[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


                 JUSTICE DENIED: FORCED ARBITRATION AND THE 
                            EROSION OF OUR LEGAL SYSTEM

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

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON ANTITRUST, COMMERCIAL AND 
                             ADMINISTRATIVE LAW

                                 OF THE


                       COMMITTEE ON THE JUDICIARY

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS


                             FIRST SESSION

                               __________

                         THURSDAY, MAY 21, 2019

                               __________

                           Serial No. 116-21

                               __________

         Printed for the use of the Committee on the Judiciary
         
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]         


               Available via: http://judiciary.house.gov               

                              __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
44-090                       WASHINGTON : 2021                     
          
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                       COMMITTEE ON THE JUDICIARY

                    JERROLD NADLER, New York, Chair
               MARY GAY SCANLON, Pennsylvania, Vice-Chair
ZOE LOFGREN, California              DOUG COLLINS, GEORGIA, Ranking 
SHEILA JACKSON LEE, Texas                Member
STEVE COHEN, Tennessee               F. JAMES SENSENBRENNER, Jr., 
HENRY C. ``HANK'' JOHNSON, Jr.,          Wisconsin
    Georgia                          STEVE CHABOT, Ohio
THEODORE E. DEUTCH, Florida          LOUIE GOHMERT, Texas
KAREN BASS, California               JIM JORDAN, Ohio
CEDRIC L. RICHMOND, Louisiana        KEN BUCK, Colorado
HAKEEM S. JEFFRIES, New York         JOHN RATCLIFFE, Texas
DAVID N. CICILLINE, Rhode Island     MARTHA ROBY, Alabama
ERIC SWALWELL, California            MATT GAETZ, Florida
TED LIEU, California                 MIKE JOHNSON, Louisiana
JAMIE RASKIN, Maryland               ANDY BIGGS, Arizona
PRAMILA JAYAPAL, Washington          TOM MCCLINTOCK, California
VAL BUTLER DEMINGS, Florida          DEBBIE LESKO, Arizona
J. LUIS CORREA, California           GUY RESCHENTHALER, Pennsylvania
SYLVIA R. GARCIA, Texas              BEN CLINE, Virginia
JOE NEGUSE, Colorado                 KELLY ARMSTRONG, North Dakota
LUCY MCBATH, Georgia                 W. GREGORY STEUBE, Florida
GREG STANTON, Arizona
MADELEINE DEAN, Pennsylvania
DEBBIE MUCARSEL-POWELL, Florida
VERONICA ESCOBAR, Texas

        PERRY APELBAUM, Majority Staff Director & Chief Counsel
                BRENDAN BELAIR, Minority Staff Director

      SUBCOMMITTEE ON ANTITRUST, COMMERCIAL AND ADMINISTRATIVE LAW

                DAVID N. CICILLINE, Rhode Island, Chair
                    JOE NEGUSE, Colorado, Vice-Chair
HENRY C. ``HANK'' JOHNSON, Jr.,      F. JAMES SENSENBRENNER, Jr., 
    Georgia,                             Wisconsin, Ranking Member
JAMIE RASKIN, Maryland               KEN BUCK, Colorado
PRAMILA JAYAPAL, Washington          MATT GAETZ, Florida
VAL BUTLER DEMINGS, Florida          KELLY ARMSTRONG, North Dakota
MARY GAY SCANLON, Pennsylvania       W. GREGORY STEUBE, Florida
LUCY MCBATH, Georgia

                       SLADE BOND, Chief Counsel
                    DANIEL FLORES, Minority Counsel
                           
                           C O N T E N T S

                              ----------                              

                              MAY 21, 2019

                                                                   Page

                           OPENING STATEMENTS

The Honorable David Cicilline, Chairman, Subcommittee on 
  Antitrust, Commercial and Administrative Law...................     1
The Honorable Jim Sensenbrenner, Ranking Member, Subcommittee on 
  Antitrust, Commercial and Administrative Law...................     3
The Honorable Jerrold Nadler, Chairman, Committee on the 
  Judiciary......................................................     4
The Honorable Doug Collins, Ranking Member, Committee on the 
  Judiciary......................................................     6

                               WITNESSES

Deepak Gupta, Founding Principal, Gupta Wessler PLLC.............     9
  Oral Testimony.................................................     9
  Prepared Testimony.............................................    11
Kevin Ziober, Lieutenant Commander, Navy Reserves................    21
  Oral Testimony.................................................    21
  Prepared Testimony.............................................    23
Gretchen Carlton, Advocate.......................................    31
  Oral Testimony.................................................    31
  Prepared Testimony.............................................    32
Phil Goldberg, Managing Partner, Shook, Hardy & Bacon L.L.P......    35
  Oral Testimony.................................................    35
  Prepared Testimony.............................................    37
Andrew Pincus, Partner, Mayer Brown L.L.P........................    40
  Oral Testimony.................................................    40
  Prepared Testimony.............................................    41
Myriam Gilles, Paul Verkuil Chair in Public Law, Benjamin Cardozo 
  School of Law..................................................    49
  Oral Testimony.................................................    49
  Prepared Testimony.............................................    50

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

A letter for the record by George Slover, Senior Policy Counsel, 
  Consumer Reports A letter from The Honorable David Cicilline, 
  Chairman, Subcommittee on Antitrust, Commercial, and 
  Administrative Law.............................................    78
A letter for the record by Lisa Gilbert, Vice President of 
  Legislative Affairs, Public Citizen from The Honorable David 
  Cicilline, Chairman, Subcommittee on Antitrust, Commercial, and 
  Administrative Law.............................................    80
A letter for the record by Terry O'Neil, Executive Director, 
  National Employment Lawyers Association from The Honorable 
  David Cicilline, Chairman, Subcommittee on Antitrust, 
  Commercial, and Administrative Law.............................    83
A letter for the record by the Fair Arbitration Now coalition 
  from The Honorable David Cicilline, Chairman, Subcommittee on 
  Antitrust, Commercial, and Administrative Law..................    87
A statement for the record by Allen Carlson, Owner, Italian 
  Colors from The Honorable David Cicilline, Chairman, 
  Subcommittee on Antitrust, Commercial, and Administrative Law..    91

                                APPENDIX

Responses to questions for the record from Andrew Pincus, 
  Partner, Mayer Brown L.L.P.....................................    95

 
 JUSTICE DENIED: FORCED ARBITRATION AND THE EROSION OF OUR LEGAL SYSTEM

                              ----------                              


                         Thursday, May 21, 2019

                        House of Representatives

                       Committee on the Judiciary

                             Washington, DC

    The Subcommittee met, pursuant to call, at 9:59 a.m., in 
Room 2141, Rayburn House Office Building, Hon. David Cicilline 
[chairman of the subcommittee] presiding.
    Present: Representatives Cicilline, Nadler, Johnson of 
Georgia, Raskin, Jayapal, Scanlon, Neguse, Sensenbrenner, 
Collins, Buck, Armstrong, and Steube.
    Staff Present: David Greengrass, Senior Counsel; John Doty, 
Senior Advisor; Madeline Strasser, Chief Clerk; Moh Sharma, 
Member Services and Outreach Advisor; Susan Jensen, 
Parliamentarian/Senior Counsel; Joseph Van Wye, Professional 
Staff Member; Lina Khan, Counsel; Slade Bond, Chief Counsel; 
Daniel Flores, Minority Chief Counsel; Andrea Woodard, Minority 
Professional Staff.
    Mr. Cicilline. The Judiciary Committee will come to order.
    Without objection, the Chair is authorized to declare 
recesses of the Committee at any time.
    Good morning and welcome to today's hearing on the impact 
of forced arbitration on the fundamental rights of hard-working 
Americans and our system of laws.
    I now recognize myself for an opening statement.
    Buried deep within the fine print of everyday contracts, 
forced arbitration clauses block American consumers and workers 
from their day in court to hold corporations accountable for 
breaking the law before the disputes even arise. This private 
system does not have the same procedural safeguards of our 
justice system. It is not subject to oversight, there is no 
judge or jury, and it is not bound by laws passed by Congress 
or the states.
    When forced arbitration is combined with non-disclosure 
agreements, it effectively silences the victims of rampant 
corporate misconduct. For example, according to a disturbing 
report by the Washington Post, hundreds of former female 
workers of Sterling Jewelers, the massive jewelry chain that 
owns Kay Jewelers and Jared, were, and I quote, ``routinely 
groped, demeaned, and urged to sexually cater to their bosses 
to stay employed.'' According to numerous sworn statements, 
male executives and supervisors at all levels of the company 
engaged in a widespread pattern of abuse, harassment, and 
discrimination. This misconduct included forcing women to 
perform sexual favors to receive better jobs or higher pay and 
retaliating against women who reported abuse within the 
company.
    One store manager wrote in her declaration that male 
executives ``prowled around like dogs that were let out of 
their cage, and there was no one to protect the female managers 
from them.'' Although many of the women at Sterling Jewelers 
sought to hold the company accountable by banding together in a 
class action, Sterling covered up this abusive conduct for 
years by forcing its workers to waive their right to bring a 
lawsuit against the company in public courtrooms.
    These arbitration proceedings were conducted in private, 
the outcome was sealed, and any settlements with the company 
were bound by confidentiality clauses. Not only did this 
massive cover-up shield the company from public accountability, 
it also blocked other victims of assault and harassment from 
coming forward until some of the stories finally became public 
years later. As Gretchen Carlson, one of our witnesses today, 
will testify, this is not an isolated incident. Far from it. 
Thousands of women across the country have suffered through 
similar pain and humiliation. They were isolated by predatory 
companies, they were silenced by forced arbitration clauses, 
and they were unable to hold wrongdoers accountable by having 
their day in court.
    This is just one example of many areas where people's legal 
rights have also been disarmed. They relate to veterans, to 
victims of civil rights violations, to service Members, and 
many others. This is nothing short of a corporate takeover of 
our nation's system of laws, and the American people have had 
enough.
    The overwhelming majority of voters, including 83 percent 
of Democrats and 87 percent of Republicans, support ending 
forced arbitration. It is time to act.
    With that in mind, I thank our panel of distinguished 
witnesses for appearing at today's important hearing and very 
much look forward to your testimony.
    It is now my pleasure to yield the balance of my time to 
the distinguished gentleman from Georgia, the sponsor of the 
FAIR Act legislation with 200 cosponsors, that would prohibit 
the use of forced arbitration in consumer, worker, civil 
rights, and antitrust disputes. Mr. Johnson, you are 
recognized.
    Mr. Johnson of Georgia. Thank you, Chairman Cicilline.
    The issue of forced pre-dispute arbitration is very 
important to me, and it is a battle I have been fighting a long 
time.
    Twelve years ago, when I was a freshman in Congress, I 
first introduced a bill that would render pre-dispute 
arbitration clauses unenforceable in certain employment, 
consumer, and civil rights cases.
    I believe that when one party is vastly more powerful than 
another, it is just not fair or equitable to allow a bigger guy 
to slam the courthouse doors shut and force the smaller guy 
into a private, for-profit dispute resolution process when the 
little guy gets treated wrongfully.
    Corporations and employers love forced arbitration because 
most of the time, they win. They get to choose the arbitrator, 
the Rule of law does not necessarily apply, and there is no 
right to appeal the decision. In arbitration, the deck is 
stacked against the person and in favor of corporate interests.
    The Federal Arbitration Act was meant to apply to 
businesses of equal bargaining positions, but today the U.S. 
Supreme Court is allowing corporations and employers to force 
consumers and workers to sign away their ability to file suit 
in court and have their cases decided by a jury of their peers, 
or to join a class-action lawsuit. This is unfair, and it is 
wrong. That is why Congress needs to pass the Forced 
Arbitration Injustice Repeal Act, which has 201 cosponsors.
    As the horror stories about forced arbitration continue to 
affect millions, Americans are realizing how they are being 
tricked, and they are starting to fight back. My bill would 
help restore the right to the courthouse for Americans 
everywhere, and restore fairness to our justice system.
    I thank the panelists for being here today.
    With that, I yield back to the Chairman.
    Mr. Cicilline. I thank the gentleman.
    It is now my pleasure to yield to the distinguished 
gentleman from Wisconsin, the Ranking Member of the 
subcommittee, Mr. Sensenbrenner, for his opening statement.
    Mr. Sensenbrenner. You will hear a different view from me.
    Eliminating arbitration achieves one thing: it enriches 
trial attorneys. It does not help claimants. In fact, research 
is clear on this. When comparing arbitration and litigation in 
employment cases, claimants win more often in arbitration.
    According to one study, when a case doesn't settle and goes 
the distance, plaintiffs win three times more often in 
arbitration. Not only are these claimants more successful, but 
the research also shows that they receive nearly double the 
monetary amounts in arbitration versus in court. Wiping out 
arbitration would not give employees a better deal.
    What is a good deal is providing Americans fair access to 
justice? Taking a case to trial is costly and a time-consuming 
endeavor. Arbitration, by contrast, allows cases to be resolved 
in a much more affordable and timely manner.
    As Justice Breyer explained in the 1995 Terminix v. Dobson 
decision, and I am paraphrasing, if a consumer with a small 
damages claim is only left with a court remedy, the cost, and 
delays of which could eat up the value of an eventual small 
recovery, eliminating arbitration would have a profound 
chilling effect on justice. For many claimants, the balance of 
whether their case is worth it, either for them or for an 
attorney, will often be tipped against them.
    Killing arbitration will also harm businesses. Increased 
litigation means increased business cost, which will inevitably 
be passed on to the consumer. Rather than amassing lawyers' 
fees, businesses can use the more affordable arbitration. We 
should not make it more expensive for businesses or claimants 
to resolve their disputes when they arise.
    Which brings me to my initial point. Eliminating 
arbitration only benefits the trial attorneys. So, the question 
for my colleagues on the Democratic side of the dais, why 
pursue legislation that puts the interests of trial attorneys 
over American workers, consumers, and businesses? I fear I 
already know the answer to that question. A lot of the fear-
mongering surrounding arbitration sounds like it was lifted 
from the talking points from the AAJ's annual flyer. The AAJ, 
or American Association for Justice, is the nice-sounding name 
of the plaintiffs' attorneys' lobbying organization. It also 
happens to be a huge donor to Democratic candidates, 
contributing millions of dollars each cycle to their campaigns.
    So, let's not seek out faults in a functioning system to 
boost the bottom line of trial lawyers. Instead, let us ensure 
that Americans are given the opportunity to resolve their 
dispute, thus provide them with access to an affordable, 
workable, and successful means to resolve their disputes, and 
ultimately let's not deny them justice.
    I yield back.
    Mr. Cicilline. Thank you, Ranking Member Sensenbrenner.
    Mr. Raskin. Mr. Chairman, point of order.
    Mr. Cicilline. What is your point of order?
    Mr. Raskin. Well, my question is just can we impute the 
policy positions that Members of the Committee take to campaign 
contributions? If so, I think I would be doing it a lot more 
frequently. I thought that is something that we don't do.
    Mr. Cicilline. Excellent point. I am sure Mr. Sensenbrenner 
didn't mean to communicate that in that way.
    Mr. Raskin. We would be hearing a lot more of that in our 
Committee if that is permissible. I am just curious. Maybe we 
can have somebody research that.
    Mr. Collins. Will the gentleman yield?
    Mr. Cicilline. I think we don't need to engage in this 
colloquy. This is an important issue with strongly held beliefs 
on both sides.
    Mr. Collins. I agree with the Chairman on this.
    Mr. Cicilline. I think everyone should avoid imputing 
motivations.
    Mr. Collins. The gentleman from Georgia.
    Mr. Cicilline. All right. The Chair now recognizes the 
distinguished Chairman of the full committee, the gentleman 
from New York, Mr. Nadler, for his opening statement.
    Mr. Nadler. Thank you, Mr. Chairman, for holding today's 
important hearing on forced arbitration.
    I will call it forced arbitration.
    Nearly a century ago, Congress enacted the Federal 
Arbitration Act to allow merchants to resolve run-of-the-mill 
contract disputes in a system of private arbitration that would 
be legally enforceable. The system the Congress envisioned was 
to be used voluntarily and only between merchants of equal 
bargaining power.
    Thanks to a series of disastrous Supreme Court decisions, 
however, this system has been turned entirely on its head. 
Private arbitration has been transformed from a voluntary forum 
for companies to resolve commercial disputes into a legal 
nightmare for millions of consumers, employees, and others who 
are forced into arbitration and are unable to enforce certain 
fundamental rights in court.
    Many companies use forced arbitration as a tool to protect 
themselves from consumers and workers who seek to hold them 
accountable for alleged wrongdoing. By burying a forced 
arbitration clause deep in the fine print of a take-it-or-
leave-it consumer and employment contract, companies can evade 
the court system where plaintiffs have far greater legal 
protections and hide behind a one-sided process that is tilted 
in their favor.
    For example, arbitration generally limits discovery, does 
not adhere to the rules of civil procedure, can prohibit class 
actions, and almost always does prohibit class actions, may 
have no right of appeal, and the proceedings and often even the 
results must stay secret.
    For millions of consumers and employees, the precondition, 
whether they know it or not, of obtaining a basic service or 
product, such as a bank account or a cell phone or a credit 
card, or even a job, is that they must agree to resolve any 
disputes in private arbitration. That means that their ability 
to enforce civil rights, consumer, labor, and antitrust laws 
are subject to the whims of a private arbitrator who is not 
required to provide plaintiffs any of the fundamental 
protections guaranteed in the courts, and whose further 
employment may depend on how good a reputation he has among the 
commercial class as ruling in their favor.
    We have a better principle in this country, and that is 
that all Americans deserve their day in court. We make a 
mockery of this principle, however, when we allow individuals 
to be stripped of this right and to be forced into private 
arbitration proceedings without the safeguards the judicial 
system affords. That is where we find ourselves today.
    This problem began in earnest in the 1980s with a series of 
Supreme Court decisions that misapplied the clear legislative 
intent of Congress and dramatically expanded the ability of 
companies to limit the rights of consumers and workers through 
forced arbitration.
    In 1984, the Court granted corporations the right to 
enforce arbitration clauses even when State law rendered them 
void. And strikingly, in 1985, the Court allowed arbitration 
proceedings to be used not just to settle contracts but also to 
interpret laws enacted by Congress to implicate fundamental 
rights, just as Sandra Day O'Connor criticized the Supreme 
Court's decision allowing arbitration clauses to preempt State 
law as a form of judicial revisionism that is, quote, 
``unfaithful to Congressional intent, unnecessary, and 
inexplicable.''
    Similarly, Professor Margaret Moses, a leading scholar in 
the field of commercial arbitration, has observed, ``The 
courthouse, step by step, built a house of cards that has 
almost no resemblance to the structure envisioned by the 
original statute.''
    Most recently, a conservative majority on the Supreme Court 
reached new heights in misreading what Congress intended. Last 
year in a 5-to-4 decision in the Epic Systems case, the Court 
held that employers could combine forced arbitration clauses 
with class action bans to prevent workers from banding together 
to hold law-breaking employers accountable, despite clear 
authority for workers to bring their claims under the National 
Labor Relations Act.
    That is why yesterday I reintroduced the Restoring Justice 
for Workers Act, legislation that would end forced arbitration 
in employment contracts and protect workers' rights to pursue 
work-related claims in court. As Justice Ruth Bader Ginsburg 
stated in her dissent in Epic Systems, ``A congressional 
correction is urgently in order.'' I strongly agree.
    That is why I also strongly support H.R. 1423, the Forced 
Arbitration Injustice Repeal Act, or FAIR Act, one of the few 
times when the acronym fits, introduced by the gentleman from 
Georgia, Mr. Johnson, which would prohibit forced arbitration 
in consumer, employment, civil rights, and antitrust disputes. 
I applaud Congressman Johnson for his leadership on this 
legislation, and I look forward to working with him and other 
Members who have introduced legislation addressing the crisis 
of forced arbitration to ensure that individuals can once again 
enforce the laws the Congress enacts.
    The widespread use of forced arbitration is a serious 
threat to our entire legal system and the basic tenets of our 
democracy. For many companies, forced arbitration has become a 
get-out-of-jail-free card to circumvent the basic rights of 
consumers and workers. It is up to Congress to reverse this 
dangerous trend.
    Let me just add here, we used to have a concept in law--
when I went to law school, they still taught it--called 
contracts of adhesion, where a contract was unenforceable if 
one party had no choice in entering into it. All these 
arbitration clauses, almost, are contracts of adhesion. You 
try, when you want to get a credit card, try crossing out the 
fine print, if you can find it without the magnifying glass, 
that says that you will settle all disputes in arbitration. 
Cross it out. See if you get the credit card. See if you get 
the bank loan. See if you get the mortgage. See if you get the 
car loan.
    You have no choice.
    When the gentleman from Wisconsin talks about voluntary 
arbitration, if it were voluntary and it were between equals, 
that is what Congress meant in 1925. These are all contracts of 
adhesion. They are turning the Federal courts into simply 
collection agencies for rich people and making them 
unavailable, making State courts unavailable for most people 
for most of the kinds of disputes that they will get into.
    It is up to Congress to reverse this dangerous trend, and I 
look forward to hearing from our distinguished panel of 
witnesses about how best to address this important issue.
    I thank the Chairman for holding today's hearing, and I 
yield back the balance of my time.
    Mr. Cicilline. I thank the gentleman.
    Now I am pleased to recognize the Ranking Member of the 
full committee, the gentleman from Georgia, Mr. Collins, for 
his opening statement.
    Mr. Collins. Thank you, Chairman Cicilline and Ranking 
Member Sensenbrenner, for holding this hearing.
    Arbitration provides consumers a simpler, cheaper, faster 
path to justice than the judicial system does. This is what the 
evidence showed the last time the Judiciary Committee performed 
oversight of the arbitration system during the 111th Congress.
    The evidence in favor of preserving access to arbitration 
since then has only increased. Companies are continuing to 
follow arbitration protocols that help to ensure due process is 
given to claimants against them. A string of new Supreme Court 
decisions has demonstrated the Court's confidence in the 
arbitration system, and the Consumer Financial Protection 
Bureau's 2015 study of arbitration highlighted problems 
consumers would face if they had no access to arbitration--this 
is the Consumer Financial Protection Bureau's study--but 
instead had to rely on flawed judicial class actions.
    That is not to say that the arbitration system is, by any 
means, perfect. The arbitration system is generally good and 
should be preserved.
    Bills have been introduced this term that would wipe out 
the use of arbitration in broad sectors of the economy. Rather 
than wipe out arbitration altogether, we should be considering 
ways to make it better still.
    The Senate Judiciary Committee Chairman Graham suggested 
just that in the Senate Judiciary Committee hearing on 
arbitration earlier this year. He also suggested that while we 
look at ways to improve arbitration, we should also look at 
ways to improve litigation. I am encouraged by those 
suggestions.
    The worst result would be to wipe out Americans' access to 
arbitration while leaving them only with an unimproved judicial 
system. You can't leave both untended. They have to be looked 
at together, and simply a blanket solution, as we found in this 
Committee many times, doesn't work. In fact, it creates more 
problems than it is worth.
    So, I look forward to the witnesses here today. Thanks for 
being here this morning. It is good to see you.
    Thanks, Mr. Chairman, for having this hearing. I yield 
back.
    Mr. Cicilline. Thank you, Mr. Collins.
    It is now my pleasure to introduce today's witnesses.
    Our first witness is Deepak Gupta, the Founding Principal 
of Gupta Wessler, PLLC. Mr. Gupta focuses on a wide range of 
issues, including constitutional law, class actions, and 
consumers' and workers' rights. He is a leading public interest 
attorney and advocate, has argued several cases before the 
Supreme Court, and has handled appeals before every Federal 
circuit and seven State supreme courts.
    Mr. Gupta was Senior Counsel for Litigation and Enforcement 
Strategy at the Consumer Financial Protection Bureau. Before 
the CFPB, he spent seven years at Public Citizen, where he 
founded the Consumer Justice Project, and in 2010 he argued 
AT&T Mobility v. Concepcion, a landmark arbitration case, and 
has since played a leading role in the debate over forced 
arbitration.
    Mr. Gupta earned his Bachelor of Arts at Fordham University 
and his law degree at Georgetown University Law Center.
    Welcome.
    Our second witness is Kevin Ziober, a Lieutenant Commander 
in the U.S. Navy Reserves, where he has served since 2008 and 
was deployed in Afghanistan in 2012 for 12 months. As a 
Lieutenant Commander, Mr. Ziober is responsible for the 
manning, training, and mobilization readiness of a 130-member 
Information Warfare Unit. Since 2016, Mr. Ziober has been a 
fierce advocate for stronger employment and reemployment rights 
for National Guard and Reserve Members under the Uniformed 
Services Employment and Reemployment Rights Act, USERRA.
    Mr. Ziober earned his Bachelor of Science degree in 
Business and Finance from the University of Southern 
California's Marshall School of Business.
    Welcome.
    Our third witness is Gretchen Carlson, an acclaimed 
journalist, best-selling author, filmmaker, and advocate. Ms. 
Carlson hosted ``The Real Story'' and co-hosted ``Fox and 
Friends'' for more than seven years on Fox News. In 2016, Ms. 
Carlson was forced out of Fox after her workplace harassment 
complaint became public and has since focused her energy on 
advocating for important legislative changes to protect sexual 
assault and sexual harassment survivors. She has written two 
New York Times best-sellers and has been recognized by the New 
York Women in Communications, the National Organization for 
Women, and the YWCA of Greater Los Angeles for her advocacy 
work.
    In 1989, Ms. Carlson became the first classical violinist 
to be crowned Miss America and is the first former Miss America 
to serve as chair of the organization. She received her 
Bachelor of Arts at Stamford University and serves as a 
National Trustee for the March of Dimes.
    Welcome.
    The fourth witness on our panel is Phil Goldberg, Managing 
Partner at Shook, Hardy & Bacon L.L.P. As co-chair of Shook's 
Public Policy Group, Mr. Goldberg has more than 25 years of 
experience addressing liability-related public policy and 
public affairs issues. His specialty is tort and product 
liability theories and defenses, and he regularly speaks at 
judicial and attorney conferences regarding liability issues.
    Mr. Goldberg has filed amicus briefs with the Supreme 
Court, the U.S. Court of Appeals, and State courts at every 
level, and his scholarship has been cited by the Supreme Courts 
of New Jersey and Rhode Island. He was admitted to the American 
Law Institute in 2001, and in 2019 was named Special Counsel to 
the Manufacturers Accountability Project. He received his 
Bachelor of Arts from Tufts University and his law degree from 
the George Washington University School of Law.
    Welcome, Mr. Goldberg.
    Our fifth witness is Andrew Pincus. Mr. Pincus is a partner 
at Mayer Brown, L.L.P., with a focus on briefing and arguing 
cases before the Supreme Court and other appellate courts. He 
has argued 29 Supreme Court cases and has been the co-director 
of the Yale Law School Supreme Court Clinic since 2006, 
providing pro bono representation in 10 to 15 Supreme Court 
cases each year.
    Prior to joining Mayer Brown, Mr. Pincus served as General 
Counsel of the United States Department of Commerce from 1997 
to 2000, and as an Assistant to the Solicitor General in the 
Department of Justice from 1984 to 1988. He received his 
Bachelor of Arts degree from Yale University and his J.D. from 
the Columbia University School of Law.
    Welcome, Mr. Pincus.
    Our final witness is Professor Myriam Gilles, who has been 
the Paul Verkuil Chair in Public Law at the Benjamin Cardozo 
School of Law since 2003. Before being appointed as Chair, Ms. 
Gilles served as an Associate Professor and Lecturer of Law at 
the Benjamin Cardozo School. She has taught courses on civil 
procedure, product liability, complex litigation, and 
contracts. Additionally, Ms. Gilles sits on the Boards of both 
the Justice Resource Center and Public Justice, where she is an 
executive Committee member of the Class Action Preservation 
Project.
    She received her Bachelor of Arts at Harvard College and 
her law degree from Yale Law School.
    Welcome, Ms. Gilles.
    We welcome all our very distinguished witnesses and thank 
them for participating in today's hearing.
    Now if you would please rise, I will begin by swearing you 
in. You must please raise your right hand.
    Do you swear or affirm under penalty of perjury that the 
testimony you are about to give is true and correct to the best 
of your knowledge, information, and belief, so help you God?
    Let the record show that the witnesses answered in the 
affirmative.
    Thank you, and you may be seated.
    To the witnesses, please note that each of your written 
statements will be entered into the record in their entirety. 
Accordingly, we ask that you summarize your testimony in 5 
minutes. To help you stay within that time, there is a timing 
light on your table. When the light switches from green to 
yellow, you have 1 minute to conclude your testimony. When the 
light turns to red, it signals that your 5 minutes has expired.
    We will begin with Mr. Gupta.

                   TESTIMONY OF DEEPAK GUPTA

    Mr. Gupta. Thank you, Chairman Cicilline, Ranking Member 
Sensenbrenner, and distinguished Members of the subcommittee. 
Thank you for inviting me to testify and for holding this 
hearing.
    As an advocate who has argued cases about forced 
arbitration before the U.S. Supreme Court, one thing has become 
clear to me, and that is that only Congress can solve this 
problem.
    I have just a few basic points this morning.
    First, forced arbitration is unavoidable and deeply 
unpopular. It is everywhere. You can't avoid it, not if you 
want to live in modern society, not if you want a mobile phone 
or a credit card or a bank account. Increasingly, you can't get 
a job unless you give up your right to hold your employer 
publicly accountable for sexual harassment or assault, for 
discrimination or wage theft.
    It is stressful enough for a family to check a loved one 
into a nursing home. Now you also have to check your legal 
rights at the door.
    A case in point involves Irene Morissette, an 87-year-old 
Catholic nun suffering from dementia who was raped in an 
assisted living facility in Alabama. After the facility failed 
to call the authorities, she was assaulted again. When Sister 
Irene's family filed a lawsuit against the nursing home, it 
invoked a forced arbitration clause, and her case was 
dismissed. 90 percent of nursing home chains across the country 
have forced arbitration clauses in their contracts. This means 
not only that families like Sister Irene's get denied justice, 
but it also means that patterns of wrongdoing don't come to 
light because arbitration mandates secrecy.
    Americans hate forced arbitration. In our hyper-partisan 
times, that opposition is remarkably bipartisan. 80 percent or 
more of Republicans, Democrats, and Independents support 
legislation to end forced arbitration.
    People might not understand all the technical legal 
details, but they know when the system has been rigged against 
them. That is why there is a movement afoot. It is why we saw 
Google workers around the world walk out, outraged at how these 
clauses shield sexual harassment. One of the walk-out 
organizers, Mr. Tanuja Gupta, is here today, and it is why law 
students, like Harvard student Molly Coleman, who is also here, 
are organizing to get law firms to drop these clauses.
    The second point I want to make this morning is that forced 
arbitration is a fundamental threat to our democracy and to our 
shared constitutional values. As the Supreme Court has 
acknowledged, an arbitration clause often means that you will 
have no way of getting justice under Federal laws that would 
otherwise have been enforceable in court.
    If Congress passes laws that can't be enforced in the real 
world, what good are those laws?
    What forced arbitration really does is it replaces the laws 
that are written by Congress with private legislation written 
by corporations into the fine print of contracts that nobody 
reads and that nobody can negotiate. That is not what is 
supposed to happen in a democracy.
    Forced arbitration also robs us of our constitutional right 
to a jury trial, and this is no technicality. The very reason 
we have a Bill of Rights at all is because the original 
Constitution lacked a right to a civil jury trial. Please take 
a moment to appreciate how far this takes us away from our 
founding ideals. John Adams once said that representative 
government and trial by jury are the heart and lungs of 
liberty. Without them, he said, we have no other fortification 
against being ridden like horses, fleeced like sheep, worked 
like cattle, and fed and clothed like swine and hounds. He 
might have been talking about forced arbitration.
    Third, the biggest problem with forced arbitration isn't 
simply that it is a biased or unfair process, it is that it 
kills people's claims entirely. If you remember only one thing 
from my testimony, I hope it is this: Forced arbitration does 
not do what its proponents say it does. It does not channel 
claims into some alternative system that is better, faster, or 
cheaper at resolving disputes. Instead, it makes sure that most 
consumers' and workers' claims simply disappear.
    One way to see this is to ask what consumers actually get 
out of arbitration. Of the hundreds of millions of consumers 
that interact with banks and other financial companies, how 
many do you think won affirmative relief on claims of $1,000 or 
less in arbitration? In a two-year period, for the nation's 
leading arbitration forum, that number was just 4--not 4 
million, not 400,000, not even 400, just 4. Contrast that with 
the tens of millions of consumers who received more than $2 
billion in cash relief through the litigation system. These 
numbers expose the arguments on the other side as a bad joke.
    Based on this kind of comparison, we can recognize forced 
arbitration for what it is, a mechanism that quietly transfers 
giant amounts of wealth from poor to rich.
    Thank you.
    [The statement of Mr. Gupta follows:]

                   STATEMENT OF DEEPAK GUPTA

    Chairman Cicilline, Ranking Member Sensenbrenner, 
distinguished Members of the Subcommittee: Thank you for 
inviting me to testify today. My name is Deepak Gupta. I am the 
founder of Gupta Wessler PLLC, a law firm focused on Supreme 
Court and appellate advocacy. Over the past decade, I have 
represented parties in some of the U.S. Supreme Court's key 
cases interpreting the Federal Arbitration Act--including AT&T 
Mobility v. Concepcion and American Express v. Italian Colors. 
I teach arbitration as a Lecturer at Harvard Law School, have 
written about arbitration, see, e.g., Arbitration as Wealth 
Transfer, 5 Yale L. & Pol'y Rev. 499 (2017), and previously 
worked on arbitration issues as Director of the Consumer 
Justice Project at Public Citizen and as Senior Counsel at the 
Consumer Financial Protection Bureau.
    My testimony today makes just a few basic points:
    First, forced arbitration is unavoidable and deeply 
unpopular. We're all subject to forced arbitration and we have 
no real choice in the matter (which is why we call it 
``forced''). Forced arbitration clauses are in 86% of private 
student loans,88% of mobile phone contracts, and 99% of 
storefront payday loans. Credit cards, bank accounts, TV and 
internet service, gym Memberships--they all require 
arbitration. Taking a job also increasingly requires you to 
give up your right to hold your employer publicly accountable 
for sexual harassment or assault, discrimination, or wage 
theft. It's difficult enough for a family to check a loved one 
into a nursing home. Now you also have to check your family's 
legal rights at the door--a practice that has been shown in 
numerous instances to shield shocking abuse and neglect from 
public scrutiny.
    When Americans are polled about forced arbitration, they 
hate it. Despite our hyper-partisan times, this sentiment is 
widely shared by voters across the political spectrum. 
Overwhelming majorities of Republicans, Democrats, and 
independents--80% or more of each--support federal legislation 
to end forced arbitration. People might not understand all the 
technical legal details, but they know when the system has been 
rigged against them.
    Second, forced arbitration is a threat to democracy and our 
shared constitutional values. As the U.S. Supreme Court has 
itself acknowledged, the presence of a forced arbitration 
clause often means that Americans will have no effective method 
of asserting their rights or getting justice under federal laws 
that could otherwise have been enforced in a court--consumer 
protection or antitrust laws, for example, or prohibitions on 
sex or race discrimination. If Congress passes laws that can't 
be enforced in the real world, what good are those laws?
    Forced arbitration in effect replaces the laws that 
Congress enacts with private legislation, written by 
corporations into the fine print of contracts that nobody reads 
and that nobody can negotiate. That's not what's supposed to 
happen in a democracy.
    Forced arbitration also robs us of our constitutional 
rights to a day in court and a civil trial by jury. This is no 
mere technicality. The very reason the U.S. Constitution has a 
Bill of Rights at all is because the original document lacked 
protection for the cherished Anglo-American right to a civil 
jury trial. Take a moment to appreciate how far this takes us 
away from our founding ideals. John Adams once said that 
``representative government and trial by jury are the heart and 
lungs of liberty. Without them we have no other fortification 
against being ridden like horses, fleeced like sheep, worked 
like cattle and fed and clothed like swine and hounds.''
    Forced arbitration is also both secret and slanted: It 
shields lawbreaking, inhibits development of the law, and 
distorts outcomes in favor of those who write the contracts, 
who get to pick the arbitration forum they prefer. Forced 
arbitration thereby enables an incredibly broad range of 
harmful and illegal practices--from sexual harassment and 
assault to illegal discrimination, from wage theft to consumer-
protection and antitrust violations--to go both unnoticed and 
unpunished.
    Third, the biggest problem with forced arbitration is not 
simply that it's a biased or unfair process--it's that it kills 
most people's claims entirely. If you remember only one thing 
from this hearing, I hope it is this: Forced arbitration does 
not do what its proponents claim it does. It doesn't channel 
claims into an alternative system that's better, faster, or 
cheaper at resolving disputes. Instead, under forced 
arbitration, claims of American consumers and workers simply 
disappear, cutting off compensation and deterrence as well as 
public accountability and the development of the law itself.
    One way to see this empirically is to ask what consumers 
actually get out of arbitration. It should be no surprise that 
few consumers with low-value claims successfully advocate for 
themselves when forced to seek individual relief. But you might 
be surprised at how few. Of the hundreds of millions of 
consumers that interact with banks, credit cards, student 
loans, payday loans, debt collectors, and other companies, how 
many do you think have won affirmative relief on claims of 
$1,000 or less in arbitration? A comprehensive study by the 
Consumer Financial Protection Bureau found that in 2010 and 
2011, for the nation's leading arbitration forum (the American 
Arbitration Association), the number was just four.
    Not four million, not 400,000, not even 400. Just four.
    These numbers expose the efficiency arguments for forced 
arbitration of consumer claims as nothing more than a bad joke. 
By contrast, between 2008 and 2012, the CFPB, at least thirty-
four million consumers of the same universe of companies 
received compensation through class actions. Four hundred 
twenty-two consumer financial class-action settlements garnered 
more than $2 billion in cash relief for consumers and more than 
$600 million in in-kind relief. Those numbers don't capture the 
additional benefits of industry-changing injunctions and 
deterrence of future bad practices. One case study comparing 
outcomes for consumers who had been swindled by banks through 
overdraft fees found that those without arbitration clauses 
were able collectively to recover hundreds of millions of 
dollars. Because the defendant was a bank, that money was 
deposited straight into the consumers' bank accounts. 
Meanwhile, while those facing enforceable arbitration clauses 
won back nothing.
    Based on this kind of empirical comparison, we can 
recognize forced arbitration for what it is: A mechanism that 
quietly transfers giant amounts of wealth from poor to rich. 
You can see the same phenomenon play out when you look at how 
forced arbitration affects a range of wage-theft, consumer-
protection, and antitrust claims--to name just a few examples.
    Finally, forced arbitration is only possible because 
unelected federal judges have twisted the original intent of a 
law passed by Congress in 1925--which means that Congress has 
the power to fix the problem now. In the 1920s, when the 
Federal Arbitration Act was passed, some legislators expressed 
concern that arbitration might let ``the powerful people . . . 
come in and take away the rights of the weaker ones.'' The 
architects of the FAA assured them this wasn't the case: ``It 
is not intended this shall be an Act referring to labor 
disputes, at all. It is purely an Act to give the merchants the 
right or the privilege of sitting down and agreeing with each 
other as to what their damages are, if they want to do it. Now, 
that is all there is in this.'' The Federal Arbitration Act 
expressly excludes all employment contracts from its reach, 
providing that ``nothing herein contained shall apply to 
contracts of employment of seamen, railroad employees, or any 
other class of workers engaged in foreign or interstate 
commerce.''
    For much of the 20th century, arbitration under the FAA 
worked as Congress had intended: to resolve the garden-variety 
contractual disputes that arise between businesses. Federal 
statutory claims were categorically beyond the FAA's reach, as 
were all claims brought by workers and all claims in State 
court. The insertion of arbitration clauses into mass contracts 
with consumers or workers was unheard of. It wasn't until the 
1980s and '90s that the Supreme Court even allowed federal 
statutory claims into arbitration. When it did so, it was 
always careful to insist on a critical ``effective 
vindication'' principle: Arbitration was permissible only so 
long as it didn't interfere with the parties' ability to 
effectively vindicate their Substantive rights. Remarkably, 
that limiting principle makes no appearance in the Supreme 
Court's most recent opinions. This essential limit--which was 
supposed to preserve the legitimacy of arbitrating statutory 
claims in the first place--now appears to have vanished 
entirely, without a trace.

