy has described Ledbetter. A very 
short statute of limitations was held to bar a woman from 
asserting her rights to equality and employment opportunities. 
But as Senator Leahy has noted, she did not know she had a 
claim. How can you pursue a claim if you do not know that the 
claim is in existence? Ledbetter is a statutory matter, and we 
can act on it. And that is something the Congress ought to move 
ahead on. And showing due regard for the independence of the 
judiciary, if it is a constitutional matter, Congress cannot 
change it except by constitutional amendment. The issues become 
more difficult where the Court is acting on constitutional 
grounds.
    We have had quite a series of events on the fundamental 
right of habeas corpus in this country. In the Rasul case, the 
Supreme Court said that habeas corpus was a constitutional 
right. The Supreme Court also said that habeas corpus was 
provided for by statute. Then the District of Columbia Court of 
Appeals in the Boumediene case made a distinction which I 
thought was not only a stretch but just wrong, saying that the 
Rasul case was decided solely on statutory grounds. And then if 
it is on statutory grounds solely, Congress has the authority 
to change it. And we did legislate to take away habeas corpus. 
I think it was a bad decision by the Congress, and my amendment 
was defeated 51-48. But there you have a lengthy opinion by 
Justice Stevens going back to the analysis of habeas corpus to 
John at Runnymede, 1215, and the Magna Carta. And he also did 
describe the statutory remedy of habeas corpus.
    But it is a very tortured reading of Rasul to say that the 
Court did not put habeas corpus on constitutional grounds. And 
then the D.C. Circuit, I think, just ignored their duty to 
follow the Supreme Court. And the Supreme Court denied cert. 
There was a lot of speculation as to what was going on, and 
then when it came out about how bad these Combat Status Review 
Boards were, there appeared to be a change in the attitude of 
some of the Justices, and the petition for re-argument was 
granted. It takes five votes, four for cert.
    So it is a healthy thing in our society to have this 
Committee take a look at these issues. So I commend you, as 
usual, Mr. Chairman, for going into a very important subject.
    Chairman Leahy. Well, I appreciate your being here and--
    Senator Specter. I want to make one other comment. All 
these empty chairs does not mean that people are not very 
concerned about this issue or about the testimony. We have a 
very distinguished line of witnesses. We have multiple hearings 
all the time. The Appropriations Committee is meeting as we 
speak on contracting in Iraq, and the Aging Committee is 
meeting as we speak on key issues there. And it is a busy 
place, and we have people who will be studying the transcripts 
and staffers will be. So we thank you for coming, and I am 
going to have to excuse myself.
    Chairman Leahy. Thank you for mentioning that about the 
other hearings. We all serve on half a dozen committees and 
subcommittees, and it seems they always meet at once. I 
especially wanted to be here for this one.
    Ms. Osa Schultz is from Cordova, Alaska. As a result of the 
Exxon Valdez disaster, the fishing cooperative, the very 
successful fishing cooperative Ms. Schultz and her husband were 
part of, was forced into bankruptcy. So she experienced 
firsthand the devastation that the tragedy wrought on the 
livelihoods and lives of so many in Prince William Sound. So we 
welcome you here today. I know you are going to speak about the 
community and how they were affected by this, and thank you for 
making the trip to Washington. Please go ahead.

          STATEMENT OF OSA M. SCHULTZ, CORDOVA, ALASKA

    Ms. Schultz. Thank you. Mr. Chairman and Senators, thank 
you for inviting me here today.
    Given the many critical and consuming issues that you are 
already faced with resolving at this time, I can barely express 
how much I, the people of Prince William Sound, and the more 
than 30,000 plaintiffs appreciate your serious review of this 
case and the Supreme Court's decision.
    It would be easy to assume that after 19\1/2\ years that 
justice has taken its course, the facts have been weighed, it 
is time to move on. But nothing could be further from the 
truth.
    Exxon would have everyone believe that they cleaned up 
their mess and paid their dues for their wanton disregard of 
safe shipping practices. When you look at the true and 
verifiable facts, again, nothing could be further from the 
truth. Exxon recovered less than 10 percent of the oil during 
their attempted clean-up, and its victims have not been fully 
compensated for their losses.
    Exxon's vast power and influence has tipped the scales of 
justice. Now the largest corporation in the world with their 
inexhaustible resources, they have managed to draw this case 
out with appeal after appeal for over 15 years. For nearly a 
generation, our community has been the David to their Goliath.
    I grew up in Portland, Oregon, and went to college in 
Eugene at the State university. In the fall of 1979, I took a 
quarter off to visit a friend who had recently moved to Alaska.
    I was captivated by the town of Cordova and the incredible 
wilderness that surrounds it. It was on this trip that I met my 
future husband, Ric. Ric took me out gillnetting on his boat, 
the Hypnotic. I was hooked--on fishing and the skipper! The 
excitement, the beauty, and the satisfaction of catching the 
bright, lively, and often elusive salmon was addicting. Ric and 
I fished together for over 10 years and continued to invest in 
our equipment to improve our fishing operation.
    In 1982, we joined a group of over 75 fisher men and women 
who had recently established the Copper River Fisherman's 
Cooperative. The co-op encouraged improved fish handling. 
Vessels started to carry ice to chill the fish in advance of 
delivery and we used the practice of ``bleeding''--cutting the 
gills to reduce bruising. Both are now standard methods in the 
industry. We invested in significant advertising strategies for 
our high-quality product and became the vanguard for fresh 
salmon provided to a domestic market. By 1989, over one-third 
of the gillnet fleet was supporting the Copper River Co-op.
    The Exxon Valdez spill tore that investment to shreds. With 
the sound unfishable and so many fishing boats working on the 
clean-up, the co-op was forced into Chapter 11 and still has a 
substantial outstanding loan. If the current ruling stands and 
the interest is paid, each investor will stand to receive at 
most only 45 percent of their original investment--for money 
invested as much as 20 years ago.