                               I.

    Forced arbitration is unavoidable. Forced arbitration 
clauses are everywhere, and they ensnare us in all facets of 
our lives, robbing us of our legal rights as consumers, as 
workers, as patients, as investors, and as small business 
owners. Amazon, AT&T, Comcast, Wells Fargo, Ticketmaster, 
Dropbox, Goldman Sachs, P.F. Chang's, and Uber are just some of 
the many companies that have modified their contracts with 
consumers or workers to include these terms.\1\ Whether you're 
taking out a student loan or checking a loved one into a 
nursing home, forced arbitration is a fact of life.
---------------------------------------------------------------------------
    \1\ See generally Jean R. Sternlight, Disarming Employees: How 
American Employers are Using Mandatory Arbitration To Deprive Workers 
of Legal Protection, 80 Brook. L. Rev. 1309 (2015); Lina Khan, Thrown 
Out of Court, Wash. Monthly, June/July/Aug. 2014, http://www. 
washingtonmonthly.com/magazine/junejulyaugust_2014/features/
thrown_out_of_court050661.php.
---------------------------------------------------------------------------
    The most comprehensive (and congressionally mandated) study 
of the prevalence and effects of arbitration found that over 
83% of prepaid cards, 86% of private student loans, 88% of 
mobile wireless contracts, and 99% of storefront payday loans 
are now subject to forced arbitration.\2\ Over 85% of contracts 
with arbitration clauses include class action bans.\3\ Market 
concentration, meanwhile, magnifies the effects. For example, 
although only 16% of credit card issuers include arbitration 
provisions in their contracts, over 50% of credit card debt is 
outstanding are subject to them.\4\ Were it not for an 
antitrust settlement requiring certain credit card issuers to 
drop their arbitration provisions, the share of debt subject to 
arbitration would have been 94%.\5\
---------------------------------------------------------------------------
    \2\ Consumer Financial Protection Bureau, Arbitration Study, 
Sec. 2, at 8 (2015) (``CFPB Study'').
    \3\ CFPB Study, Sec. 2, at 8.
    \4\ Id.
    \5\ Id at Sec. 2, at 9-11.
---------------------------------------------------------------------------
    Existing inequality both reflects and facilitates the 
growing prevalence of forced arbitration clauses. Economic 
concentration has handed a relatively small number of firms 
outsized influence over the contractual terms that govern most 
transactions. For example, Comcast and TimeWarner together 
control at least 57% of the national broadband market, and 
around 63% of Americans live in areas where they can choose 
only between these two providers.\6\ Some cities--including 
Boston and the Twin Cities--are served by only one company, 
leaving residents with no choice at all.\7\ One or two 
companies, as a result, now set the contractual terms for a 
significant share of U.S. broadband consumers. The same is 
increasingly true of local hospitals, commercial banks, and 
airlines, to name a few. Under such diminished competition, 
consumers have no bargaining power and largely sign contracts 
on a take-it-or-leave-it basis.
---------------------------------------------------------------------------
    \6\ Shalini Ramachandran, New FCC Broadband Benchmark Lifts 
Comcast's Share to Nearly 60%, WAll St. J. (Jan. 29, 2015, 5:17 p.m.), 
http://blogs.wsj.com/corporate-intelligence/2015/01/29/comcast-bulks-
up-on-broadband. Others estimate their joint share could be as high as 
75%. See William Conlow, Quantifying Comcast's Monopoly Power, Techdirt 
(Aug. 1, 2014), https://www.techdirt.com/articles/20140726/10180428015/
quantifying-comcasts-monopoly-power.shtml.
    \7\ Kate Cox, Here's What the Lack of Broadband Competition Looks 
Like on a Map, Consumerist (Mar. 7, 2014), http://consumerist.com/2014/
03/07/heres-what-lack-of-broad band-competition-looks-like-in-map-form.
---------------------------------------------------------------------------
    Taking a job in America also increasingly requires waiving 
your legal rights. Last year, the Economic Policy Institute 
estimated that more than half of nonunion private-sector 
employees in the United States are already subject to mandatory 
arbitration.\8\ That's roughly 60 million American workers--and 
that number has been climbing each year. Forced arbitration is 
more common in low-wage workplaces and among larger employers; 
it is also more common in industries that are 
disproportionately composed of women and in industries that are 
disproportionately composed of African-American workers.\9\
---------------------------------------------------------------------------
    \8\ Alexander J.S. Colvin, The growing use of mandatory 
arbitration: Access to the courts is now barred for more than 60 
million American workers, Economic Policy Institute (April 6, 2018), 
https://www.epi.org/publication/the-growing-use-of-mandatory-
arbitration-access-to-the-courts-is-now-barred-for-more-than-60-
million-american-workers/.
    \9\ Id.
---------------------------------------------------------------------------

                              II.

    Forced arbitration is deeply unpopular--and that sentiment 
is overwhelmingly bipartisan. Forced arbitration is still 
poorly understood by the public, which is why hearings like 
this are so important. When Americans are asked about what's 
happening in the fine print, their opinion comes through loud 
and clear.
    One national survey from earlier this year showed that a 
whopping 84% of American voters support federal legislation to 
end forced arbitration for consumers and employees.\10\ And 
that support was overwhelmingly bipartisan, representing the 
view of 80% or more of Republicans, Democrats, and independents 
surveyed. Eighty-three percent of Democrats and 84% of 
Republicans polled strongly believe that consumers should have 
a choice between court and arbitration. Moreover, six in ten 
Americans understand that arbitration requirements mainly 
benefit corporations over consumers or employees, and seven in 
ten oppose the ability of a company to select the arbitrator. A 
GOP polling firm found that substantial majorities of 
Republicans, independents, and Democrats alike supported action 
to limit forced arbitration of consumer contracts.\11\ The 
evidence also suggests that forced arbitration is growing 
increasingly unpopular--perhaps as a result of increased public 
attention in the wake of the #MeToo movement and various 
financial scandals.\12\
---------------------------------------------------------------------------
    \10\ National Survey on Required Arbitration, Hart Research 
Assocs., Feb. 28, 2019, https://www.justice.org/sites/default/files/
2.28.19%20Hart%20poll%20memo.pdf.
    \11\ Sylvan Lane, GOP polling firm: Bipartisan support for consumer 
bureau arbitration rule, The Hill, Oct. 5, 2017, http://thehill.com/
policy/finance/354143-gop-polling-firm-finds-bipartisan-support-for-
consumer-bureau-arbitration-rule.
    \12\ A poll of likely voters before the 2016 election found that 
75% supported the right of bank customers to take complaints to court, 
rather than being forced into private arbitration. Americans for 
Financial Reform & Center for Responsible Lending, 1,000 Likely 2016 
National Voters, Lake Research Partners (2015), http://
ourfinancialsecurity.org/wp-content/uploads/2015/07/
Toplines.AFRCRL.public.070715.pdf.
---------------------------------------------------------------------------

                              III.

    The main purpose and effect of forced arbitration is to 
kill people's legal claims--plain and simple. If you have only 
one takeaway from this hearing, I hope it is this: The biggest 
problem with forced arbitration is that it kills people's 
claims. Contrary to what forced arbitration's proponents would 
have you believe, it doesn't channel claims into an alternative 
system that's better, faster, or cheaper at resolving 
individual disputes. Instead, under forced arbitration, the 
small-dollar claims of American consumers and workers simply 
disappear.
    To see this in action, consider how forced arbitration 
plays out in three different areas: Wage-and-hour law, consumer 
law, and antitrust. In each area, the evidence shows that 
arbitration functions to transfer wealth upwards from 
individuals to those who draft the arbitration clauses.\13\
---------------------------------------------------------------------------
    \13\ The following discussion is adapted from Deepak Gupta & Lina 
Kahn, Arbitration as Wealth Transfer, 35 Yale L. & Pol'y. Rev. 499 
(2017), https://ylpr.yale.edu/arbitration-wealth-transfer.
---------------------------------------------------------------------------
    Wage theft. The growing prevalence of forced arbitration 
clauses in employee contracts decimates workers' ability to 
hold their employers accountable for labor violations. At a 
time when, according to federal and State officials, ``more 
companies are violating wage laws than ever before,'' \14\ 
workers have found themselves increasingly unable to recover 
stolen wages from their employers.\15\
---------------------------------------------------------------------------
    \14\ Steven Greenhouse, More Workers are Claiming ``Wage Theft,'' 
N.Y. Times, Aug. 31, 2014, http://www.nytimes.com/2014/09/01/business/
more-workers-are-claiming-wage-theft.html.
    \15\ Brady Meixell & Ross Eisenbrey, An Epidemic of Wage Theft is 
Costing Workers Hundreds of Millions of Dollars a Year, Econ. Pol'y 
Inst. (Sept. 11, 2014), http://www.epi.org/publication/epidemic-wage-
theft-costing-workers-hundreds.
---------------------------------------------------------------------------
    Wage theft occurs in several forms, and employers sometimes 
engage in multiple types of violation simultaneously. Some 
employers pay workers less than the legally required minimum 
wage, fail to pay workers legally required rates for overtime 
work, or wrongfully deduct pay. In other cases, employers 
commit ``off-the-clock'' violations, requiring workers to come 
in early or stay late while failing to compensate them for that 
additional time. Laws against wage theft are massively under-
enforced,\16\ which means that joining a collective lawsuit is 
frequently a worker's only means to recover money they earned 
but were never paid. Forced arbitration clauses and class 
action bans block this vital path for redress, enabling 
employers to steal workers' wages with impunity.\17\ Because 
wage theft is already regressive, practices that enable it, 
like forced arbitration clauses, transfer wealth away from 
workers and towards big companies.
---------------------------------------------------------------------------
    \16\ Winning Wage Justice: An Advocate's Guide to State and City 
Policies to Fight Wage Theft, Nat'l Emp't Law Project 17-18 (Jan. 
2011), http://www.nelp.org/content/uploads/2015/03/
WinningWageJustice2011.pdf.
    \17\ It is worth noting that some low-wage employers do not provide 
workers with contracts at all. These workers--usually the most 
vulnerable to wage theft--are therefore not directly affected by forced 
arbitration clauses and class action bans. The trend may still affect 
these workers in a broader sense, given that these contractual terms 
promote and normalize a general culture of impunity.
---------------------------------------------------------------------------
    Experts estimate the sum of wages stolen nationally to be 
as high as $50 billion a year, ``a transfer from low-income 
employees to business owners that worsens income 
inequality.''\18\ In Los Angeles, for example, low-wage workers 
lose$26.2 million in wage theft violations every week, or $1.4 
billion annually.\19\ In New York, meanwhile, wage theft is 
estimated to cheat 2.1 million workers across the State out of 
a cumulative $3.2 billion in wages and benefits.\20\ Nor is the 
phenomenon isolated to a handful of firms or industries. A 2009 
study that surveyed more than 4,000 workers in low-wage 
industries found that 76% had been underpaid or not paid at all 
for their overtime hours.\21\ The report found that wage theft 
is prevalent across sectors--including retail, restaurants and 
grocery stores, domestic work, manufacturing, construction, 
janitorial, security, dry cleaning, laundry, car washes, and 
nail salons.\22\
---------------------------------------------------------------------------
    \18\ Meixell & Eisenbrey, supra.
    \19\ Ruth Milkman et al., Wage Theft and Workplace Violations in 
Los Angeles: The Failure of Employment and Labor Law for Low-Wage 
Workers, Instit. for Research on Labor and Emp't (2010), http://
www.labor.ucla.edu/downloads/wage-theft-and-workplace-violations-in-
los-angeles-2.
    \20\ Aditi Sen, By a Thousand Cuts: The Complex Face of Wage Theft 
in New York, Ctr. for Popular Democracy (2015), http://
populardemocracy.org/sites/default/files/WageTheft 
%2011162015%20Web.pdf.
    \21\ Annette Bernhardt et al., Broken Laws, Unprotected Workers: 
Violations of Employment and Labor Laws in American Cities, Unprotected 
Workers, http://www.unprotectedworkers.org/index.php/broken_laws/index 
(last visited Jan. 11, 2016).
    \22\ Id.
---------------------------------------------------------------------------
    Through class action lawsuits, workers have recovered 
millions of dollars in unpaid wages from their employers. In 
2009, for example, Walmart agreed to pay $40 million in unpaid 
wages as part of a settlement with thousands of former and 
current employees.\23\ To resolve a class action dispute, 
Staples paid $42 million in back pay to its assistant store 
managers,\24\ and Schneider Logistics paid $21 million to its 
workers.\25\ In other recent examples, New Jersey truck drivers 
filed suit and recovered $2 million in back wages,\26\ New York 
car wash workers $3.5 million,\27\ and cheerleaders for the 
Oakland raiders $1.25 million.\28\
---------------------------------------------------------------------------
    \23\ Dave Copeland, Wal-Mart Will Pay $40 m to Workers, Boston.com 
(Dec. 3, 2009), http://www.boston.com/news/local/massachusetts/
articles/2009/12/03/wal_mart_will_pay_40m_to_workers.
    \24\ Donna Goodison, Staples to Pay $42 m to Settle Wage Claims 
(Jan. 30, 2010), http://news.bostonherald.com/business/general/view/
20100130staples_to_pay_42m_to_settle_ wage_claims.
    \25\ Carrillo v. Schneider Logistics, 823 F. Supp. 2d 1040 (C.D. 
Cal. 2011).
    \26\ Erik Ortiz, Raymour & Flanigan Drivers Get $2 m for OT (July 
8, 2009), http://www.pressofatlanticcity.com/business/
article_394857c209233c-517c-9dd2-fcf148daac8c.html.
    \27\ Libby Nelson, Car Wash Chain to Pay $3.4 Million in Back 
Wages, N.Y. Times (June 30, 2009, 4:38 p.m.), http://
cityroom.blogs.nytimes.com/2009/06/30/car-wash-chain-will-pay-34-
million-in-back-wages/.
    \28\ Robin Abcarian, Cheerleaders' Wage-Theft Lawsuit to Cost 
Oakland Raiders $1.25 Million, L.A. Times (Sept. 4, 2014), http://
www.latimes.com/local/abcarian/la-me-ra-raiders-settle-cheerleader-
lawsuit-20140904-column.html.
---------------------------------------------------------------------------
    Once a company introduces a forced arbitration clause with 
a class action ban, these suits vanish. A worker's only chance 
at recourse then is individual arbitration, which studies 
suggest is stacked against workers. For example, a 2011 study 
found that employees win in arbitration far less often than in 
employment litigation trials, and that when employees do win, 
their average awards were ``substantially lower'' in 
arbitration than in court.\29\ This in itself suggests that 
forced arbitration in the employee context transfers wealth 
upwards.
---------------------------------------------------------------------------
    \29\ Alexander J. S. Colvin, An Empirical Study of Employment 
Arbitration: Case Outcomes and Processes, 8 J. Empirical Legal Stud. 1 
(2011).
---------------------------------------------------------------------------
    Yet comparing outcomes in litigation and arbitration 
actually underestimates the regressive effect, since it fails 
to capture individuals dissuaded from initiating action 
altogether. This sort of ``claim suppression'' is a primary 
effect of forced arbitration and class action bans.\30\ 
Although some commentators argue that arbitration offers 
employees a more accessible venue for redress than 
litigation,\31\ ``empirical evidence now shows that mandatory 
employment arbitration is bringing about the opposite result--
eroding rather than boosting employees' access to justice by 
suppressing employees' ability to file claims.'' \32\ This 
evidence reveals that employees covered by forced arbitration 
provisions ``almost never file arbitration claims.'' \33\
---------------------------------------------------------------------------
    \30\ As David S. Schwartz writes, ``[t]he compelling logic of what 
is commonly called `mandatory arbitration' is that it is intended to 
suppress claims,'' and ``[n]othing is more claim-suppressing than a ban 
on class actions, particularly in cases where the economics of 
disputing make pursuit of individual cases irrational.'' David S. 
Schwartz, Claim-Suppressing Arbitration: The New Rules, 87 Ind L.J. 
239, 240, 242 (2012). See also Judith Resnik, Diffusing Disputes: The 
Public in the Private of Arbitration, the Private in Courts, and the 
Erasure of Rights, 124 Yale L.J. 2804 (2015) (``The result has been the 
mass production of arbitration clauses without a mass of arbitrations. 
Although hundreds of millions of consumers and employees are obliged to 
use arbitration as their remedy, almost none do so--rendering 
arbitration not a vindication but an unconstitutional evisceration of 
statutory and common law rights'').
    \31\ See, e.g., Samuel Estreicher, Saturns for Rickshaws: The 
Stakes in the Debate Over Predispute Employment Arbitration Agreements, 
16 Ohio St. J. on Disp. Resol. 559 (2001).
    \32\ Sternlight, supra, at 1312.
    \33\ Id.
---------------------------------------------------------------------------
    As a result, the class action recoveries workers obtained 
even a few years ago are increasingly out of reach. Fewer 
workers file suit at all, and the claims of those who do are 
usually dismissed.\34\ Employers annually steal, and will 
continue to steal, billions of dollars from workers--yet 
arbitration clauses will keep workers from claiming any of it 
back.
---------------------------------------------------------------------------
    \34\ Id.
---------------------------------------------------------------------------
    Consumer claims. Research shows that forced arbitration is 
widespread across consumer markets, in industries ranging from 
nursing homes and online retail to auto dealers and cell phone 
providers. For insight into the effects of arbitration in 
consumer markets, look to the CFPB's March 2015 study. Their 
report is based on filings with the American Arbitration 
Association (AAA), which administers the vast majority of 
consumer financial arbitration cases. Although the report 
examines just one segment of the economy, it is by far the most 
comprehensive empirical study to date on outcomes in consumer 
arbitration.
    The CFPB found that a large share of financial products and 
services are now subject to forced arbitration, including 44% 
of checking accounts, 83% of prepaid cards, 86% of private 
student loans, 88% of mobile wireless contracts, and 99% of 
storefront payday loans.\35\ Over 85% of contracts with 
arbitration clauses include class action bans. Market 
concentration, meanwhile, magnifies the effects. For example, 
although only 16% of credit card issuers include arbitration 
provisions in their contracts, over 50% of credit card loans 
outstanding are subject to them.\36\ Were it not for an 
antitrust settlement requiring certain credit card issuers to 
drop their arbitration provisions, the share of loans subject 
to arbitration would be 94%.\37\
---------------------------------------------------------------------------
    \35\ CFPB Study, Sec. 2, at 8.
    \36\ Id. at Sec. 2, at 10.
    \37\ Id. at Sec. 2, at 9-11.
---------------------------------------------------------------------------
    This rise of forced arbitration eliminates what had been a 
key means of consumer redress. Between 2008 and 2012, 422 
consumer financial class action settlements garnered more than 
$2 billion in cash relief for consumers and more than $600 
million in in-kind relief.\38\ These figures underestimate the 
consumer benefit generated by these class action suits, given 
that several settlements also required companies to change 
their business practices. As the CFPB notes, cases ``seldom 
provided complete or even any quantification of the value of 
this kind of behavioral relief.'' \39\ Nor does monetary relief 
capture the deterrence value of class action suits, the threat 
of which can serve as a powerful check on corporate wrongdoing.
---------------------------------------------------------------------------
    \38\ Id. at Sec. 1, at 16.
    \39\ Id.
---------------------------------------------------------------------------
    So how do consumers fare under the new regime? Although it 
can be difficult to compare litigation and arbitration 
outcomes, the CFPB's report includes a case study that 
resembles a controlled-experiment comparison. The study 
examines outcomes in a multidistrict class action, filed 
against twenty-three banks for illegally charging consumers 
millions of dollars in excessive overdraft fees.\40\ In total, 
debit cardholders reached eighteen settlements through the 
litigation, resulting in $1 billion in cash relief for over 
twenty-eight million consumers. Not all account holders were 
able to join the class, however, because nine of the twelve 
banks with arbitration clauses moved to enforce them. Five of 
the banks succeeded, getting their cases moved to arbitration, 
while four eventually chose to settle, giving individuals the 
chance to opt-out and arbitrate instead. As of February 2015, 
CFPB could not verify that even a single one of the consumers 
who had pursued claims in arbitration--either by choice or 
because banks had forced them to arbitrate--received any relief 
at all.\41\ In a class action against one of the banks that had 
forced arbitration, the arbitrator dismissed the consumers' 
contract and tort claims, and they were awaiting an answer on 
their federal statutory claims.\42\ Of the 242 opt-outs, no 
more than three consumers brought overdraft claims before an 
arbitrator, and zero were successful.\43\ Meanwhile, the 
twenty-eight million consumers who had secured settlements 
through litigation saw money transferred directly to their bank 
accounts.\44\
---------------------------------------------------------------------------
    \40\ Id. at Sec. 8, at 39-46 (discussing In Re Checking Account 
Overdraft Litig., MDL 2036. 685 F.3d 1269 (11th Cir. 2012)).
    \41\ Specifically, 173 consumers opted out of the settlement with 
Chase, thirty-four opted out of the settlement with M&I, and thirty-
five opted out of the settlement with Compass Bank. Id. at App. A, at 
108-09.
    \42\ Id. at Sec. 5, at 86-87.
    \43\ ``No more than three'' because CFPB does not know precisely 
whether the three opt-outs that did go on to file claims through 
arbitration had been involved in the overdraft litigation specifically, 
or some other class action suit. Id. at App. A, at 104.
    \44\ Id. at Sec. 8, at 40 & 45-46.
---------------------------------------------------------------------------
    Because information on both the opt-outs and those forced 
to arbitrate is incomplete, we cannot say with total certainty 
that those who pursued arbitration received no money at all. 
The thirty-two consumers who won money awards from AAA 
arbitrators in 2010 and 2011 could have included victims of 
unfair overdraft fee practices. But even the most generous 
reading of these outcomes strongly suggests that arbitration is 
worse at achieving justice for wronged consumers than is class 
action litigation. That a maximum of three of the 242 opt-outs 
attempted to arbitrate, too, suggests that forced arbitration 
suppresses claims.\45\
---------------------------------------------------------------------------
    \45\ Anecdotes suggest that defense lawyers recognize the 
suppressive effect of arbitration clauses. As a recent news story 
reported, ``[Lawyers believe] they may have found, in the words of one 
law firm, the `silver bullet' for killing off legal challenges. In an 
industry podcast, two lawyers discussed the benefits of using 
arbitration to quash consumers' lawsuits. The tactic, they said, is 
emerging at an opportune time, given that debt collectors are being 
sued for violating federal law. The beauty of the clauses, the lawyers 
said, is that often the lawsuit `simply goes away.' '' Jessica Silver-
Greenberg & Michael Corkery, Sued Over Old Debt, and Blocked From Suing 
Back, N.Y. Times, Dec. 22, 2015, http://www.nytimes.com/2015/12/23/
business/dealbook/sued-over-old-debt-and-blocked-from-suing-back.html.
---------------------------------------------------------------------------
    Moreover, arbitration seems to favor businesses over 
consumers not just relative to litigation, but in an absolute 
sense. The CFPB found that, within arbitration, companies are 
far more successful than consumers. According to the Bureau's 
report, businesses won relief in 93% of the business-initiated 
cases in which arbitrators reached a decision on the merits. In 
the disputes that businesses won, they received ninety-eight 
cents for every dollar they had claimed; taking into account 
the disputes where they lost, they recovered ninety-one cents 
for every dollar claimed. In disputes initiated by consumers, 
by contrast, arbitrators provided relief to consumers in 27% of 
cases and awarded them an average of forty-seven cents for 
every dollar claimed. Among consumer-initiated disputes as a 
whole, consumers won an average of thirteen cents for every 
dollar they had claimed.\46\ While a host of factors may 
account for the disparity in outcomes, it is clear that 
businesses are more often satisfied with arbitrator decisions 
than are consumers.
---------------------------------------------------------------------------
    \46\ These figures exclude cases in which consumers were disputing 
debts they were alleged to owe. Including outcomes in those disputes, 
consumers won some form of relief in 20% of cases and recovered an 
average of twelve cents for every dollar they claimed. CFPB Study, 
supra, at Sec. 5, at 41-45.
---------------------------------------------------------------------------
    The distributive implications of forced arbitration in 
consumer finance seem clear. As more cases are diverted into 
arbitration, consumers will likely win at lower rates and 
receive lower sums than they would through class action 
litigation. The cost of wronging consumers--whether by design 
or through negligence--will drop, given that consumers pursue 
claims through arbitration at far lower rates than they do 
through litigation, and those arbitration claims that are filed 
are less often successful. Moreover, because arbitration 
proceedings are private, businesses shed the risk of 
reputational damage. So long as wrongful acts are sufficiently 
lucrative, firms can build in the occasional arbitration 
payment as a cost of doing business. As financial institutions 
can acquire greater sums from consumers with greater impunity, 
wealth is transferred upwards.
    Forced consumer arbitration has especially pernicious 
distributive effects given that the primary users of payday 
loans and prepaid cards--which include arbitration clauses at 
particularly high rates--are low-income consumers. This 
suggests that those most vulnerable to exploitation by 
financial institutions are the most likely to be deprived of 
effective means of redress.
    Antitrust. One area of law especially vulnerable to the 
preclusive effects of arbitration is antitrust. A primary 
example of this dynamic was at play in Italian Colors, the 
Supreme Court case in which a small business owner alleged that 
American Express was illegally abusing its market power. 
Troublingly, firms that possess monopoly power can enact a sort 
of ``double punch'' by imposing arbitration terms that insulate 
their abuse of that same power. As Justice Kagan warned in her 
dissent in that case, ``The monopolist gets to use its monopoly 
power to insist on a contract effectively depriving its victims 
of all legal recourse.'' \47\ In this way, ``a company could 
use its monopoly power to protect its monopoly power, by 
coercing agreement to contractual terms eliminating its 
antitrust liability.'' \48\
---------------------------------------------------------------------------
    \47\ Italian Colors, 133 S. Ct. at 2313 (Kagan, J., dissenting).
    \48\ Id. at 2314.
---------------------------------------------------------------------------
    In Italian Colors, American Express achieved just that, by 
coupling a forced arbitration clause with a class action ban. 
Because proving antitrust damages today requires costly 
economic analysis, private plaintiffs generally cannot bring 
suits unless they can split expenses, be it through joining as 
a class or sharing costs some other way. Since American Express 
had effectively prohibited all cost-sharing arrangements, 
upholding the arbitration clause would deprive the plaintiff of 
any economically viable way to pursue a claim. By ruling for 
American Express, the Supreme Court handed firms a tool to 
deflect private antitrust suits--a gift for monopolistic 
companies, who can use their market power to impose contractual 
terms that shield abuses of that same market power from 
liability.
    Two consequences stand out: First, antitrust enforcement 
suffers as a whole, and second, this erosion of antitrust 
enforcement transfers wealth from low-income to high-income 
individuals.
    Although the Court's holding enables firms to deflect only 
private suits, there's sound reason to think that a fall-off in 
private claims will injure enforcement as a whole. For one, 
private litigation has been a traditional mainstay of antitrust 
enforcement. Indeed, Congress designed the antitrust statutes 
in order to promote private suits, not only creating a private 
right of action but also awarding private parties treble 
damages and injunctive relief. As the Court has noted, Congress 
created these private rights ``not merely to provide private 
relief'' but ``to serve as well the high purpose of enforcing 
the antitrust laws.'' \49\ Moreover, ``Congress has expressed 
its belief that private antitrust litigation is one of the 
surest weapons for effective enforcement of the antitrust 
laws.'' \50\ Furthermore, private and public enforcement often 
work in conjunction, as public officials draw on information 
revealed through private suits to build their own cases.\51\ 
Anemic private enforcement undermines the antitrust statutes as 
a whole.\52\
---------------------------------------------------------------------------
    \49\ Zenith Radio Corp. v. Hazeltine Research, 395 U.S. 100, 130-31 
(1969).
    \50\ Minn. Mining & Mfg. Co. v. N.J. Wood Finishing Co., 381 U.S. 
311, 318 (1965).
    \51\ Joshua P. Davis & Robert H. Lande, Defying Conventional 
Wisdom: The Case for Private Antitrust Enforcement, 48 Ga. L. Rev. 1 
(2013).
    \52\ Einer Elhauge, How Italian Colors Guts Private Antitrust 
Enforcement by Replacing It With Ineffective Forms of Arbitration, 38 
Fordham Int'l L.J. 771 (2015).
---------------------------------------------------------------------------
    Weaker antitrust, in turn, exacerbates economic inequality 
by enabling wealth transfers from consumers, workers, and small 
businesses to the executives and shareholders of large 
corporations. While the connection between extreme market 
concentration and wealth distribution has been overlooked for 
decades, the current inequality crisis is drawing new attention 
to the ways in which undue market power transfers wealth 
upwards.\53\
---------------------------------------------------------------------------
    \53\ See, e.g., Khan & Vaheesan, supra; Robert Reich, The Political 
Roots of Widening Inequality, Am. Prospect (Spring 2015), http://
prospect.org/article/political-roots-widening-inequality; Robert Reich, 
Saving Capitalism: For the Many, Not the Few (2015); Dave Dayen, Bring 
Back Antitrust, Am. Prospect (Fall 2015), http://prospect.org/article/
bring-back-antitrust-0; Jason Furman & Peter Orszag, A Firm-Level 
Perspective on the Role of Rents in the Rise in Inequality, Nat'l 
Bureau of Econ. Research, Oct. 16, 2015; Paul Krugman, Challenging the 
Oligarchy, N.Y. Review of Books, Dec. 17, 2015, http://www.nybooks.com/
articles/2015/12/17/robert-reich-challenging-oligarchy/ (reviewing 
Robert Reich's Saving Capitalism: For the Many, Not the Few).
---------------------------------------------------------------------------
    Abuse of market power contributes to inequality in a number 
of ways. Most obviously, monopolistic and oligopolistic firms 
often hike consumer prices. For example, a host of studies 
documents how consolidation across the healthcare industry has 
enabled hospitals, health insurers, and pharmaceutical 
companies to charge consumers more for the same goods and 
services.\54\ Businesses also use their dominance to suppress 
workers' wages. In 2006, for instance, around 20,000 registered 
nurses filed a class action suit alleging that hospitals in and 
around Detroit had colluded to keep their wages low. Three 
hospitals settled for more than a combined $48 million; 
litigation against a fourth is still pending. Similarly, in 
2010, a group of high-tech companies--including Adobe, Apple, 
Google, Intel, Intui, and Pixar--were found to have squashed 
competition by agreeing not to poach or solicit each other's 
employees. Four of the firms ultimately settled a private suit 
for $415 million, providing relief to 64,000 software 
engineers. Lastly, firms with monopoly power can extract wealth 
from smaller businesses. Italian Colors originated in a suit 
brought by Alan Carlson, the owner of a family restaurant in 
Oakland, California, who alleged that American Express had been 
using its monopoly power in premium and corporate credit cards 
to force merchants to accept ordinary cards at much higher 
rates than what rivals charged. An economist analyzing the 
excess fees charged to the Italian Colors plaintiffs estimated 
that the company's tactics cost Carlson's restaurant nearly 
$500 a year--a transfer of income from his small business to 
American Express.\55\
---------------------------------------------------------------------------
    \54\ Zack Cooper et al., The Price Ain't Right? Hospital Prices and 
Health Spending on the Privately Insured, Health Care Pricing Project, 
Dec. 2015; Leemore Dafny et al., More Insurers Lower Premiums: Evidence 
From Initial Pricing in the Health Insurance Marketplaces, Nat'l Bureau 
of Econ. Research, Working Paper No. 20140, May 2014.
    \55\ Joint App. at 96, Italian Colors, 133 S. Ct. 2304 (2013) (No. 
12-133), available at http://guptawessler.com/wp-content/uploads/2012/
05/12-133ja.pdf. While Carlson's complaint focused on the swipe fee 
costs incurred by merchants--and hence the transfer of wealth from 
small businesses to credit card companies--the swipe fee system more 
generally institutes a systemic wealth transfer from low-income to 
high-income consumers. This is because credit card use is strongly 
correlated with consumer income, and merchants pass on swipe fees in 
the form of higher retail prices to all customers. Cash buyers 
therefore end up subsidizing the cost of credit cards, while lacking 
access to the rewards and financial perks that credit card users enjoy. 
The Boston Federal Reserve estimates that the swipe fee system 
generates a yearly transfer of $1,282 from the average cash payer to 
the average card payer. Scott Schuh et al., Who Gains and Who Loses 
From Credit Card Payments?: Theory and Calibrations, Fed. Reserve Bank 
of Boston Pub. Pol'y Paper, No. 10-03, Aug. 31, 2010, https://
www.bostonfed.org/economic/ppdp/2010/ppdp1003.pdf.
---------------------------------------------------------------------------
    Since forced arbitration clauses and class action bans tend 
to preclude private antitrust suits, the rise of arbitration 
will enable firms with monopolistic power to abuse that power 
with greater impunity. Insofar as anticompetitive behavior 
transfers income from consumers, workers, and small businesses 
to the owners and managers of larger firms, the expansion of 
arbitration will lead to regressive wealth distribution.

                              IV.

    Forced arbitration is only possible because unelected 
judges have twisted the original intent of a law passed by 
Congress in 1925. Until the 1920s federal courts generally 
refused to enforce arbitration agreements. But in the early 
decades of the century, as the number of corporate 
transactions--and, by extension, disputes--grew, businesses 
wanted to give legal effect to arbitration agreements reached 
by businesses that wanted to keep their mutual disputes out of 
court.\56\ Arguing that arbitration would relieve congested 
courts, business interests lobbied Congress to let them set up 
private solutions that would be faster and cheaper than public 
courts.
---------------------------------------------------------------------------
    \56\ Margaret L. Moses, Statutory Misconstruction: How the Supreme 
Court Created a Federal Arbitration Law Never Enacted by Congress, 34 
Fla. St. U. L. Rev. 99 (2006); Imre Szalai, Outsourcing Justice: The 
Rise of Modern Arbitration Laws in America (Carolina Academic Press 
ed., 2013).
---------------------------------------------------------------------------
    When officials expressed concern that arbitration would let 
``the powerful people . . . come in and take away the rights of 
the weaker ones,'' supporters of arbitration legislation 
assured them that the device would be used only between 
consenting merchants of roughly equal bargaining power--not 
against workers or consumers.\57\ The Federal Arbitration Act 
(FAA) passed Congress in 1925, expressly excluding workers from 
its reach.
---------------------------------------------------------------------------
    \57\ Moses, supra, at 106-107.
---------------------------------------------------------------------------
    For much of the twentieth century, arbitration largely 
worked as Congress had intended: To resolve the sorts of fact-
based contractual disputes that arise between businesses in the 
course of routine transactions--concerning whether a party had 
complied with the terms of payment, for example, or delivered 
goods at the right place and right time.\58\ Federal statutory 
claims were categorically outside the FAA's reach, as were all 
claims brought by workers and all claims brought in State 
court. The insertion of arbitration clauses into mass contracts 
with consumers or workers was unheard of.
---------------------------------------------------------------------------
    \58\ Id. at 111.
---------------------------------------------------------------------------
    Starting in the 1980s, however, the U.S. Supreme Court 
issued a series of decisions that would begin to steer us down 
an entirely new path. One key moment came in 1983, when the 
Court declared that the FAA reflected a ``federal policy 
favoring arbitration.'' \59\ The idea that Congress had 
intended arbitration as preferable to courts, rather than just 
as an alternative, was not founded in legislative history.\60\ 
Still, the Court's language suggested as much, and future 
judges would lean on it as they razed the walls that had kept 
arbitration in its place.
---------------------------------------------------------------------------
    \59\ Moses H. Cone Mem'l. Hosp. v. Mercury Constr., 460 U.S. 1 
(1983).
    \60\ Moses, supra.
---------------------------------------------------------------------------
    Two successive decisions cemented what might have been a 
quirky deviation into a major turning point. In 1984, the 
Supreme Court heard a case brought in California by 7-Eleven 
franchisees against their parent company, Southland, which had 
included in their contracts a binding arbitration clause.\61\ 
California outlawed these clauses, recognizing that franchisees 
usually lacked power to negotiate these terms. Yet Southland 
argued that its contract overrode State law. Drawing on the 
Court's interpretation from the previous year--that Congress 
had intended a ``federal policy favoring arbitration''--a 7-2 
majority on the Supreme Court ruled for Southland, eroding the 
power of states to limit how companies use arbitration.
---------------------------------------------------------------------------
    \61\ Southland Corp. v. Keating, 465 U.S. 1 (1984).
---------------------------------------------------------------------------
    In a striking dissent, Justice Sandra Day O'Connor 
criticized the majority for ignoring legislative history. 
``Today's decision is unfaithful to congressional intent, 
unnecessary, and . . . inexplicable,'' she wrote. ``Although 
arbitration is a worthy alternative to litigation, today's 
exercise in judicial revisionism goes too far.'' \62\
---------------------------------------------------------------------------
    \62\ Id. at 36 (O'Connor, J., dissenting).
---------------------------------------------------------------------------
    It would soon go farther. In 1985, the Supreme Court heard 
Mitsubishi v. Soler Chrysler-Plymouth, a case in which a car 
dealer had sued the Japanese firm for violating antitrust laws, 
and Mitsubishi had pushed to arbitrate.\63\ The car dealer 
noted that the FAA allowed companies to use arbitration only to 
settle disputes about contracts they had written, not to 
interpret laws Congress had passed, like the Sherman Antitrust 
Act. A five-justice majority--continuing its recent pattern of 
pro-arbitration decisions--sided with Mitsubishi. Arbitrators 
could now Rule on actual statutory law--civil rights, labor 
protections, as well as antitrust--despite having no 
accountability or obligation to the public.
---------------------------------------------------------------------------
    \63\ Mitsubishi v. Soler Chrysler-Plymouth, 473 U.S. 614 (1985).
---------------------------------------------------------------------------
    In a powerful dissent, Justice John Paul Stevens warned 
that there were great dangers in allowing ``despotic decision-
making,'' as he called it, to extend to law like antitrust. 
``[Arbitration] is simply unacceptable when every error may 
have devastating consequences for important businesses in our 
national economy, and may undermine their ability to compete in 
world markets,'' he wrote.\64\
---------------------------------------------------------------------------
    \64\ Id. at 657.
---------------------------------------------------------------------------
    In the span of these three decisions, the Supreme Court had 
drastically enlarged the scope of arbitration. Against the 
backdrop of a movement claiming excessive lawsuits were 
strangling small businesses, courts would continue to expand 
the realms in which companies could compel arbitration. In the 
1995 case Allied-Bruce, the Supreme Court permitted the use of 
arbitration clauses by companies in routine consumer 
contracts.\65\ This prompted Justice O'Connor to remark that, 
``over the past decade, the Court has abandoned all pretense of 
ascertaining congressional intent with respect to the Federal 
Arbitration Act, building instead, case by case, an edifice of 
its own creation.'' \66\ In 2001, the Court ruled against a 
group of Circuit City workers, holding that employers could use 
arbitration clauses in contracts with employees despite 
statutory language to the contrary.\67\ In 2004, a court ruled 
that arbitration clauses were enforceable against illiterate 
consumers; \68\ a separate court ruled that they were 
enforceable even when a blind consumer had no knowledge of the 
agreement.\69\
---------------------------------------------------------------------------
    \65\ Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995).
    \66\ Id. at 283 (O'Connor, J., concurring).
    \67\ Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001). This 
decision is impossible to square with both the statutory text and 
legislative history. As one of the FAA's architects explained in 1923:

    ``It is not intended this shall be an Act referring to labor 
disputes, at all. It is purely an Act to give the merchants the right 
or the privilege of sitting down and agreeing with each other as to 
what their damages are, if they want to do it. Now, that is all there 
is in this.''

    A Bill to Make Valid and Enforceable Written Provisions or 
Agreements for Arbitration, Hearing Before the Senate Judiciary 
Committee, 67th Cong. 9 (1923).
    \68\ Wash. Mut. Fin. Grp. v. Bailey, 364 F.3d 260, 264-66 (5th Cir. 
2004).
    \69\ Am. Gen. Fin. Servs., Inc. v. Griffin, 327 F. Supp. 2d 678, 
683 (N.D. Miss. 2004).
---------------------------------------------------------------------------
    Yet the real watershed came in 2011, in AT&T Mobility v. 
Concepcion. Vincent and Liza Concepcion had sued AT&T in 
federal court in California, alleging that the company had 
engaged in false advertising by claiming that their wireless 
plan included free cell phones--a practice that had 
shortchanged millions of consumers out of about $30 each. When 
they tried to litigate as a class, AT&T pointed to the fine 
print in their contract, which included a class action ban.
    The Concepcions pointed out that class action bans violated 
California law. Many State and federal courts had forbidden 
class action bans, on the grounds that individuals often had no 
practical way to make a claim unless they joined with other 
plaintiffs to share the cost of litigating. Allowing companies 
to eliminate this right in ``take-it-or-leave-it'' contracts 
would effectively let corporations violate laws with little 
risk of accountability.
    The district court and the U.S. Court of Appeals for the 
Ninth Circuit both ruled for the Concepcions, holding that 
AT&T's terms were unconscionable and that nothing in the FAA 
preempted this arbitration-neutral Rule of State law. \70\ When 
the case reached the Supreme Court, eight State attorneys 
general, as well as a group of civil rights organizations, 
consumer advocates, employee rights groups, and prominent law 
professors, weighed in, arguing that permitting class action 
bans would enable companies to evade entire realms of law. The 
Supreme Court, in a five to four split, ruled that AT&T's 
contract was enforceable, opening the door for companies to ban 
class actions routinely in their fine print.
---------------------------------------------------------------------------
    \70\ Laster v. T-Mobile USA, Inc., No. 05CV1167DMS AJB, 2008 WL 
5216255, at Cal. Aug. 11, 2008) aff'd sub nom; Laster v. AT&T Mobility 
LLC, 584 F.3d 849 (9th Cir. 2009) rev'd sub nom. AT&T Mobility LLC v. 
Concepcion, 563 U.S. 333 (2011).
---------------------------------------------------------------------------
    At this point, one limit on class action bans remained: if 
a ban eliminated the only way someone could bring a case, it 
would be unenforceable. But in 2013, the Supreme Court razed 
even this protection in a case pitting a group of small 
merchants--including Italian Colors, the family restaurant--
against American Express.\71\ This time around, the same five-
judge majority ruled that arbitration clauses containing class 
action bans were enforceable--even when it meant citizens had 
no way to ``effectively vindicate'' their rights and were left 
with no recourse. Even for antitrust laws designed to police 
the very market power that enables big companies to insert 
these clauses in the first place.
---------------------------------------------------------------------------
    \71\ Italian Colors, 133 S. Ct. at 2304.
---------------------------------------------------------------------------
    In AT&T Mobility v. Concepcion and American Express v. 
Italian Colors, the Supreme Court gave companies a green light 
to use arbitration clauses to cut off collective claims by both 
consumers and small businesses, under both State and federal 
law. The latest Supreme Court decision in this vein, Epic 
Systems v. Lewis, sweepingly extends this dangerous trend by 
blocking workers from banding together to redress the full 
range of workplace legal violations as well.
    Just last month, Justice Ginsburg took the unusual step of 
repeating her call for Congress to take action to bring the 
Federal Arbitration Act back in line with its original intent. 
``Congressional correction of the Court's elevation of the FAA 
over the rights of employees and consumers to Act in concert,'' 
she warned, is ``urgently in order.'' \72\
---------------------------------------------------------------------------
    \72\ Lamp Plus v. Varela, slip op at 5 (S. Ct. 2019) (Ginsburg, J., 
dissenting).
---------------------------------------------------------------------------
    There was a time when reasonable people might have believed 
that forced arbitration for consumers and workers was worth 
allowing as an experiment in cheaper, faster dispute 
resolution. As Americans wake up to the spreading reality of 
forced arbitration, and as the #MeToo movement and financial 
scandals expose its pernicious effects, that time has long 
since passed. Now the only question is when and how we're going 
to fix it. I urge you to support and enact legislation to end 
forced arbitration.
    Thank you again for the opportunity to testify. I am happy 
to answer any of your questions.

    Mr. Cicilline. Thank you.
    The Chair now recognizes Mr. Ziober for 5 minutes.

         TESTIMONY OF LIEUTENANT COMMANDER KEVIN ZIOBER

    Lieutenant Ziober. Chairman Cicilline, Ranking Member 
Sensenbrenner, and other distinguished Members of the 
committee, thank you for the opportunity to testify today.
    I am a Lieutenant Commander in the Navy Reserves and a 
Federal employee, but I am here in my private capacity to share 
my own story as a Reservist who was fired on the eve of my 
deployment to Afghanistan and later forced to arbitrate my 
discrimination claim when I returned home.
    I am here to speak for tens of millions of workers who have 
been forced to agree to arbitration as a condition of 
employment. I am here asking this Congress to pass legislation 
to help give all workers a real choice to enforce their rights 
in court or in arbitration.
    Forced arbitration takes away the rights of all Americans, 
women and men, people with disabilities, veterans, consumers, 
Republicans, Democrats, and Independents. As a registered 
Republican for most of my life, I hope both parties will work 
together to restore the legal rights of all Americans, which 
are often eviscerated by forced arbitration agreements.
    I am very grateful to you, Chairman Cicilline, for your 
leadership in holding this hearing and your efforts to protect 
service Members from forced arbitration. Your bill, the Justice 
for Service Members Act, would simply clarify that service 
Members cannot be required to arbitrate their employment claims 
under USERRA, the Federal law that guarantees civilian 
employees can take military leave and later return to their 
jobs.
    I also want to thank Chairman Nadler for his leadership 
with the Restoring Justice for Workers Act, and Congressman 
Johnson for sponsoring the FAIR Act, and other Members of this 
Committee for your support with these important bills.
    In 2008, I joined the Navy Reserves to fulfill my lifelong 
dream of serving my country. One challenge all Reservists face 
is balancing their military and civilian careers, as many 
Members of Congress know personally. Unfortunately, I learned 
the hard way that some employers do not support their Reservist 
employees.
    In July 2010, I was hired by BLB Resources, a Federal 
contractor in Irvine, California. I worked hard helping BLB 
grow from a staff of 18 to over 90 employees. Six months into 
my tenure, BLB asked me and other employees to sign an 
arbitration agreement as a condition of keeping our jobs. Like 
other employees who needed their jobs to make ends meet, I felt 
that I had no choice but to sign.
    In November 2012, I received orders to deploy to 
Afghanistan for 12 months. On my last day of work, my 
colleagues greeted me with a standing ovation. My office was 
decorated with camouflage netting and Navy-colored balloons. 
Cards and gifts were stacked on my desk.
    At noon, BLB held a surprise party in my honor where 40 co-
workers gathered to wish me well on my deployment. There was 
even a large cake with an American flag decorated in red, 
white, and blue with the inscription, ``Best Wishes Kevin.''
    Around 4:45 p.m. that same afternoon, I was called into a 
meeting in the HR Department, where I was fired and told my 
position would not be available to me after my deployment. The 
shock of being terminated on the eve of my deployment to a 
combat zone created an unimaginable amount of concern and 
anxiety about how I would support myself and my family when I 
returned home. That is exactly why Congress enacted USERRA, so 
that no service member who is asked to leave their job to fight 
for our country would ever have to worry about fighting for 
their job when they returned home.
    When my deployment ended in 2014, I tried to enforce my 
USERRA rights in Federal court, but BLB moved to compel 
arbitration, and the district judge told me I had to arbitrate 
my case. The Ninth Circuit later upheld that ruling because it 
felt that USERRA's text was not clear enough in banning forced 
arbitration.
    Thankfully, my story did not end there. In 2017, when I 
asked the Supreme Court to hear my case, 20 Members of Congress 
from both parties filed an amicus brief asking the Court to 
uphold Congress' intent that USERRA bars forced arbitration. 
Although the Supreme Court declined to hear my case, bipartisan 
Members of Congress have expressed support for legislation to 
end forced arbitration for service Members and veterans in 
cases like mine. I hope that this Congress will Act to protect 
service Members, veterans, and all Americans from forced 
arbitration.
    Arbitration takes away so many rights that make our legal 
system fair, the right to an impartial judge and jury, a public 
and transparent forum, fair and consistent procedural rules, 
and a meaningful right to appeal. For me, the choice is easy. I 
prefer my day in court. Others may prefer arbitration. We all 
should get to make this choice freely and only after a dispute 
has occurred.
    As a service member, I try to remember that our service is 
not for ourselves but for every American, and in my view, no 
American should be denied the choice to enforce their rights. 
Thank you.
    [The statement of Lieutenant Ziober follows:]

         STATEMENT OF LIEUTENANT COMMANDER KEVIN ZIOBER

    Before the United States House Subcommittee on Antitrust, 
Commercial and Administrative Law May 16, 2019
    Chairman Cicilline, Ranking Member Sensenbrenner, and other 
distinguished Members of the House Subcommittee on Antitrust, 
Commercial and Administrative Law, thank you for affording me 
the opportunity to testify about my experience with forced 
arbitration and encourage Congress to pass legislation to 
protect servicemembers, veterans, and all Americans from forced 
arbitration.
    In 2016, I testified before the Senate Committee on 
Veterans' Affairs in support of the Justice for ServiceMembers 
Act of 2016, a bipartisan bill to clarify that servicemembers 
and veterans cannot be required to arbitrate their claims under 
the Uniformed Services Employment & Reemployment Rights Act 
(``USERRA''). USERRA is the federal law that has made it 
possible for millions of Americans to serve in the guard and 
reserves, because the law guarantees that civilian employees 
can take military leave and return to their civilian jobs, and 
be free of workplace discrimination and retaliation related to 
their military service. See 38 U.S.C. Sec. Sec. 4301 et seq.
    I offered similar testimony in April of 2019 in the Senate 
Judiciary Committee in a hearing organized by Chairman Lindsey 
Graham and Ranking Member Diane Feinstein. During that hearing, 
a bipartisan consensus appeared to emerge that arbitration has 
gotten out of control and is undermining the rights of every 
American under the important laws that this Congress has passed 
over the past century. I heard about my fellow Americans being 
subjected to outrageous conduct--harassment, physical assault, 
and fraud--only to have their rights stripped away by 
arbitration agreements when they had no meaningful or informed 
choice about whether to sign those agreements. I heard Members 
of the Senate on both sides of the aisle coming together to 
identify specific areas where forced arbitration should not be 
permitted, including for servicemembers and veterans, 
harassment, and other forms of discrimination, and calling for 
barring all forced arbitration so that workers and consumers 
can decide how to enforce their fundamental rights.
    I am honored to speak again today in support of millions of 
servicemembers and veterans whose rights are being taken away 
by forced arbitration when they need to invoke USERRA or the 
Servicemembers Civil Relief Act (``SCRA'').\1\ I am also 
honored to speak about how forced arbitration is jeopardizing 
the rights of all American workers and consumers, and to urge 
all Members of Congress to come together to fix this growing 
problem.
---------------------------------------------------------------------------
    \1\ Today, I am sharing my own views as a private citizen about the 
importance of USERRA. I am not speaking on behalf of any other person 
or institution. I accepted this invitation to speak and am testifying 
in my personal capacity. The views expressed in my remarks are my own 
and do not necessarily reflect the official positions of the U.S. 
Government, the U.S. Navy, or the Department of Defense. I am speaking 
on my own behalf and have no affiliation with public or private 
entities. Nor do I seek any financial or political gain by 
participating in this hearing.
---------------------------------------------------------------------------
    I am proud to have served my country in the United States 
Navy for more than a decade. Like all service Members, I joined 
the military and continue to serve because I care deeply about 
protecting the American people and our nation. And that is why 
I am here today, to seek to protect millions of servicemembers 
and veterans and hundreds of millions of Americans whose 
fundamental rights are being undermined by forced arbitration.
    I also appreciate the opportunity to tell my own personal 
story about how on my last day of work before a one-year 
deployment to Afghanistan, my employer threw an office-wide 
party to celebrate my military service, but then fired me just 
before my deployment training began in violation of federal 
law. Almost seven years later, in large part because of forced 
arbitration, I am still fighting to enforce my rights and seek 
justice. Sadly, my story is not unique. It happens every day 
across America, not only to servicemembers and veterans whose 
rights are violated, but also to working people and consumers 
of all backgrounds.
    Forced arbitration takes away the rights of all Americans--
women and men; people of all racial, ethnic, and religious 
backgrounds; people with disabilities; servicemembers and 
veterans; consumers who buy all types of products and services; 
Republicans, Democrats, and Independents.
    I hope that both parties in Congress will work together to 
reform the federal arbitration law for the benefit of all 
Americans. Though I have been a registered Republican for the 
vast majority of my life, I want to see our elected leaders 
find common ground to protect the rights that make our lives 
better--like consumer protection, civil rights, and veterans' 
rights.
    I would like to personally thank all of the Members of this 
Committee who have introduced or sponsored legislation to 
reform our federal laws so that servicemembers and veterans can 
have their day in court, and several of you who filed an amici 
curiae brief in my case before the U.S. Supreme Court to tell 
the justices that Congress always intended to protect 
servicemembers and veterans from forced arbitration under 
USERRA.
    I would also like to thank the countless Members of 
Congress who have personally served in the Armed Forces or 
whose family Members have served in the Armed Forces, and all 
of the Members of Congress who work in a bipartisan fashion to 
ensure that military families get the support that they need 
and deserve. You know the sacrifices that servicemembers and 
their families routinely make so that America can remain safe 
and free, and you understand why our federal laws must protect 
those who have honorably served.

            Balancing Civilian and Military Careers

    I grew up in California and now live in Orange County, 
California. After graduating from the University of Southern 
California with a degree in business/finance, I worked in the 
commercial finance, mortgage banking, and real estate 
industries where I enjoyed the opportunity to manage teams in 
sales, operations, underwriting, and production.
    As my civilian career developed, I realized that my life-
long desire to serve my country in the Armed Forces would soon 
close, due to the military's 40-year-old age restriction. I've 
always respected the great sacrifices that our courageous 
servicemembers have made to defend our nation, especially after 
the September 11, 2001 terrorist attacks on our homeland.
    In 2008, I joined the Navy Reserves to serve my country and 
help protect America's liberties, freedoms, and security. I 
chose to serve in the intelligence field, because I wanted to 
support those servicemembers on the front lines who literally 
sacrifice life and limb to keep America safe and defend our 
national security interests around the world.
    On July 4, 2008, on the flight deck of the USS Midway, I 
was commissioned as an Ensign in the Navy Reserves. It was a 
dream come true, and one of the proudest moments of my life. In 
2010, I was promoted to the rank of Lieutenant Junior Grade. In 
2012, I was promoted to the rank of Lieutenant and deployed to 
Afghanistan. In 2018, I was promoted to the rank of Lieutenant 
Commander. In my current duties, I oversee the manning, 
training, and mobilization readiness of a 130-member 
Information Warfare unit in San Diego.
    When I joined the Navy Reserves in 2008, I understood that 
like more than 1 million reservists \2\ I would need to balance 
my civilian career with a military career. I understood that on 
a moment's notice I could be called to active duty for weeks, 
months, or even years, and that my military service could take 
me across the United States or half-way around the globe.
---------------------------------------------------------------------------
    \2\ See Congressional Research Service, Reserve Component Personnel 
Issues: Questions and Answers at 3 (Oct. 4, 2018) (stating that 
1,036,644 Americans are Members of the Select Reserve or Individual 
Ready Reserve/Inactive National Guard as of July 31, 2018), available 
at https://fas.org/sgp/crs/natsec/RL30802.pdf.
---------------------------------------------------------------------------
    Like all reservists, I hoped that my future employers would 
support my military service and understand that by allowing me 
to take military leave from my civilian job they were literally 
making it possible for me to serve our country in the Armed 
Forces. And while I believe that most employers want to do the 
right thing and comply with USERRA, many employers find it 
inconvenient when their employees take military leave, and 
regrettably some employers even take adverse action against 
reservists--such as terminating them or refusing to reemploy 
them after their military service is over.
    Even though this type of adverse action violates USERRA, 
many employers believe that reservists will simply move on to 
the next job without taking any action to enforce their rights. 
And increasingly employers are requiring reservists to enforce 
their rights in secret arbitration proceedings that are often 
overseen by arbitrators selected by employers with a limited 
opportunity for reservists to discover the key facts in their 
cases. These employers hope that the secrecy of arbitration 
will prevent the public from learning about how they have 
mistreated reservists or veterans, even if it means taking away 
many of the key rights that Congress has bestowed upon 
reservists since the 1940s.

    Fired the Day Before I Began a Deployment to Afghanistan

    In July 2010, I was hired as a manager by BLB Resources, 
Inc. (``BLB''), a federal contractor headquartered in Irvine, 
California. From 2010 to 2012, I worked hard and helped BLB to 
grow from a staff of 18 employees to a workforce of over 90. I 
enjoyed my work and took pride in it, and I planned to build a 
career at the company.
    Six months into my tenure at BLB, the company asked me and 
other employees to sign several legal documents, including an 
arbitration agreement as a condition of keeping our jobs. Like 
other employees who needed their jobs to make ends meet, I felt 
that I had no choice but to sign the papers. I had no intention 
of losing my livelihood. Plus, things were going well for me at 
the company, I didn't foresee any legal issues arising, and I 
didn't want to cause any problems, so I signed the paperwork 
and I moved onto doing my job to the best of my ability.
    In November 2012, I received official orders from the Navy 
to deploy to Afghanistan for 12 months. (I had been on a short 
list for a mobilization for more than a year, and during that 
time my employer was aware that I would likely be deployed.) On 
my last day of work on November 30, 2012, I was greeted by my 
colleagues with a standing round of applause. My personal 
office was decorated with camouflage netting and Navy colored 
balloons. Cards and gifts were stacked on my desk. At noon, BLB 
held a surprise party in my honor, where 40 of my co-workers 
gathered to wish me well on my deployment. There was even a 
large cake with an American flag decorated in red, white, and 
blue, with the inscription ``Best Wishes Kevin.'' A picture of 
that farewell cake is attached to my testimony as Exhibit A.
    Right after the party, I felt amazing. I even called my 
family to tell them about how moved I was that my colleagues 
had honored me and my military service. 1Around 4:45 p.m. that 
same afternoon, I was summoned to a meeting in the company's 
human resources department. I didn't receive any advance notice 
of the meeting, so I didn't know what it was about. When I 
walked into the room, I saw three people: The director of human 
resources, my direct supervisor, and another person who I 
believe was the company's lawyer or employment consultant. I 
was fired on the spot and told that my position would not be 
waiting for me upon my return from active duty.
    The shock of learning that I was being terminated from my 
job on the eve of my deployment to a combat zone created an 
unimaginable amount of concern and anxiety about how I would 
support myself and my family when I returned home. In the 
course of a few hours, I went from feeling supported, proud, 
and focused on serving my country, to feeling embarrassed, 
confused, and concerned about the well-being of my loved ones.
    No servicemember who is asked to leave his family and 
friends to fight for our country should ever have to worry 
about fighting for his job when he returns home. That was the 
primary reason why Congress enacted USERRA and the 
servicemember protection laws that came before USERRA and date 
back to the 1940s.\3\
---------------------------------------------------------------------------
    \3\ When Congress enacted USERRA in 1994, it stated that the 
purposes of the law are: ``(1) to encourage noncareer service in the 
uniformed services by eliminating or minimizing the disadvantages to 
civilian careers and employment which can result from such service; (2) 
to minimize the disruption to the lives of persons performing service 
in the uniformed services as well as to their employers, their fellow 
employees, and their communities, by providing for the prompt 
reemployment of such persons upon their completion of such service; and 
(3) to prohibit discrimination against persons because of their service 
in the uniformed services.'' 38 U.S.C. Sec. 4301(a).
---------------------------------------------------------------------------

           Forced to Arbitrate My Claims Under USERRA

    I never considered myself to be a litigious person and 
never thought that I would be involved in a lawsuit. When I 
returned home from Afghanistan in the spring of 2014, I made 
the decision to try to right the wrong that I believe BLB 
committed against me and my family when it terminated me on the 
eve of my deployment.
    I talked to a lawyer and filed a USERRA action in federal 
court. Having been around the world, I am particularly grateful 
for the Rule of law and American courts. I firmly believe that 
the American justice system is the fairest and most impartial 
system in the world, and I placed my faith in that process.
    However, BLB immediately filed a motion to compel 
arbitration, arguing that the paperwork that I was forced to 
sign six months into my employment took away my right to go to 
court. The judge granted the motion, dismissing my case and 
sending it to a private arbitration company for resolution.
    I was surprised and disappointed to be denied my day in 
court like all Americans deserve. In arbitration, I would have 
no access to a federal judge nominated by the President and 
confirmed by the Senate, I would lose my Seventh amendment 
right to a jury trial, I would lose any meaningful right to an 
appeal, and I would lose my right to a public proceeding of any 
kind. Along with other servicemembers, I have fought to advance 
American ideals and values abroad, so it was particularly 
disheartening to lose these fundamental rights at home.
    I appealed the decision to the United States Court of 
Appeals for the Ninth Circuit, which affirmed the district 
court's decision to compel me into arbitration. The Court 
``acknowledge[d] the possibility that Congress did not want 
`Members of our armed forces to submit to binding, coercive 
arbitration agreements.' '' Ziober v. BLB Res., Inc., 839 F.3d 
814, 821 (9th Cir. 2016) (quoting Landis v. Pinnacle Eye Care, 
LLC, 537 F.3d 559, 564 (6th Cir. 2008) (Cole, J., concurring)). 
But it still held that I and all other reservists who work 
outside of the Federal Government could be forced to arbitrate 
our USERRA claims. Id.
    One judge on the three-judge panel in my case issued a 
separate opinion to State that he had serious ``doubts about 
whether [the Court was] reaching the right result.'' Ziober, 
839 F.3d at 821 (Watford, J., concurring). He explained that 
USERRA voids any contract that ``reduces, limits, or eliminates 
in any manner any right . . . provided by'' USERRA, and that 
the arbitration agreement in my case ``certainly `limits'--and 
for all practical purposes `eliminates'--[my] right to litigate 
[my] claims in court.'' Id. at 821-822 (quoting 38 U.S.C. 
Sec. 4302(b)). He also acknowledged that the Department of 
Labor in 2005 had issued regulations that interpret USERRA as 
prohibiting arbitration agreements that prevent reservists from 
filing actions in court. Id. (citing 70 Fed. Reg. 75246, 75257 
(Dec. 19, 2005)). Nevertheless, this judge and the three-judge 
panel concluded that the text of USERRA was not explicit enough 
in prohibiting forced arbitration, based on binding Supreme 
Court precedent about what Congress must say to override the 
Federal Arbitration Act. Id. at 821-822.
    I am grateful that one of the judges on the Ninth Circuit 
panel urged Congress to fix the law so that it makes clear that 
servicemembers cannot be forced to arbitrate their USERRA 
claims, and that he pointed to a previous case in 2008, when 
another appellate judge had similarly encouraged Congress to 
fix the law. Id. at 822-823 (Watford, J., concurring) (citing 
Landis, 537 F.3d at 564 (Cole, J., concurring)). As I describe 
below, many Members of Congress have heeded these judges' calls 
to amend USERRA so that it will forever be clear that 
servicemembers and veterans cannot be forced to arbitrate their 
claims.
    In 2017, I asked the U.S. Supreme Court to hear my case to 
challenge the notion that employers can force servicemembers 
and veterans to waive their hard-earned USERRA rights.
    Many people came to my side. In fact, 20 Members of 
Congress from both sides of the aisle, including a number of 
leaders of the House Judiciary Committee, filed a friend of the 
court brief asking the U.S. Supreme Court to hear my case and 
recognize that Congress intended to prohibit forced arbitration 
of USERRA claims when it enacted the law in 1994. See Brief of 
Members of Congress as Amici Curiae in Support of Petitioner, 
Ziober v. BLB Resources, Inc., No. 16-1269, 2017 WL 2376427, at 
*9 (U.S. May 24, 2017) (``Amici Curiae Brief''). The members of 
the House of Representatives who signed the brief include House 
Judiciary Chairman Jerrold Nadler (D-NY), House Subcommittee 
Chairman David Cicilline (D-RI), former House Judiciary 
Committee Chairman John Conyers, Jr. (D-MI), House Ethics 
Committee Chairman Ted Deutch (D-FL), Hank Johnson (Dp-GA), 
Jamie Raskin (D-MD), Joe Wilson (R-SC), Walter Jones (R-NJ) 
Rep. Jackie Walorski (R-IN). In addition, the brief was signed 
by Senators Richard Blumenthal (D-CT), Patty Murray (D-WA), 
Sheldon Whitehouse (D-RI), Sherrod Brown (D-OH), and Senator 
Mazie Hirono (D-HI). See Amicus Curiae Brief Appendix.
    These Members of Congress pointed out that when Congress 
unanimously passed USERRA, it stated that the law's anti-waiver 
provision ``would reaffirm that additional resort to mechanisms 
such as grievance procedures or arbitration or similar 
administrative appeals is not required,'' and that ``even if a 
person protected under the Act resorts to arbitration, any 
arbitration decision shall not be binding as a matter of law.'' 
Amici Curiae Brief at 9 (quoting H.R. Rep. No. 103-65, at 20 
(1993)). They also noted that in 2005 Labor Secretary Elaine 
Chao had recognized the same principle in the Department of 
Labor's regulations--that USERRA prohibits forced arbitration. 
Id. at 9-10.
    Unfortunately, the Supreme Court declined to hear my case. 
This means that for servicemembers or veterans who work for 
private companies or State or local governments, their 
employers can require them to sign arbitration agreements as a 
condition of employment (or continued employment, like in my 
case), and they can effectively take away a range of rights-- 
some of which exist under many laws and some of which are 
unique and longstanding under USERRA and its predecessor laws. 
On the other hand, federal employees cannot be forced to 
arbitrate their USERRA claims, because the Federal Circuit has 
interpreted the same language of USERRA to ban forced 
arbitration. Russell v. MSPB, 324 F. App'x 872, 874-875 (Fed. 
Cir. 2008) (per curiam). Given how many servicemembers and 
veterans work outside of the Federal Government, it is 
disappointing that so many men and women who have served can 
now be forced into arbitrating their USERRA claims.

Congress Should Reaffirm ServiceMembers' and Veterans' Ability 
                    to Enforce Their Rights

    I am here today to ask the Members of this Committee to 
step in where the federal courts have failed to follow 
Congress' clear intent to protect the rights of servicemembers 
and veterans against forced arbitration, and also to advocate 
for the principles that motivated many of us to volunteer for 
service in the first place: the right to choose how we go about 
exercising our rights and the right to access one of the 
greatest civil justice systems in the world.
    All that Congress needs to do is to reaffirm what has been 
the law since the 1950s. In fact, in 1958, the Supreme Court 
held that servicemembers could not be required to arbitrate 
their reemployment rights claims under the law that later 
became USERRA. McKinney v. Missouri-Kan.-Tex. R.R. Co., 357 
U.S. 265, 268-270 (1958). As the Supreme Court wrote in 
McKinney, a person enforcing his rights under the reemployment 
statute ``sues not simply as an employee,'' ``but as a veteran 
asserting special rights bestowed upon him in furtherance of a 
federal policy to protect those who have served in the Armed 
Forces.'' Id. at 268-269. To require veterans to pursue private 
adjudication of their rights ``would ignore the actual 
character of the rights asserted and defeat the liberal 
procedural policy clearly manifested in the statute for the 
vindication of those rights'' in court. Id. at 269-270.
    The procedures that the Supreme Court recognized in 
McKinney as contrary to arbitration include the right to file 
an action in any district where the employer has a place of 
business and that no fees or costs may be taxed against the 
servicemember in litigation (such as no filing fees). See Id. 
at 269 n.1. Those same procedures still exist to this day under 
USERRA. See 38 U.S.C. Sec. Sec. 4323(c)(2), (h)(1). But These 
protections are routinely undermined by arbitration agreements 
that require servicemembers to pursue arbitration in the 
specific location that the employer chooses (even if the 
servicemember is deployed or lives across the country) or that 
impose significant fees or costs on servicemembers. There are 
additional protections in USERRA that are inconsistent with 
forced arbitration. For example, USERRA has no statute of 
limitations, but arbitration agreements often impose very brief 
limitations periods; USERRA is designed to avoid any delay in 
adjudicating servicemembers' rights, without any need to file a 
charge with an administrative agency, but arbitration 
agreements often require multi-step procedures to be exhausted 
before a person can obtain a hearing before an arbitrator.
    Over the past decade, bipartisan Members of the United 
States Senate and House of Representatives have introduced 
legislation to reaffirm that servicemembers and veterans cannot 
be required to arbitrate their USERRA claims, unless they agree 
to arbitrate after the employment dispute has occurred. That 
legislation includes the following bills.

     LIn 2017, Subcommittee Chairman David Cicilline 
(D-RI), Rep. Henry C. "Hank" Johnson (D-GA), Rep. Joe Wilson 
(R-SC), Rep. Walter B. Jones (D-NC), Rep. Jackie Walorski (R-
IN), and other House members sponsored H.R. 2631, the Justice 
for Servicemembers Act of 2017. A companion bill was sponsored 
in the Senate by Senators Richard Blumenthal (D-CT), Richard 
Durbin (D-IL), Sheldon Whitehouse (D-RI), Kirsten Gillibrand 
(D-NY), and Mazie Hirono (D-HI).
     LIn 2016, Subcommittee Chairman David Cicilline 
(D-RI), Rep. Henry Hank Johnson (D-GA), Rep. Joe Wilson (R-SC), 
Rep. Walter B. Jones (D-NC), Rep. Jackie Walorski (R-IN), and 
other House members sponsored H.R. 5426, the Justice for 
Servicemembers Act of 2016. A companion bill was sponsored in 
the Senate by Senator Richard Blumenthal (D-CT), Senator 
Patrick Leahy (D-VT), Senator Richard Durbin (D-IL), and 
Senator Klobuchar (D-MN).
     LIn 2014, Senator Lisa Murkowski (R-AK), Senator 
Mark Pryor (D-AR), and Senator Richard Blumenthal (D-CT) 
sponsored S. 2392, the Servicemember Employment Protection Act 
of 2014.
     LIn 2012, Senator Robert Casey Jr. (D-PA), Senator 
Ron Wyden (D-OR), and Senator Mark Begich (D-AK) sponsored S. 
3233, the Servicemembers Access to Justice Act of 2012.
     LIn 2009, Senator Robert Casey Jr. (D-PA), Senator 
Edward M. Kennedy (D-MA), and Senator Ron Wyden (D-OR) 
sponsored S. 263, the Servicemembers Access to Justice Act of 
2009.