    The devastation caused by the Valdez spill continues to 
this day. Without fish to send to the market, we lost our 
niche; salmon from other sources replaced it. Even with years 
of marketing strategy, we still struggle to get back to where 
we were in 1988. In addition, one of the four local processors, 
Chugach, went bankrupt as well--a facility that had the 
capacity to process more than all of the other canneries 
combined. As a result, in the following years when the fish 
were being caught in high numbers again, we lacked the 
processing facilities to handle them, and dollars that would 
have been generated in Cordova were taken to other ports. Our 
lives, the fishing community, and the economy of Cordova have 
been devastated, and because compensatory damages were 
calculated based on only a few years, Exxon stands to pay 
pennies on the dollar.
    I am not a lawyer, but I have read some of the briefs filed 
in the Exxon v. Baker case. I urge the Committee members to 
read a brief filed by four former Alaska Governors because it 
lays out in painful detail the promises the oil industry made 
in order to win approval for drilling in the Arctic and 
building the Trans-Alaska Pipeline and the provisions made by 
Congress to ensure that oil companies acted with the highest 
degree of care.
    Well, Exxon did not act with the highest degree of care. 
Far from it, they acted recklessly. They knowingly put a 
relapsed alcoholic behind the helm of a tanker navigating the 
treacherous waters of Prince William Sound. That recklessness 
ruined the economic lives of thousands of hard-working fisher 
men and women. It caused the loss of traditional subsistence 
resources that are the cultural backbone of the Native people 
of Prince William Sound. It resulted in the total loss of our 
herring fishery, once a vital keystone species to the region's 
economy.
    Exxon has delayed justice for nearly 20 years, and it seems 
likely now to end up paying just a fraction of the damages they 
actually caused. If our highest Court in America fails to hold 
them accountable, how can they ever be forced to take 
responsibility for their destructive actions?
    I am just one person, but there are countless self-employed 
people and small business owners like myself that struggle to 
provide for our customers and support the infrastructure that 
keeps America the incredible country that it is. The influence 
of corporate power has become corrupt and divisive. Nowhere is 
this more true than in the oil industry today. And no other 
corporation is more accomplished at this corruption than Exxon. 
The only way to get their attention is to significantly affect 
their bottom line--Profit.
    In setting a 1:1 ratio between the compensatory and 
punitive damages, the high Court sends the wrong message. 
Punitive damages are the only means by which citizens can 
punish a corporation for wrongdoing. In its ruling, the Court 
has said that the punishment should be equal to the losses of 
the victims. As great as our losses are--and they are 
substantial--comparing--sorry.
    Equating punishment to a--equating punishment to a multi-
billion dollar corporation with the losses of self-employed 
fishermen such as my husband and me is in no way punishment or 
deterrent. And it is not justice.
    I call upon this Committee to lead the way in ensuring that 
no corporation can ever do again what Exxon has done to Prince 
William Sound. In America, bottom-line corporate interests 
should never trump the rights of individual citizens.
    Thank you.
    [The prepared statement of Ms. Schultz appears as a 
submission for the record.]
    Chairman Leahy. Thank you, Ms. Schultz. And from the 
letters I have received and others on this Committee have 
received, I think you speak for an awful lot of people from 
that part of Alaska.
    Ms. Schultz. I do.
    Chairman Leahy. Our next witness is Professor Bartholet, 
professor at Harvard Law School. She teaches civil rights and 
family law. The professor also has extensive experience as an 
arbitrator. She has worked with a number of arbitration 
organizations, including the National Arbitration Forum. Her 
experience as an arbitrator was featured in a recent 
BusinessWeek cover story entitled ``Banks vs. Consumers (Guess 
Who Wins).''
    Professor, please go ahead, and thank you for taking the 
time to be here.

STATEMENT OF ELIZABETH BARTHOLET, MORRIS WASSERSTEIN PROFESSOR 
      OF LAW, HARVARD LAW SCHOOL, CAMBRIDGE, MASSACHUSETTS

    Ms. Bartholet. Thank you, Mr. Chairman, and thank you, 
Senator Whitehouse.
    My focus is going to be mandatory pre-dispute arbitration 
in both the credit card and the employment areas. As you know, 
this is a practice in which the big players--the banks, the 
credit card companies, and employers--force upon the little 
players--the people who want credit cards and want jobs--so-
called agreements to arbitrate. Now, these are not, obviously, 
real agreements because those who want and need credit cards 
and jobs have no real choice.
    The practice of mandatory pre-arbitration is something that 
the U.S. Supreme Court brought into being by its startling 
interpretation of the Federal Arbitration Act, an 
interpretation that was a complete surprise to many of those 
who had taught or written in the area. It is an interpretation 
that Congress is free to correct by corrective legislation.
    I want to talk about two kinds of quite different problems 
with mandatory pre-dispute arbitration. One is what I will call 
the private justice or biased forum problem: the risk that the 
big player gets the justice that he pays for, the results that 
he wants, and the little player gets no justice at all. The 
second problem is what I will call the private law problem: the 
transformation of our civil rights regime, designed by Congress 
to be important public law into something entirely different, 
something that fails to serve any public law function.
    So, first, the private justice or biased forum problem. 
This arises from the nature of mandatory pre-dispute 
arbitration. The big player selects and pays the arbitration 
provider. Arbitrators only get paid if they get selected to 
decide cases, unlike judges. The big players, because they are 
repeat players in the system, are in a position to strike 
arbitrators who do not decide for them and, thus, to choose the 
arbitrator, who is, of course, supposed to be unbiased.
    My experience serving as an arbitrator for the National 
Arbitration Forum, NAF, is telling, but it is only one of 
several troubling experiences that I have had as an arbitrator 
during the nearly three decades that I have so served. My 
arbitration experience with NAF began in 2001, when I agreed to 
be on a roster of arbitrators, knowing very little about what 
they did. I then discovered that they have locked up basically 
the credit card arbitration business of the country.
    Out of the first 19 cases that I was assigned by NAF, I 
decided 18 for the credit card company because it appeared that 
debts were indeed owed, and I dismissed one case. After those 
19 cases, I decided one case in which the alleged debtor 
happened to be a lawyer and asked for a hearing. Not a single 
person before this case had asked for a hearing. This alleged 
debtor also made a counterclaim against the company, claiming 
that he had been significantly damaged by the whole process, 
which included damaging his credit rating.
    In the end, after hearing the case on the merits, the first 
case I heard on the merits, I ordered the credit card company 
to pay this alleged debtor some $48,000 and, of course, 
wondered to myself whether I would ever see another NAF case.
    I saw four more apparently because in the next four cases 
it was too late for either side to exercise what NAF has in its 
rules as a peremptory challenge--a challenge without cause. Of 
these cases already in the works, I decided two that involved 
the credit card company which had been involved in all prior 19 
cases.
    In the next 11 cases after that, all involving the same 
credit card company, I was not allowed to decide a single case. 
The company removed me by peremptory challenge in seven cases, 
and they moved to dismiss in the remaining four cases, 
dismissal giving them an opportunity to get the case before 
another arbitrator. They simply needed to refile it.
    In the first three cases in which I was removed, NAF sent 
me copies of a letter that had been sent to the parties falsely 
informing the parties that I was unavailable because of a 
schedule conflict. Now, if a party is to have any opportunity 
to challenge the arbitrator for bias, they would like to know 
if a prior arbitrator has been dismissed for some reason. So 
this false information going out telling people that I had 
withdrawn because of a schedule conflict seemed to me a pretty 
major problem.
    At that stage, immediately after getting those misleading 
letters and after having been disqualified for several cases, I 
attempted to discuss with NAF personnel--and I discussed with 
personnel on two levels--the problems I saw with the fairness 
of their system and got no satisfaction. At that point, I 
resigned from the NAF roster of arbitrators with a letter 
stating that the reason for my resignation was my concern about 
the NAF system's ``apparent systematic bias in favor of the 
financial services industry.''
    After that, NAF did its best to silence me from telling any 
part of this story. A party who had a dispute which, by 
contract again, was supposed to be in the NAF forum, wanted to 
prove that the NAF forum was biased. Now, what the Supreme 
Court has told us, of course, as part of the guarantee that 
arbitration will work okay, is that people will have an 
opportunity to prove bias in the forum if there is any such 
bias. So this party wanted to prove bias and felt they needed 
my testimony because they had heard about my story. They wanted 
my testimony to try to prove bias.
    At that point, NAF tried to prevent me from testifying. 
They moved to quash the discovery deposition. They claimed that 
the confidentiality provisions in my original assignment 
agreement with NAF, which I had terminated, barred me from 
testifying, even as to general matters relating to bias in 
their arbitration system. Obviously, I had told them I was not 
going to testify to anything with respect to parties or cases.
    Although I believed the NAF claim to be entirely frivolous, 
I felt forced to hire a lawyer to protect myself. In the end, a 
Massachusetts court found that nothing in my agreement 
prevented my testifying about bias in the NAF system and 
ordered me to testify.
    I concluded from my experience that the NAF pool of 
arbitrators is likely to be overwhelmingly stacked against the 
consumer, with arbitrators either being systematically removed 
if they rule against the credit card companies, or arbitrators 
feeling pressured into always ruling for the credit card 
companies out of fear of removal.
    This, together with my other experience as an arbitrator 
and reading of the literature, leads me to believe that the 
Supreme Court's approval of mandatory pre-dispute arbitration 
has given banks and credit card companies a private justice 
system in which they can purchase the results they want, at the 
expense of the debtors forced into the system.
    I want, much more briefly, to address the second problem, 
which I have called the private law problem. This problem is 
illustrated in the employment discrimination area, which is an 
area where I have taught for three decades and developed 
growing concern with the impact of mandatory pre-dispute 
arbitration, both because of the bias problem just discussed 
and because of the private law problem. And I want to emphasize 
that these are two independent problems. Even if the bias 
problem were to be solved, arbitration is incapable of 
providing the kind of public law that I believe Congress 
intended when it passed the panoply of civil rights legislation 
that includes Title VII, the Age Discrimination Act, and the 
Disabilities Act.
    The Supreme Court in the 1960s, 1970s, and early 1980s 
treated this law as important public law. By ``important public 
law,'' I mean law intended to have an impact on society in a 
far-reaching way. I mean what the Court did when they provided 
victorious plaintiffs with attorneys fees, with the idea that 
they should act as private attorneys general. I mean the class 
actions that enabled thousands of class members to get relief 
who would have been unable to get relief otherwise. I mean the 
systemic proof that class actions and broad discovery enabled. 
And I mean the systemic theories like the disparate impact 
theory. And I mean the public decisions which educated 
employers across the land--
    Chairman Leahy. Professor?
    Ms. Bartholet. Yes?
    Chairman Leahy. I am going to put your full statement in 
the record because we want to leave time for questions in case 
we have to get interrupted by votes. If you want to make a 
conclusory--
    Ms. Bartholet. I will make a very conclusory statement, 
which is simply that in arbitration, none of this public law 
exists. Arbitration is designed for two individuals to solve 
little tiny problems very quietly. And it is incapable of--and 
this is exactly why employers are flocking to arbitration--it 
is incapable of implementing public law.
    I think that because of this, these mandatory pre-dispute 
arbitration decisions of the Supreme Court are the single most 
important and devastating decisions issued by the Court in the 
last three decades in terms of the rights of plaintiffs.
    Thank you.
    [The prepared statement of Ms. Bartholet appears as a 
submission for the record.]
    Chairman Leahy. Thank you very much.
    Patricia Ann Millett is a partner at Akin Gump Strauss 
Hauer & Feld, here in Washington. She co-heads the firm's 
Supreme Court practice. From August 1996 to September 2007, Ms. 
Millett served as assistant to the Solicitor General at the 
Justice Department, had experience that most lawyers would 
envy. She has argued 26 cases before the Supreme Court.
    Thank you for being here, Ms. Millett, and please go ahead. 
Is your microphone on? There you go.