    In 2016, the Senate Committee on Veterans' Affairs held a 
hearing to consider the Justice for ServiceMembers Act of 2016. 
In advance of that hearing, The Military Coalition, a group of 
32 military, veterans, and uniformed services organizations, 
endorsed the Justice for Servicemembers Act. Furthermore, all 
of these pieces of legislation identified above have enjoyed 
strong and unwavering support from the many organizations 
within The Military Coalition, including the Reserve Officers 
Association, the Military Officers Association of America, and 
the Military Order of the Purple Heart. Despite such strong and 
broad support, these bills to clarify that USERRA bans forced 
arbitration has never received a vote in a Committee or on the 
House or Senate floor.
    I hope that 2019 is the year that Congress finally passes 
the Justice for Servicemembers Act. Millions of servicemembers 
and veterans who have rights under USERRA will benefit from 
this legislation, which will ensure that those of us who serve 
our country can turn to federal judges to protect our 
reemployment rights and benefits.
    USERRA rights and enforcement are more important today than 
ever before. In its most recent report to Congress (covering 
Fiscal Year 2017), the Department of Labor's Veterans 
Employment and Training Service (``DOL VETS'') stated that it 
had 1,098 pending cases in which DOL VETS was investigating 
USERRA complaints of servicemembers and veterans, including 944 
cases that were opened in Fiscal Year 2017.\4\ When the base 
where my unit is located hosted trainings on USERRA in 2017, 
countless commanders and Members of various units had pressing 
questions about their USERRA rights and what they can do to 
ensure that their rights are protected. They were not inquiring 
because they wanted to file lawsuits, but because their USERRA 
rights help them balance their military and civilian careers 
and they want to ensure that their employers understand how to 
comply with the law and support our reservists.
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    \4\ U.S. Department of Labor, Veterans' Employment and Training 
Service, Annual Report to Congress Fiscal Year 2017 at 22, available at 
https://www.dol.gov/vets/media/VETS 
_FY17_3Annual_Report_to_Congress.pdf.
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    Today, because of the increasing reliance on the Guard and 
Reserve to support the global activities of our Armed Forces, 
it is more important than ever to ensure that we have strong 
USERRA protections--so that Guard and Reserve Members can 
seamlessly transition between their civilian and military 
positions. A recent Congressional Research Service report 
highlights the way in which the role of the reserve components 
of the Armed Forces has changed over the past several decades, 
especially the increasing reliance on reservists for both 
combat and ordinary military operations. For example, between 
1986 and 1989, reservists annually contributed about 1 million 
duty-days, whereas in 2002 they contributed 41.3 million days, 
in 2005 they contributed 68.3 million days, and in 2014 they 
contributed 17.3 million days.\5\
---------------------------------------------------------------------------
    \5\ Congressional Research Service, Reserve Component Personnel 
Issues: Questions and Answers at 7-9 (Oct. 4, 2018) (stating that 
1,036,644 Americans are Members of the Select Reserve or Individual 
Ready Reserve/Inactive National Guard as of July 31, 2018), available 
at https://fas.org/sgp/crs/natsec/RL30802.pdf.
---------------------------------------------------------------------------

   Congress Should Act To Protect the Rights of All Americans

    My experience with forced arbitration stems from my status 
as a servicemember and the special rights that Congress has 
conferred upon servicemembers like me. But arbitration does not 
just impact servicemembers or veterans. The increasing and 
systemic use of forced arbitration is impacting every American 
and taking away our rights to enforce the federal and State 
laws that promote economic opportunity and security, protect 
our health and safety, and stamp out fraud.
    Experts estimate that more than 60 million employees are 
bound by forced arbitration--constituting more than half of all 
non-union private sector employees.\6\ Forced arbitration has 
grown at a rapid pace, despite the fact that the vast majority 
of Americans, regardless of race, age, gender, or political 
affiliation, prefer to have the right to decide whether to 
arbitrate their disputes or go to court.
---------------------------------------------------------------------------
    \6\ Alexander J.S. Colvin, The growing use of forced arbitration: 
Access to the courts is now barred for more than 60 million American 
workers, Economic Policy Institute (Sept. 27, 2017), available at 
https://www.epi.org/publication/the-growing-use-of-mandatory-
arbitration/.
---------------------------------------------------------------------------
    Earlier this year, a poll conducted by Hart Research 
Associates found that 84% of Americans believe that they should 
have the choice of whether to resolve their legal claims 
through arbitration or court, rather than being required to 
arbitrate their claims. Republicans (84%) and independents 
(89%) were more likely than Democrats (83%) to support the 
right of workers and consumers to choose between arbitration 
and court enforcement.\7\ In 2016, a Pew survey found that 90% 
of individuals supported being allowed to have their case heard 
by a judge and jury and 90% supported being able to appeal 
legal decisions--two things that arbitration agreements take 
away or severely limit.\8\ Another Pew study found that while 
about half of all consumers support what arbitration advocates 
say are its benefits, 88 percent of consumers disapprove of 
arbitration when the process is explained in greater detail.\9\ 
These studies demonstrate that the American people 
``overwhelmingly want a choice between going to court and 
entering arbitration.'' \10\
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    \7\ Guy Molyneux & Geoff Garin, Hart Research Associates, National 
Survey on Required Arbitration (Feb. 28, 2019) (reporting on the 
results of a survey or 1,201 voters that was conducted between January 
16 and 28, 2019), available at https://www.justice.org/sites/default/
files/2.28.19%20Hart%20poll%20memo.pdf.
    \8\ CFPB to Act on Banking Dispute Resolution, Pew Charitable 
Trusts (Feb. 16, 2016), http://www.pewtrusts.org/en/research-and-
analysis/analysis/2016/02/16/cfpb-to-act-on-banking-dispute-resolution.
    \9\ Banking on Arbitration: Big Banks, Consumers, and Checking 
Account Dispute Resolution, November 2012, http://www.pewtrusts.org//
media/assets/2012/11/27/pew_arbitration _report.pdf.
    \10\ Id. at 7.
---------------------------------------------------------------------------
    There are good reasons why the vast majority of Americans 
believe that workers and consumers should be able to choose 
between a court of law and arbitration.
    First, forced arbitration is incredibly unfair to ordinary 
people, who lack the power to decide whether to sign an 
arbitration agreement when starting a job or purchasing a 
consumer product. Employers don't tell job applicants whether 
they will be required to sign an arbitration agreement. As a 
result, millions of workers show up on their first day of work, 
and they are told that they must sign an arbitration agreement 
or they can't start the job. Let's say that you've already 
resigned from your prior job to start a new job at a new 
company. What worker would realistically decline to sign the 
arbitration agreement on the first day of work at the new job, 
if that means leaving his or her family with no income or 
health care insurance? In my case, I was required to sign an 
arbitration agreement months after I had started my job at BLB. 
I had no effective choice to decide whether I wanted to sign 
the agreement. If I didn't sign, I would be fired. No worker 
starts a job thinking that he will sue his or her employer, and 
no worker wants to disappoint his or her employer on the first 
day of work by refusing to sign the forms that he or she is 
told to sign. In other words, the decision to sign an 
arbitration agreement is unfair and coercive.
    Based on my experience, it seems that the right time for a 
worker to decide whether he or she wants to agree to 
arbitration is after the dispute has occurred. When a worker 
realizes that his or her rights may have been violated, he or 
she can consult with an attorney and make an informed decision 
about whether it makes sense to go to court or arbitration.
    Second, in arbitration, a single person--usually a lawyer, 
though in some cases it's not even a lawyer--decides all of the 
legal and factual questions. But in court, in most cases 
Americans are entitled to have a jury of our peers decide the 
factual questions, and have an impartial judge decide the legal 
questions.
    Third, arbitration is often conducted in confidential, 
secret proceedings, while our courts are open to the public. 
With arbitration becoming so prevalent, this means that the 
public is being denied important information about practices 
that affect so many of us and employees are routinely prevented 
from sharing their stories with others. For example, employees 
can be denied the opportunity to hear about executives--like 
Harvey Weinstein or Roger Ailes--who sexually harass employees. 
Workers can be denied information about which employers fail to 
pay the minimum wage or overtime, or which bosses steal their 
employees' tips. The federal agencies who enforce critical laws 
may be denied the opportunity to learn about serious problems--
like federal contractors who discriminate against reservists, 
fail to pay prevailing wages mandated by federal law, or 
jeopardize the health and safety of their employees.
    Fourth, arbitration agreements often limit what information 
employees or consumers can discovery about their claims--even 
though it's usually the employer or company who possesses the 
key information that the worker or consumer needs to prove his 
claim. This is like holding a boxing match where one of the 
boxers has one arm tied behind his back for all 12 rounds. In 
comparison, our federal and State courts have consistent rules 
that put all parties on equal footing and that give every 
American the same rights to search for the truth.
    Fifth, with arbitration employers dictate which arbitrators 
can be selected by the parties. This is the opposite of the 
American civil justice system, where one party cannot determine 
which judge will hear the case. The average worker or consumer 
will never arbitrate more than a single case in his or her 
lifetime. But large employers and companies may arbitrate 
hundreds or even thousands of claims. This creates an incentive 
for arbitrators to Rule in favor of employers and companies, so 
that they will be selected to arbitrate future cases. This is 
big business for the people who serve as arbitrators. Often 
arbitrators earn $8,000 to $10,000 per day. It would be foolish 
for an arbitrator to be hostile to the companies who select and 
pay them.
    Sixth, arbitration agreements usually do not permit an 
employee or consumer to appeal an adverse decision--even if the 
decision clearly misinterprets the law, overlooks key facts in 
the case, or does not State a basis for the decision. Although 
the Federal Arbitration Act allows individuals to ask a court 
to vacate an arbitration award under very limited 
circumstances, it makes it so difficult to overturn the 
arbitrator's award that there effectively is no right to appeal 
an arbitrator's decision. In contrast, every litigant in 
court--a poor person, a rich person, a small business, or a 
massive corporation alike--has the same right to appeal and 
have an appellate court decide whether the district court 
misinterpreted the law or misunderstood the facts.
    Seventh, arbitration agreements routinely limit the amount 
of time that individuals have to enforce their rights--
sometimes to as little as six months from when the dispute 
arises. This is a major problem for servicemembers and 
veterans, given that USERRA does not have a statute of 
limitations period (Congress clarified this issue in a 2008 
amendment that was unanimously enacted by Congress and signed 
by President George W. Bush). It's also a big problem for 
workers who are affected by wage theft or discrimination, given 
that civil rights and employment laws often provide more time 
for individuals to initiate their legal actions.
    Finally, it is common for arbitration agreements to require 
employees or consumers to arbitrate their disputes in a single 
city or county, even if that location is far away from where 
the employee or consumer lives. Many federal laws allow 
employees or consumers to bring their legal actions in a broad 
range of places, in order to promote enforcement of the law and 
prevent companies from always litigating cases on their home 
turf. As I mentioned above, since the 1950s USERRA and its 
predecessor laws have allowed servicemembers to sue wherever 
the employer has a place of business, in recognition of the 
fact that servicemembers frequently change their place of 
residence or are deployed far from home.
    To me, the choice is easy. I would always prefer to enforce 
my rights in a court of law, with a neutral judge, a jury of my 
peers, full and fair discovery, and a right to appeal. At the 
same time, I recognize that some people may prefer arbitration 
over court. I think that the people who prefer arbitration 
should have every right to make that choice. With all due 
respect, I believe that I and hundreds of millions of Americans 
should be able to choose to go to court rather than 
arbitration, and we should never be forced to arbitrate our 
claims.
    Like most people, I value the independence and freedom that 
I have to make my own choices, particularly when it comes to 
enforcing my legal rights. My employer took that freedom away 
from me when it required me to sign an arbitration agreement on 
a take-it-or-leave-it basis. Arbitration might make sense for 
some people in some circumstances, but every individual should 
be able to make the choice for himself or herself.
    The Forced Arbitration Injustice Repeal Act of 2019, H.R. 
1423 (and S. 610 in the Senate), would give this choice to 
every American employee and consumer. This vital legislation 
would create a simple Rule that employees and consumers cannot 
be required to sign an arbitration agreement until the dispute 
occurs. Once the dispute occurs, the consumer or employee would 
be free to enter into an arbitration agreement if both of the 
parties want to arbitrate.
    I thank Chairman Cicilline and Representative Hank Johnson 
for introducing the FAIR Act. I thank the 198 Members of the 
House of Representatives who have sponsored the Forced 
Arbitration Injustice Repeal Act of 2019, including many 
Members of the Judiciary Committee and this Subcommittee. I 
hope that all the other Members of the House will consider 
sponsoring or supporting the passage of this legislation. The 
goal of this legislation is not to create more legal actions, 
but to ensure that every American has the same ability to 
enforce his or her rights that already exist under federal and 
State laws.
    As a servicemember, I try to remember that our service is 
not on behalf of ourselves, but on the behalf of every 
American. And, in my opinion, no American should be denied the 
opportunity to have their day in court and enforce the rights 
that this Congress or the states have given us.

                           Conclusion

    I sincerely appreciate that the Committee is considering 
this important issue and legislation. Thank you very much for 
your time and consideration of my views.

[GRAPHIC] [TIFF OMITTED] T4090.001


    Mr. Cicilline. Thank you very much.
    I now turn to Gretchen Carlson for 5 minutes.

                 TESTIMONY OF GRETCHEN CARLSON

    Ms. Carlson. Thank you for having me here today.
    On July 6, 2016, my story about sexual harassment and Fox 
News Chairman and CEO Roger Ailes became public. It ran like 
wildfire across the Twitter feeds and across the media around 
the world. Back then, I could have never known or could have 
ever imagined that I would become one of the prominent faces 
fighting against forced arbitration, or that in the two-and-a-
half years since my case, a tidal wave of women would have 
joined me in courageously speaking out about workplace 
harassment. Here is what I found out during that time, that 
courage is contagious, and the cultural revolution that we are 
experiencing right now is long overdue.
    The first step for me was telling the truth. The next step 
was to work to change the system for all women and men across 
our country. So, I spent much of 2017, 2018, and now 2019 
walking the halls of Congress, encouraging legislators to take 
real, meaningful action to help workplace harassment victims. 
In December 2017, I proudly joined legislators from both sides 
of the aisle--Congresswomen Bustos and Stefanik, and Senators 
Gillibrand and Graham--to introduce in both chambers the Ending 
Forced Arbitration of Sexual Harassment Act. On February 28th 
of this year, with a new Congress, the bill was reintroduced in 
the House, H.R. 1443, a bill to restore workplace harassment 
victims' constitutional 7th amendment right to a jury trial 
instead of the secrecy of forced arbitration.
    So why is this bill so important to me? Because it is not 
about me. It is about the thousands and thousands of women 
across this country who reached out to me after my story became 
public, making me realize that almost every woman in this 
country has a story. Over the past two-and-a-half years, these 
women have shared their pain and their humiliation with me, and 
what is the number-one thing that they tell me? That they have 
been mostly silenced because that is what forced arbitration 
helps to do. It turns out that silencing all of these women in 
our country ends up being the harasser's best friend.
    Hypothetically, here is what happens to a woman being 
harassed on the job when she finally decides to muster up the 
courage to come forward. She goes to HR to complain, and if she 
has an arbitration clause, and she likely does, the HR rep may 
do this: ``Phew. No one will ever know about this.'' Her case 
is promptly thrown into the secret chamber. In arbitration, she 
will find out there are limits on discovery, evidence 
gathering, limits on witnesses. There are no appeals. In many 
cases, the company even picks the arbitrator for you. It is 
called repeat business. In the process, she will probably be 
blacklisted, demoted, and fired from her job. She may get a 
paltry settlement, but our woman will probably never work 
again. No one else at her place of employment will know what 
happened to her. Worst of all, her perpetrator gets to stay on 
the job, because nobody knows about it. The whole process is 
secret, and that person is free to harass again and again. I 
ask you today, what is fair about that?
    Sadly, that hypothetical story is not unique. For years, 
this happened at American Apparel. The chairman there was 
finally thrown out, the President of the company, but they all 
had arbitration clauses. Same thing with 180 women who reported 
being sexually assaulted at a company called Massage Envy. You 
heard about Sterling Jewelers earlier from the Chair.
    So, none of us expect to start a new job and get into any 
kind of dispute like this. I know I didn't. So many Americans, 
they sign these forced arbitration agreements, they don't even 
know what they are signing or what the ramifications are with 
regard to their constitutional rights.
    To be silenced after simply having the guts to come 
forward, that is unjust, that is un-American.
    Now we are seeing the effects of people saying enough is 
enough. After we introduced our bill in 2017, Microsoft decided 
to take arbitration clauses out of their employment contracts. 
Then Uber, Lyft, and after the Google walk-out, Google, Ebay, 
Airbnb, Facebook, Fox Media, et cetera.
    So, it turns out that courage is not only contagious, so is 
action, and the voices of workers across this country. Now it 
is time for us, in a bipartisan way, to come together and stop 
the silence. Let's do something together as a Nation for our 
women, our men, and our children.
    Thank you.
    [The statement of Ms. Carlson follows:]

                   STATEMENT GRETCHEN CARLSON

    Chairman Cicilline, Ranking Member Sensenbrenner, and other 
distinguished Members of the House Subcommittee on Antitrust, 
Commercial and Administrative Law, thank you for providing me 
with the opportunity to testify about my experience with forced 
arbitration.
    On July 6, 2016, my story about sexual harassment and Fox 
News Chairman and CEO Roger Ailes became public. And it ran 
like wild fire on twitter feeds and breaking news alerts all 
around the world. Back then, I could have never known I would 
become one of the prominent faces fighting against forced 
arbitration, or that in the 2\1/2\ years since my case, a tidal 
wave of women would have joined me in courageously speaking out 
against workplace harassment. Here's what I've found out: 
Courage is contagious . . . and the cultural revolution we're 
experiencing right now . . . is long overdue.
    The first step for me was telling the truth. The next step 
. . . was to work to change the system . . . for all women and 
men across our country. So, I spent much of 2017, 2018, and now 
2019 walking the halls of Congress, encouraging legislators to 
take real, meaningful action to help workplace harassment 
victims. In December 2017, I proudly joined legislators from 
both parties--Congresswomen Bustos and Stefanik and Senators 
Gillibrand and Graham--to introduce in both chambers the 
``Ending Forced Arbitration of Sexual Harassment Act.'' On 
February 28th of this year, with a new Congress, the bill was 
reintroduced in the House--House Bill 1443--a bill to restore 
workplace harassment victims' Constitutional 7th amendment 
right to a jury trial instead of the secrecy of forced 
arbitration.
    So why is this bill so important to me?
    Because this isn't about me. This is about the thousands of 
women across this country who reached out to me after my story 
became public--making me realize that almost every woman in our 
country has a story and that's shameful. Over the past 2\1/2\ 
years, these women have shared their emotional stories of pain 
and humiliation--but mostly about how they've all been 
silenced--because that's what forced arbitration helps to do. 
Turns out--that silencing is the harasser's best friend.
    Sadly, my story is not unique. Sexual harassment of women 
and men in the workforce isn't a new problem, and unfortunately 
neither is the use of forced arbitration to cover up systemic 
sexual harassment. For years, Dov Charney, the founder and 
former CEO of American Apparel sexually harassed and assaulted 
employees of the company. These were young women, teenagers--
some as young as 17 years old.\1\ But, it wasn't until 2014 
that Mr. Charney was held accountable for his actions and he 
was fired by the company's board. The sexual misconduct was 
able to be hidden for years because the company required all 
employees to sign employment agreements that included a forced 
arbitration clause.\2\ The purpose of which was clear: To keep 
any disputes secret and away from public scrutiny. Had the 
company not used forced arbitration, they would have faced 
public accountability and been forced to Act years sooner and 
many of his victims would have been spared.
---------------------------------------------------------------------------
    \1\ Katie Baker, Dov Charney ``Sex Slave'' Lawsuit Will Settle Out 
of Court, Jezebel, March 22, 2012: https://jezebel.com/5895487/dov-
charney-sex-slave-lawsuit-will-settle-out-of-court.
    \2\ Steven Davidoff Solomon, Arbitration Clauses Let American 
Apparel Hide Misconduct, July 15, 2014: https://dealbook.nytimes.com/
2014/07/15/arbitration-clauses-let-american-apparel-hide-misconduct/.
---------------------------------------------------------------------------
    Another horrifying example is the more than 180 women who 
have reported being sexually assaulted by massage therapists at 
Massage Envy spas.\3\ These women put their trust into a 
company and its employees, only to suffer the trauma of being 
sexually assaulted and then continue to suffer as the company 
did little to help them and instead tried to silence them. Now 
that these women are seeking public accountability in court, 
the company is trying to force them into arbitration, because 
hidden in the fine print of the terms and conditions of the 
company's app and iPads (used to check in for services) was a 
forced arbitration clause.\4\ Take the case of Lilly Silbert 
from California, who I recently met and whose story I listened 
to. Lilly says that she was sexually assaulted by her Massage 
Envy therapist, but because she used the company's app to try 
and cancel her Membership after she was sexually assaulted, the 
company is trying to force her, and many women like her, into 
arbitration.
---------------------------------------------------------------------------
    \3\ Katie Baker, More Than 180 Women Have Reported Sexual Assaults 
at Massage Envy, BuzzFeed News, November 26, 2017: https://
www.buzzfeednews.com/article/katiejmbaker/more-than-180-women-have-
reported-sexual-assaults-at.
    \4\ Brooks Jarosz, Fears loom that sexual assault cases involving 
Massage Envy will remain private, FOX KTVU, December 21, 2018: http://
www.ktvu.com/news/fears-loom-sexual-assault-cases-involving-massage-
envy-will-remain-private.
---------------------------------------------------------------------------
    Recently, The New York Times covered the story of thousands 
of women who were employed by Sterling Jewelers who suffered 
widespread sexual harassment and pay discrimination for 
years.\5\ The article describes the conduct the women were 
subjected to--groping, sexual coercion, sexual degradation and 
even rape. For years, the conduct was covered up, with the 
women being forced into arbitration. As the article describes 
``[t]he benefit to the company was that it was resolved in 
secret. The secrecy was the point.'' \6\ In 2008, many of the 
women decided to come forward and seek legal action against the 
company, filing a class action lawsuit which at one point was 
comprised of 69,000 women.\7\ However, because Sterling 
Jewelers required their employees to sign arbitration 
agreements the company has been trying to dismiss the lawsuit 
and force all of the women into private, secretive arbitration, 
on an individual basis--creating a wall of silence even between 
the women.\8\ This prevents women from having important 
evidence about a pattern of behavior, and from supporting one 
another in stressful litigation against a large corporation.
---------------------------------------------------------------------------
    \5\ Taffy Brodesser-Akner, The Company That Sells Love to America 
Had a Dark Secret, New York Times Magazine, April 23, 2019: https://
www.nytimes.com/2019/04/23/magazine/kay-jewelry-sexual-harassment.html.
    \6\ Taffy Brodesser-Akner, The Company That Sells Love to America 
Had a Dark Secret, New York Times Magazine, April 23, 2019: https://
www.nytimes.com/2019/04/23/magazine/kay-jewelry-sexual-harassment.html.
    \7\ Drew Harwell, Hundreds allege sex harassment, discrimination at 
Kay and Jared jewelry company, Washington Post, February 27, 2017: 
http://wapo.st/2mEkm1F?tid=ss_mail&utm_ term=.03d00fdedcd3.
    \8\ Nick Brown, Sterling Motion to Disallow Class Action Rejected, 
Law360, January 5, 2010: https://www.law360.com/articles/141374/
sterling-motion-to-disallow-class-action-rejected.
---------------------------------------------------------------------------
    In all these cases, because of the secrecy that surrounds 
forced arbitration, it is impossible to know exactly how many 
women were sexually assaulted or harassed and came forward. 
What we also don't know is how many women chose not to come 
forward, but to stay quiet, or quit, because they knew that 
they would be forced into arbitration where their voices would 
be silenced.
    My going public shed a light on the scourge of more of this 
pervasive epidemic--the Weinstein allegations, the Bill Cosby 
allegations, the Bill O'Reilly allegations, the Les Moonves 
allegations, the Matt Lauer allegations, the Charlie Rose 
allegations, the Mark Halperin allegations . . . and more.
    From the victim's point of view . . . here's what happens 
when a woman being harassed on the job finally decides to come 
forward. She goes to HR to complain and if she has an 
arbitration clause--and she probably does since 60 million 
Americans do--the HR reps probably says--phew! ``No one will 
ever know about this!'' Her case is promptly thrown into the 
``secret chamber.'' More than likely she'll be blacklisted, 
demoted or fired from her job. She may get a paltry settlement, 
but in arbitration she'll find out there are no appeals, limits 
on discovery--which is evidence gathering--and on witnesses. 
Arbitrators come back for repeat business where they've been 
before. Individual employees do not provide repeat business for 
arbitrators--but a large corporation--like Sterling Jewelers 
with thousands of complaints--can keep an arbitrator paid for 
years. Our woman will probably never work again, and notably, 
no one else at her place of employment will know that 
harassment may be an issue, and worst of all, her perpetrator 
will likely get to stay on the job--because the whole process 
has been a secret--free to harass again and again.
    None of us expect to start a new job and get into any kind 
of dispute. I know I didn't. So many Americans sign forced 
arbitration agreements without even knowing what they are or 
thinking about what they mean for their Constitutional rights. 
The employer can refuse to hire people who won't sign. What 
kind of ``agreement'' is that?
    To be silenced after simply having the guts to come 
forward? That's unjust and un-American.
    Now we're seeing the effects of people saying enough is 
enough. We're seeing that the voices of women and men are being 
heard! Companies are taking notice!
    After we first introduced our bill in 2017, Microsoft 
decided to be bold and take forced arbitration clauses out of 
their employment contracts. Then Uber and Lyft. Then after the 
Google walk out, Google, Ebay, Airbnb, Facebook, and Vox Media.
    Turns out--It's not just courage that's contagious--Action 
is too. The voices of workers across this country matter--and 
they are being heard.
    I want to thank the brave Members of Congress from both 
sides for already drawing a line in the sand. Thank you for 
doing what's right for women.
    Now its time for all Members of Congress to show the same 
kind of courage. It's my hope Members from both sides of the 
aisle will stand up and speak up in support of this bill.
    Sexual harassment is not a partisan issue. It knows no 
political or socio-economic boundaries. It's our police 
officers, firefighters, teachers, lawyers, doctors, bankers, 
Congressional workers, and journalists. The consequences show 
no bounds. We've seen titans from both sides fall.
    That is why we should all care.
    In this cultural revolution, it's time to get something 
real done for women. It is my great hope that we will get it 
done in a bi-partisan way--for women, for men, for our children 
and our country.
    Thank you.

    Gretchen Carlson
    Journalist, Author, Advocate

    Mr. Cicilline. Thank you, Ms. Carlson.
    The Chair now recognizes Mr. Goldberg for 5 minutes.

                   TESTIMONY OF PHIL GOLDBERG

    Mr. Goldberg. Thank you, Chairman Cicilline, Ranking Member 
Sensenbrenner, and Members of the committee. Thank you for your 
invitation and allowing me to testify here today. It is a 
particular honor for me to be here before this committee. 
Twenty years ago, I worked for a member, Steve Rothman, who 
served on this committee, and I hold this Committee in 
incredibly high regard, as I do the civil justice system.
    I am now a partner at the law firm of Shook, Hardy & Bacon, 
and a member of the American Law Institute, and since 2015 I 
have been the Director of the Progressive Policy Institute 
Center for Civil Justice. At PPI, we believe that the civil 
justice system is a public good. It is a keystone of American 
economic and political liberties because it is a forum where 
aggrieved individuals and businesses can peacefully resolve 
disputes. Unfortunately, we also recognize that it has its 
limitations and that it can be abused.
    As is customary, today the views I express are my own.
    The major reason why pre-dispute arbitration agreements are 
common today is because they provide these goals, a peaceful, 
quick, and conclusive dispute resolution, often better than the 
civil justice system for many claims.
    It didn't escape me that the title for this hearing is 
about the erosion of the civil justice system. Mr. Chairman, 
the frustration has been that the civil justice system has been 
eroding for several decades. It has become more expensive. It 
has become less responsive to real people in many cases.
    Pre-dispute arbitration agreements are increasingly filling 
those voids because it provides real people the ability to 
obtain meaningful redress, particularly with modest claims that 
are below the threshold for which someone can get a lawyer, or 
where relationships are at stake, that they want to maintain 
those relationships after the dispute is resolved.
    Overall, people have found pre-dispute arbitration 
agreements more efficient because they have streamlined rules 
and are less formal. They are less costly. The defendant often 
pays the cost and attorney's fees in many situations. They are 
timely. You can get resolution in months rather than years. It 
is less adversarial than civil litigation, and the results, 
they are not all or nothing like civil litigation, but they 
focus on what is fair. The Supreme Court has said the process 
must be reasonable and fair. Trust me, courts will throw out 
unconscionable pre-dispute arbitration agreements.
    For some, agreeing ahead of time to avoid the high costs 
and the high stakes of prolonged litigation can make the 
difference in the choice to pursue justice. Otherwise, those 
injuries will go uncompensated and unaddressed, and the 
defendant will be held unaccountable.
    This is particularly important in modest consumer, 
employment, and business disputes. If it is you as an 
individual and you have one of these more modest claims, there 
is no access to justice. Lawyers now generally do not take 
cases that have a value under $100,000. The Minnesota task 
force recently concluded it is closer to $200,000. If the claim 
is below this threshold, a pre-dispute arbitration agreement is 
the only chance at redemption.
    Sometimes disputes can be brought as class actions, but as 
this Committee has heard time and again, the class actions are 
notoriously bad at real redress for real people in these types 
of claims. The resolutions, particularly in these areas, focus 
on lawyers' fees, coupon settlements--you have to buy more of 
the defendant's products--cy pres awards for third parties in 
which the victims get nothing, and redemption rates are anemic, 
not surprisingly; generally, between 1 and 4 percent of people 
participate when they are in the class. In a lot of class 
action settlements, real people get nothing, or they get 
practically nothing.
    The latest abuse is this no-injury litigation where you 
have lawyers sort of dreaming up speculative ideas on how to 
sue companies, and there are no plaintiffs that are actually 
aggrieved.
    Pre-dispute arbitration agreements are also important where 
relationships matter. Litigation is highly contentious and 
expensive, and for many people it is completely undesirable. 
You have the risk of ruining important relationships, not just 
with the defendant but with colleagues, business partners and 
customers, even when a company takes significant measures to 
protect employees from retaliation.
    So, if you believe your benefits were wrongly calculated or 
you were unfairly denied a promotion or a raise, what does the 
average worker do if they want to stay at that company? If they 
don't have a pre-dispute arbitration agreement and they are 
scared off by the civil litigation system, then that is not 
good for anybody. It is not good for the companies who want to 
provide their employees with a good, safe place to go to work, 
and it is not good for the employees who just want to put in an 
honest day's work and be able to go home and spend time with 
their families.
    Finally, litigation has become subject to too much abuse. 
It is no longer providing plaintiffs and defendants with access 
to justice. Discovery battles are incredibly expensive, lawyers 
are skilled at inflaming juries and escalating awards and 
exploiting weaknesses in the civil justice system, and 
plaintiffs, even when they can hire a lawyer, often lose half 
to the contingency fee and to expenses.
    It is not surprising that both claimants and defendants 
find value in an alternative system that focuses on getting 
aggrieved individuals fairly compensated and not paying 
lawyers. These benefits cannot be achieved unless they are 
agreed to beforehand, because once the dispute arises, all gets 
thrown out the door. For many people, Mr. Chairman, a pre-
dispute arbitration agreement is the only path for obtaining 
redress.
    Thank you very much.
    [The statement of Mr. Goldberg follows:]

                   STATEMENT OF PHIL GOLDBERG

    Chairman Cicilline, Ranking Member Sensenbrenner, and 
Members of this distinguished Committee, thank you for your 
gracious invitation and allowing me to testify today about pre-
dispute arbitration agreements. It is a particular honor for me 
to be here. While I was attending law school at night in 1998-
1999, I worked during the day for a member of Congress who 
served on the Judiciary Committee. I have high reverence for 
this Committee and the judiciary.
    Currently, I am a partner at the law firm of Shook Hardy & 
Bacon, L.L.P. and co-chair the firm's Public Policy Group and 
National Amicus Practice. In 2015, I became the Director of the 
Progressive Policy Institute's Center for Civil Justice. The 
PPI Center for Civil Justice believes that the civil justice 
system is a keystone of American economic and political liberty 
because it provides a forum for aggrieved individuals and 
businesses to peacefully resolve their disputes. This ability 
to resolve disputes quickly and conclusively undergirds free 
enterprise by protecting economic and social rights. As is 
customary, the views I express today are my own.
    A major reason that pre-dispute arbitration agreements have 
become more commonplace in our society is because they achieve 
this goal of peaceful, quick and conclusive dispute resolution 
often better than the civil justice system for many types of 
claims. As I will discuss below, the civil justice system over 
the past few decades has become much more expensive for the 
parties involved and much less responsive to consumers and 
employees. Agreeing ahead of time to avoid the high cost and 
high stakes of prolonged litigation, which often serves the 
lawyers more than the parties, is increasingly making sense for 
many types of claims.

The Benefits of Pre-Dispute Arbitration vs. the Deficiencies of 
                           Litigation

    The primary benefit of pre-dispute arbitration agreements, 
and arbitration generally, for consumers, employees and other 
claimants is that it provides them with a more efficient, less 
costly, and less adversarial means to obtain redress than civil 
litigation. Filing and waging a lawsuit is not for everyone. It 
has been described as being to everyday life like ``war is to 
peacetime.'' \1\ It can be costly, time-consuming and draining. 
In many cases, the lawyers on both sides operate from a 
position of mutually assured destruction, where the battles are 
contentious, expensive and focused on exerting pain to the 
other side. So, for many people, if they sustain an injury, 
litigation may be unrealistic and undesirable. Knowing that a 
path to resolve such a dispute has already been agreed to 
where, by law, you must be given a reasonable and fair path to 
redress, can be the deciding factor to pursue justice. Without 
a pre-dispute arbitration agreement, that person's injury may 
go unaddressed and the defendant will not be held accountable.
---------------------------------------------------------------------------
    \1\ Janet Malcolm, The Journalist and the Murderer 63 (2011).
---------------------------------------------------------------------------
    Consumer, employment and business-to-business disputes 
often fall into the categories where pre-dispute arbitration 
provides the most benefits. An injury, no matter how important 
to the person, may be too financially modest to pursue in 
litigation. A lawyer may not have the financial interest in 
taking a low-stakes case if the injury is solely to an 
individual. About 20 years ago, studies found that lawyers may 
not take a case unless the expected value of the claim was at 
least $60,000.\2\ That number is now closer to $200,000.\3\ 
Litigation has simply become a lot more expensive and time-
consuming, and many lawyers who take claims on contingency 
bases want to make sure they are going to be compensated for 
their time. So, where the contingency fee used to be seen as a 
mechanism to allow people to hire lawyers for questionable or 
small claims, that is no longer true. Most skilled plaintiffs' 
lawyers treat the contingency fee like a certainty fee. When a 
claim is below that threshold, arbitration may provide the only 
chance at redemption, especially for very modest claims where 
the defendant pays the costs and fees involved.
---------------------------------------------------------------------------
    \2\ See Elizabeth Hill, AAA Employment Arbitration: A Fair Forum at 
Low Cost, 58 Disp. Resol. J. May-Jul. 2003, at 8, 10-11.
    \3\ See, e.g., Minn. State Bar Ass'n, Final Report: Recommendations 
of the Minnesota Supreme Court Civil Justice Task Force 11 (Dec. 23, 
2011), at http://www.mncourts.gov/mncourtsgov/media/assets/documents/
reports/Civil_Justice_Ref_Task_Force_Dec_2011_Rpt.pdf.
---------------------------------------------------------------------------
    In the consumer setting, some low dollar cases may be 
brought as class actions. This may entice a lawyer to take the 
case, but class actions over small-scale injuries have proven 
to be poor dispute resolution methods for the parties. 
Experience has shown that often, few Members of a class choose 
to redeem any award they may be owed.\4\ For example, a study 
by the Consumer Financial Protection Bureau (CFPB) of consumer 
class actions reported a ``weighted average claims rate'' by 
class Members of only about 4%.\5\ Other studies report even 
lower rates of class member involvement.\6\ As a result, class 
actions generally end up focusing on lawyer fees, coupon 
settlements, and cy pres awards to third parties to justify 
their fees and releasing the claims against the defendant--not 
providing injured people with any actual recoveries.
---------------------------------------------------------------------------
    \4\ See U.S. Chamber Inst. for Legal Reform, Unstable Foundation: 
Our Broken Class Action System and How To Fix It 3-5 (Oct. 2017), at 
https://www.instituteforlegalreform.com/uploads/sites/1/
UnstableFoundation_Web_10242017.pdf (analyzing studies of recoveries 
under class actions and discussing specific case examples).
    \5\ See Consumer Fin. Pro. Bureau, Arbitration Study: Report to 
Congress 2015 30 (Mar. 2015).
    \6\ See, e.g., Mayer Brown LLP, Do Class Actions Benefit Class 
Members? An Empirical Analysis of Class Actions (Dec. 11, 2013), at 
https://www.mayerbrown.com/files/uploads/Documents/PDFs/2013/December/
DoClassActionsBenefitClassMembers.pdf.
---------------------------------------------------------------------------
    Further, class lawyers are increasingly coming up with the 
legal theories for suing companies and then finding plaintiffs 
on whose behalf to sue, not the other way around.\7\ In these 
actions, the vast majority of the class has not experienced the 
harm alleged in the complaint, which is why they do not 
participate in any awards. In these cases, class litigation is 
becoming an abstract endeavor no longer focused on creating a 
path to compensate those who are actually injured. Also, the 
stakes for the litigation far outpace any actual harm. 
Plaintiffs' lawyers have similarly become skilled at inflating 
noneconomic damages in other types of cases.\8\ Recent studies 
have shown that pain and suffering awards in the United States 
are more than ten times those in the most generous of other 
nations.\9\ In inflation-adjusted numbers, for example, product 
liability awards were five times higher in 2005 than in 
1992.\10\ Pre-dispute arbitration agreements protect businesses 
from potential abuse and reduce the risk of losing a 
``jackpot'' award, while at the same time allow actually 
aggrieved individuals to pursue justice and receive an 
appropriate recovery.
---------------------------------------------------------------------------
    \7\ See Victor E. Schwartz & Cary Silverman, The Rise of Empty Suit 
Litigation, 80 Brook. L. Rev. 599 (2015).
    \8\ See Melvin M. Belli, The Adequate Award, 39 Cal. L. Rev. 1 
(1951) (observing the size of pain and suffering awards took its first 
leap after World War II as personal injury lawyers became adept at 
finding ways to enlarge these awards).
    \9\ See Stephen D. Sugarman, A Comparative Look at Pain and 
Suffering Awards, 55 DePaul L. Rev. 399, 399 (2006).
    \10\ See Lynn Langton & Thomas H. Cohen, Civil Bench and Jury 
Trials in State Courts, 2005, at 10 tbl. 11 (Bureau of Justice 
Statistics, Apr. 9, 2009).
---------------------------------------------------------------------------
    Further, arbitration is superior to litigation when it is 
important to try to resolve a dispute without compromising 
useful relationships that will need to endure after the 
dispute's resolution. This may not be a critical factor for 
consumers, but it often is for employees and vendors who know 
the people they are suing. In deciding whether to pursue 
justice, they may weigh the potential that litigation will 
adversely impact key relationships--not just with the 
defendant, but with colleagues, business partners, and 
customers. These dynamics can exist even when companies take 
significant measures to protect their employees from 
retaliation and particularly when the suits involve small or 
family-run businesses. Litigation by its nature is adversarial 
and can be highly personal for the people involved, either as 
parties or witnesses. The person who was wronged may have to 
decide that a dispute is important enough to take these risks, 
let alone go through the cost, time and hardship of litigation. 
Relying on litigation alone may mean that small or medium size 
issues will never get reported or remedied. That is not good 
for anyone--neither the companies who want to provide employees 
with a good, safe place to go to work, nor employees who simply 
want to go to work and do their jobs.
    Pre-dispute arbitration agreements provide a viable 
alternative to the civil justice system in each of these areas: 
it is focused on resolving disputes, not inflaming them. 
Arbitration is also much less expensive than litigation, which 
can allow claimants to keep more of any awards they are given. 
In employment cases, for example, the American Arbitration 
Association (AAA) procedures dictate that employees cannot pay 
more than $300 in total arbitration costs.\11\ In many 
situations, this fee is less than the filing fee in court. The 
employer pays all of the remaining fees. In fact, often the 
plaintiff or claimant pays nothing in arbitration and does not 
have to pay a 40% contingency fee to a lawyer.\12\ Also, 
bearing the costs of the proceedings, which for employment 
litigation can include the employee's attorney fees, can 
motivate the company to settle quickly. That can be a good 
thing in many situations. Even when claims are taken through 
arbitration, they often reach conclusions far faster than had 
they pursued litigation. As this Committee can appreciate, many 
courthouses are overburdened, and after discovery battles, and 
escalating litigation tactics, it could take years to resolve 
disputes that arbitration can resolve in months. Discovery in 
arbitration is much more streamlined, the rules are less 
formal, and the claimant may never have to be deposed or 
testify. Again, the system is wired toward quick and fair 
resolutions.
---------------------------------------------------------------------------
    \11\ Am. Arbitration Ass'n, Employment/Workplace Fee Schedule: 
Costs of Arbitration (Oct. 1, 2017), available at https://www.adr.org/
sites/default/files/Employment_Fee_Schedule.pdf.
    \12\ See, e.g., Elizabeth Hill, Due Process at Low Cost: An 
Empirical Study of Employment Arbitration Under the Auspices of the 
American Arbitration Association, 18 Ohio St. J. on Disp. Resol. 777, 
802 (2003).
---------------------------------------------------------------------------
    Also, as pre-dispute arbitration has become more 
commonplace, the system has become more standardized and 
produces results often as good as litigation for the claimant. 
Arbitrators are generally skilled neutrals, many of whom are 
former judges. The AAA and JAMS have comprehensive rules and 
procedures to ensure independence and competence among 
arbitrators and due process for claimants. Rather than preside 
over litigation, which can be an all-or-nothing dispute 
resolution method, arbitrators can have other, varied options. 
An arbitrator can work with the parties to reach a fair 
resolution for both sides. A study published in the Stanford 
Law Review found that, contrary to what we hear from the other 
side, plaintiffs or claimants generally get the same or better 
outcomes in arbitration than in litigation.\13\ The U.S. 
Supreme Court has made these points in case law endorsing the 
use of pre-dispute arbitration agreements. ``The advantages of 
arbitration are many: it is usually cheaper and faster than 
litigation; it can have simpler procedural and evidentiary 
rules; it normally minimizes hostility and is less disruptive 
of ongoing and future business dealings among the parties; it 
is often more flexible in regard to scheduling of times and 
places of hearings and discovery devices.'' \14\ Also, ``the 
informality of arbitral proceedings is itself desirable, 
reducing the cost and increasing the speed of dispute 
resolution.'' \15\
---------------------------------------------------------------------------
    \13\ See David Sherwyn et al., Assessing the Case for Employment 
Arbitration: A New Path for Empirical Research, 57 Stan. L. Rev. 1557, 
1578 (2005); see also Christopher R. Drahozal & Samantha Zyontz, An 
Empirical Study of AAA Consumer Arbitrations, 25 Ohio St. J. on Disp. 
Resol. 843 (2010); Michael Delikat & Morris M. Kleiner, An Empirical 
Study of Dispute Resolution Mechanisms: Where Do Plaintiffs Better 
Vindicate Their Rights?, 58 Disp. Resol. J. 56 (Nov. 2003-Jan. 2004); 
Theodore Eisenberg & Elizabeth Hill, Arbitration and Litigation of 
Employment Claims: An Empirical Comparison, 58 Disp. Resol. J. 44, 45, 
47-50 (Nov. 2003-Jan. 2004); Hill, supra note 4, at 802; Elizabeth 
Hill, AAA Employment Arbitration: A Fair Forum at Low Cost, 58 Disp. 
Resol. J. 9, 13 (May/July 2003).
    \14\ Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 280 
(1995) (quoting H.R. Rep. No. 97-542, at 13 (1982)).
    \15\ AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 345 (2011).
---------------------------------------------------------------------------
    These benefits, though, cannot be achieved unless the 
arbitration path is agreed to before the injury or dispute 
arises. Once the parties become adversarial, they are unlikely 
to agree on a method for resolving their disputes. In addition 
to the hard feelings that are likely to infest these 
relationships, the parties' incentives fundamentally change 
after a dispute has occurred, and they are diametrically 
opposed to each other. A business may not agree to arbitrate 
small claims because they know that the individual or other 
businesses may not want to take on the risks and burdens of 
litigation or be able to find a lawyer willing to take the 
case. The opposite may occur if the claim is for a substantial 
amount of money or if civil litigation, regardless of the 
merits or size of the claim, could create business and 
reputation risks for the company. Here, the company may prefer 
arbitration and the individual may not. This is why post-
dispute arbitration agreements rarely occur, and when they do, 
it is often only when both sides are looking to buy down risks.