 STATEMENT OF PATRICIA ANN MILLETT, PARTNER, AKIN GUMP STRAUSS 
               HAUER & FELD LLP, WASHINGTON, D.C.

    Ms. Millett. Thank you, Mr. Chairman, Senator Whitehouse, 
and other Members of the Committee for inviting me here today. 
It is a real privilege.
    Before I start, I just want to make clear that I am 
speaking in my personal capacity. I am not here as a 
representative either of my law firm or any particular client, 
and that makes sense because, as Senator Leahy pointed out, I 
have only been in private practice less than a year. Most of my 
observations of the Supreme Court and its decisionmaking are 
based on the 11 years I spent in the Solicitor General's office 
under both the Clinton and Bush Administrations.
    I understand that two areas of interest for the Committee 
are arbitration and punitive damages, but I think it is very 
important in understanding what is going on in the Supreme 
Court to take a broad overview of the Term. Just as one cannot 
assess what this Congress has accomplished in a session by 
looking at one law or two, one needs to look at everything the 
Supreme Court did over a Term to assess what is going on there. 
And when you look at business cases from this last Term, they 
came down almost 50/50 between pro-business and pro-employee, 
or anti-business, however one wishes to characterize it.
    The theme that I saw in those decisions that I think is 
most relevant for this body is the enormous deference to 
Congress. There were a lot more statutory decisions, and what 
the Court made clear was that it was taking the statutory text 
that this Congress enacts at its word and was going to 
implement it. And if things are incorrect, it will leave it to 
this body to change it because that is the role that the Court 
should play. The Court in areas of statutory construction 
should follow, not lead.
    The Court also expressed important adherence to principles 
of stare decisis. There was concern that it would overrule 
precedents from some prior terms, in particular some precedent 
where Justice O'Connor had been the fifth vote, and that 
inspired discussion that this is the chance now for the new 
Roberts Court to overturn the rulings. They did not do that. 
They adhered closely to stare decisis, which means in the 
statutory area that when the Court makes a decision, if the 
Congress does not react and Congress goes along with the 
decision, does not change the law, then it is not for the Court 
itself to change course later in time without Congress' lead.
    The other thing that is of interest, I think, is that there 
was broad consensus in the business area. The Court was more 
unanimous there than any of the other areas of law that it 
addressed, and it had only two 5-4 decisions, and they were in 
relatively obscure areas of the law--one involving the standing 
of assignees for collection, and one involving the rights of 
tribal courts to regulate non-Indians and the disposition of 
land that they hold.
    In the area of employment rights, employees this term won 
four of five cases and essentially came to a draw with business 
in the fifth case. The Court upheld in two different cases the 
protection of civil rights laws against not just core 
discrimination, but retaliation by employers against the 
exercise of those rights. And that is very important because a 
right does not mean much if you are not protected against being 
punished for asserting your rights.
    They also adopted, in a case called Meacham, a strong rule 
in support of employees on the burden of proof for the 
``reasonable factor other than age'' issue in age 
discrimination cases.
    In Federal Express v. Holowecki, they adopted a pro-
plaintiff rule on what it takes to trigger EEOC investigation 
of a claim.
    In a case called Sprint v. Mendelsohn, they essentially 
said that there is no per se rule against the introduction of 
what is known as ``me too'' evidence in discrimination cases. 
``Me too'' evidence is when the employee wants to introduce 
evidence that other employees have been discriminated against 
by other supervisors, not involving their particular 
discrimintory event, but obviously showing a broader atmosphere 
within a corporation.
    The Court also addressed a number of preemption cases, and 
I do want to clarify one thing, I think, in my written 
statement. I left out the Chamber of Commerce v. Brown case, 
which was another preemption case the Court addressed this 
term. The Court was fairly consistent on ruling in favor of 
preemption, although it rejected a preemption argument in the 
Exxon case, and in that aspect ruled in favor of the 
plaintiffs. But, again, what is interesting about the 
preemption cases is even broader unanimity. One of them was 7-
2; Riegel v. Medtronic, involving medical devices, was 8-1; two 
more were unanimous. And so what that means, I think, combined 
with a broad consensus that we saw in the employment right 
cases, is that in a lot of these areas of business, this is not 
a Court where one or two Justices are going to change anything. 
There is a lot of consensus that one does not always see in 
other areas from the Court.
    In the area of arbitration, which I know this Committee is 
interested in, the Court decided two cases this term. One was 
called Preston v. Ferrer. That was decided 8-1 by the Court, 
and all it held was that, where arbitration has been agreed to 
by parties, there would not be a diversion to State 
administrative procedures. What the Court did there was simply 
apply what it had held in prior cases, holding that you do not 
get diverted to State courts when you have an arbitration 
agreement, and that there would not be a distinction for State 
administrative procedures. So, again, the Court simply applied 
prior precedent that preceded the Roberts Court and left it to 
direction from this body before it would change course.
    And then in a second case called Hall Street Associates v. 
Mattel, the Court held that parties to arbitration cannot 
simply contract out of the statutory standards of review set by 
the Congress in the Federal Arbitration Act. That was a 6-3 
decision. And in so holding, the Court again looked closely at 
the directive language of the statute itself, a statute that 
said that arbitration decisions must be enforced unless 
particular categories of exceptions delineated in the statute 
were satisfied. And the Court specifically voted that policy 
arguments were presented, but said those were for this body and 
not for the Court.
    The last case I want to mention, is the Exxon case, the 
punitive damages case, which is obviously an incredibly 
emotional subject for many Americans. I think it is important 
to keep in mind what exactly was decided in that case. What the 
Supreme Court decided in a 5-3 decision written by Justice 
Souter was that, as a matter of admiralty common law, there 
would be a 1:1 ratio for punitive damages. There was no 
constitutional ruling, no constitutional question in the case. 
The Supreme Court opened this aspect of its ruling by noting 
that it had a common law job to do, but Congress could change 
the decision.