                           Conclusion

    For many people, pre-dispute arbitration may be their only 
path for achieving justice for many types of claims. The civil 
justice system has become exceedingly expensive and time- 
consuming over the past few decades, particularly in the types 
of cases where pre-dispute arbitration agreements are most 
often used. The title of this hearing refers to the erosion of 
the civil justice system, and I would agree that the civil 
justice system has been eroding for many people in many 
situations. Many plaintiffs' lawyers are highly skilled at 
trying to inflame juries and judges against corporate 
defendants, leverage out-of-court business and consumer 
pressures to generate settlements regardless of the merits of 
the claims, and use litigation gamesmanship and in-court 
techniques to drive up noneconomic and punitive damages. It is 
not a surprise that the parties--both claimants and 
defendants--find value in an alternative dispute resolution 
system that is not subject to this escalation and abuse, but 
focuses on ensuring aggrieved individuals get fairly 
compensated. There may be ways to improve the pre-dispute 
arbitration system, but it is providing the access to justice 
for plaintiffs and defendants that they can no longer find in 
the civil justice system.
    Again, thank you for the honor of testifying before you 
today. I would be pleased to answer any questions you may have.

    Mr. Cicilline. Thank you, Mr. Goldberg.
    The Chair now recognizes Mr. Pincus for 5 minutes.

                   TESTIMONY OF ANDREW PINCUS

    Mr. Pincus. Thank you, Chairman Cicilline, Ranking Member 
Sensenbrenner, and Members of the subcommittee. It is an honor 
to appear before you today to present the views of the U.S. 
Chamber Institute of Legal Reform. ILR strongly supports 
arbitration as a fair, less complex, and lower-cost alternative 
to our overburdened court system.
    First, consumers and employees do as well or better in 
arbitration as in litigation. The just-released study 
commissioned by ILR compared the results of employment claims 
that were arbitrated and employment claims that were litigated 
in Federal court. It found that the overwhelming majority, 
around 75 percent, of the employment cases are settled in both 
arbitration and litigation. It is no surprise to lawyers that 
most cases settle.
    For the cases that were decided either by the arbitrator or 
by the court, employee plaintiffs won three times as often in 
arbitration compared to wins in court, 32 percent compared to 
11 percent.
    Employee plaintiffs also recovered much larger amounts in 
arbitration than in a court. The median award in arbitration 
was around $114,000, compared to around $52,000 in court. The 
mean award was $520,000 in arbitration, compared to around 
$270,000 in court. These results are consistent with the 
findings of numerous other studies.
    Second, arbitration is fair. The nation's largest 
arbitration providers, the AAA and JAMS, accept cases only when 
the governing arbitration agreement satisfies basic fairness 
standards regarding the selection of arbitrators, minimal costs 
for claimants, and the availability of discovery.
    In addition, and I cite these cases in my written 
testimony, courts can and do invalidate arbitration agreements 
that specify unfair procedures such as unreasonable limits on 
discovery, unfair procedures for selecting arbitrators, 
excessive arbitration fees, requirements that arbitration take 
place in inconvenient locations, and ``loser pays'' provisions.
    Third, arbitration procedures are much simpler than complex 
rules that apply in court. A claimant need not ever make a 
personal appearance to secure a judgment. Consumer claims, in 
particular, often can be and are adjudicated based solely on 
written submissions or on a telephone conference if the 
consumer chooses to proceed that way. The simpler procedures 
can be navigated by an individual with much less legal 
assistance, and therefore lower legal fees, or even without a 
lawyer. That flexibility and lower cost empowers consumers and 
employees, enabling them to obtain redress for small claims 
that could not practically be brought in court because of the 
inability to attract a lawyer. I think, as everyone knows, to 
proceed in court without a lawyer makes no sense and is very 
unlikely to result in any recovery.
    Fourth, arbitration cannot be used to conceal wrongdoing. 
Claimants in arbitration are free to discuss their claims 
publicly and to report alleged wrongdoing to law enforcement 
officials. If an arbitration agreement purported to prevent the 
claimant from publicly disclosing his claim or misconduct, or 
from reporting that misconduct to law enforcement authorities, 
that restriction would be invalidated in court, and courts have 
invalidated those provisions.
    The same is true of arbitrators' decisions. Indeed, State 
laws require disclosure of arbitration outcomes by arbitral 
forums such as the AAA, and courts consistently hold that the 
results of arbitration proceedings may be disclosed by either 
party.
    Fifth, critics complain that arbitration agreements require 
resolution of disputes on an individual basis and preclude 
class-action lawsuits. Most claims that are asserted by 
consumers and employees are individualized and can't be brought 
as class actions. And the reality is when class actions are 
filed, they rarely provide benefits to class Members. The 
CFPB's own study found that 87 percent of the class actions 
studied provided no benefits whatsoever, and that the remainder 
benefitted, on average, only 4 percent of class Members.
    Finally, as Justice Kagan recognized in her dissenting 
opinion in the American Express case, non-class-action options 
abound for vindicating small injuries through arbitration.
    In sum, arbitration provides significant benefits to 
claimants as well as companies, and courts have the tools 
needed to prevent abuses of the arbitration process. For that 
reason, ILR believes that no legislation eliminating 
arbitration or restricting pre-dispute arbitration provisions 
is necessary and would harm consumers, employees, and 
businesses.
    Thank you, and I look forward to answering your questions.
    [The statement of Mr. Pincus follows:]

                 STATEMENT OF ANDREW J. PINCUS

    Chairman Cicilline, Ranking Member Sensenbrenner, and 
Members of the Subcommittee:
    It is an honor to appear before you today to present the 
views of the U.S. Chamber Institute for Legal Reform (``ILR''). 
ILR is an affiliate of the U.S. Chamber of Commerce and is 
dedicated to making our nation's overall civil legal system 
simpler, fairer, and faster for all participants.
    The Chamber and ILR strongly support arbitration as a fair, 
less-complex, and lower-cost alternative to our overburdened 
court system.
    The arbitral process is overseen by impartial decision-
makers, and subject to strict fairness rules. Courts are 
obligated to consider claims that an arbitration agreement 
contains provisions that are unconscionable under generally-
applicable contract law, and they can and do invalidate 
arbitration agreements that specify unfair procedures.
    Empirical studies show that consumers and employees do as 
well or better in arbitration as in litigation: they prevail on 
their claims at the same rate or more frequently, and they 
recover as much or more when they do prevail.
    Arbitration is much simpler and less costly than court 
litigation--in terms of the money, time, and effort required by 
the dispute-resolution process. All parties benefit from the 
reduced expense and complexity--but, most importantly, 
consumers and employees are able to seek redress for claims 
that could not practically be brought in court.
    Critics of arbitration contend that it enables wrongdoers 
to conceal their offenses by barring public discussion of 
claims and arbitrators' decisions. In fact, arbitration does 
not inherently impose a ``gag rule'': Employees and consumers 
are free to discuss their claims with law enforcement 
authorities, the public, and other employees and consumers. 
Importantly, arbitration agreements that provide otherwise are 
typically invalidated by the courts.
    Critics also cite the fact that arbitrations typically 
decide claims on an individual basis and that there generally 
are no class actions. As Justice Kagan has recognized, ``non-
class options abound'' for vindicating small injuries through 
arbitration. Class actions typically deliver little to anyone 
other than lawyers, who reap huge fees.
    In sum, arbitration provides significant benefits to 
claimants as well as companies, and courts already have the 
tools needed to prevent abuses of the arbitration process. For 
that reason, ILR believes that legislation eliminating or 
restricting pre-dispute arbitration provisions is not necessary 
and would harm claimants and companies.

  Claimants in Arbitration Do Better--Or at Least as Well--As 
                      Plaintiffs in Court

    One common assertion by arbitration critics is that 
claimants do worse in arbitration than in court, but the facts 
point strongly in the opposite direction. Multiple empirical 
studies have concluded that ``there is no evidence that 
plaintiffs fare significantly better in litigation. In fact, 
the opposite may be true.''\1\
---------------------------------------------------------------------------
    \1\ David Sherwyn et al., Assessing the Case for Employment 
Arbitration: A New Path for Empirical Research, 57 Stan. L. Rev. 1557, 
1578 (Apr. 2005); see also, e.g., Theodore J. St. Antoine, Labor and 
Employment Arbitration Today: Mid-Life Crisis or New Golden Age?, 32 
Ohio St. J. on Disp. Resol. 1, 16 (2017).
---------------------------------------------------------------------------
    Most recently, NDP Analytics compared results of employment 
claims that were arbitrated and employment claims that were 
litigated in federal court. The study examined more than 
100,000 cases, using data from the nation's leading arbitration 
providers and litigation data from the federal courts.
    NDP Analytics found that employees won more often and won 
more money in arbitration than in court:

      The overwhelming majority (75%) of employment cases are 
settled in both arbitration and court litigation, but for the cases 
decided by the arbitrator or court, employee-plaintiffs won three times 
as often in arbitration compared to wins in court--32% compared to 11%.
      Employee-plaintiffs also recovered larger amounts in 
arbitration than in court: Employees whose claims were arbitrated 
generally recovered approximately double the amount recovered by 
employees in court. The median award in arbitration was $113,818, 
compared to $51,866 in court, and the mean award was $520,630 in 
arbitration compared to $269,885 in court.\2\
---------------------------------------------------------------------------
    \2\ NDP Analytics, Fairer, Faster, Better: An Empirical Assessment 
of Employment Arbitration 5-10 (May 2019). These results are consistent 
with other empirical analyses of employment arbitration. See Michael 
Delikat & Morris M. Kleiner, An Empirical Study of Dispute Resolution 
Mechanisms: Where Do Plaintiffs Better Vindicate Their Rights?, 58 
Disp. Resol. J. 56, 58 (Nov. 2003-Jan. 2004).

    Studies of consumer arbitration have reached similar 
conclusions. For example, a 2010 study found that consumers won 
relief 53.3% of the time in arbitration, compared with a 
success rate of roughly 50% in court.\3\ And just as in court, 
plaintiffs who win in arbitration is able to recover not only 
compensatory damages but also ``other types of damages, 
including attorneys' fees, punitive damages, and interest.'' 
\4\
---------------------------------------------------------------------------
    \3\ Christopher R. Drahozal & Samantha Zyontz, An Empirical Study 
of AAA Consumer Arbitrations, 25 Ohio St. J. on Disp. Resol. 843, 896-
904 (2010); Theodore Eisenberg et al., Litigation Outcomes in State and 
Federal Courts: A Statistical Portrait, 19 Seattle U. L. Rev. 433, 437 
(1996); see also Christopher R. Drahozal & Samantha Zyontz, Creditor 
Claims in Arbitration and in Court, 7 Hastings Bus. L.J. 77, 80 (2011); 
Ernst & Young, Outcomes of Arbitration: An Empirical Study of Consumer 
Lending Cases (2005).
    \4\ Drahozal & Zyontz, Empirical Study, supra n.3 at 902.
---------------------------------------------------------------------------
    In the healthcare industry, the Kaiser Foundation Health 
Plan uses arbitration to resolve disputes with its more than 
eight million California Members, and an independent review 
found that 96% of those who used the system said it was better 
than or the same as court. Awards to successful claimants 
ranged from $4,500-$3,469,778.\5\
---------------------------------------------------------------------------
    \5\ Office of the Independent Administrator, Annual Report of the 
Kaiser Foundation Health Plan, Inc. Mandatory Arbitration System 
(2018), https://www.oia-kaiserarb.com/2059/-reports/annual-reports/
annual-report-for-2018.
---------------------------------------------------------------------------
    Moreover, these studies probably understate the 
effectiveness of arbitration, compared with litigation, as a 
means of vindicating plaintiffs' claims, because of ``selection 
effects.'' Arbitration claims typically come from middle-income 
claimants with claims too small to attract the legal 
representation needed to proceed in the court system--thus, 
studies that compare the average amount obtained by prevailing 
parties in arbitration and litigation probably tilt in favor of 
litigation. And, because of arbitration's relatively 
streamlined procedures as compared with litigation, 
``relatively weaker claims . . . are more likely to go to an 
arbitration hearing on the merits than in litigation'' given 
the additional procedural hurdles present in litigation.\6\
---------------------------------------------------------------------------
    \6\ See Samuel Estreicher et al., Evaluating Employment 
Arbitration: A Call for Better Empirical Research, 70 Rutgers U.L. Rev. 
375, 389-93 (2018).
---------------------------------------------------------------------------
    In short, the caricature of arbitration as a system rigged 
against plaintiffs simply isn't accurate. Most claimants in 
arbitration do as well, and likely better, than in court.

              Arbitrations Employ Fair Procedures

    The legal rules governing arbitration require fair 
procedures. The nation's largest arbitration providers accept 
cases for arbitration only when the governing arbitration 
agreement satisfies basic fairness standards. Most importantly, 
courts invalidate arbitration agreements that contain unfair 
provisions.
    The American Arbitration Association (AAA), the country's 
largest arbitration provider, developed fairness rules for 
employment and consumer arbitrations more than two decades ago. 
The AAA will not accept a case for arbitration unless the 
arbitration agreement complies with those due process 
standards.\7\ Specifically, these rules:
---------------------------------------------------------------------------
    \7\ Am. Arbitration Ass'n, Employment Due Process Protocol (May 9, 
1995), perma.cc/93NR-TXQP; Am. Arbitration Ass'n, Consumer Due Process 
Protocol Statement of Principles (Apr. 17, 1998), perma.cc/VPW4-KXUV.

      Require that arbitrators must be neutral and disclose any 
conflict of interest and that both parties have an equal say in 
selecting the arbitrator;
      limit the fees paid by employees and consumers to $200 
for consumers and $300 for employees-amounts that are less than the 
filing fee in federal court;
      empower the arbitrator to order any necessary discovery; 
and
      require that damages, punitive damages, and attorneys' 
fees be awardable to the claimant to the same extent as they would be 
in court.

    The AAA rules require that consumers be given the option of 
resolving their dispute in small claims court. JAMS, another 
leading arbitration provider, requires similar protections--as 
do other arbitration providers.\8\
---------------------------------------------------------------------------
    \8\ JAMS, JAMS Policy on Employment Arbitration Minimum Standards 
of Procedural Fairness (July 15, 2009), perma.cc/WC48-KP8G; JAMS, JAMS 
Policy on Consumer Arbitrations Pursuant to Pre-Dispute Clauses Minimum 
Standards of Procedural Fairness (July 15, 2009), perma.cc/HN4C-RN23; 
Nat'l Arbitration and Mediation, Employment Rules and Procedures 
(2017), perma.cc/F2XD-TCHJ.
---------------------------------------------------------------------------
    The courts provide another layer of oversight. If an 
arbitration provision is unfair, courts can and do step in and 
declare the arbitration agreement unconscionable and 
unenforceable. For example, courts invalidate limits on 
recovery of damages that would not be permissible if the claim 
were litigated in court; \9\ excessive fees for accessing the 
arbitral forum; \10\ requirements that the arbitration take 
place in inconvenient locations for claimants; \11\ attempts to 
shorten the applicable statutes of limitations that would be 
invalid if the claim were litigated in court; \12\ ``loser 
pays'' provisions under which a claimant might have to pay the 
full costs of the arbitration,\13\ or must pay the drafting 
party's costs regardless of who wins; \14\ unreasonable limits 
on discovery; \15\ and unfair procedures for selecting 
arbitrators.\16\
---------------------------------------------------------------------------
    \9\ See, e.g., Ziglar v. Express Messenger Sys. Inc., No. CV-16-
02726-PHX-SRB, 2017 WL 6539020, at *3 (D. Ariz. Aug. 31, 2017), vacated 
on other grounds, 739 F. App'x 444 (9th Cir. 2018) (arbitration 
agreement was unconscionable because it purported to prevent employees 
from recovering treble damages under state employment law); Smith v. 
D.R. Horton, Inc., 790 S.E.2d 1, 5 (S.C. 2016) (arbitration agreement 
that prevented claimants from recovering damages was unconscionable); 
Alexander v. Anthony Int'l, L.P., 341 F.3d 256, 263 (3d Cir. 2003) 
(arbitration agreement that barred punitive damages was 
unconscionable); Woebse v. Health Care & Ret. Corp. of Am., 977 So. 2d 
630 (Fla. Dist. Ct. App. 2008) (same).
    \10\ The Supreme Court has held that a party to an arbitration 
agreement may challenge enforcement of the agreement if the claimant 
would be required to pay excessive filing fees or arbitrator fees in 
order to arbitrate a claim. See Green Tree Fin. Corp.-Ala. v. Randolph, 
531 U.S. 79, 90-92 (2000). Since Randolph, courts have aggressively 
protected consumers and employees who show that they would be forced to 
bear excessive costs to access the arbitral forum. See, e.g., Chavarria 
v. Ralphs Grocery Co., 733 F.3d 916, 923-26 (9th Cir. 2013) (refusing 
to enforce an arbitration agreement that required the employee to pay 
an unrecoverable portion of the arbitrator's fees ``regardless of the 
merits of the claim''); Am. Express Co. v. Italian Colors Rest., 570 
U.S. 228, 236 (2013) (reaffirming that a challenge to an arbitration 
agreement might be successful if ``filing and administrative fees 
attached to arbitration . . . are so high as to make access to the 
forum impracticable'' for a plaintiff). Courts also have reached the 
same conclusion under State unconscionability law.
    \11\ See, e.g., Willis v. Nationwide Debt Settlement Grp., 878 F. 
Supp. 2d 1208 (D. Or. 2012) (travel from Oregon to California); Coll. 
Park Pentecostal Holiness Church v. Gen. Steel Corp., 847 F. Supp. 2d 
807 (D. Md. 2012) (travel from Maryland to Colorado); Hollins v. Debt 
Relief of Am., 479 F. Supp. 2d 1099 (D. Neb. 2007) (travel from 
Nebraska to Texas); Philyaw v. Platinum Enters., Inc., 54 Va. Cir. 364 
(Va. Cir. Ct. 2001) (travel from Virginia to California).
    \12\ See, e.g., Zaborowski v. MHN Gov't Servs., Inc., No. C 12-
05109 SI, 2013 WL 1363568 (N.D. Cal. Apr. 3, 2013); Adler v. Fred Lind 
Manor, 103 P.3d 773 (Wash. 2004) (180 days); see also Gandee v. LDL 
Freedom Enters., Inc., 293 P.3d 1197 (Wash. 2013) (refusing to enforce 
arbitration agreement in debt-collection contract that required debtor 
to present claim within 30 days after dispute arose); Alexander, 341 
F.3d at 256 (same, for an employee); Stirlen v. Supercuts, Inc., 60 
Cal. Rptr. 2d 138, 138 (Cal. Ct. App. 1997) (rejecting provision that 
imposed shortened one-year statute of limitations).
    \13\ See Gandee, 293 P.3d at 1197; Alexander, 341 F.3d at 256; Sosa 
v. Paulos, 924 P.2d 357 (Utah 1996).
    \14\ See, e.g., In re Checking Account Overdraft Litig., 485 F. 
App'x 403 (11th Cir. 2012); see also Samaniego v. Empire Today LLC, 140 
Cal. Rptr. 3d 492 (Cal. Ct. App. 2012) (attorneys' fees).
    \15\ See, e.g., Narayan v. Ritz-Carlton Dev. Co., 400 P.3d 544, 555 
(Haw. 2017).
    \16\ See, e.g., Chavarria, 733 F.3d at 923-26 (arbitration 
agreement was unconscionable and unenforceable when it ``would always 
produce an arbitrator proposed by [the company] in employee-initiated 
arbitration[s]''and barred selection of ``institutional arbitration 
administrators''); Ruiz v. Millennium Square Residential Ass'n, 156 F. 
Supp. 3d 176, 182 (D.D.C. 2016) (refusing to enforce arbitrator 
selection provision that ``gives [the claimant] no say in the 
arbitrator-selection process''); Magno v. Coll. Network, Inc., 204 Cal. 
Rptr. 3d 829, 840 (Cal. Ct. App. 2016) (arbitration provision was 
unconscionable because, among other things, it allowed the defendant to 
select the arbitrator and ``contain[ed] no assurances of neutrality'').
---------------------------------------------------------------------------
    This judicial oversight ensures that companies have an 
incentive to craft arbitration agreements that are fair to 
their customers and employees--and that arbitration agreements 
that are not fair to claimants will not be enforced.

   Arbitration Is Quicker and Easier To Navigate Than Court 
                          Adjudication

    Everyone recognizes that litigation in court is extremely 
expensive, immensely time- consuming, and highly complicated. 
By contrast, as the Supreme Court has explained in an opinion 
written by Justice Breyer, arbitration ``is usually cheaper and 
faster than litigation; it can have simpler procedural and 
evidentiary rules; it normally minimizes hostility and is less 
disruptive of ongoing and future business dealings among the 
parties; [and] it is often more flexible in regard to 
scheduling of times and places of hearings and discovery 
devices.'' \17\
---------------------------------------------------------------------------
    \17\ Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 280 (1995) 
(quoting H.R. Rep. No. 97-542, at 13 (1982)); see also, e.g., AT&T 
Mobility LLC v. Concepcion, 563 U.S. 333, 345 (2011) (``[T]he 
informality of arbitral proceedings is itself desirable, reducing the 
cost and increasing the speed of dispute resolution.'').
---------------------------------------------------------------------------
    Flexibility is one of arbitration's greatest advantages. An 
arbitration plaintiff need not ever make a personal appearance 
to secure a judgment; claims often can be adjudicated based 
solely on written submissions or on the basis of a telephone 
conference.\18\ In court, by contrast, a claimant is often 
obligated to appear, wait in line, and perhaps return another 
day if the court is unable to get through its docket. Even for 
those litigants who can afford to take time off from work or 
family obligations--and many cannot--these inconveniences can 
erode the benefits of any possible recovery.
---------------------------------------------------------------------------
    \18\ See, e.g., Am. Arbitration Ass'n, Consumer Arbitration Rules 
22 (Sept. 1, 2014) (``A hearing may be by telephone or in person.''), 
perma.cc/E8JN-FQE4.
---------------------------------------------------------------------------
    Arbitrations are also resolved quickly--which means that 
claimants receive relief faster. The recent NDP study found 
that arbitration cases in which the employee-plaintiff 
prevailed took, on average, 569 days to complete, while cases 
in court required an average of 665 days. Ten percent of the 
court cases took an average of 1,283 days--50% longer than the 
longest 10% of arbitration proceedings.\19\ Another study found 
that awarded arbitrations took an average of just 11 months to 
decision, versus an average of 26.6 months to verdict in State 
court jury trial cases.\20\
---------------------------------------------------------------------------
    \19\ NDP Analytics, supra n. 2, at 11-12.
    \20\ Andrea Cann Chandrasekher & David Horton, Arbitration Nation: 
Data From Four Providers, 107 Cal. L. Rev. 1, 51 (2019).
---------------------------------------------------------------------------

Arbitration Expands Access to Justice by Enabling Consumers and 
    Employees to Pursue Claims That They Would Be Unable To 
                       Litigate in Court

    Arbitration's speed, efficiency, and flexibility make it a 
lower-cost means of resolving disputes--which, in turn, expands 
consumers' access to justice by providing a forum in which they 
can realistically prosecute low-dollar-value claims.
    Most harms suffered by employees and consumers are 
relatively small in economic value and are individualized. A 
key obstacle to pursuing an individualized, small-value claim 
in court is the cost of hiring counsel. Unrepresented parties 
have little hope of navigating the complex procedures that 
apply to litigation in court, yet a lawyer's hourly billing 
rate may itself exceed the amount at issue in many claims. Many 
lawyers, especially those working on a contingency basis, are 
unlikely to take cases when the prospective of a substantial 
payout is slim. Studies indicate that a claim must exceed 
$60,000, and perhaps $200,000, in order to attract a 
contingent-fee lawyer.\21\
---------------------------------------------------------------------------
    \21\ Elizabeth Hill, Due Process at Low Cost: An Empirical Study of 
Employment Arbitration Under the Auspices of the American Arbitration 
Association, 18 Ohio St. J. on Disp. Resol. 777, 783 (2003). In some 
markets, this threshold may be as high as $200,000. Minn. State Bar 
Ass'n, Recommendations of the Minnesota Supreme Court Civil Justice 
Reform Task Force 11 (Dec. 23, 2011), perma.cc/VJ8L-RPEY.
---------------------------------------------------------------------------
    Arbitration thus empowers individuals because they can 
realistically bring a claim in arbitration without the help of 
a lawyer.\22\ Although a party always has the choice to retain 
an attorney, arbitration procedures are sufficiently simple and 
streamlined that in many cases no attorney is necessary.\23\ 
And even if a consumer or employee retains a lawyer, costs may 
well be lower because of the increased speed and efficiency of 
arbitration. As the Supreme Court put it: ``[a]rbitration 
agreements allow parties to avoid the costs of litigation, . . 
. which often involves smaller sums of money than disputes 
concerning commercial contracts.'' \24\
---------------------------------------------------------------------------
    \22\ While one study found that pro se plaintiffs ``struggle'' in 
arbitration, see Chandrasekher & Horton, supra n.20, at 2, 52, a pro se 
plaintiff who can afford a lawyer is nonetheless far better off in 
arbitration than litigation.
    \23\ St. Antoine, supra n.1, at 15 (``it is feasible for employees 
to represent themselves or use the help of a fellow layperson or a 
totally inexperienced young lawyer'').
    \24\ Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 123 (2001) 
(emphasis added).
---------------------------------------------------------------------------
    Indeed, a study of 200 AAA employment awards concluded that 
low-income employees brought 43.5% of arbitration claims, most 
of which were low-value enough that the employees would not 
have been able to find an attorney willing to bring litigation 
on their behalf.\25\ These employees were often able to pursue 
their arbitrations without an attorney and won at the same rate 
as individuals with representation.\26\
---------------------------------------------------------------------------
    \25\ Hill, supra n.21, at 794.
    \26\ Id.
---------------------------------------------------------------------------
    Without arbitration, as Justice Breyer explained in a 
Supreme Court opinion, ``the typical consumer who has only a 
small damage claim (who seeks, say, the value of only a 
defective refrigerator or television set) [would be left] 
without any remedy but a court remedy, the costs and delays of 
which could eat up the value of an eventual small recovery.'' 
\27\
---------------------------------------------------------------------------
    \27\ Allied-Bruce Terminix Cos., 513 U.S. at 281.
---------------------------------------------------------------------------
    In short, for a very large percentage of the harms suffered 
by consumers and employees, arbitration is the only realistic 
opportunity for obtaining relief. One law professor explained 
why:

        In a world without employment arbitration as an available 
        option, we would essentially have a ``cadillac'' system for the 
        few and a ``rickshaw'' system for the many. The unspoken (yet 
        undeniable) truth is that most claims filed by employees do not 
        attract the attention of private lawyers because the stakes are 
        too small and outcomes too uncertain to warrant the investment 
        of lawyer time and resources. These claims have only one place 
        to go: Filings with administrative agencies where they 
        essentially languish, for the agencies themselves lack the 
        staffing (and often even the inclination) to serve as lawyers 
        for average claimants. The people who benefit under a 
        litigation-based system are those whose salaries are high 
        enough to warrant the costs and risks of a lawsuit undertaken 
        by competent counsel; these are the folks who are likely to 
        derive benefit from the considerable upside potential of 
        unpredictable jury awards. Very few claimants, however, are 
        able to obtain a position in this ``litigation lottery.'' \28\
---------------------------------------------------------------------------
    \28\ Samuel Estreicher, Saturns for Rickshaws: The Stakes in the 
Debate Over Predispute Employment Arbitration Agreements, 16 Ohio St. 
J. on Disp. Resol. 559, 563 (2001).

    As another commentator puts it in the context of employment 
disputes, ``a substantial number of nonunion employees, 
particularly those with small financial claims, have a 
realistic opportunity to pursue their rights through mandatory 
arbitration that otherwise would not exist.'' \29\
---------------------------------------------------------------------------
    \29\ St. Antoine, supra n.1, at 16.
---------------------------------------------------------------------------

 Arbitration Agreements Cannot Prevent Consumers or Employees 
From Discussing Claims With Government Agencies or the Public--
        and Arbitrators' Decisions Cannot Be Kept Secret

    Critics of arbitration contend that arbitration imposes 
confidentiality obligations that allow wrongdoers to cover up 
their offenses. That is simply false. As a leading law 
professor has explained, ``under U.S. law, the privacy of 
arbitration typically does not extend to precluding a party's 
disclosure of the existence of the arbitration or even its 
outcome. Instead, it means that non-parties can be excluded 
from the hearing and that the arbitrator and arbitration 
provider cannot disclose information about the proceeding.'' 
\30\
---------------------------------------------------------------------------
    \30\ Christopher R. Drahozal, FAA Preemption After Concepcion, 35 
Berkeley J. Emp. & Lab. L. 153, 167 (2014). The American Arbitration 
Association's rules provide that ``[t]he arbitrator and the AAA shall 
maintain the privacy of the hearings unless the law provides to the 
contrary.'' Am. Arbitration Ass'n, Commercial Arbitration Rules and 
Mediation Procedures 31 (Apr. 1, 1999), perma.cc/5U92-5PQF. This Rule 
applies only to the hearings themselves; nothing in the rules requires 
that the outcome be kept confidential.
---------------------------------------------------------------------------
    Thus, claimants in arbitration are free to discuss their 
claims publicly and to report alleged wrongdoing to law 
enforcement officials.\31\ If an arbitration agreement 
purported to impose a ``gag order,'' or to prevent a claimant 
from publicly disclosing misconduct or reporting that 
misconduct to law enforcement authorities, that restriction 
would be invalidated in court.\32\
---------------------------------------------------------------------------
    \31\ See, e.g., Christopher C. Murray, No Longer Silent: How 
Accurate are Recent Criticisms of Employment Arbitration, 36 
Alternatives to the High Cost of Litigation 65, 78 (2018). The only 
even possible exception is one-off arbitration agreements individually 
negotiated with highly-paid, high-ranking executives or similar 
employees, which could bar public disclosure of confidential 
information. But even in that context, confidentiality obligations face 
a high bar.
    \32\ See, e.g., Davis v. O'Melveny & Myers, 485 F.3d 1066, 1078 
(9th Cir. 2007), overruled on other grounds by Kilgore v. KeyBank, 
Nat'l Ass'n, 673 F.3d 947 (9th Cir. 2012); Longnecker v. Am. Express 
Co., 23 F. Supp. 3d 1099, 1110 (D. Ariz. 2014); DeGraff v. Perkins Coie 
LLP, No. c 12-02256 JSW, 2012 WL 3074982, at *4 (N.D. Cal. July 30, 
2012).
---------------------------------------------------------------------------
    The same is true of arbitrators' decisions. Indeed, State 
laws require disclosure of arbitration outcomes by arbitral 
forums such as the AAA,\33\ and courts consistently hold that 
the results of arbitration proceedings may be disclosed by 
either party.\34\
---------------------------------------------------------------------------
    \33\ E.g., Cal. Code Civ. Proc. Sec. 1281.96.
    \34\ Courts have invalidated on unconscionability grounds 
arbitration agreement provisions requiring that outcomes be kept 
confidential. See, e.g., Larsen v. Citibank FSB, 871 F.3d 1295, 1319 
(11th Cir. 2017); Davis, 485 F.3d at 1079.
---------------------------------------------------------------------------
    In sum, the claim that arbitration allows businesses to 
avoid public disclosure of disputes with employees or consumers 
is simply false; consumers and employees retain the ability to 
make these disputes public even if they are resolved in 
arbitration.

 Banning Pre-dispute Arbitration Agreements Will Eliminate All 
                          Arbitration

    Arbitration critics often assert that if arbitration is 
beneficial for both sides of a dispute, businesses and 
employees will agree to arbitrate after disputes arise and that 
a ban on pre-dispute arbitration agreements therefore will not 
eliminate all arbitration. In reality, post-dispute arbitration 
agreements are as rare as unicorns.
    The reasons for this are simple. Once a particular dispute 
has arisen, the parties ``often have an emotional investment in 
their respective positions,'' built up over the course of the 
events that led to the dispute.\35\ And especially at the 
beginning of a dispute, parties are ``reluctan[t] . . . to 
evaluate their cases pragmatically.'' \36\ The emotional 
investment in a case thus tends to skew the preferences of one 
party or another in favor of ``refus[ing] to arbitrate'' \37\ 
and instead opting to litigate in court.
---------------------------------------------------------------------------
    \35\ Steven C. Bennett, The Proposed Arbitration Fairness Act: 
Problems and Alternatives, 67 Disp. Resol. J. 32, 37 (2012).
    \36\ Lewis L. Maltby, Out of the Frying Pan, Into the Fire: The 
Feasibility of Post-Dispute Employment Arbitration Agreements, 30 Wm. 
Mitchell L. Rev. 313, 326 (2003).
    \37\ Id. at 327.
---------------------------------------------------------------------------
    The lawyers for one or both sides also have financial 
incentives to induce their clients to opt for litigation in 
court rather than arbitration. Litigation in court--which takes 
much longer than arbitration and involves many more procedural 
hurdles--offers lawyers the opportunity to earn much higher 
fees than they could earn in arbitration. Consciously or not, 
they may advise clients to choose a judicial forum that is 
really in the lawyers' own best interest rather than in the 
clients' interest.
    As one law professor explained: ``I know, from personal 
experience representing clients and in my work drafting 
postdispute arbitration rules for the Center for Public 
Resources (a consortium of companies and lawyers that promotes 
various forms of ADR), that postdispute arbitration agreements 
are almost never negotiated. It is a chimerical alternative to 
predispute arbitration agreements.'' \38\ In reality, post-
dispute arbitration agreements simply do not happen.
---------------------------------------------------------------------------
    \38\ Samuel Estreicher, Saturns for Rickshaws, supra n.28, at 567.
---------------------------------------------------------------------------
    Finally, even if parties were willing to negotiate post-
dispute arbitration agreements, it would not make economic 
sense for businesses to do so. Maintaining a top-quality 
arbitration system requires a business to shoulder virtually 
all of the costs of arbitration, including filing fees and 
arbitrator expenses. Companies willingly bear these costs 
because, on average, they pay less in legal fees to resolve 
disputes in arbitration than to litigate cases in court. If 
companies could not ensure that most or all of their dispute 
resolution proceedings would take place in arbitration rather 
than litigation, they would simply relegate all disputes to the 
court system--rather than paying both the high litigation costs 
for court proceedings and virtually all of the fees associated 
with arbitration. That result would be harmful to plaintiffs, 
who would lose the ability to access arbitration for low-value 
claims that cannot be brought in court.

    Arbitration's Individualized Process and Lack of Class 
        Procedures Does Not Justify Banning Arbitration

    Opponents of arbitration often complain that arbitration 
agreements require resolution of disputes on an individual 
basis and preclude class action lawsuits. But while the 
features of class actions--aggregation of claims and spreading 
of litigation costs over many class Members--may sound 
appealing in theory, these benefits are very rarely, if ever, 
realized. Most class actions provide little or no benefit at 
all to class Members. The indisputable beneficiaries of class 
actions, rather, are the plaintiffs' attorneys who file them 
and receive large fees if the cases are settled.
    Importantly, most claims asserted by consumers and 
employees are individualized and cannot be brought as class 
actions. When an employee argues that his or her pay or 
benefits were wrongly calculated, or that he or she was 
unfairly denied a raise or promotion, or claims injury from 
harassment, those claims in the overwhelming majority of 
situations cannot be brought as class actions. And on the 
consumer side, a study of claims asserted by consumers--and not 
by lawyers--found that the overwhelming majority could not be 
litigated in a class action.\39\
---------------------------------------------------------------------------
    \39\ Letter from David Hirschmann & Lisa Rickard to Monica Jackson, 
Re: Notice of Proposed Rulemaking on Arbitration Agreements, Dkt. No. 
CFPB-2016-0020-3941 at 3, Appendix A 13-14 (Aug. 22, 2016).
---------------------------------------------------------------------------
    Thus, while it is often claimed that class actions are 
necessary to allow certain low-value claims to be brought in 
court, the reality is that abandoning arbitration in order to 
allow for class actions would be the surest way to prevent many 
low-value claims from being prosecuted, because most low-value 
claims are not eligible for class treatment.
    Moreover, the benefits of class actions are greatly 
overstated. Most class actions do not produce any recovery for 
absent class Members. Class action studies consistently find 
that the overwhelming majority of these cases are resolved with 
no benefit to class Members--87% in one study, 66% in another, 
and 60-80% in a third.\40\
---------------------------------------------------------------------------
    \40\ Consumer Fin. Prot. Bureau, Arbitration Study: Report to 
Congress 2015, Section 6, Page 39 (Mar. 2015), perma.cc/8AX5-AYWN 
(hereinafter CFPB Study); Mayer Brown LLP, Do Class Actions Benefit 
Class Members? An Empirical Analysis of Class Actions (Dec. 11, 2013), 
goo.gl/3B27FQ (hereinafter Mayer Brown Study); Jason Scott Johnston, 
High Cost, Little Compensation, No Harm to Deter: New Evidence on Class 
Actions Under Federal Consumer Protection Statutes, 2017 Colum. Bus. L. 
Rev. 1 (2017).
---------------------------------------------------------------------------
    Even in the small percentage of cases that settle, the 
benefits for class Members are largely illusory:

      Most class action settlements do not involve automatic 
distribution of settlement payments and the vast majority of class 
members do not file claims for payment from these settlement funds.
      One study reported a "weighted average claims rate" in 
class actions of just 4%--in other words, 96% of the class members got 
nothing.\41\
---------------------------------------------------------------------------
    \41\ FPB Study at Section 8, Page 30; see also Mayer Brown Study at 
7 & n.20 (in the handful of cases where statistics were available, and 
excluding one outlier case involving individual claims worth, on 
average, over $2.5 million, the claims rates were minuscule: 0.000006%, 
0.33%, 1.5%, 9.66%, and 12%).
---------------------------------------------------------------------------
      That figure comports with academic studies, which 
regularly conclude that only ``very small percentages of class members 
actually file and receive compensation from settlement funds.'' \42\
---------------------------------------------------------------------------
    \42\ Linda Mullenix, Ending Class Actions as We Know Them: 
Rethinking the American Class Action, 64 Emory L.J. 399, 419 (2014).
---------------------------------------------------------------------------
      A recent empirical study explains that ``although 60 
percent of the total monetary award may be available to class members, 
in reality, they typically receive less than 9 percent of the total.'' 
The author concluded that class actions "clearly do[] not achieve their 
compensatory goals . . . . Instead, the costs . . . are passed on to 
consumers in the form of higher prices, lower product quality, and 
reduced innovation.'' \43\
---------------------------------------------------------------------------
    \43\ Joanna Shepherd, An Empirical Study of No-Injury Class 
Actions, 2, 5, 21 (Emory Univ. Sch. of L., Legal Studies Research Paper 
Series No. 16-402, Feb. 1, 2016), perma.cc/TU9R-UDSM.

    While class Members get little benefit from class actions, 
the lawyers who file these cases profit handsomely. These 
payments to lawyers, of course, are subtracted from the funds 
available to class Members, and therefore are highly relevant 
in assessing the benefit that class actions provide to class 
Members. One study found that the average settlement payment 
was no better than $32.35 per class member,\44\ but attorneys' 
fees averaged $1 million per case.\45\ And the average fee paid 
to plaintiffs' lawyers--as a percentage of the announced 
settlement (not the smaller amount actually distributed to 
class Members)--was 41%, with a median of 46%.\46\
---------------------------------------------------------------------------
    \44\ CFPB Study at Section 8, Pages 27-28; see also Statement of 
the U.S. Chamber of Commerce to House Committee on Financial Services, 
Subcommittee on Financial Institutions and Consumer Credit (May 18, 
2016) at Appendix, page 5 (explaining calculation), perma.cc/TJ92-CE9G.
    \45\ CFPB Study at Section 8, Page 33.
    \46\ CFPB Study at Section 8, Page 34.
---------------------------------------------------------------------------
    Class actions also typically take significantly longer to 
resolve than arbitrations. That means employees must wait much 
longer to obtain relief. One study found that class actions 
that produced a class-wide settlement took an average of nearly 
two years to resolve.\47\ And that two-year average duration, 
moreover, may not even include the time needed for class 
Members to submit claims and receive payment after a settlement 
is reached. Another study found that 14% of the class actions 
were still pending four years after they were filed, with no 
end in sight.\48\
---------------------------------------------------------------------------
    \47\ CFPB Study at Section 8, Page 37.
    \48\ Mayer Brown Study at 1.
---------------------------------------------------------------------------
    Moreover, arbitration can provide an efficient means of 
effectively litigating small injuries shared by a large number 
of employees or consumers. Parties with related claims can use 
the same lawyer and (if needed) the same expert in order to 
share costs. Justice Kagan (in an opinion for herself and 
Justices Ginsburg and Breyer) has recognized that groups of 
claimants can vindicate their rights in arbitration without 
class procedures--through ``informal coordination among 
individual claimants, or amelioration of arbitral expenses,'' 
\49\ both of which are features of virtually all arbitration 
agreements. One study suggested that plaintiffs' lawyers may be 
able to ``create a simulacrum of the class action by initiating 
dozens or even hundreds of two-party arbitrations against the 
same defendant'' and thereby pursue class-action style cases in 
the employment arbitration arena.\50\
---------------------------------------------------------------------------
    \49\ Italian Colors, 570 U.S. at 249 (Kagan, J., dissenting).
    \50\ Chandrasekher & Horton, supra n.20, at 2, 9, 52-54.
---------------------------------------------------------------------------
    Thus, the notion that the only way for employees and 
consumers to band together to bring small claims is in class 
actions is incorrect--arbitration provides an effective way to 
Act collectively, while also giving employees with 
individualized claims the opportunity to bring those claims (an 
opportunity that class actions do not provide).
    Thank you again for the opportunity to testify today. I 
look forward to answering your questions.

    Mr. Cicilline. Thank you, Mr. Pincus.
    The Chair now recognizes Ms. Gilles for 5 minutes.

                   TESTIMONY OF MYRIAM GILLES

    Ms. Gilles. Thank you, Chairman Cicilline, Ranking Member 
Sensenbrenner, distinguished Members of the subcommittee. Thank 
you so much for inviting me here. It is a privilege to be 
before you.
    In my few minutes, I would just like to explain how forced 
arbitration systematically strips us of our legal rights.
    Forced arbitration clauses are everywhere. These provisions 
are buried in the boilerplate of take-it-or-leave-it consumer 
and employment contracts, and they require that all legal 
claims be resolved in private, one-on-one arbitrations.
    What this really means is that, for example, if an employer 
rips off a group of employees, they can't sue that employer. 
They can't sue in court, they can't bring a group action, they 
can't bring a group action in arbitration. The only thing a 
given employee could do in that scenario is to take on all the 
burden and cost of going against the employer in a one-on-one 
arbitration.
    If an individual employee only has, say, $500 at stake, 
that is the amount that the employer ripped off, that is the 
amount of wage theft that we are talking about, he is not going 
to spend many times that amount in order to bring a claim. The 
game isn't worth the candle.
    So nearly all claims like this where forced arbitration is 
in effect, the employee rationally abandons her claim, and that 
means that the employer has basically drafted for itself what 
Congressman Nadler described as a get-out-of-jail-free card. 
There is no accountability, no liability.
    Given that reality, I think it is not surprising that 
forced arbitration is still popular, that over the past decade 
it is almost impossible to find a product, a service, an 
amenity of modern life that doesn't require us to sign away our 
rights. Over 60 million American workers are subject to forced 
arbitration. That is more than half the non-unionized 
workforce. The Economic Policy Institute predicts that in three 
to five years, 80 percent of all workers will be bound by 
forced arbitration.
    I want that to sink in for just a moment. Eighty percent of 
workers are going to have to sign away their rights to have a 
fair workplace before they can even get a job. That just seems 
crazy.
    In consumer transactions, 86 percent of student borrowers, 
90 percent of the nation's credit card debt, 88 percent of 
mobile wireless providers, 99 percent of payday lenders--this 
is happening, and it is happening everywhere. Probably every 
single person in this room, and certainly every person in this 
country, is subject to a forced arbitration clause in some 
aspect of their lives, to apply for a job, get a credit card, 
get a checking account, get a loan, belong to a gym, send your 
kid to a camp, or put your parents in a nursing home. You must 
sign away your rights.
    Take, for example, Richard Heggens, my fellow New Yorker 
who is here in the gallery today. Richard worked for Chipotle 
Restaurant in 2015. He tried to join a lawsuit brought by a 
group of Chipotle employees against the company for wage theft. 
The problem was that Richard had unknowingly agreed to a forced 
arbitration clause, and I am using the air quotes because the 
clause was buried in the fine print of an online welcome packet 
that Chipotle emailed to all its new employees requiring them 
to click ``Agree'' before they could start work. You didn't 
actually have to read the documents to click ``Agree,'' and we 
have all been on those online sites, right? So, we can relate.
    Richard didn't read the arb clause, but that didn't matter. 
His case was kicked out of court and sent into individual 
arbitration.
    Now, what Chipotle was really banking on here was that 
Richard and the other employees, once blocked from going to 
court as a collective, would just drop their claims, because 
that is what typically happens. Again, it is usually not worth 
it for an individual employee to bring the claim. That is not 
what happened here.
    The lawyers who were representing Richard and the other 
employees who have been pick-pocketed by Chipotle, they called 
Chipotle's bluff, and they started to bring serial 
arbitrations, over 1,000 arbitrations. Do you know what 
Chipotle did? They cried uncle. They went back to Federal court 
and said please help us out of this mess.
    What is the mess? The mess is actually having to defend 
itself against allegations of wage theft by their own 
employees.
    I think it is clear in this example that Chipotle's plan 
all along was to avoid any accountability to its workers. It 
was trying to use its forced arbitration clause as a shield, 
and it just couldn't believe it when it didn't work.
    But Richard's case is an exception, because I think that 
lots of companies use forced arbitration in this way and are 
able to suppress claims by using forced arbitration in this 
way. This is just not the way the civil justice system is 
supposed to work. This is not what I teach my students. This is 
not how it is supposed to go.
    So, I do think that it is time for Congress to act. Last 
month, in the most recent contested decision by the Supreme 
Court on forced arbitration, Justice Ginsburg issued a clarion 
call to the Congress. She told you it is urgent that Congress 
Act to protect the rights of employees and consumers, and I 
really hope you do.
    Thank you.
    [The testimony of Ms. Gilles follows:]

                   STATEMENT OF MYRIAM GILLES

    Distinguished Members of the House Subcommittee:
    Thank you for inviting me to participate in this important 
hearing. I hope my testimony will help inform the discussion of 
the pernicious effects of class-banning forced arbitration 
clauses on consumers, employees and small businesses. In this 
written testimony, I (1) chronicle the rise and troubling 
consequences of forced arbitration, and (2) expose the reality 
behind the myths and talking points perpetuated by arbitration 
advocates--all to make clear that a legislative solution is 
desperately needed to solve this escalating crisis in access to 
justice. It my hope that today's hearing will spur the 
Committee and the Congress to Act on the slate of proposed 
legislation seeking to amend the Federal Arbitration Act, 
including the Forced Arbitration Injustice Repeal Act (H.R. 
1423/S. 610), the Restoring Justice for Workers Act (H.R. 
7109), and the Justice for ServiceMembers Act (H.R. 2631).
    INTRODUCTION
    In 1925, the 68th Congress enacted the Federal Arbitration 
Act (``FAA'') to protect voluntary agreements to arbitrate, 
entered into by savvy businesses seeking a fast and economical 
alternative to the judicial system and a private forum where 
trade secrets and other commercial matters would be kept 
confidential.\1\ Not one member of that Congressional body 
could have imagined that this statute would someday be 
interpreted to permit companies to impose pre-dispute 
arbitration clauses in standard-form contracts with consumers 
and employees. Surely no one who supported the legislation 
thought for a second that, in enacting the FAA, they would be 
undermining private enforcement of consumer, antitrust, 
securities, employment and civil rights statutes that preserve 
and protect our shared rights.\2\ clearly no member of the 68th 
Congress believed that casting a vote in favor of the FAA would 
render American citizens and small business owners unable to 
access public courts to resolve disputes, seek redress for 
grievances, or enforce State and federal laws.
---------------------------------------------------------------------------
    \1\ See, e.g., Sen. Rep. No. 536, 68th Cong., 1st Sess. 3 (1924) 
(the goal of promoting arbitration as an alternative to the judicial 
system ``appeal[ed] to big business and little business alike, to 
corporate interests as well as to individuals'').
    \2\ Indeed, even the FAA's primary draftsman, Julius Henry Cohen, 
warned that arbitration was not the appropriate forum ``for deciding 
points of law of major importance involving constitutional questions or 
policy in the application of statutes.'' Andrea Chandrasekher & David 
Horton, Arbitration Nation: Data from Four Providers, 109 Cal. L. Rev. 
(forthcoming 2019) (citing Julius Henry Cohen & Kenneth Dayton, The New 
Federal Arbitration Law, 12 Va. L. Rev. 265, 281 (1926)).
---------------------------------------------------------------------------
    Yet that is precisely where we find ourselves today, as the 
result of a series of flawed judicial decisions that have 
strayed far from the 68th Congress's original intent in 
enacting the FAA. The result has been a proliferation of 
mandatory, pre-dispute arbitration clauses and class action 
bans. Given the certainty that most consumers and employees 
cannot afford to arbitrate small-dollar claims individually, or 
attract counsel on a contingent fee basis, these provisions 
effectively eliminate access to justice and undermine rights 
guaranteed by federal and State law.\3\
---------------------------------------------------------------------------
    \3\ See Consumer Financial Protection Bureau, Arbitration Study 
(2015) at 10 [hereinafter, CFPB Arbitration Study] (``Across each 
product market, 85-100% of the contracts with arbitration clauses--
covering close to 100% of market share subject to arbitration in the 
six product markets studied--include no-class arbitration 
provisions.'').
---------------------------------------------------------------------------
    Until now, debates over forced arbitration have largely 
been confined to academics and policymakers; but recent 
scandals have revealed the extent to which these provisions 
enable companies to cover up persistent wrongdoing. And polling 
reveals that citizens are now demanding change: 84% of voters--
87% of Republicans and 83% of Democrats--support legislation to 
end forced arbitration.\4\ In other words, in this moment of 
partisan factionalism where we seem to agree on little, 
Americans across the political spectrum agree that closing the 
courthouse door is harmful. It therefore falls upon this 116th 
Congress to faithfully represent the interests of this vast 
majority by amending the FAA to make clear that it does not 
apply to pre-dispute, class-banning forced arbitration clauses 
imposed by powerful companies upon unknowing consumers, 
employees and other weaker counterparties.
---------------------------------------------------------------------------
    \4\ The percentage of Americans against forced arbitration has 
risen steadily in the past few years. For example, in 2017, 67% of 
American--64% of Republicans and 74% of Democrats--supported the CFPB's 
Rule which would have banned forced arbitration clauses in consumer 
financial contracts. See Sylvan Lane, GOP Polling Firm: Bipartisan 
Support for Consumer Bureau Arbitration Rule, The Hill, Oct. 2017. The 
more recent nationwide poll by Hart Research found even greater 
bipartisan support for an even broader federal ban on all forced 
arbitration clauses in consumer and employment contracts.
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      I. The Ominous Rise of Forced Arbitration in America

    In 2005, I began studying the effects of forced arbitration 
clauses on consumers, employees and small businesses. That 
year, I published an article about class-banning arbitration 
provisions and warning that these clauses could become 
ubiquitous, blocking citizens' access to judges and juries.\5\ 
Two important rulings by the United States Supreme Court of the 
United States brought to life all my dire predictions. In its 
2011 decision in AT&T Mobility v. Concepcion, the Court held 
that the FAA preempts, not only State law rules that ban 
arbitration in some category of cases, but also any Rule that 
requires the availability of collective procedures for the 
resolution of disputes.\6\ This reading of the FAA has since 
preempted many subsequent attempts by states to regulate 
arbitration clauses in consumer and employment contracts.\7\
---------------------------------------------------------------------------
    \5\ Myriam Gilles, Opting Out of Liability: The Forthcoming, Near-
Total Demise of the Modern Class Action, 104 Mich. L. Rev. 373 (2005).
    \6\ 563 U.S. 333 (2011).
    \7\ See, e.g., Kindred Nursing Centers Ltd. P'ship v. Clark, 137 S. 
Ct. 1421 (2017); DirecTV, Inc. v. Imburgia, 136 S. Ct. 463 (2015); 
Marmet Health Care Ctr., Inc. v. Brown, 565 U.S. 530 (2012).
---------------------------------------------------------------------------
    The Court expanded the reach of the FAA in its 2013 
decision in American Express v. Italian Colors.\8\ There, a 
class of small business owners brought an antitrust class 
action against American Express challenging various 
anticompetitive practices. The case had important implications 
for millions of small merchants who felt abused by Amex's high 
fees, and whose theory of antitrust injury sought important 
changes in the electronic payments industry. By dint of 
Congressional intent and statutory enactment, these are 
precisely the types of claims that small businesses are meant 
to pursue.\9\ Yet five Justices the Supreme Court enforced 
Amex's class-banning arbitration clause buried in its merchant 
service agreement, prohibiting these small businesses from 
pursuing their legal claims collectively.\10\ Given that the 
cost of an individual small business bringing an antitrust 
action against a huge company like American Express was 
prohibitive, this ruling all but ensured that Amex and other 
big companies that impose forced arbitration on small 
businesses are rendered immune from liability and free to 
engage in whatever anti-competitive conduct they want.\11\
---------------------------------------------------------------------------
    \8\ 559 U.S. 1103 (2013).
    \9\ See, e.g., Mitsubishi Motors Corp. v. Soler Chrylser-Plymouth, 
473 U.S. 614, 634 (1985) (declaring the ``fundamental importance [of 
antitrust law] to American democratic capitalism''); Am. Safety Equip. 
Corp. v. J.P. Maguire & Co., 391 F.2d 821, 826 (2d Cir. 1968) (``A 
claim under the antitrust laws is not merely a private matter. The 
Sherman Act is designed to promote the national interest in a 
competitive economy; thus, the plaintiff asserting his rights under the 
Act has been likened to a private attorney-general who protects the 
public's interest.''); American Safety Equip. Corp. v. J.P. Maguire & 
Co., 391 F.2d 821, 826-27 (2d Cir. 1968) (observing that an antitrust 
violation ``can affect hundreds of thousands--perhaps millions--of 
people and inflict staggering economic damage,'' such that arbitration 
of such ``issues of great public interest'' was ill advised).
    \10\ 559 U.S. 1103 (2013).
    \11\ See Testimony of Alan Carlson, Named Plaintiff in Italian 
Colors et al. v. American Express, U.S. Senate Committee on the 
Judiciary, Dec. 17, 2013, available at https://
www.judiciary.senate.gov/imo/media/doc/12-17-13CarlsonTestimony.pdf 
(``Normally, every American has the right to join with others to fight 
to hold corporate giants accountable. But I don't, because of a forced 
arbitration clause buried in the fine print of terms and conditions 
imposed upon me years after I started taking American Express cards. If 
I cannot be part of a class action to enforce my rights against 
American Express, I have no way of enforcing those rights. I don't have 
the money to take on American Express by myself.'').
---------------------------------------------------------------------------
    These decisions, widely viewed as illogical and incorrect 
interpretations of the FAA, set the Court upon a crooked legal 
path, leading it to uphold class-banning arbitration clauses in 
numerous circumstances that stray far from the original goals 
of the FAA.\12\ In case after case, slim majorities have held 
that it does not matter that individual citizens are unable to 
vindicate their statutory rights in a one-on-one arbitration--
i.e., that countless legal claims will ``slip through the legal 
system,'' leaving serious corporate wrongdoing unaddressed.\13\ 
As Justice Kagan wrote in her blistering dissent in Amex, ``the 
nutshell version'' of the majority view is simply this: ``Too 
darn bad.'' \14\
---------------------------------------------------------------------------
    \12\ 9 U.S.C Sec. 2. Since 2010, the Supreme Court has decided 
fourteen cases interpreting the FAA. See, e.g., Kindred Nursing Centers 
Ltd. P'ship v. Clark, 137 S. Ct. 1421 (2017); DirecTV, Inc. v. 
Imburgia, 136 S. Ct. 463 (2015); BG Grp., PLC v. Republic of Argentina, 
134 S. Ct. 1198 (2014); Am. Exp. Co. v. Italian Colors Rest., 133 S. 
Ct. 2304 (2013); Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064 
(2013); Nitro-Lift Techs., L.L.C. v. Howard, 568 U.S. 17 (2012); Marmet 
Health Care Ctr., Inc. v. Brown, 565 U.S. 530 (2012); CompuCredit Corp. 
v. Greenwood, 565 U.S. 95 (2012); KPMG LLP v. Cocchi, 565 U.S. 18 
(2011); AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011); Granite 
Rock Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287 (2010); Rent-A-Ctr., 
W., Inc. v. Jackson, 561 U.S. 63 (2010); Stolt-Nielsen S.A. v. 
AnimalFeeds Int'l Corp., 559 U.S. 662 (2010); New Prime v. Oliviera, 
138 S.Ct. 1164 (Jan. 16, 2019); Lamps Plus v. Varela, No. 17-988, slip 
op. (U.S. Sup. Ct. October 2018).
    \13\ Concepcion, 563 U.S. at 341.
    \14\ Amex, 559 U.S. at 1111 (Kagan, J., dissenting).
---------------------------------------------------------------------------
    These Supreme Court decisions have given a green light to 
corporations looking to suppress legal claims and opt out of 
liability.\15\ Corporate actors, seeing that green light, have 
hit the gas, and the use of class-banning forced arbitration 
clauses has skyrocketed in recent years.\16\ These clauses have 
quickly spread from telecom and credit card contracts, to 
contracts with insurance companies, airlines, landlords, payday 
lenders, banks, gyms, rental car companies, parking facilities, 
schools, kids' camps, shippers--even HMOs and nursing 
homes.\17\ Today, nearly every American is subject to a class-
banning forced arbitration clause in some aspect of their 
lives--and, going forward, we should expect that there will be 
few transactions and interactions that are not accompanied by 
these remedy-stripping provisions.
---------------------------------------------------------------------------
    \15\ See, e.g., Jessica Silver-Greenberg & Robert Gebeloff, 
Arbitration Everywhere, Stacking the Deck of Justice, N.Y. Times, Nov. 
1, 2015 (``Corporations said that class actions were not needed because 
arbitration enabled individuals to resolve their grievances easily. But 
court and arbitration records show the opposite has happened: Once 
blocked from going to court as a group, most people dropped their 
claims entirely.'').
    \16\ Id. (``By inserting individual arbitration clauses into a 
soaring number of consumer and employment contracts, companies [have] 
devised a way to circumvent the courts and bar people from joining 
together in class-action lawsuits, realistically the only tool citizens 
have to fight illegal or deceitful business practices.'').
    \17\ Myriam Gilles & Gary Friedman, After Class: Aggregate 
Litigation in the Wake of AT&T Mobility v. Concepcion, 79 U. Chi. L. 
Rev. 623, 631 (2012) (``[A]bsent broad legal invalidation, it is 
inevitable that the waiver will find its way from the agreements of 
`early adopter' credit card, telecom, and e-commerce companies into 
virtually all contracts that could even remotely form the predicate of 
a class action someday. After all, the incremental burden of including 
magic words in dispute resolution boilerplate--or even on point-of-sale 
purchase receipts or box-stuffer notices--is surely minimal in relation 
to the benefit of removing oneself from potential exposure to aggregate 
litigation.'').
---------------------------------------------------------------------------

                          a. Consumers

    Class-banning forced arbitration clauses have permeated 
every corner of the consumer universe. For example, the 
Consumer Financial Protection Bureau (``CFPB'') found that 
seven of the eight largest mobile wireless providers, covering 
99.9% of subscribers, required arbitration in their customer 
agreements.\18\ This means an estimated 290 million cell phone 
subscribers are bound to service agreements that contain class-
banning forced arbitration clauses. Likewise, credit card 
issuers representing more than 90% of all credit card debt 
impose arbitration clauses in their contracts with 
consumers.\19\ In the checking account market, banks 
representing 44% of insured deposits have arbitration clauses 
in their customer contracts, while 98.5% of payday lenders 
impose arbitration on borrowers.\20\ As a result, tens of 
millions of consumers are, today, subject to these rights-
stripping clauses.
---------------------------------------------------------------------------
    \18\ See CFPB Arbitration Study, supra note 3. See also Theodore 
Eisenberg et al., Arbitration's Summer Soldiers: An Empirical Study of 
Arbitration Clauses in Consumer and Nonconsumer Contracts, 41 U. Mich. 
J.L. Ref. 871, 882-84 (2008) (reviewing internet, phone, and data 
service contracts finding that 75% contained mandatory arbitration 
clauses and 80% contained class action bans).
    \19\ CFPB Arbitration Study, supra note 3, at 22-23. Specifically, 
the CFPB Arbitration Study noted that, at the time of its study, four 
major credit card issuers were subject to a federal court injunction 
under which they were temporarily barred from imposing their mandatory 
arbitration clauses. Ross v. Bank of America, N.A., 2006 WL 2685082 
(S.D.N.Y. 2010). If those four credit card issuers had continued their 
policy of requiring arbitration during the CFPB's study period, the 
percentage of outstanding loans subject to mandatory arbitration would 
have risen to over 93%. Id. Indeed, a casual web check of those four 
issuers' terms and conditions today shows they have reinstated their 
arbitration requirements.
    \20\ Id.
---------------------------------------------------------------------------
    Given the ubiquity of these provisions, one might expect 
some significant number consumers to arbitrate their disputes. 
But the opposite is true: Only a tiny percentage of consumers 
file arbitrations annually.\21\ For example, Yale Law professor 
Judith Resnik found that the American Arbitration Association 
(``AAA''), which is ``designated by AT&T to administer its 
arbitrations,'' reported that only ``134 individual claims 
(about 27 a year) were filed against AT&T between 2009 and 
2014.'' \22\ During the same time period, Professor Resnik 
calculates AT&T had over 120 million wireless customers, and 
that the company was subject during these years to numerous 
investigations and public enforcement actions for violations of 
consumer laws.\23\
---------------------------------------------------------------------------
    \21\ Id. (finding that from 2010 to 2012, only 411 consumers filed 
individual arbitrations to resolve disputes--while nearly 10 million 
consumers were represented in comparable class actions during the same 
period).
    \22\ See Judith Resnik, Diffusing Disputes: The Public in the 
Private of Arbitration, the Private in Courts, and the Erasure of 
Rights, 24 Yale L.J. 2680, 2811 (2015).
    \23\ Id. at 2812.
---------------------------------------------------------------------------
    More recent data provided by the AAA reveals that, in the 
first quarter of 2019, it resolved only 895 consumer 
arbitrations for the hundreds of companies for which it is a 
designated arbitral provider. Again, this is a miniscule number 
of claims when compared to the millions of American consumers 
who sign consumer contracts every year that require them to 
resolve disputes through individual arbitration. It is also 
tiny compared to the millions of consumers who would have 
benefited from class actions, when these procedures were 
available.\24\
---------------------------------------------------------------------------
    \24\ CFPB Arbitration Study, supra note 3 at pp. 29-31 (concluding 
that, in the time period it examined, millions of consumers were class 
Members while just hundreds brought claims in arbitration; and that 
consumers were awarded less than $200,000 in arbitration compared to 
$1.1 billion in class actions).
---------------------------------------------------------------------------
    One reason consumers don't arbitrate their claims is that 
it would be too costly to do so: under these class-banning 
arbitration clauses, a consumer must bear 100% of all the costs 
charged to her in arbitration by herself; her claim cannot be 
joined with those of any other arbitral claimant as a way of 
distributing costs and risks. Rational consumers are unwilling 
to take on the cost and hassle of an individual arbitration to 
recover de minimis damages, nor can they find attorneys to do 
so.\25\ Indeed, in a recent case, a lawyer for the company 
Fitbit admitted to a federal judge that the company was betting 
that no rational litigant would pay arbitration fees, which 
start at $750, to litigate a relatively small-dollar claim 
involving a defective device.
---------------------------------------------------------------------------
    \25\ Concepcion, 584 U.S. 849 (2011) (Breyer, J. dissenting) 
(``What rational lawyer would have signed on to represent the 
Concepcions in litigation for the possibility of fees stemming from a 
$30.22 claim?'').
---------------------------------------------------------------------------
    Another reason consumers don't arbitrate their claims is 
they have no idea that they have signed away their right to go 
to court before a jury of their peers. In a Congressionally-
mandated study conducted by the Consumer Financial Protection 
Bureau in 2015, half of all respondents surveyed did not know 
whether they had the right to sue their credit-card issuer in 
court and more than a third of those who were bound by forced-
arbitration clauses incorrectly believed that they could still 
go to court to resolve disputes.\26\ This utter lack of 
awareness is no surprise, given that class-banning forced 
arbitration clauses are often hidden in the boilerplate 
language that consumers either skim or ignore when making 
purchases. Indeed, companies now regularly and intentionally 
impose these class-banning arbitration clauses in click-wrap, 
envelope-stuffers and other delivery methods intended to 
obscure or minimize the immensity of the rights that are being 
forfeited.
---------------------------------------------------------------------------
    \26\ CFPB Arbitration Study, supra note 3 at pp. 19-24 (reporting 
that half of all respondents surveyed did not know whether they had the 
right to sue their credit-card issuer in court, and more than a third 
of those who were bound by forced-arbitration clauses still believed, 
incorrectly, that they could take the company to court).
---------------------------------------------------------------------------
    Further, these rights-stripping clauses are a precondition 
to obtaining the product or service in question--i.e., they are 
imposed long before any dispute or problem arises. And since 
most people simply don't contemplate dispute-resolution 
procedures at the start of any relationship--but especially not 
when transacting for a product or service--we simply lack the 
information necessary to place sufficient value on the rights 
we're giving up until it's far too late.
    All this leaves American consumers without remedy for 
widespread wrong-doing and allows unscrupulous companies to 
engage in widespread misconduct with little fear of exposure or 
penalty. For example, forced arbitration allowed companies like 
Wells Fargo \27\ and Equifax \28\ to block consumer lawsuits 
that would have exposed their misconduct far sooner. In the 
case of Wells Fargo, injured customers began suing the company 
for opening fake accounts back in 2013--two years before press 
reports surfaced that employees had opened 3 million such 
accounts--but these claims were quickly forced into the Black 
box of arbitration.\29\
---------------------------------------------------------------------------
    \27\ See, e.g., Michael Corkery & Stacy Cowly, Wells Fargo Killing 
Sham Account Suits by Using Arbitration, NY Times, Dec. 16, 2016.
    \28\ See, e.g., Diane Hembree, Consumer Backlash Spurs Equifax to 
Drop ``Ripoff Clause'' in Offer to Security Hack Victims, Forbes, Sept. 
9, 2017.
    \29\ See, e.g., Michael Hiltzik, No Surprise: Wells Fargo Is 
Leveraging Its Arbitration Clause to Win an Advantageous Scandal 
Settlement, Los Angeles Times, March 31, 2017; see also Col. Lee F. 
Lange, I Served to Protect Our Rights; Don't Let Equifax Take Them 
Away, Medium (reporting that ``only four arbitrations have been filed 
against Wells Fargo in Arizona despite up to 178,972 or more fake 
accounts in the state'').
---------------------------------------------------------------------------

                          b. Employees

    In recent years, companies have also imposed class-banning 
arbitration clauses on their employees, silencing aggrieved 
workers and eliminating corporate accountability for systemic 
workplace violations.\30\ Employer-drafted arbitration clauses 
require workers to resolve all disputes within the employment 
relationship in private arbitration, including payment of wages 
and benefits, provision of breaks and rest periods, rights in 
termination, and prohibitions against discrimination or 
harassment. Indeed, many companies go so far as to explicitly 
highlight federal statutes that they are denying their workers 
the right to enforce in court--listing, for example, that 
alleged violations of the Civil Rights Act of 1964, the Family 
Medical Leave Act, the American with Disabilities Act, and the 
Age Discrimination in Employment Act can only be resolved in 
private, one-on-one arbitration.
---------------------------------------------------------------------------
    \30\ See Lauren Weber, More Companies Block Employees From Filing 
Suits, Wall St. J., Mar. 31, 2015 (reporting that CVS, Kmart, 
Nordstrom, and Halliburton are ``among the largest employers that 
require or ask employees to waive their rights to sue as a class''); 
Kriston Capps, Sorry: You Still Can't Sue Your Employer, Citylab, July 
11, 2017 (reporting that Wells Fargo, Citibank, Comcast, AT&T, Time-
Warner Cable, Olive Garden, T.G.I. Friday's, Applebee's, Macy's, 
Target, Amazon, Uber, and Lyft all impose arbitration and class action 
bans in employment contracts).
---------------------------------------------------------------------------
    These provisions leave workers nowhere to turn when their 
rights are violated--a problem of growing magnitude as more 
employers impose class-banning arbitration clauses. A 2018 
study by Cornell Professor Alexander Colvin estimated that over 
half the country's nonunionized workforce is now subject to 
these provisions--more than double the number in the early 
2000s.\31\ Some of the country's best-known companies, 
including Amazon, Walmart, Starbucks, Macy's and McDonald's, 
now require all or most of their workers to sign class-banning 
forced arbitration clauses--some before they can even apply for 
a job.\32\ Further, Professor Colvin's study found that forced 
arbitration is more common in low-wage workplaces, and in 
industries (such as education and healthcare) that are 
disproportionately comprised of women and African-American 
workers.\33\
---------------------------------------------------------------------------
    \31\ See Alexander Colvin, The Growing Use of Mandatory 
Arbitration, Economic Policy Institute (April 6, 2018). See also 
Carlton Fields 2015 Class Action Survey, available at (finding that the 
percentage of companies using arbitration clauses to preclude 
employment class actions jumped from 16.1% in 2012 to 42.7% and that 
the number of employment class action suits filed decreased 
precipitously between 2011 and 2014).
    \32\ For example, when Gloria Marmolejo sought a janitorial 
position at an LA Fitness club, she filled out a job application that 
contained an arbitration clause. She got the job, but then, five years 
later (as she approached 50) was fired. When Marmolejo tried to 
challenge her termination, the court upheld the arbitration clause in 
the application--despite the fact that Marmolejo credibly claimed she 
had not understood when she was applying for the job that she was also 
signing away her rights to be treated fairly while in the position. See 
Marmolejo v. Fitness Intl. LLC3, Civ. No. E064190 (Cal. Ct. App., March 
7, 2018). There are countless similar examples of workers subjected to 
arbitration clauses in the process of applying for a job.
    \33\ Colvin, supra note 31.
---------------------------------------------------------------------------
    Yet, despite the large chunk of the U.S. workforce bound to 
individually arbitrate their disputes, few workers do.\34\ One 
study has estimated that only 1 in 10,400 workers subject to 
forced arbitration has filed a claim in arbitration--putting a 
lie to the claim that arbitration is preferable.\35\ The 
remaining workers with potentially valid claims--somewhere 
between 315,000 to 722,000 each year \36\--are left to suffer 
in silence, unwilling to shoulder the expense of individual 
arbitration and unable to be heard by a judge and jury.\37\ One 
legal scholar estimates that, as a result of the unprecedented 
implementation of class-banning arbitration clauses, 98% of 
employment cases that would otherwise be brought in some forum 
are abandoned.\38\
---------------------------------------------------------------------------
    \34\ Id.
    \35\ Id.
    \36\ Id.
    \37\ Cynthia Estlund, The Black Hole of Mandatory Arbitration, 96 
N.C. L. Rev. 679 (2018).
    \38\ Id.
---------------------------------------------------------------------------
    The scope and effects of forced arbitration are likely to 
worsen given the Supreme Court's 2018 decision in Epic Systems 
v. Lewis \39\ and its recent decision in Lamps Plus v. 
Varela.\40\ In Epic Systems, the Court upheld class-banning 
arbitration clauses notwithstanding the federally-guaranteed 
right to ``collective action'' protected by the National Labor 
Relations Act.\41\ In Lamps Plus, the Court ruled that workers 
are assumed to have ``consented'' to individualized arbitration 
even if their employment contract does not clearly waive the 
right to join in collective arbitrations.\42\ Observers expect 
that, given the breadth of these recent decisions, companies 
that have not yet imposed arbitration on their workers will 
quickly move to do so in order to take advantage of the 
immunity from liability promised by the Court's decisions.\43\
---------------------------------------------------------------------------
    \39\ 138 S. Ct. 1612 (2018).
    \40\ No. 17-988, slip op. (U.S. Sup. Ct. October 2018).
    \41\ 138 S. Ct. 1612 (2018).
    \42\ No. 17-988, slip op. (U.S. Sup. Ct. October 2018).
    \43\ Jess Bravin, Supreme Court Imposes Limits on Workers in 
Arbitration Cases, Wall St. J., May 21, 2018 (reporting that lawyers 
expect that companies will now impose forced arbitration clauses ``on 
millions more'' workers, and that the Epic Systems decision could 
affect ``worker claims against Amazon, Grubhub, Lyft and Uber,'' among 
other large companies).
---------------------------------------------------------------------------

    II. The Troubling Consequences of Class--Banning Forced 
                      Arbitration Clauses

    The costs of enforceable class-banning forced arbitration 
clauses are borne by the millions of consumers, employees and 
small businesses that are left without meaningful access to 
justice, as corporations escape accountability for all kinds of 
illegality and abuse. For example:

      Payday lenders are notorious for illegal, 
predatory practices: Some have made unauthorized debits from 
consumers' checking accounts or illegally renewed debts without 
borrower consent; \44\ others have used aggressive methods to 
collect debts--such as posing as federal authorities, 
threatening borrowers with criminal prosecution, trying to 
garnish wages improperly, or engaging in campaigns to harass 
borrowers. Rapacious profiteers trap low-wage workers and 
military personnel into ``a thicket of debt from which many 
never emerge.'' \45\ Ordinarily, citizens could rely on a 
combination agency enforcement actions and private litigation 
brought by injured borrowers to detect and reform illegal 
payday lending practices.\46\ Indeed, limited public resources 
and a preference for decentralized enforcement have resulted in 
significant reliance placed upon private litigation as the 
primary enforcement vehicle. But because nearly all payday 
lenders include forced arbitration clauses in their loan 
agreements to avoid liability exposure, the ability of private 
citizens to enforce their rights is hamstrung as never 
before.\47\ The resulting enforcement gap leaves hundreds of 
thousands of unsophisticated borrowers exposed to these 
unscrupulous and largely unregulated lenders.\48\
---------------------------------------------------------------------------
    \44\ See, e.g., Gunson v. BMO Harris Bank, N.A., 43 F. Supp. 3d 
1396 (S.D. Fla. 2014) (borrower claiming that bank had used an 
electronic debiting network to help lenders collect payday loan 
payments in violation of State and federal laws; motion to compel 
arbitration granted).
    \45\ Brian Grow & Keith Epstein, The Poverty Business, Bloomberg 
(May 20, 2007).
    \46\ See, e.g., Kristensen v. Credit Payment Servs., 12 F. Supp. 3d 
1292, 1308 (D. Nev. 2014) (certifying class action brought by consumers 
against payday lenders alleging violations of the Telephone Consumer 
Protection Act); Mitchem v. GFG Loan Co., No. 99-C-1866, 2000 WL 
294119, at *3, *6 (N.D. Ill. Mar. 17, 2000) (partial denial of motion 
to dismiss consolidated claims brought by borrowers against payday 
lenders under the Truth in Lending Act); Purdie v. ACE Cash Express, 
Inc., No. Civ. A. 301CV1754L, 2003 WL 22976611, at *1 (N.D. Tex. Dec. 
11, 2003).
    \47\ See CFPB Arbitration Study, supra note 3 (reporting that 98.5% 
of payday lenders impose arbitration on borrowers).
    \48\ See generally Myriam Gilles, Class Warfare: The Disappearance 
of Low-Income Litigants from the Civil Docket, 65 Emory L.J. 1531, 1542 
(2016) (discussing the claim-suppressing effects of forced arbitration 
clauses and class action bans on borrower litigation against 
unscrupulous payday lenders).
---------------------------------------------------------------------------
      Forced arbitration perpetuates the exploitation 
of women in the workplace by shunting victims into a private 
system where each is unaware of the other and where the 
arbitration provider (who is chosen and paid by the employer) 
lacks authority to remedy systemic and recurring workplace 
abuse. Media reports have shed light on the ways in which 
forced arbitration enabled high-profile companies, including 
Miramax and Fox News, to cover-up widespread workplace 
harassment.\49\ Other less visible stories reveal the appalling 
ubiquity of the problem. For example, throughout the late 
1990's and 2000's, hundreds of employees of Sterling Jewelers 
(parent company to Kay Jewelers and Jared Jewelers) were 
``routinely groped, demeaned and urged to sexually cater to 
their bosses to stay employed''--but their claims were forced 
into private arbitration to protect company executives, who 
were never held accountable, while those who spoke up were 
fired.\50\ These examples reveal that sexual harassment in the 
workplace affects both the victim and the broader economy, 
because companies that are allowed to shroud illegal activity 
enjoy an unfair advantage in the marketplace that would not be 
afforded them had their practices been exposed to the public. 
Accordingly, last year 56 state attorneys general from both 
parties wrote this body, urging a federal ban on forced 
arbitration of sexual harassment claims.\51\
---------------------------------------------------------------------------
    \49\ Emily Martin, Forced Arbitration Protects Sexual Predators and 
Corporate Wrongdoing, Consumer Law & Policy Blog, Oct. 23, 2017.
    \50\ See, e.g., Drew Harwell, Hundreds Allege Sex Harassment, 
Discrimination at Kay and Jared Jewelry Co., Wash. Post, Feb. 27, 2017; 
Drew Harwell, Sterling Discrimination Case Highlights Differences 
Between Arbitration, Litigation, Wash. Post, March 1, 2017.
    \51\ As forced arbitration has expanded, State attorneys general 
have repeatedly warned that these provisions ``erode the states' 
ability to protect their citizens and economies.'' See, e.g.,American 
Express v. Italian Colors, Brief of the State of Ohio and 21 Other 
States as Amici Curiae in Support of Respondents.
---------------------------------------------------------------------------
      Consumers today are more vulnerable than ever to 
identity theft and data breaches. The notorious fraud committed 
by Wells Fargo employees described above affected nearly 3.5 
million customers, many of whom are still trying to get their 
money back and repair their credit. Similarly, the massive 
Equifax data breach exposed personal information of over 145 
million people.\52\ Other major data breaches have exposed the 
personal and financial information of millions of 
Americans.\53\ And forced arbitration has allowed companies 
that fail to protect their customer's data to block consumer 
lawsuits that would have exposed their misconduct far sooner.
---------------------------------------------------------------------------
    \52\ See, e.g., Diane Hembree, Consumer Backlash Spurs Equifax to 
Drop ``Ripoff Clause'' in Offer to Security Hack Victims, Forbes, Sept. 
9, 2017 (reporting that Equifax tried to limit its exposure by offering 
data breach victims ``free'' credit monitoring in exchange for agreeing 
to an arbitration clause containing a class action ban).
    \53\ See, e.g., Orman v. Citigroup, 2012 WL 4039850 (S.D.N.Y. 2012) 
(dismissing class action alleging that Citigroup failed to ``adequately 
secure their computer systems against intrusion,'' resulting in data 
breach and identity theft, because of class-banning arbitration 
clause).