    What the Court emphasized most that it was looking for in 
the area of punitive damages was some predictability and 
consistency when it adopted the standard for punitive damages, 
just as Congress itself had required such consistency across 
criminal defendants in the United States Sentencing Guidelines 
and has set particular penalty ratios in many statutes. And the 
Court emphasized that, because this was a case where the action 
was found to be non-intentional, and there was not proof that 
Exxon had profited from the activity, that a 1:1 ratio would be 
appropriate. The Court left open whether a different ratio 
would be appropriate in a case where there was intentional 
conduct or conduct that was taken with a specific profit motive 
in mind.
    The conclusion, again, is that this Court in the business 
area, as in other areas, is demonstrating broad consensus. This 
is not the area of the controversial 5-4 decisions that one 
hears about in the press. And they are taking small steps and 
following paths that have already been laid out by prior 
precedent, deferring substantially to the Congress in statutory 
areas.
    Again, I think one should keep in mind in characterizing 
the Supreme Court, if I could just say lastly, that slightly 
over half of the cases were decided this term in favor of 
business. They decided more cases in favor of criminal 
defendants than they did in favor of business this term. But no 
one wants to characterize it as a pro-criminal defense Supreme 
Court.
    The important message is to look at everything in context 
and look at an overall view of the Supreme Court's term, and I 
think it shows a fair amount of balance in the business area 
this term.
    Thank you.
    [The prepared statement of Ms. Millett appears as a 
submission for the record.]
    Chairman Leahy. Thank you very much. I am going to have to 
be here, and I know others are going to have to leave, so I am 
going to yield first to Senator Whitehouse for questions. But I 
am going to put in the hearing record written testimony 
submitted by Simon Lazarus of the National Senior Citizens Law 
Center; Jocelyn Samuels of the National Women's Law Center; and 
Doug Kendall of the Constitutional Accountability Center; and 
several fishermen and Native Alaskans affected by the Exxon 
Valdez disaster.
    Senator Whitehouse.
    Senator Whitehouse. Thank you, Chairman.
    Ms. Schultz, thank you very much for being here. It makes a 
big difference to us, dealing with what are often very kind of 
processy and legalistic and legislative issues, to hear from 
people who have been affected so directly and who, after--how 
many years since--
    Ms. Schultz. Nineteen and a half.
    Senator Whitehouse. Nineteen and a half years, still feel 
that the justice system has not served them and has instead 
been far more beneficial to the big corporation at fault in 
this. And the question of the big corporation being at fault, 
one of the phrases that stood out to me in the Supreme Court's 
opinion was that the Supreme Court said it found ``no earmarks 
of exceptional blameworthiness on the part of Exxon.'' And it 
was very much that determination that there were no earmarks of 
exceptional blameworthiness on the part of Exxon that drove the 
decision. In fact, it appears that if they had found earmarks 
of exceptional blameworthiness, the rule might have been 
different. That is where the standard cuts off.
    So I am just wondering--I have not been up to see the 
damage. You have lived with it for 19\1/2\ years. Did you see 
any earmarks of exceptional blameworthiness in what took place 
and what led to the destruction of your co-op?
    Ms. Schultz. Absolutely. The main thing is the loss of the 
herring fleet and the loss of the herring fishery, because that 
was a keystone species. It started our season in the spring. 
That is where the fishing activity started rolling. That is 
when the town came alive. The work that was done on that 
fishery got everything financed because of that income. That 
was a third of the fin fish collected income for the season. It 
is gone completely. And it was not until just recently that 
science has been able to prove that it was a result of the 
spill. So that is why there was not any substantial evidence 
for the court case in 1994.
    Senator Whitehouse. Professor Bartholet, it strikes me that 
the jury system in our governmental structure, our 
constitutional structure, has a significant governmental role. 
It is not just there as a means for adjudication of disputes, 
at least in my view. I see it as a vital part of what the 
Founders saw as popular Government. And as I look around 
Washington and see the extent to which, you know, money flows 
in this town and vested interests have huge throw weight, we 
have an executive administration that often seems, at least to 
me, to be in the pockets of certain industries, and I doubt 
that the Founding Fathers were blind to the possibility that 
the executive branch or the legislative branch could become 
enthralled to special interests. And it strikes me that in that 
context, the independent jury system of people chosen at random 
from the community to stand up for a real sense of justice was 
sort of the last bastion of true democracy and a core piece of 
the popular input that makes American democracy. And yet I see 
it constantly under assault and getting very little of the 
respect that other institutions of Government ordinarily 
obtain. And I just wonder if you would comment on those 
observations.
    Ms. Bartholet. Well, certainly one of the many important 
rights that mandatory arbitration takes away is the right to 
the jury trial, so that when you are forced into arbitration by 
the kind of agreements that the Supreme Court has now approved, 
people lose their right to a jury trial. I do think that is 
important. However, I would say it is simply one of a range of 
hugely important rights that are lost. I think the right to an 
unbiased judge is also important, and I think that is gone with 
mandatory pre-dispute arbitration. I think the right to a judge 
or an arbitrator who actually understands the law--you are not 
going to get arbitrators who understand sophisticated 
employment discrimination theory. So--
    Senator Whitehouse. Before my time runs out, which it is 
about to, let me jump into the peremptory challenge rule, which 
strikes me as institutionally biased when you are dealing with 
repeat players. The credit card companies keep coming back and 
back and back and back again. They wrote the contract. They set 
this up. They are there every time. And the individual 
litigants, if you will, the supplicants, if you will, are there 
just that one time. And they have no real idea who is for them 
or who is against them. They have no institutional or vested 
interest in striking anybody. And so it looks as if a very, 
very significant permanent bias has been deliberately built 
into the system. And I am wondering if you would evaluate that 
in the light of laws that we have, frankly, against outright 
rackets and schemes and artifice to defraud. Because it strikes 
me that if you deliberately set up a mechanism whereby one side 
has the ability to twist the system so that they win, and you 
then sell it to people as a fair arbitration, somebody is being 
defrauded out there, and I am wondering if you have considered 
it from a civil or prosecutive point of view.