    But the damage caused by class-banning forced arbitration 
clauses extends far beyond those who are barred access to 
public courts: All citizens are harmed when the courthouse 
doors are closed and legal claims are suppressed. And that is 
precisely what these clauses accomplish by demanding that each 
claim be brought on one-on-one basis. As the CFPB Arbitration 
Study exposed, once blocked from going to court as a group, 
most people drop their claims entirely. This regime allows 
wrongful conduct to continue undetected and unremedied long 
after such illegality would otherwise come to light. Without 
public accountability through the court system, companies have 
less incentive to follow the law and treat workers and 
consumers fairly.
    Class-banning forced arbitration clauses also undermine the 
principles central to the Rule of law, such as stare decisis 
and the development of legal precedents.\54\ These provisions 
force disputes into hermetically-sealed, secret proceedings, 
denying citizens the transparency, openness and accountability 
necessary for the operation of a fair and democratic civil 
justice system.\55\ By allowing companies to opt out of the 
court system, we have ``frozen the law . . . denying the courts 
the ability to develop and adapt the law as society and 
business changes.'' \56\
---------------------------------------------------------------------------
    \54\ See, e.g., Myriam Gilles, The Day Doctrine Died: Private 
Arbitration and the End of Law, 2016 U. Ill. L. Rev. 371 (2016); 
Lilliam T. Howan, The Prospective Effect of Arbitration, 7 Berkeley J. 
Emp. & Lab.O L. 60, 62 (1985) (``In contrast to the judicial doctrine 
of stare decisis, an arbitrator's interpretation of the contractual 
relation is not technically binding on a future arbitrator. Instead, 
the arbitrator must exercise independent and impartial judgment in each 
case.'').
    \55\ See AAA Consumer Due Process Protocol, Principle 12.2 
(arbitrator must ``maintain the privacy of the hearing to the extent 
permitted by applicable law''); AAA Commercial Rule 25 (directing 
arbitrators to ``maintain the privacy of the hearings unless the law 
provides to the contrary''). See also Michelle Andrews, Signing a 
Mandatory Arbitration Agreement With a Nursing Home Can Be Troublesome, 
Wash. Post., Sept. 17, 2012 (reporting that nursing home arbitration 
hearings ``are conducted in private and [these] proceedings and 
materials are often protected by confidentiality rules'').
    \56\ S. 1782, Arbitration Fairness Act of 2007: Hearing Before the 
Subcomm. on the Constitution of the S. Comm. on the Judiciary, 110th 
Cong. 10 (2007) (statement of Richard Alderman).
---------------------------------------------------------------------------

III. The Truth Behind Class--Banning Forced Arbitration Clauses

    Class-banning forced arbitration clauses are not designed 
to achieve fair, expeditious or cost-effective resolutions. 
Rather, the entire point of these provisions is to make it 
nearly impossible for consumers and employees seeking redress 
for broadly distributed small-value harms to pursue one-on-one 
arbitrations. Let's face it: If private companies really wanted 
to create a fair arbitration regime, they could easily do so by 
(1) offering citizens arbitration as an alternative to 
litigation after a dispute has arisen; and (2) permitting class 
or collective arbitration so that an individual victim wouldn't 
alone shoulder the entire cost and exposure of arbitration. No 
company has done so--and indeed, faced with bad publicity over 
their forced arbitration clauses, companies like Google, 
Microsoft and others have instead chosen to eliminate 
arbitration altogether (or for some subset of claims) rather 
than expose themselves to more evenhanded processes.
    Nonetheless, large corporations and lobbying groups like 
the Chamber of Commerce have spent a decade advocating for 
forced arbitration on grounds that it is ``better, cheaper, 
faster'' for ordinary Americans.\57\ Their claims are based on 
a series of hackneyed misrepresentations and fact distortions:
---------------------------------------------------------------------------
    \57\ See, e.g., Stephen J. Ware, Paying the Price of Process: 
Judicial Regulation of Consumer Arbitration Agreements, 2001 J. Disp. 
Resol. 89, 91-93 (asserting that adhesion agreements to arbitrate are 
fair in that they allow companies to pass on savings in costs from 
standard forms to their customers and employees); Archis Parasharami, 
Testimony Before Senate Committee on the Judiciary, Dec. 17, 2013 
(``Arbitration before a fair, neutral decision-maker leads to outcomes 
for consumers and individuals that are comparable or superior to the 
alternative--litigation in court--and that are achieved faster and at 
lower expense.'').
---------------------------------------------------------------------------

              a. The ``Litigation Explosion'' Myth

    Arbitration advocates try to breed panic by claiming that, 
should Congress outlaw forced arbitration, the result will be a 
massive ``litigation explosion'' of frivolous civil lawsuits 
that will harm corporate defendants and lead to higher prices 
for goods and services. There has never been, in our history, 
any credible data to support the claim that litigation rates 
have risen due to specious claiming, rather than population 
growth.\58\ Put differently--we weren't in the midst of a 
litigation explosion immediately prior to the rise of forced 
arbitration (circa 2012) and we won't be thrown into one if 
forced arbitration is prohibited tomorrow. Moreover, companies 
that have eliminated forced arbitration have not, by their own 
account, experienced significant upticks in litigation that 
would threaten their overall financial condition.\59\
---------------------------------------------------------------------------
    \58\ For example, the National Center for State Courts reports that 
the number of civil cases filed in State courts decreased by 16% 
between 2007 and 2016. Examining the Work of State Courts: An Overview 
of 2012 State Court Caseloads, National Center for State Courts, 2014. 
Likewise, federal civil filings have decreased by 7.1% between 2009 and 
2018. Federal Judicial Caseload Statistics 2014, Administrative Office 
of the United States Courts.
    \59\ For example, both Capital One and Bank of America eliminated 
forced arbitration in their consumer contracts. Their most recent SEC 
Form 10-K filings State that management believes that any ``loss 
contingencies arising from pending [litigation] will not have a 
material adverse effect on the consolidated financial position or 
liquidity of the Corporation.'' Major tech companies have similarly 
concluded that ending forced arbitration would not affect thecompany's 
bottom line. Microsoft (which ended forced arbitration for sexual 
harassment claims in 2017) and Google (which recently decided to end 
forced arbitration in all disputes) have each advised the SEC and their 
shareholders that any increase in litigation would not result in a 
material change to the overall liquidity of the company.
---------------------------------------------------------------------------
    More importantly, these fear tactics obfuscate a basic 
reality: eliminating all consumer, employment or other kinds of 
claims from the public court system is not a sensible way of 
screening meritless cases. Forced arbitration does not screen 
for merit--instead, it shunts all cases into an expensive, 
private system meant to deter claimants from seeking redress. 
Forced arbitration does not keep cases out of the court system 
that don't belong there--instead, it guarantees that hundreds 
of thousands of important and worthy lawsuits will never be 
heard.
    In any event, federal judges possess numerous procedural 
tools to rid dockets of frivolous cases--including rules that 
require plaintiffs to make it through a gauntlet of heightened 
pleading standards,\60\ summary dismissals,\61\ justiciability 
doctrines,\62\ rigorous class certification requirements,\63\ 
limited discovery,\64\ and the narrowing of personal 
jurisdiction over multinational corporations.\65\ Closing the 
courthouse doors before citizens have an opportunity to run 
this procedural gauntlet is not fair or efficient, but rather, 
tips the scales of justice in favor of the large and powerful.
---------------------------------------------------------------------------
    \60\ See, e.g., Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) 
and Ashcroft v. Iqbal, 556 U.S. 662 (2009) (announcing a new 
``plausibility'' standard for determining the adequacy of pleadings at 
the motion to dismiss stage). See also Theodore Eisenberg & Kevin M. 
Clermont, Plaintiphobia in the Supreme Court, 100 Cornell L. Rev. 193 
(2014) (heightened pleading requirements in Twombly and Iqbal ``had 
palpably negative effects on plaintiffs'').
    \61\ See Joe S. Cecil et al., A Quarter-Century of Summary Judgment 
Practice in Six Federal District Courts, 4 J. Empirical Legal Stud. 
861, 883 (2007) (``Over the 25-year period [from 1975 to 2000], the 
percentage of cases with one or more summary judgment motions granted 
in whole or in part doubled from 6 percent to 12 percent.'').
    \62\ See, e.g., Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) 
(determining whether statutory injury is sufficient to meet article III 
``particularized'' and ``concrete'' harm requirement for standing to 
sue).
    \63\ See, e.g., Bristol-Myers Squibb Co. v. Superior Court, 137 S. 
Ct. 1773 (2017) (finding due process does not permit exercise of 
specific personal jurisdiction in California over nonresident 
consumers' claims); J. McIntyre v. Nicastro, 564 U.S. 873 (2011) 
(rejecting personal jurisdiction over a foreign company doing business 
in the United States and in the State where plaintiff was injured); 
Goodyear Dunlop Tires Operations S.A. v. Brown, 564 U.S. 915 (2011) 
(finding foreign corporations subject to general jurisdiction only 
where they are ``at home''); Daimler AG v. Bauman, 134 S.Ct. 746 (2014) 
(same).
    \64\ See, e.g., F.R.C.P. 26(b)(1) (amended 2015 to require that 
discovery be ``proportional'').
    \65\ See, e.g., Wal-Mart Stores Inc. v. Dukes, 564 U.S. 338 (2011) 
(elevating predominance requirement under Rule 23(a)); Comcast Corp. v. 
Behrend, 569 U.S. 27 (2013) (finding that economic models of antitrust 
injury must be common to the class).
---------------------------------------------------------------------------

 b. Banning Forced Arbitration Doesn't Prohibit All Arbitration

    Make no mistake: no one argues that we should ban 
arbitration. When used knowingly by businesses as originally 
intended by the 1925 Congress that enacted the FAA, arbitration 
can be an effective alternative to our court system. It allows 
sophisticated entities to voluntarily agree to resolve complex 
disputes before an industry-expert neutral, allowing these 
entities to protect their trade secrets and maintain their 
important business relationships.\66\ As Professor Christopher 
Leslie explains, ``in relationships between commercial parties, 
buyers and sellers are similarly likely to be the plaintiff or 
defendant.'' \67\ Accordingly, these sophisticated parties can 
negotiate on a level field for arbitration procedures that they 
believe will fairly and efficiently resolve their disputes.
---------------------------------------------------------------------------
    \66\ See Katherine Van Wezel Stone, Rustic Justice: Community and 
Coercion Under the Federal Arbitration Act, 77 N.C. L. Rev. 931, 970-71 
(1999) (``[t]he merchant guilds established arbitration tribunals 
because they felt that the courts were not sufficiently knowledgeable 
about commercial customs'').
    \67\ Christopher Leslie, Conspiracy to Arbitrate, 96 N.C. L. Rev. 
381, 393 (2018).
---------------------------------------------------------------------------
    When pre-dispute arbitration clauses and class action bans 
are forced upon consumers and employees in take-it-or-leave-it, 
standard-form agreements, ``the probability of litigation 
positions is highly asymmetrical: the seller is far more likely 
to be the defendant in any dispute, and the consumer the 
plaintiff.''\68\ There is no negotiation, no choice, and the 
resulting arbitration procedures are not, in truth, intended to 
provide a forum to resolve claims. The one and only objective 
of forced, pre-dispute, class-banning arbitration clauses is to 
suppress and bury claims. The whole point is that consumers and 
employees seeking redress for broadly distributed small-value 
harms cannot and will not pursue one-on-one arbitrations.\69\ 
Ever.
---------------------------------------------------------------------------
    \68\ Id.
    \69\ The CFPB's Arbitration Study revealed that very few consumers 
arbitrate disputes. For example, of the nearly 80 million credit 
cardholders, checking account holders and payday borrowers who were 
subject to arbitration clauses as of the end of 2012, only 1241 
consumers had filed arbitrations to resolve disputes with their credit 
card companies, banks, and lenders. CFPB Arbitration Study, supra note 
3 at p. 63-64. Professor Colvin's study of employment arbitration 
estimates that only 1 in 10,400 workers subject to forced arbitration 
actually files claim in arbitration. Colvin, supra note 29.
---------------------------------------------------------------------------

     c. Unmasking the True Intent Behind Forced Arbitration

    The actions of companies faced with large numbers of 
individual arbitrations expose the true intent behind class-
banning arbitration clauses--namely, ensuring that individuals 
drop their claims altogether. For example, in 2015, a group of 
Chipotle employees alleged their employer had violating the 
wage-and-hour provisions of the Fair Labor Standards Act 
(``FLSA'').\70\ Chipotle sought to enforce the class-banning 
arbitration clauses buried in the fine print of its online 
employee welcome pack--knowing that workers with backpay claims 
ranging from about $100 to $3000 would be unlikely to expend 
the resources filing an individual claim--and it won.
---------------------------------------------------------------------------
    \70\ Turner v. Chipotle Mexican Grill, Inc., 123 F. Supp.3d 1300 
(D. Co. 2015). A federal district judge in Colorado initially allowed 
2,814 employees to proceed in a collective action, but while the action 
was pending, the Supreme Court issued its decision in Epic Systems v. 
Lewis upholding the legality of arbitration clauses that prohibit 
collective employment actions. See infra. Accordingly, the judge 
dismissed the claims brought by employees who had previously ``agreed'' 
to resolve their disputes through arbitration and granted defendant 
Chipotle's motion to compel individual arbitration of these claims. See 
Dave Jamieson, The Supreme Court Just Helped Chipotle Boot 2,814 
Workers From a Wage Theft Lawsuit, Huffington Post, Aug. 10, 2018. More 
than 7,000 employees who were not required to sign mandatory 
arbitration agreements remained in the federal court opt-in case.
---------------------------------------------------------------------------
    The plaintiffs' lawyers then did something unexpected: 
instead of dropping these claims, they began filing individual 
arbitrations on behalf of injured employees. Chipotle soon 
found itself ``facing thousands of individual arbitration cases 
spread across the country, almost all the expenses of which it 
may have to shoulder itself--potentially tens of thousands of 
dollars per case.'' \71\ While ``thousands of individual 
arbitrations'' is precisely what Chipotle's arbitration clause 
invites, the company balked: It returned to court and pleaded 
with the federal judge to suspend the arbitral filings and 
disqualify plaintiffs' counsel.\72\ The judge denied both 
motions, chastising Chipotle for its ``attempts to delay and 
obfuscate'' the workers' claims. In the wake of those rulings, 
Chipotle has reportedly prevented ``the arbitrations from going 
ahead by failing to pay its $1,100 share of the filing fee for 
each case.'' \73\
---------------------------------------------------------------------------
    \71\ Michael Hiltzik, Chipotle May Have Outsmarted Itself by 
Blocking Thousands of Employee Lawsuits Over Wage Theft, Los Angeles 
Times, Jan. 4, 2019.
    \72\ Dave Jamieson, Chipotle's Mandatory Arbitration Agreements Are 
Backfiring Spectacularly, Huffington Post, Dec. 20, 2018.
    \73\ Id.
---------------------------------------------------------------------------
    We see a similar crisis of confidence in arbitration at 
Uber, in the wake of serial arbitrations brought against the 
ride-sharing company by 12,501 individual drivers seeking to be 
classified as employees instead of independent contractors.\74\ 
Uber was so ``overwhelmed'' by the prospect of these individual 
arbitrations that, according to its designated arbitral 
provider, JAMS, the company initially refused to pay its share 
of the filing fees in an effort to stem the tide.\75\ When that 
failed, Uber (in the height of hypocrisy) tried to argue that 
some issues were common across the cases and should therefore 
be decided in a consolidated proceeding--despite the fact that 
its arbitration clause prevents any consolidation of 
claims.\76\ And when that gambit failed--and after calculating 
that it would cost more to defend itself in individual 
arbitrations--Uber ultimately settled the drivers' claims en 
masse. The resistance by Chipotle, Uber and other companies to 
arbitrating these claims--after steering workers into 
arbitration--suggests that their policies were never really 
about fairness and efficiency, but about suppressing claims at 
all costs.
---------------------------------------------------------------------------
    \74\ Abadilla v. Uber Techs., No. 18-cv-7343-EMC (N.D. Cal. Dec. 5, 
2018) (asserting that more than twelve thousand individual arbitration 
demands have been filed against Uber after the Ninth Circuit determined 
that Uber drivers were required to arbitrate, and that little progress 
has been made in arbitrating those claims).
    \75\ Alison Frankel, JAMS to Uber: Our Rules and Your Contracts 
Demand Individual Arbitrations, Reuters, Jan. 25, 2019 (quoting JAMS 
notice to Uber that ``[w]hile it is not our preference to force the 
parties to litigate these issues seriatim, our policies and procedures, 
absent party agreement otherwise, require that we collect a filing fee 
in each case to be pursued'').
    \76\ Id.
---------------------------------------------------------------------------

III. Legislation is the Only Solution to the Problem of Class--
                   Banning Forced Arbitration

    It is clear that legislation prohibiting class-banning 
forced arbitration of consumer, employment and civil rights 
claims is necessary to restore access to justice, corporate 
accountability, and the Rule of law by giving American citizens 
the choice of how to pursue their rights against a corporation. 
Indeed, the Supreme Court itself has made plain that it will 
continue to ``rigorously enforce'' all the remedy-stripping 
terms that private companies insert in their arbitration 
clauses--never mind the consequences--unless the FAA's mandate 
is ``overridden by congressional command.'' \77\
---------------------------------------------------------------------------
    \77\ American Express, 133 S.Ct. at 2309, citing CompuCredit Corp. 
v. Greenwood, 132 S.Ct. 665, 668-669 (2012). See also Gilles, 104 Mich. 
L. Rev. at 395 (``[T]he Supreme Court's arbitration jurisprudence over 
the past thirty years have evinced an incredibly expansive view of the 
FAA, and while the full import of this national policy favoring 
arbitration has been criticized by many--including Members of the Court 
itself--there is no reason to believe the Court will swing back to a 
more nuanced interpretation of the FAA.'').
---------------------------------------------------------------------------
    As the access-to-justice crisis grows more untenable, a 
chorus of judges of all party affiliations have expressed 
severe misgivings about the Court's arbitration precedents--
even as they are compelled to follow them. For example, in 
CellInfo, LLC v. American Tower Corp., federal district Judge 
Young observed ``that one-sided species of arbitration [are] 
unconscionably forced on vulnerable consumers and workers and 
almost universally reviled, enforceable only due to the mandate 
of a slim majority of the Supreme Court.'' \78\ The West 
Virginia Supreme Court accused the Justices of manufacturing 
FAA preemption out of whole cloth, explaining that ``[w]ith 
tendentious reasoning, the United States Supreme Court has 
stretched the application of the FAA from being a procedural 
statutory scheme effective only in federal courts, to being a 
substantive law that preempts State law in both federal and 
State courts.'' \79\ And in a recent decision, a district court 
judge reluctantly granted a motion to compel arbitration in a 
racial discrimination claim, observing that responsibility for 
changing the law lies squarely with Congress:
---------------------------------------------------------------------------
    \78\ 352 F. Supp. 3d 127, 131 (D. Mass. 2018).
    \79\ Brown ex rel. Brown v. Genesis Healthcare Corp., 724 S.E.2d 
250 (W. Va. 2011). The U.S. Supreme Court reversed in a terse, per 
curiam decision. Marmet Health Care Ctr., Inc. v. Brown, 132 S. Ct. 
1201 (2012) (per curiam).

        ``No matter one's opinion of the widespread and controversial 
        practice of requiring consumers to relinquish their fundamental 
        right to a jury trial--and to forgo class actions--as a 
        condition of simply participating in today's digital economy, 
        the applicable law is clear . . . . While th[e] result might 
        seem inequitable to some, this Court is not the proper forum 
        for policy objections to mandatory arbitration clauses in 
        online adhesion contracts. Such objections should be taken up 
        with the appropriate regulators or with Congress.'' \80\
---------------------------------------------------------------------------
    \80\ Selden v. Airbnb, 2016 WL 6476934 at *2 (D.C. 2016).

    These judges are duty-bound to follow Supreme Court 
precedent, even where they believe it wrong and misguided. 
Congress, on the other hand, is free to reverse the Court's 
rulings in this area by prohibiting pre-dispute class-banning 
arbitration clauses in standard-form contracts with consumer, 
employment and small businesses. Indeed, Congress has already 
enacted legislation outlawing these clauses in payday loan and 
consumer credit contracts with military families, as well as 
amendments limiting the use of arbitration clauses in 
residential mortgage loans and automobile dealer franchise 
agreements.\81\ It is laudable that Congress has sought to 
safeguard the ability of military families and auto dealer 
franchisees to vindicate their rights--but it is well past time 
to extend that ability to all consumers, employees, and small 
businesses.
---------------------------------------------------------------------------
    \81\ See 10 USC Sec. 987(e)(3), (f)(4) (voiding arbitration clauses 
in payday loan or any consumer credit contracts--with the exception of 
residential mortgages and car loans--with Members of the military or 
their families); 15 USC Sec. 1639c(e)(1) (barring arbitration clauses 
in residential mortgage loans); 15 USC Sec. 1226(a)(2) (prohibiting 
automobile manufacturers from imposing predispute arbitration clauses 
in their franchise agreements with dealers).