    Ms. Bartholet. I would agree with you that it is a racket. 
I think this system is completely stacked to simply benefit the 
credit card companies. And peremptory challenge can sound fair 
to people because, yes, it is a typical thing that exists in 
our court system. But it is very different when, as you say, 
there is a repeat player and the little guy does not have a 
lawyer, does not know the system, does not know who has been 
disqualified before or who might have ruled for the credit card 
company before.
    Senator Whitehouse. And does not repeat.
    Ms. Bartholet. The additional problem here is the financial 
pressure that arbitrators are under, so most arbitrators, 
unlike me, do arbitration as their main livelihood. Sometimes 
it is 100 percent of their income, or it is most of their 
income. For me, it was 1 percent when I was working for NAF. My 
NAF income was 1 percent.
    If you depend on your livelihood for these cases and you 
know one side is going to use its peremptory challenge to get 
rid of you if you displease them--and that word is out. I mean, 
I learned it and can testify about it. But the word is out. I 
mean, to me, one of the really shocking things is that when I 
told my story to people in the American Bar Association, on 
arbitration committees, talked--you know, people know this 
system is stacked, but nobody is doing anything about it.
    Senator Whitehouse. My time has expired. Thank you very, 
very much.
    Chairman Leahy. Thank you.
    Senator Cornyn.
    Senator Cornyn. Thank you, Mr. Chairman, and thanks to each 
of the witnesses for being here.
    I wonder, Ms. Millett, I see that you have argued before 
the U.S. Supreme Court as an assistant to the Solicitor General 
during both the Clinton and the George W. Bush Administrations. 
Could you tell the Committee of your impressions of whether the 
way the Court has handled its docket, the way it has conducted 
its business has been, in your view, dramatically different or 
not as compared to those--comparing those two administrations?
    Ms. Millett. Thank you. I have seen very little change, 
certainly no dramatic change at all. There are little things 
that would be of no interest to the Committee but that are of 
interest to people who argue in the Court about how Chief 
Justice Roberts conducts the courtroom. But, overall, if 
anything, there is, as expressed this term, really strong 
allegiance to stare decisis in the statutory area and to 
following Congress' lead when it writes a statute, giving full 
effect to the terms of the statute, and to not jumping ahead 
and overruling precedents. They were very firm about that this 
term.
    But, overall, I think statistically is there a big 
difference? No. If there is any big difference, it is the fact 
that they decided 58 percent of their cases in favor of 
criminal defendants this term, fewer cases in favor of 
business. But, overall, there has been no dramatic change. 
There are small ups and downs, and that is the way the Court 
has always been. It is a reactive institution. It does not go 
out like Congress and find issues. It waits for people to bring 
issues to it. And some terms it has more of one issue than 
another, and that is why it is very important to look over time 
at the Court's operation.
    Senator Cornyn. Some, including me, have been very pleased 
with the elevation of Chief Justice John Roberts and Justice 
Samuel Alito. Have you noticed from any empirical evidence any 
dramatic changes in the way the Court approaches its business 
as a collegial decisionmaking body or the outcomes since those 
two Justices have been elevated to the Court?
    Ms. Millett. This term saw a fair amount of unanimity, 
particularly in the business area. It goes beyond their two 
votes. As I said, a number of the cases are coming down 8-1, 7-
2 in the business area and elsewhere. But what I saw this term 
that I think was most interesting was that you saw--on hot 
button issues like the death penalty, the lethal injection 
case, or the voter ID case that the Court addressed this term, 
where one might have thought before you would have 5-4 
decisions or splintered decisions, we actually saw broader 
consensus with 7-2 and 6-3 decisions from the Court. I think 
part of that is because Chief Justice John Roberts and Justice 
Alito have made clear their allegiance to principles of stare 
decisis and to a limited role for courts, taking small steps 
and incremental measures. And Justice Stevens and some of the 
other Justices--sometimes Justice Souter, sometimes Justice 
Breyer--have joined in that.
    Now, this is not universal. There are still controversial 
decisions. But--
    Senator Cornyn. That will always be the case, I guess by 
definition, as those are the cases that make their way to the 
U.S. Supreme Court. But I agree with your comment about the 
apparent influence of Chief Justice Roberts in particular, and 
not to take anything away from Justice Alito, but since Chief 
Justice Roberts is the Chief, it does appear that there are 
more consensus decisions and not as many 5-4 sharply divided 
decisions on the Court, or at least that is my impression.
    But I am sure that with any court you are going to find 
cases that you agree with, outcomes you agree with, and that 
you disagree with. As far as I am concerned, the Court was 
about batting .500 over the last few decisions. The Boumediene 
decision I thought was moving the goalpost right after the 
Court told Congress it needed to be involved in the process of 
creating--of setting out detainee rights and creating a 
military commissions process, and then we did so, and then the 
Court came back, moved the goalpost, and Justice Kennedy's 
opinion I thought really represented an overreach by the 
judiciary on what should be the job of the executive and 
legislative branches.
    Again, in the Louisiana child rape case, where the Court 
talked about emerging consensuses with regard to views of 
capital punishment and apparently missed the fact that the U.S. 
Congress had passed the death penalty for child rape in some 
instances and just flat did not even note that fact in talking 
about its consensus. I mean, the Court is--there are always 
going to be decisions that we agree with and disagree with, 
which is our right. But ultimately in our system it is the 
Court that makes the final decision, at least until Congress 
then comes back and changes the statute, if it is a statutory 
interpretation, or the people decide then in the Constitution 
to come out with a different outcome.
    I want to ask--Professor, I know you are critical of 
mandatory arbitration provisions in contracts, but I want to 
ask you a little bit about the history of alternative dispute 
resolution. I remember that Chief Justice Burger, in 
particular, was critical of the delay and the expense to 
ordinary litigants in litigation and worried that that might be 
just as an effective bar to access to justice as anything else. 
And so the legal profession, working with the judiciary, came 
up with a system of alternative dispute resolution, which I 
concede is not perfect any more than our system of deciding 
cases by litigation, ordinary litigation, is not perfect. But 
it was an attempt to try to address those concerns about the 
delays and the cost of access to at least some impartial 
tribunal.
    Do you agree that that is important to try to find 
mechanisms, if we can, that can provide access to an impartial 
decisionmaker that costs less money and reduces the time that 
could be otherwise consumed in ordinary litigation?
    Ms. Bartholet. Absolutely. I am a fan of ADR, which is part 
of why I have served as an arbitrator for almost 30 years. But 
there is an enormous difference between mandatory pre-dispute 
arbitration and post-dispute arbitration where the two parties 
genuinely agree to have arbitration. When they make a genuine 
agreement like that, the alternative is to go to court. In 
mandatory pre-dispute, it is all in the hands of the big player 
forcing it down the throat of the other, and it is in the hands 
of the big player to design the process, pick the arbitration 
provider, and ensure the kind of biased outcome that I think my 
experience with NAF illustrated.
    Senator Cornyn. So you just think the fix is in and there 
is no such thing as an impartial decision by an arbitration 
panel?
    Ms. Bartholet. No. I just said that I believe in ADR, and I 
think there is a huge difference between mandatory pre-dispute 
ADR and authentic ADR, if you will, that if two parties 
genuinely agree to do arbitration, it is a completely different 
matter.
    Senator Cornyn. I see my time is up.
    Chairman Leahy. Thank you.
    Now, Ms. Millett, I should point out--Senator Cornyn has 
mentioned the cases on the military commissions. There are some 
of who feel that when the Supreme Court stands up for the 
Constitution, they are not really moving the goalpost. But I do 
take your point that corporations have lost some cases in this 
term along with big cases that they have won. My only concern 
is the trend and its effect on ordinary Americans. In a lot of 
terms, the Supreme Court has ruled with the Chamber of Commerce 
70 percent of the time when they filed a brief. Now, that 
number by itself does not mean that they are wrong. But I 
wonder, when you look at the 19-year litigation ordeal that Ms. 
Schultz went through, or the arbitration process that the 
professor has talked about, does that sound fair to you?
    Ms. Millett. To be clear, this term the Supreme Court ruled 
in favor of the Chamber of Commerce--only about 50 percent of 
the time, not 78 or 80--
    Chairman Leahy. I was talking about the last two terms.
    Ms. Millett. Well, the last term was about--I guess if you 
average them, I suppose--I am not good at math. Is that 68 or 
60-something percent? It has not been 80 percent over the last 
two terms.
    Chairman Leahy. Seventy. I said 70.
    Ms. Millett. I am sorry if I misunderstood, but I want to 
make clear that this term business sort of won as much as it 
lost. And I think questions of fairness are at some level 
policy questions. What the Supreme Court was doing in these 
cases was applying statutory text that was enacted by this 
body, signed by an assortment of Presidents, and adhered to its 
stare decisis rule in the statutory area, which is that 
Congress leads and the Court follows. A lot of these decisions, 
especially the arbitration decisions, have their roots back 10 
to 20 years. All they did this term in arbitration were very 
narrow applications of what had already happened before. So I 
think--
    Chairman Leahy. Of course, there are cases where one would 
argue that they did not follow the Congress's lead, the 
Ledbetter case being an example of that. Many feel that not 
only the congressional--not only the legislation, but the way 
that legislation has been interpreted was not followed by the 
Court.
    Ms. Millett. The Court does not always get it right. I am 
not here to say that they do, and people will think different 
ones are wrong and different ones are right. As a woman, I have 
enormous sympathy for Mrs. Ledbetter and an understanding of 
how difficult it is for someone faced with discrimination to 
realize it and to have the courage to bring a complaint. It 
affects their livelihoods. Part of that problem may also be it 
is good to have a Supreme Court that has people who come from 
different backgrounds and different experiences.
    Chairman Leahy. Well, you preach to the converted there. I 
have recommended to the last four Presidents that they go 
outside what I call the ``judicial monastery'' and pick 
somebody--I have done this with both Democratic and Republican 
Presidents, recommend they go outside the judicial monastery 
and pick somebody more in the real world. When I hear members 
of the Supreme Court talk about, well, if somebody can just 
take the time to do this or take the time to do that, these are 
people that could plan something for 2:30 on June 12th 2 years 
from now and know they could do it. Most people in real life 
cannot plan something for 2:30 this afternoon. It is things 
like that that are of concern.
    The Exxon decision, I was concerned that what they are 
saying is that the corporations have to be able to predict 
punitive damages. I am more concerned about the rights of 
people. I look at what Ms. Schultz has said. They found damages 
after 19 years of this on something where the Exxon Valdez and 
the corporation were totally at fault. I think everybody agreed 
with that. Your losses that you have suffered are not covered 
by that decision. Is that correct, Ms. Schultz? I am speaking 
about you. I mean you and the others in a similar position.
    Ms. Schultz. The compensatory damages were calculated for 
the first 1 to 3 years, and they did not foresee how long it 
would take our fishery to recover or that the herring would not 
come back at all. And it also excluded a lot of claims, for 
instance, the devaluation of vessels and permits owned by 
fishermen which fell 60% or more. These investments represented 
the equity that people had. It was their retirement. And it 
just disappeared and it was never in any way compensated for.
    Our attorneys told us the punitive damages will take care 
of that, don't worry about it. And now with the reduction not 
only from the original case in 1994 being from $5 billion, down 
half, and then down to a tenth, it has left us with nothing.
    Chairman Leahy. Professor, is there any doubt in your mind 
based upon misleading letters that NAF sent to parties about 
your unavailability, as you have testified, the unsatisfactory 
explanations you got from their legal counsel, that you were 
prevented from deciding cases because you ruled once out of 19 
cases against them? In other words, you were not one who could 
be seen as every single time ruling with them? I am not trying 
to put words in your mouth. I will let you explain it the way 
you want.
    Ms. Bartholet. There is no doubt in my mind, and indeed 
when I said to the two staff people with NAF that this was what 
I had to assume was the reason for my disqualification, one of 
them agreed with me, and the other one did not deny it.
    Chairman Leahy. I am thinking when Professor Robert 
Lawless, who testified in our first hearing, in this series of 
hearings on Supreme Court decisions, he talked about the 
National Arbitration Forum. He said, ``Arbitrating a debt 
collection bypasses the normal procedural safeguards that a 
court proceeding will give, and before the NAF, the debt 
collector will almost always win. According to the San 
Francisco city attorney, in 18,075 cases, the NAF ruled against 
consumers in 18,045 of them.'' Professor Lawless suggested they 
are acting more as a debt collector than an arbitrator. Would 
you agree?
    Ms. Bartholet. Well, yes, although I think there is nothing 
necessarily wrong with debt collection cases, and I will point 
out that I myself ruled almost all the time, 18 cases, for the 
credit card company. So I think there definitely are valid 
claims that can be brought to collect debts, and I do think the 
statistics do not tell the full story in that sense that it 
makes it perhaps look--well, I think the importance of my story 
really is that it gets beyond the statistics, because you might 
well have a fair system in which credit card companies would 
win most of the time. And I think you have to get beyond just 
the statistics to understand why the system is intrinsically 
unfair.
    Chairman Leahy. Might they feel more--might people feel 
happier about the arbitration system if they felt they had a 
real choice in whether to go before arbitration or not?
    Ms. Bartholet. I think they would not only feel happier, 
but they would get a--they should feel happier because they 
would get a different brand of justice, that if they were in a 
position after they had a dispute to decide whether or not to 
agree to arbitration, then the other side would have to be 
offering them an arbitration system that was a fair deal as 
compared to going to court.
    I mean, again, I am not a defender of the court system. It 
is in many ways too expensive, takes too long; there are lots 
of problems with it. So there may well be lots of times when it 
is better for consumers to have an arbitration system, and that 
is why, you know, if you banned pre-dispute arbitration--
    Chairman Leahy. What you are saying is give them a choice.
    Ms. Bartholet. Give them a choice, and then you will get a 
better brand of justice.
    Chairman Leahy. Thank you.
    Any other questions? If not, we have another hearing. 
Senator Cornyn?
    Senator Cornyn. If I could just ask questions on another 
brief area, Mr. Chairman.
    Chairman Leahy. Of course.
    Senator Cornyn. Thank you very much. While we are all 
concerned about the fairness of our justice system, I want to 
just ask a couple of questions. I have introduced legislation 
that would address abuses by securities class action counsel, 
basically breaching their fiduciary duty to the members of a 
class by not keeping them fully informed or by perhaps even 
paying kickbacks to the class counsel. Of course, this followed 
on the heels of a couple of high-profile scandals involving 
Melvyn Weiss and William Lerach for which they ended up going 
to prison.
    What was so shocking, I think, about that was that the Wall 
Street Journal reported that Mr. Lerach, when he was confronted 
about his conduct, he said, ``Believe me, it was industry 
practice.''
    And the Washington Post editorialized in response to the 
scandal that ``what is needed now is a sober discussion about 
how best to achieve a fair, more balanced legal system through 
comprehensive tort reform. .  .  . Smart and ethical 
businesspeople and lawyers--and, yes, there are many who fit 
the bill--would be wise to start working together to craft such 
a fix.''
    The Dallas Morning News in my home State called the scandal 
evidence of ``one of the dirty little secrets of securities 
fraud cases--kickbacks and other secret arrangements that 
provide a pile of cash to lawyers and far less to the 
supposedly defrauded ordinary investors.''
    And I would just ask Ms. Millett, is this an area that you 
think would be worthy of Congress's scrutiny, perhaps even 
holding hearings to look at whether there are things we might 
be able to do to help make sure that when securities class 
action litigation is initiated, that it actually benefits the 
class members, the defrauded investors, and not just the 
lawyers who bring the lawsuits?
    Ms. Millett. This is not my area of expertise, but I do not 
think anyone, certainly any lawyer, could be opposed to efforts 
to make lawyers and the legal system be responsive to the 
people it is supposed to serve. And it is always an 
embarrassment to me as a lawyer when things like this come out, 
because I believe very highly in the integrity of our 
profession and of our court system. And so I think certainly 
when problems arise, it is very important for this body to look 
and to examine those, and those kinds of measures are what the 
Supreme Court then follows. The Court cannot solve these 
problems alone. It can only deal with the cases that come to 
it. It is for this body to deal with the more intrinsic 
problems. Beyond that, I am not an expert to know the details 
of it one way or the other, but no one can be opposed to making 
lawyers and the system more responsive to the people it serves.
    Senator Cornyn. On the panel, you have two former Attorneys 
General and a former prosecutor, and it would be my hope that--
you know, certainly we all as members of the profession do not 
believe that all lawyers are bad.
    Ms. Millett. I hope not.
    Senator Cornyn. Most lawyers in my experience do try to 
practice in an ethical and upright way, but I think this is an 
area that would certainly be worthwhile to make sure that the 
persons for whom the litigation is brought actually benefit and 
not just a lawyer who is engaged in perhaps unethical or even 
illegal activity.
    Thank you, Mr. Chairman.
    Chairman Leahy. Thank you, and we will keep the record 
open. You will see your transcript, and if you look at it and 
think, ``I should have added'' whatever, obviously we will 
leave it open for that. I appreciate all three of you taking 
this time to be here. We are not trying to play a game of 
``gotcha.'' If you want to add things to it, feel free, and I 
will also hold it open if others want to ask questions.
    I thank you for taking the time. We have hundreds of 
hearings going on on the Hill every day, and I always feel so 
gratified that people take time from their own busy lives to 
come here to testify. It means a lot to all of us.
    Senator Cornyn, I thank you, and, of course, Senator 
Specter and Senator Whitehouse, and the others and their staffs 
who will have questions.
    Thank you very much. We stand in recess.
    [Whereupon, at 11:20 p.m., the Committee was adjourned.]
    [Questions and answers and submissions follows.] 

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