    Mr. Cicilline. Thank you, Ms. Gilles. Thank you to all of 
our witnesses for your testimony.
    We will now proceed under the 5-minute Rule with questions. 
I will begin with the gentleman from New York, the Chairman of 
the full committee, Mr. Nadler, who is recognized.
    Mr. Nadler. Thank you very much, Mr. Chairman.
    Professor Gilles, Congress has enacted laws to protect 
American workers from discrimination, wage theft, and unsafe 
workplaces. These laws are ultimately meaningless if employers 
are able to sidestep accountability for breaking these laws by 
funneling workers into an arbitration trap that is expensive, 
time-consuming, and secretive.
    What effect has forced arbitration had on the ability of 
workers to protect their rights to a safe workplace, to fair 
wages, and to be free from discrimination in the workplace?
    Ms. Gilles. I think you have already heard a bit from Ms. 
Carlson and the other witnesses. Forced arbitration disables 
the right of employees to be able to bring claims, to bring 
group claims in particular. As Mr. Deepak says, it obscures 
patterns of misconduct, systematic wrongdoing, like sex 
discrimination that could be systematic in a workplace, because 
these are group claims, right? When you all enact laws to 
protect American citizens, many times you enact private rights 
of action, and you expect and imagine that these laws will be 
enforced through class actions, through collective litigation.
    I realize that it is the job of Mr. Pincus and Mr. Goldberg 
to talk about how class actions are terrible for everyone. I 
mean, that is what they are paid to do. The truth is actually 
quite far from that. Class actions desegregated schools in 
America. They improved nursing homes in America. They have made 
life fair and equal for America. I am here probably because of 
a class action that was brought at some point.
    So, this idea that people don't benefit, I think that is 
pretty ridiculous. I think when Mr. Pincus and Mr. Goldberg 
talk about benefits from class actions, they are talking about 
dollars that end up in people's wallets. It is true that the 
system might not be the most efficient way of getting dollars 
into consumers' pockets, and maybe we should fix the system. 
That doesn't mean we should abandon the entire civil justice 
system.
    Mr. Nadler. Thank you. Some commentators have suggested 
that arbitration can facilitate a quicker and cheaper 
resolution of disputes than through the courts. What is your 
response?
    Ms. Gilles. Well, take a look at Richard's example. I mean, 
it certainly didn't help him get a quicker result. The whole 
point of Chipotle's arbitration clause was that it would never 
have to be accountable to its workers. So, I don't buy the 
quicker, cheaper, faster, easier. I think it is good for the 
employer, good for the company. I think it is terrible for the 
consumer, period.
    Mr. Nadler. Mr. Gupta, you described forced arbitration as 
a wealth transfer. How does arbitration contribute to economic 
inequality?
    Mr. Gupta. Well, it is not the only cause of economic 
inequality, right? Economic inequality is probably the big 
problem of our times, but it makes it a lot worse. And the way 
it does that is that in cases where people have small amounts 
of money that they are ripped off in large numbers, the only 
way meaningfully that you are going to get redress is through 
some sort of group litigation, right? A class action, a 
collective action, a mass action. As Professor Gilles 
explained, there is no way that a single worker is going to be 
able to go up against the company for those kinds of claims.
    So, when you look at wage theft, which transfers billions 
of dollars from workers to employers, when you look at 
antitrust, when you look at consumer protection violations 
involving banks or lenders, the kinds of practices that brought 
down our economy and led to the financial crisis, those are the 
kinds of situations where you have to have some ability for 
people to band together and assert their legal rights. If you 
cut off that avenue, which is what forced arbitration, in my 
view, is principally designed to do, that is going to result in 
a massive transfer of wealth from the poor to the rich, and 
that is exactly what we see happening.
    Mr. Nadler. Thank you. It also results in an unsafe 
condition which may have an arbitration award against the 
company being kept secret so they can keep repeating that 
unsafe condition all the time.
    Let me ask, some people have said that Italian Colors 
demonstrates how forced arbitration and the failure to enforce 
antitrust laws hurts small businesses. Can you explain the 
importance of maintaining private antitrust suits to the 
enforcement of the antitrust laws? Has the Court decision in 
Italian Colors made it more likely that companies will be able 
to evade antitrust litigation through forced arbitration 
clauses?
    Mr. Gupta. Yes. Thank you for the question, Chairman 
Nadler. I represented the restaurant in that case, Italian 
Colors. It was an antitrust case that went all the way to the 
Supreme Court. Italian Colors, like many restaurants, they deal 
with these credit card swipe fees. It eats a lot out of their 
profits, and they don't have much bargaining power when it 
comes to dealing with the credit card companies.
    So, they asserted that the credit card company, in that 
case American Express, was abusing its market power against 
small merchants, and all they wanted was their day in court to 
be able to prove that kind of claim.
    Now, a small restaurant like Italian Colors is not going to 
be able to bring an antitrust suit on its own. That requires 
hiring economists, studying the marketplace, and figuring out 
whether there is an abuse of market power. So, the way 
meaningfully that a claim like that has to be brought is again 
for people to be able to band together and assert their claim.
    The case went all the way to the Supreme Court. I think if 
the Members of this Committee are going to read one decision of 
the U.S. Supreme Court on this issue, you should read Justice 
Kagan's dissent in that case. She puts it better than I 
possibly could. She says that the Court isn't even hiding the 
fact that they are taking this one Federal law, the antitrust 
law, and they are taking another Federal law, the Federal 
Arbitration Act, that was supposed to ostensibly facilitate 
dispute resolution, they are putting the two laws together, and 
in some strange Act of judicial alchemy, people cannot resolve 
disputes under the antitrust clause. The cases just go away 
because it is not feasible to assert the dispute in one-on-one 
arbitration.
    What Justice Kagan says is that the majority of the Supreme 
Court's response is ``too darn bad.'' That is not an acceptable 
response, and I think that is why Congress needs to step in.
    Mr. Nadler. Thank you. My time has expired.
    Mr. Cicilline. Thank you.
    I now recognize the Ranking Member of the subcommittee, Mr. 
Sensenbrenner, for 5 minutes.
    Mr. Sensenbrenner. Thank you, Mr. Chairman.
    I have a couple of questions for Mr. Pincus.
    First, you testified that in arbitration, consumer and 
employee claimants actually do well or better than they do in 
court. Can you provide more detail on that?
    Mr. Pincus. Certainly, and I think one sort of idea being 
propagated here is that if a claim goes into arbitration, 
somehow it either disappears or the company automatically wins. 
As the study of employment claims that I referenced in my 
opening remarks shows, employees do better in arbitration than 
they do in court, and they win a substantial number of cases.
    Another study of nursing home claims found that in nursing 
home claims, the average, comparing claims in arbitration, 
claims in court--the average recovery was only $3,000 apart. 
There are numerous other studies that I have detailed in my 
prepared testimony that show when you compare like claims in 
arbitration to like claims in court, arbitration claimants do 
as well or better.
    Mr. Sensenbrenner. You also have suggested that consumers 
and employees need access to arbitration because too many of 
their claims cannot practically be brought in court, and that 
is largely because the amount in dispute is relatively low. Can 
you explain that in more detail?
    Mr. Pincus. Certainly. Mr. Goldberg mentioned, studies show 
that to get a lawyer, a claim has to be substantial. There is a 
debate, $60,000, maybe $200,000 at issue. Most claims that real 
people have don't rise to that level. So, if court is the only 
option for them and they can't get a lawyer, they are not going 
to have any way to recover. So, the question is what do you do 
in that situation?
    Arbitration provides a viable option where: (A) The lawyer 
may be willing to take the claim for less because the time it 
is going to take is less because arbitration takes less time 
and less lawyer time; or (B) in many situations the employee or 
the consumer can push the claim on his or her own. Arbitration 
doesn't have the complicated rules in court that you need a 
lawyer to navigate. It is informal. You can file your complaint 
online in a very user-friendly way. The arbitrator sets the 
procedures that work for the particular case.
    So, for these large number of cases that we don't see in 
court at all because they are too small ever to get there, 
arbitration provides access to justice. There is a reason why 
we don't see a lot of decided arbitration claims, or even filed 
arbitrations, because in most cases, most arbitration 
provisions have a mediation process. Bring the claim to the 
company first for 30 days and see if it can be resolved. Many, 
many, many claims are resolved, thousands, if not hundreds of 
thousands, in that process, because arbitration provides 
leverage for the employee or the consumer, because when the 
arbitration claim is filed, there are limits on the fees that 
the consumer or the employee must pay in these large 
arbitration forums that handle most arbitrations, $300 or $200.
    Upon filing, the employer or the company, if it is a 
consumer dispute, has to pay more than $1,000. So, depending on 
what the amount in dispute is, it is pretty sensible for the 
company, unless it is a totally frivolous claim, to say we are 
going to make you whole, because if you file your arbitration 
claim, we are going to pay $1,000 right away and even more 
later on. So that gives the claimant significant leverage.
    Mr. Sensenbrenner. A final question. You have litigated 
before the Supreme Court several cases about arbitration. Based 
on your experience and review of the case law, would you say 
that the Court appreciates the importance of having the 
arbitration system available so that the courts will do less 
work?
    Mr. Pincus. I think courts are worried about overcrowding, 
but I think they are also worried about what we were just 
discussing, that there are some claims that, as a practical 
matter, people can't vindicate in court. You quoted Justice 
Breyer speaking for the Court in the Allied-Bruce case. There 
are other instances in which justices have pointed out that 
arbitration is cheaper, less complex, and quicker, and enables 
small claims to be vindicated in a way that they can't be 
vindicated in court.
    The Supreme Court has also said, the Chief Justice speaking 
for the Court in particular, that if arbitration provisions 
have unfair clauses, the general rules about unconscionability 
that apply to contracts of adhesion will invalidate those 
provisions, the kinds of provisions that I listed in my opening 
remarks.
    Mr. Sensenbrenner. Thank you very much.
    My time is up.
    Mr. Cicilline. I thank the gentleman.
    I recognize the gentleman from Georgia, Mr. Johnson, for 5 
minutes.
    Mr. Johnson of Georgia. Thank you. Again, thank you for the 
witnesses being here. Thank you for your testimony.
    Mr. Ziober, thank you for your service to the nation. That 
must have been a heck of a day, to be honored by your fellow 
employees in such a way that you described. I was touched with 
that kind of celebration and seeing you off. That must have 
been a high point in your life. Then less than a few hours 
later, to be smacked in the face with a bat and told that when 
you come back, you won't have a job.
    Then, Ms. Carlson, thank you so much for your courage and 
your sense of wanting to give back to the community and give 
back to people, particularly women without a voice who suffer 
silently in the workplace, undergoing what must be--I am a man, 
so I don't really know what you have to put up with. Millions 
of women around this country having to put up with a climate 
and a culture of sexual harassment, my heart goes out to you, 
and I want to thank you so much for your courage and sticking 
with this.
    Mr. Pincus, you mentioned that the arbitrator often sets 
the procedure to accommodate the needs of the parties; correct?
    Mr. Pincus. Yes.
    Mr. Johnson of Georgia. In fact, there is really no 
requirement that the arbitrator be trained in the law, no 
requirement that the arbitrator be a lawyer or a judge; is that 
correct?
    Mr. Pincus. I think it depends on the arbitral forum.
    Mr. Johnson of Georgia. It depends on the arbitrator.
    Mr. Pincus. So, a lot of claims--
    Mr. Johnson of Georgia. There is no requirement, though.
    Mr. Pincus. There is a requirement that the arbitrator be 
fair, and that the arbitrator be capable of rendering a fair 
decision.
    Mr. Johnson of Georgia. There is certainly no requirement, 
if the arbitrator gets to select the procedure, there is no 
requirement that the rules of procedure apply, no requirement 
that there be a need for the rules of evidence to apply, no 
need for there to be an adherence to the Rule of law; in other 
words, statutes or case law that has decided similar issues. 
Isn't that correct? There is no requirement; yes or no?
    Mr. Pincus. Well, there is no requirement.
    Mr. Johnson of Georgia. No requirement.
    Mr. Pincus. No particular rules apply, but there is a 
requirement that there be a fair opportunity to obtain 
discovery and that the rules applied be fair.
    Mr. Johnson of Georgia. But, the arbitrator can decide 
whatever he or she wants for a particular case. That doesn't 
seem consistent with the Rule of law. That seems to be 
consistent with the whim of whoever is in charge, and it is 
usually the business interests that are in charge.
    Now, it seems to me to be counter-intuitive that an 
employer or a nursing home operator, since you cited employer 
claims and nursing home claims, it would seem to be counter-
intuitive to me that they would prefer arbitration when the 
studies that you cite show that they lose more, and the 
claimants are awarded more money. Can you explain why would an 
employer or nursing home operator prefer arbitration when the 
outcomes are worse than going to court?
    Mr. Pincus. Because the lion's share of the cost of a 
litigation are paying lawyers, and the legal fees are--
    Mr. Johnson of Georgia. Most of those lawyers are defense 
lawyers, are they not?
    Mr. Pincus. Well, they are defense lawyers, and they are 
plaintiffs' lawyers.
    Mr. Johnson of Georgia. Yes, but arbitration--
    Mr. Pincus. Most defense lawyers don't like arbitration 
because they make less money.
    Mr. Johnson of Georgia. The corporate lawyers are charging 
$950 an hour these days, and then the corporation that is 
paying them, like the NRA, gets a chance to write off the 
expense of paying the lawyer, who is a member of the same 
country club that they are. The poor claimant who has a $500 
claim--most lawyers don't want to get a percentage of that, and 
they know that it is going to take at least several hours to 
adjudicate the case. So, the $500 claimants get left out. The 
$100,000, $200,000 claimants, Mr. Goldberg, there are always 
lawyers willing to take those cases on a contingent fee basis; 
would you not agree?
    Mr. Cicilline. The gentleman's time has expired, but the 
witness may answer the question.
    Mr. Goldberg. Yes, and I think you are pointing to the 
exact problem as to why pre-dispute arbitration provides a 
viable path for someone with the $500 claim who wouldn't be 
able to seek justice.
    Mr. Johnson of Georgia. What about the $100,000 or the 
$200,000 claim? There are always going to be some lawyers out 
there who will take that for a percentage.
    Mr. Goldberg. That is right.
    Mr. Johnson of Georgia. I used to take them all the time 
myself as a private practitioner, a good little payday. Thank 
you.
    Mr. Cicilline. Thank you to the gentleman.
    Now I recognize the gentleman from Maryland, Mr. Raskin, 
for 5 minutes.
    Mr. Raskin. Mr. Chairman, thank you very much. I am still 
trying to get over the AT&T v. Concepcion case, and I just want 
to re-live the gruesome details of this case. I don't mean to 
cause you any nightmares, Mr. Gupta, but as I understand it, 
California had a pro-arbitration State law.
    Mr. Gupta. That is right.
    Mr. Raskin. What it said was that you can build into a 
contract a clause which forbids class-wide arbitration, right? 
In other words--
    Mr. Gupta. That is right.
    Mr. Raskin. --all it was saying was your contracts cannot 
categorically block out a class-wide arbitration. It was 
challenged in State court under State and Federal Constitution 
laws, and in the Discover bank case, if I remember correctly, 
the California Supreme Court said it was totally fine.
    So now we have a situation where, if the businesses really 
love arbitration, they can have both kinds. They can have 
individual, and they can have class-wide, but they went to 
court to sue against California's law to get it struck down, 
right? As preempted by the Arbitration Act, the Federal 
Arbitration Act, a massive assault on Federalism and on due 
process rights and the right of states to decide on their own 
civil justice systems, and so it was found preempted.
    Why would the people who today are coming forward to say 
they love arbitration, that arbitration saves all this money, 
go to the Supreme Court to get a law struck down that was 
protecting arbitration? Can you answer that, Mr. Gupta?
    Mr. Gupta. Yes. Thank you for the question. Well, so, I 
can't get over the case either. My friend, Andy Pincus over 
here, he was my opponent in the case, and I am sure he will 
have a different view. The reason is that the corporations are 
not really interested in arbitration. They are interested in 
claim suppression. So, the idea of having class arbitration, 
the idea of allowing people to band together and bring their 
claim in arbitration was the worst of all worlds for this 
company, because suddenly consumers would be able to assert 
their claims, and then the company would have no right of 
appeal. Then all the things we are complaining about 
arbitration, the company would be complaining about.
    Mr. Raskin. In your case, weren't people being hit up for a 
$20 fee--
    Mr. Gupta. Exactly, yes.
    Mr. Raskin. --when they bought a cell phone? So, it 
wouldn't make sense for anybody to spend the money to get a 
lawyer, a couple of hundred bucks or $500, $1,000, to litigate 
over a $20 fee themselves, but if you band everybody together--
there were tens or hundreds of thousands of people in 
California--that is where a class-wide arbitration would make 
some sense. The State law tried to protect that, but the 
corporations came in and sued and said we think that this 
violates our rights to subject us to a class-wide arbitration.
    Mr. Gupta. Right, right. All the State law was trying to 
do--this was general contract law. I am surprised that Mr. 
Pincus mentioned unconscionability law because the whole effort 
in the Supreme Court has been to get rid of the traditional 
tools of unconscionability that police unfair contracts. All 
the State law was saying was, you can't have a get-out-of-jail-
free card. You have to be able to let people with these kinds 
of small claims, as you mentioned, band together and assert 
their rights.
    When you have a $30 fee on your cell phone bill, that is 
sort of the prototypical example of a case for a class action. 
If AT&T can rip everyone off for $30, and the people don't have 
the right to band together to assert those claims, they are 
going to get away with it and fraud will pay. So, you have to 
have a way to allow people to band together and assert these 
claims.
    Mr. Raskin. Okay. I want to give Mr. Pincus his fair--I 
think he is my constituent, and that is the only reason I am 
doing it.
    [Laughter.]
    Mr. Raskin. Because I know he has a very big platform in 
the world. He is a brilliant lawyer, there is no doubt. If you 
could set aside all of your brilliance and your litigious 
cleverness and just tell us why would you be taking the 
position today that it is a good thing for everybody to have 
arbitration, and yet the whole point in the Supreme Court was 
to destroy a class-wide arbitration.
    Mr. Pincus. I love Maryland, but I am a citizen of the 
District of Columbia.
    Mr. Raskin. Oh, okay. Then I can use my time to talk to Ms. 
Carlson, then.
    [Laughter.]
    Mr. Raskin. I will give you 15 seconds, but I do have a 
question for her.
    Mr. Pincus. Well, I think the critical issue in the 
Concepcion case was the fundamental nature of AT&T's clause. 
What AT&T did was to use arbitration to create an incentive for 
small claims to be brought. What AT&T said is if you bring a 
claim, and in our pre-mediation or mediation process we don't 
settle, and on the merits you win even a penny more, you are 
going to get a minimum payment of $5,000. Your attorneys' fees 
will be paid. That payment is now up to $10,000, double 
attorneys' fees, and all your expert witness costs, because 
what AT&T--
    Mr. Raskin. Okay. I only have 10 seconds left, but I will 
go back and read the Supreme Court argument and look for an 
answer in there.
    Ms. Carlson, if you could, tell us quickly what happened to 
you in the arbitration process. Can you tell us?
    Mr. Cicilline. The gentleman's time has expired, but the 
witness can answer the question.
    Ms. Carlson. So, I never got to that point after my lawyers 
figured out how to make my case public in a different way, by 
suing my alleged perpetrator independently and not the company. 
For the millions of Americans, especially women, who do have 
arbitration clauses with regard to sexual harassment, I would 
just ask this Committee to look at the word ``forced,'' because 
if you actually have a choice, then why wouldn't we let the 
American people do that?
    Mr. Raskin. I see. It just so happened--forgive me, Mr. 
Chairman--that Mr. Ailes had independent means. You could sue 
him for what he had done to you. If you had somebody who wasn't 
a deep pocket like that and you had to sue your employer, you 
would have been forced into a dark room someplace where nothing 
would have ever come of it.
    Ms. Carlson. That is the whole problem with the way in 
which our country has chosen to deal with sexual harassment 
claims within the workplace. Because arbitration has become a 
tool to cover up a company's dirty laundry, nobody will ever 
know about all these women.
    Mr. Raskin. Thank you.
    Mr. Cicilline. Thank you.
    I now recognize the gentlelady from Washington, Ms. 
Jayapal.
    Ms. Jayapal. Thank you, Mr. Chairman.
    I just want to say thank you to all the witnesses for being 
here, in particular, Ms. Carlson and Mr. Ziober--did I say that 
right, Mr. Ziober?--for sharing your stories and your work.
    I have just watched this whole area with horror because it 
is exactly as you said, Ms. Carlson, that there are these 
ordinary people who are signing agreements to give up all kinds 
of rights to go to court, and they don't know that they are 
doing so, most of the time. These mandatory arbitration 
agreements, as we know, are often buried very deep in an 
employee handbook somewhere, or a credit card agreement, or an 
app's listing of terms and conditions. It is that prevalent.
    Who benefits from these mandatory arbitration agreements? 
More often than not, it is the large and powerful corporations 
that put these agreements in there in the first place. These 
mandatory arbitration agreements I think pose a very dangerous 
threat to almost every regular person who would like to keep 
their rights intact, from consumers to small businesses to 
nursing home residents.
    For years I have been particularly concerned about the 
harms that workers face with these mandatory arbitration 
agreements, and especially vulnerable workers. Workers of color 
are hampered from protecting their civil rights, even when they 
experience egregious racial discrimination. Survivors of sexual 
assault, as Ms. Carlson has been such a powerful spokesperson 
for this issue, can't join together because mandatory 
arbitration allows this toxic culture of secrecy to prevail and 
abuse to fester. Workers are prevented from speaking up and 
taking collective action.
    So, Ms. Carlson, I am a very proud original co-sponsor of 
our bipartisan, bicameral bill together to end forced 
arbitration around sexual harassment. We were able to last 
session get a number of major companies to come on board. I 
thank you for your courageous voice and testimony and your 
advocacy on that.
    Many other women from your workplace came forward with 
similar stories of sexual assault and mistreatment, and yet you 
couldn't join together with them. In fact, you can't even speak 
publicly about how you dealt with the mandatory arbitration 
clause in your contract. In your testimony you said very 
powerfully, ``silencing women is the harasser's best friend.'' 
I was struck by that phrase.
    Can you explain how a mandatory arbitration agreement 
undermined your rights and your ability to band with other 
survivors and seek remedy?
    Ms. Carlson. Yes. Unfortunately, because the other way in 
which we solve harassment cases in our country is settlements 
with NDAs, I cannot tell you specifics about my story. I can 
tell you hypothetically how it happens when women can't band 
together. Arbitration means that you have no way of knowing 
that anyone else is facing the same thing within the confines 
of the workplace structure. There is no way to know because the 
whole process is secret.
    As I described during my testimony, if you do muster up the 
courage to go and complain and you have an arbitration clause, 
that is a good day for the company because no one will ever 
know anything about your story.
    The worst ramification of all of this is that the 
perpetrator gets to stay in the job. I think one of the reasons 
that we have seen this cultural revolution that we are 
experiencing right now is because the American public was 
actually so angry about hearing about these stories, and they 
were wondering why didn't we know about this. The reason they 
didn't know about it is because of forced arbitration.
    Ms. Jayapal. Thank you.
    Professor Gilles, Mr. Pincus claimed in his testimony that 
arbitration is not secretive, and I just want to give you a 
chance to say whether you agree with that, and why or why not.
    Ms. Gilles. So, this won't surprise you. I completely 
disagree. Mr. Pincus is right that California, the great State 
of California has enacted a statute that requires disclosure of 
arbitration outcomes. I have to say, I have tried, as a 
researcher, to access and use that database. It is pretty 
bloodless. It is very redacted. It is very hard to get real 
information, and that is not what we need.
    If a court of law would just have to tell me the name, 
date, and winner of a case, that is not what we mean when we 
talk about full and fair access to justice. I think Congressman 
Nadler said this earlier, we need to know what is going on in 
the court system. We need to know the types of claims that 
people are bringing. We need to know what systemic harms are 
going on in the workplace, as Ms. Carlson just noted. These 
disclosure statutes are not enough. We really need true public 
access.
    Ms. Jayapal. You said earlier that 80 of workers will be 
subjected to mandatory arbitration.
    Ms. Gilles. That is what the EPI is predicting, in three to 
five years.
    Ms. Jayapal. That is a stunning number.
    Ms. Gilles. When you think about it, though, why wouldn't 
they? I mean, the Supreme Court has just decided Epic Systems, 
which gives a green light to all employers, right? They are 
going to do it unless you stop them.
    Ms. Jayapal. Right. Well, I thank you for your testimony.
    I also want to just say thank you so much to Richard 
Heggens for taking on mandatory arbitration at Chipotle for 
wage theft. I also want to thank Molly Coleman for organizing 
law students to be aware and resist mandatory arbitration 
contracts. I don't know where you are, Molly, but thank you.
    Mr. Chairman, I just think that these efforts are so 
important because I don't think the majority of Americans 
understand how this affects their daily life, their rights, and 
their access to due process.
    Mr. Cicilline. Hopefully, this hearing is going to help 
bring that--
    Ms. Jayapal. Yes, thank you for doing this.
    Mr. Cicilline. Thank you.
    I will now recognize the gentleman from North Dakota, Mr. 
Armstrong, for 5 minutes.
    Mr. Armstrong. Thank you, Mr. Chair.
    As a preface, prior to getting here, I served in the State 
legislature, and two things we have done over the last six 
years is we have raised the small claims rate continually 
higher and higher, and one of the reasons for that is because, 
quite frankly, access to the court system is getting more and 
more expensive. So as a recovering attorney, I can place some 
blame on myself for that, and my profession.
    Mr. Goldberg, if the arbitration system is wiped out, it 
really only leaves litigation as the solution, and you have 
suggested that for consumers' and employees' litigation has 
steadily become much more expensive, particularly in a State 
like North Dakota with really fast population growth. Our court 
systems across the State are overburdened, so less responsive 
over the last decade. Why is that?
    Mr. Goldberg. I think in large part there is certainly a 
lot more litigation, and as you have seen over the past 20, 30, 
40 years, litigation has just become a lot more expensive, and 
it is more of a battle between both sides over discovery and 
all these things that happen, which just makes it untenable for 
a lot of people both from their disposition, and then also from 
an economic perspective and the ability to actually get a fair 
outcome for themselves. I think what we are seeing in the worst 
aspects of this is in the class action area, where you are 
seeing these no-injury cases and a bunch of class actions that 
have nothing to do with anybody being injured, without anybody 
being aggrieved. It is millions of dollars that go into 
litigating them and paying attorneys' fees, and the result ends 
up being either a cy pres award to a third party or a recovery 
that nobody really wants, and so nobody participates in it.
    That is what is causing civil justice to erode, and that is 
where I think the pre-dispute arbitration agreements are 
providing a viable alternative in filling that void.
    Mr. Armstrong. You stated, and I think this figure probably 
differs somewhat region by region, but that lawyers may not 
take cases unless the value is $200,000 or higher. So why do 
you think that figure is so high?
    Mr. Goldberg. I think because litigation has become so 
expensive, and trial lawyers, just like anybody, they want to 
get paid for their work. I don't blame them for that. It takes 
more money and more effort to engage in litigation these days 
than it used to. Twenty years ago, that number, according to 
studies, used to be closer to $60,000. Now it is upwards of 
$100,000 to $200,000. So, the people who fall below that line 
just don't have access to justice and to the civil justice 
system when it is a one-off case.
    Mr. Armstrong. So, if we get rid of arbitration in this 
realm, how many consumer and employee claims are going to be 
shut out altogether if arbitration isn't available, at least 
for smaller claims?
    Mr. Goldberg. I don't have an exact number in terms of the 
number of claims, but most of the claims that would fall under 
those would not have access to justice. The pre-dispute 
arbitration agreement provides the only path where oftentimes 
the arbitration is paid for by the employer or by the company, 
and often attorneys' fees are available if the consumer or the 
employee prevail. So, it is a much more cost-effective and 
streamlined way for them to get the recovery that they are 
seeking. So even if it is a $500 amount, they are going to get 
to keep more of that than they would if it were in litigation.
    Mr. Armstrong. I think you and Mr. Pincus both kind of 
agree on post-dispute arbitration agreements. What are the 
real-world barriers to those types of arrangements?
    Mr. Goldberg. Well, once a dispute arises, agreeing to even 
the size of the table to sit at, let alone what path you are 
going to choose, is probably going to be a difficult endeavor. 
More to the point, the incentives change. So if it is a small 
dispute, if it is under that threshold we are talking about, 
the $100,000 or $200,000 threshold, the claimant may say, hey, 
I would rather go to arbitration because that is a fairer or 
better way for me to get justice, and then the company may say 
no, we are not going to arbitrate that claim because it is not 
to our--if you would not bring that claim another way, why 
would we engage in that? Then if the claim is larger, then the 
reverse may be true.
    So, the only way to really make the system work is to offer 
it ahead of time. It creates a system, again, that is based on 
trying to get what is fair. It is not all or nothing, it is not 
as expensive, and it is trying to get a result that works, that 
is the right result given the situation at hand.
    Mr. Armstrong. With the limited time I have left, we have 
had a Bakken shale revolution, an oil boom in western North 
Dakota, and one of the big issues that comes up is landowner 
mineral rights versus oil company rights. Without some of the 
arbitration stuff that we have done at the State level, we 
would dramatically decrease access for farmers in the middle of 
western North Dakota that just simply don't have the resources 
to take on a medium, small, or large oil company. So, there are 
inverse situations where this is absolutely necessary.
    With that, I yield back.
    Mr. Cicilline. I thank the gentleman.
    I now recognize the very distinguished gentleman from the 
State of Colorado, Mr. Neguse, for 5 minutes.
    Mr. Neguse. Thank you, Mr. Chairman.
    I want to thank the witnesses for testifying today, in 
particular, Ms. Carlson and Mr. Ziober. Thank you for sharing 
your stories and for your courage. Certainly, we are hopeful 
that we can help others avoid the ways in which, I think, 
employers and a variety of corporations have abused this system 
of forced arbitration. It is why I am proud to be a sponsor of 
the FAIR Act, and I appreciate Representative Johnson and 
Representative Cicilline, and of course the Chairman, for their 
leadership on this front.
    Mr. Goldberg, I have a line of questioning, but I could not 
resist the temptation of following up on my good friend and 
colleague, Mr. Armstrong's, questions, because it sounds like--
and I will quote the words you used. The notion that claimants 
who may have a claim that is smaller, relatively speaking, 
lower than $200,000 I think is the number that has been sort of 
tossed around today, that their ``only path'' absent forced 
arbitration would be arbitration. That is, if we get rid of the 
modern arbitration system, they would have no, I think in your 
words, access to justice.
    I guess I am confused because my understanding as a lawyer 
is that claimants can pursue pro se actions in court. They 
would have to retain a lawyer; obviously, to the extent that 
they would like to retain one, they would have to pay for one. 
The same is true in the arbitration context, is that right? So, 
I am not understanding this argument or this notion that they 
have no access to justice if we remove forced arbitration as 
the mechanism today.
    Mr. Goldberg. The civil litigation system is pretty 
burdensome and onerous, and--
    Mr. Neguse. Let's talk about that.
    Mr. Goldberg. Oftentimes--
    Mr. Neguse. Reclaiming my time, you are familiar with small 
claims court, correct?
    Mr. Goldberg. Absolutely.
    Mr. Neguse. I happen to hail from the great State of 
Colorado. We have a small claims court system. Under $7,500, 
you can go into court. You can file a simple form. I am sure 
that the same holds true in the State where you practice law. 
Sound about right.
    Mr. Goldberg. Yes.
    Mr. Neguse. You pay a small filing fee. I believe it is $31 
in Colorado, probably similar to what you pay in a small claims 
court in your jurisdiction. Fair?
    Mr. Goldberg. Yes.
    Mr. Neguse. There is a mediation option, actually, in our 
small claims court. I don't know if that happens to be a 
function of your system, but it certainly is the case in 
Colorado.
    So, this is where I am struggling, because I understand if 
you want to make the case--in your testimony, the first page, I 
will quote. You say, ``A major reason that pre-dispute 
arbitration agreements have become more commonplace in our 
society is because they achieve this goal of peaceful, quick, 
and conclusive dispute resolution.'' I understand if you want 
to make the case that employers, corporations, businesses have 
concluded that, what I have just described. The notion that 
consumers and employees have made that judgment, I think, is 
just not the case. It is not supported by the facts, because 
ultimately consumers aren't making the choice. Employees aren't 
making the choice. I would hope you would agree, at least with 
respect to that quote that I just mentioned, this 
presupposition that somehow employees and consumers are the 
reason why these agreements are more commonplace. That is not 
what you are suggesting?
    Mr. Goldberg. I think there is a large gap between the 
$7,500 figure that you mentioned in terms of what caps you out 
at the small claims court and the $100,000 to $200,000 value of 
a claim that sometimes requires you to get a lawyer. Pro se 
plaintiffs, yes, you can pursue a claim pro se, and small 
claims court may be a very viable opportunity for people under 
that threshold. By and large, people are not going to be able 
to bring a claim if they are above that threshold, and they 
don't need a lawyer oftentimes if they are going through a 
small, pre-dispute arbitration path either.
    So, it provides access for people above that, but below the 
threshold of where a lawyer may not take the claim, and it 
provides as good, if not better.
    Mr. Neguse. I appreciate that. That is a little bit 
different. I just misunderstood the point that you were making, 
and Mr. Pincus made earlier, with respect to claims that are a 
couple of thousand dollars.
    In any event, and not to belabor the point, but is it your 
position that these agreements have become more commonplace 
because employees and consumers have made that decision? I just 
want to make sure I am clear on that front. That is not your 
position.
    Mr. Goldberg. I actually think that arbitration agreements 
are becoming more commonplace and people are using it more, as 
we heard from some of the testimony.
    Mr. Neguse. Sir, they are not using them more because 
consumers aren't drafting these agreements. I mean, I presume 
you use Facebook, you go to an ATM, maybe you flew to 
Washington, DC to testify today, maybe you took an Uber or a 
Lyft to come and testify in front of this committee. You didn't 
draft any of those arbitration agreements, correct?
    Mr. Goldberg. Correct.
    Mr. Neguse. Yes. The corporations did, the employers did. 
That is my point. So again, I understand if you want to make 
the case about the values of arbitration. That is certainly 
your case to make. Let's not engage in this intellectual 
fantasy that somehow consumers and employees are making the 
choice, because anyone can pick up their phone and look up 
their Uber app or Lyft app or any other similar app and see 
that the terms and conditions are very far deep within that 
app, and the notion that the consumers are making the choice to 
do so I just think is a fallacy.
    The last thing I would note, Mr. Chair, because I do know 
that my time has expired, I know a number of folks will 
recognize the Pipeline Parity Project. We are joined today by 
some of the law students from that project. I appreciate their 
advocacy with respect to having law firms remove forced 
arbitration clauses from their contracts, and I appreciate, Mr. 
Goldberg and Mr. Pincus, that both of your law firms, I 
understand, have abandoned forced arbitration contracts for 
your employees. If that is not the case, you certainly have a 
chance to clarify that.
    Mr. Pincus. We never had one.
    Mr. Neguse. Never had one. Well, I would hope that we could 
agree on legislation that would enable employers across the 
country to take that same approach, and I yield back.
    Mr. Cicilline. Thank you. Thank you very much.
    I now recognize myself for 5 minutes.
    Since the Second World War, Congress has expanded and 
strengthened laws that guarantee every veteran and active-duty 
service member, including those serving at the Reserves and 
National Guard, the right to be free from discrimination in the 
workplace based on their military service, and the right to 
their day in court to enforce these protections. As Mr. Ziober 
has testified, these laws are meaningless if they are not 
enforceable through the courts. He is not alone. The Military 
Coalition, which is a broad consortium of unified service and 
veterans' organizations representing more than 5.5 million 
current and former service Members, has referred to forced 
arbitration as, and I quote, ``an un-American system wherein 
service Members' claims against a corporation are funneled into 
a rigged, secretive system in which all the rules, including 
the choice of the arbiter, are picked by the corporation,'' end 
quote.
    Our brave men and women in uniform deserve better, and that 
is why I have introduced the Justice for Service Members Act 
that Mr. Ziober referred to that would prohibit the 
circumvention of their rights under laws designed to protect 
service Members and veterans.
    I would ask you, Mr. Ziober, if you could just expand on 
what it was like and what impact it had on you as you were 
about to depart to a war zone in defense of your country to 
know that you were deprived of your right to contest your 
firing, even though Congress had expressly provided for that 
protection in Federal law.
    Lieutenant Ziober. Mr. Chairman, first, I want to thank you 
for introducing the Justice for Service Members Act. I believe 
it was introduced yesterday. Thank you for your support in that 
endeavor.
    In my case, as I mentioned in my testimony, at noon I am 
having a big party with the company, cards and gifts and a lot 
of support. You have a sense of patriotism and an appreciation 
for your service. Then at 5 o'clock you are sitting there 
getting fired, and you are trying to compartmentalize what just 
happened. You are confused, you are embarrassed, you have 
anxiety about what your future is going to hold.
    I was leaving for pre-deployment training that following 
Monday, so my mind was set to be focused on training. Now, I am 
wondering how I am going to support myself and my family when I 
return home from my deployment.
    You go do your mission. You do the best you can to support 
your mission and your teammates down range. That is what you 
are there for, to go do, but in the back of your mind your 
family back home, if you have a wife or kids, you are thinking 
how are you going to pay the mortgage when you get back? How am 
I going to provide food on the table? The kids need braces, 
whatever the case may be. So, it is not a position that service 
Members should be put into.
    If I could just quickly say, I think there is a bigger 
picture here, too. I mean, in my case it hurt me, and I am here 
to advocate to not have other service Members feel the same 
type of pain. I think this is a military readiness issue. I 
mean, we draw on our Reservists so much, for strategic 
reserves, operational support nowadays.
    USERRA is a law that lets service Members go from civilian 
to military duty and back to civilian jobs. The more that is 
weakened, I think that is going to discourage people who truly 
want to step up and serve their country in that regard, and 
they bring a lot of skills--medical, aviation, engineering. The 
diversity is really beneficial to our country.
    Mr. Cicilline. Thank you very much and thank you for your 
service.
    Mr. Gupta, when Congress enacted the Federal Arbitration 
Act in 1925, it never intended for arbitration to serve as a 
corporate shield against the enforcement of our laws, or a 
sword to weaken protections, or to protect corporate 
wrongdoing. Far from it. As the Supreme Court noted in 1967 in 
the Prima Paint decision, the legislative history of the law 
makes clear that Congress did not intend for parties with 
unequal bargaining power to be forced to arbitrate claims on a 
take-it-or-leave-it basis.
    How do you explain the Supreme Court's departure from 
decades of case law and the clear legislative intent in the 
Federal Arbitration Act and other laws that are designed to be 
enforced through the justice system? Is there any label for 
this other than judicial activism on behalf of corporate 
wrongdoers?
    Mr. Gupta. I don't think there is. It would be hard to 
identify another Federal statute passed by Congress where the 
Supreme Court has strayed so far from the original intent of 
the legislation. I have gone back and looked at the history of 
the Act from 1925. People weren't blind to the possibility of 
abuse. They raised these concerns before this committee, in 
fact, and the architects of the legislation were clear: This is 
about letting businesses of equal bargaining power that want to 
resolve their disputes out of court, letting them do that, and 
I have no objection to that. That makes perfect sense.
    The drafters were clear: This is not about foisting this on 
people who don't consent through take-it-or-leave-it contracts. 
In fact, Congress put in a provision, section 1 of the Federal 
Arbitration Act, that says this shall not apply to any class of 
workers. Remarkably, the Supreme Court has read that language 
to mean precisely the opposite, and now it can apply to any 
class of workers.
    So, we have strayed so far away from what Congress intended 
in 1925, and that is why only this body, Congress, can set 
things right.
    Mr. Cicilline. Thank you.
    My very final question. It is really hard to understand, 
Professor Gilles, what Mr. Pincus argues, this idea that people 
want arbitration. We know it is deeply unpopular with 
Democrats, Republicans, Independents, so it is not a political 
thing. It is deeply unpopular with the American people, above 
80 percent. Obviously, if it produced better outcomes, people 
could voluntarily pick it. Of course, they don't. They are 
forced into it by the other party in the disagreement, the 
corporation.
    So is Mr. Pincus right, that people like arbitration, they 
want it, they are dying to be into it, or--
    Ms. Gilles. The numbers don't support Mr. Pincus at all. I 
mean, we are all going to do some selective citing of studies, 
but I think mine are better.
    [Laughter.]
    Ms. Gilles. We know that, for example, only 1 out of every 
10,400 employees ever files an arbitration claim. I think that 
when Mr. Pincus talks about how well employees do in 
arbitration, he is talking about high-value cases, cases that 
probably would have done fine in court but, for whatever 
reason, those employees decided, maybe for the privacy, because 
some claims are a little bit embarrassing, to have those claims 
in arbitration. That is all fine.
    We are not talking about getting rid of arbitration 
altogether here, people. We are talking about making it 
voluntary. We are talking about making it post-dispute, so that 
they can decide. Despite what Mr. Goldberg says, I think the 
American people can handle that choice. I don't think it is 
going to create a ton of transaction costs. I think he is just 
worried that they won't take you up on the offer, right? They 
would prefer to be in court.
    They wouldn't prefer to be in court because they want their 
lawyers to get paid. They would prefer to be in court because 
that is where claims belong, in public court, not in private 
arbitration. So, Mr. Pincus and I disagree.
    Mr. Cicilline. Thank you.
    Ms. Gilles. Thank you.
    Mr. Cicilline. At this time, I now seek unanimous consent 
to add a number of letters and statements to the record from 
organizations in support of ending forced arbitration and 
passing the FAIR Act: A letter in support from George Slover, a 
Senior Policy Advisor with Consumer Reports, without objection, 
a letter in support of legislatively ending forced arbitration 
from Lisa Gilbert, the Vice President of Legislative Affairs of 
Public Citizen, without objection; a letter in support of the 
FAIR Act from Terry O'Neil, the Executive Director of the 
National Employment Lawyers Association, without objection; a 
letter supporting the FAIR Act from the Fair Arbitration Now, 
without objection; and a statement from Allen Carlson, owner of 
Italian Colors Restaurant, supporting the FAIR Act, without 
objection.
    [The information follows:]
      

                        CICILLINE FOR THE RECORD

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

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                            Alan S. Carlson

     Owner, Italian Colors Restaurant, 2220 Mountain Blvd.,

                       Oakland, CA 94611

    My name is Alan Carlson and I am the chef and owner of 
Italian Colors Restaurant, a small business located in Oakland, 
California. I respectfully submit this statement for the record 
of the hearing held on May 16, 2019 in the House Subcommittee 
on Antitrust, Commercial and Administrative Law entitled, 
``Justice Denied: Forced Arbitration and the Erosion of our 
Legal System.''
    The Italian Colors Restaurant was the lead plaintiff in 
Italian Colors v. American Express, a class action lawsuit on 
behalf of merchants across the country who allege we are harmed 
by anti-competitive conduct engaged in by American Express in 
violation of the U.S. antitrust laws. In 2013, the Supreme 
Court held that we could not bring our antitrust claim because 
American Express used a forced arbitration clause in its 
contracts that prohibits its business customers from joining 
together to hold American Express accountable through the 
public court system. I strongly urge Congress to pass H.R. 
1423, the Forced Arbitration Injustice Repeal Act (FAIR Act), 
to ensure that small businesses like Italian Colors have 
recourse when we are victims of predatory and illegal behavior 
by large corporations that take advantage of our situation.
    I was born in s11burban Detroit and have been working in 
the restaurant business in one way or another since I was 14 
years old, when I started out washing dishes at a Greek diner. 
My passion for food grew into a career. In 1979, I graduated 
from the Culinary Institute of America in New York City. 
Afterwards, I traveled across America and worked with a number 
of chefs, absorbing new knowledge and skills from each 
opportunity. In the early 1980s, I settled in Oakland, 
California, and opened my first restaurant in 1986. Since then, 
I have started and run several restaurants in and around the 
San Francisco Bay area.
    Twenty-six years ago I opened Italian Colors with my wife, 
Dee Carlson-Cohen, and business partner, Steve Montgomery. Our 
goal was to create the quintessential neighborhood restaurant, 
geared toward community, quality food, and great customer 
service. I am incredibly proud to say that over two decades 
later, we are still open, serving our community and employing 
more than 30 people.
    However, like most local restaurants, our profit margins 
are razor thin. We survive through fostering client loyalty, 
keeping prices low, and cooking high quality food. Like so many 
other communities in the United States, we operate in a charge 
card and credit card-driven world and could not survive without 
accepting credit cards as payment.
    To customers, one form of payment is as good as another, 
but for small businesses, that is far from the reality. In 
fact, American Express cards are pretty much the most expensive 
form of payment we must accept to survive.
    A significant percentage of my restaurant's earnings comes 
from clients who use American Express cards. They are an 
extremely popular form of payment especially for diners who 
spend a lot of money at the restaurant because of all of the 
perks they offer. American Express imposes special rules and 
restrictions on restaurants and small businesses who must 
accept their cards as payment. For example, in order to accept 
any American Express card, my restaurant has to accept all 
types of American Express cards--even cards that carry rates 
and fees that are higher than all other forms of payment. In 
addition, American Express does not allow me to offer cash 
discounts or to encourage customers to pay with a form of 
payment that actually works better for my business. I cannot 
encourage my customers to pay in cash or debit cards by 
offering discounts or other incentives.
    If I could offer discounts to my customers who use cash or 
their debit cards, or be able to say which cards make sense for 
me to accept, without being forced to accept all cards, I would 
be able to increase my earnings and decrease my costs--which 
means providing more services, having more employees.
    Being forced to make a decision that is bad for my business 
isn't right. A number of years ago, after talking about what I 
was facing with a long-time customer, friend, and attorney, 
Edward Zusman, he talked to other anti-trust attorneys with 
whom he was acquainted and they decided to take up the cause. 
They believed that American Express was engaging in anti-
competitive practices in violation of the antitrust laws.
    When I started with American Express in the early 1090's my 
first agreement did not have a forced arbitration clause. To 
this day, I have not actually seen a forced arbitration clause, 
but I have been told that in the late 1990's they included 
forced arbitration as a term and condition of continued use of 
their cards. I did not know until the litigation commenced that 
that provision even existed.
    Edward explained that forced arbitration means American 
Express cannot be held accountable in court, and that I will 
not be able to join with other small business owners to help 
defray the costs of enforcing our rights. Instead, if I want to 
hold American Express accountable, I would have to try to do it 
in an individual, private arbitration tribunal designed by 
American Express.
    Needless to say, I was shocked. I honestly cannot recall 
ever even reading a forced arbitration clause, and certainly do 
not remember signing a contract that included one. But even if 
I knew the clause was in the fine print of the contract, my 
American Express contract was offered on a take-it-or-leave-it 
basis.
    As we figured out how to move forward, we discovered that 
the cost of individual forced arbitration was so high that even 
if a small business won, it would lose. An expert economist 
explained in testimony that it would not be cost-effective for 
any small business owner in the same situation as me to pursue 
an individual arbitration claim against American Express. In 
fact, it would cost more to bring their claim than they could 
recover. This cost prohibitive system means that there is no 
way one small business can get justice alone.
    Every American should have the right to join with others to 
fight to hold corporate giants accountable. But I don't, 
because of a forced arbitration clause buried in the fine print 
of terms and conditions imposed upon me years after I started 
taking American Express cards. And I have learned that the 
majority of consumers and workers have also signed forced 
arbitration clauses in just about every aspect of their lives. 
Ifwe cannot be part of a class action to enforce our rights 
against companies like American Express, we have no way of 
enforcing those rights. I certainly don't have the money to 
take on American Express by myself.
    I tracked my case through the courts and I was very pleased 
with the results at the lower courts. The case went all the way 
to the U.S. Supreme Court, where I thought surely justice would 
prevail. However, as you probably know, the Supreme Court ruled 
that I had to take my case to individual arbitration, even 
though the evidence presented showed that I would have to pay 
more in arbitration than I could ever recover, making that 
choice impossible for me and other small businesses. When the 
Supreme Court issued its decision in favor of American Express 
and forced arbitration, you can imagine my disappointment and 
shock. Essentially the Supreme Court was saying that it didn't 
matter that a small business couldn't pursue important rights 
against a big business.
    I was surprised to learn recently that a number of very 
large companies, including Walgreens, CVS and Safeway, are 
taking American Express to trial this summer over the same 
issues I was not allowed to bring to court. It turns out that 
these huge corporations had enough bargaining power with 
American Express that they were able to negotiate contracts 
that did not include forced arbitration clauses. They will get 
their day in court. But small businesses throughout America, 
who are suffering from the exact same harmful business 
practices, do not have the same rights. We will never get our 
day in court because of forced arbitration. I believe this is 
unAmerican.
    Because forced arbitration makes it impossible for small 
businesses to hold large corporations publicly accountable, 
those companies are able to continue their unfair business 
practices and small firms like mine continue to be harmed with 
no recourse. I have heard that there will be a ``litigation 
explosion'' if we end forced arbitration. I do not believe 
that. If we end forced arbitration, more companies will follow 
the law and everyone will benefit.
    It has become clear to me that certain congressional 
actions can and must be taken to help protect the small 
businesses on ``Main Streets'' across America. Small businesses 
and consumers should have the same access to the justice system 
as large corporations, like American Express and Walgreens and 
CVS. And corporate Goliaths should never be able to take away 
our ability to hold them responsible for their actions.
    Small businesses are the lifeblood of America and we play 
an essential role in creating good jobs. Small businesses, our 
customers, and really, our neighborhoods and communities are 
the ones who lose when big business gets to violate the law and 
get away with it.
    There are many small business owners like me across the 
country who are struggling to stay in business and live the 
American dream. The FAIR Act would give back to small 
businesses the right to go before a judge and jury against big 
corporations instead of being locked into a forced arbitration 
system that is too expensive to use. I urge you to pass the 
FAIR Act to restore equal access to justice for small 
businesses and consumers.

    Mr. Cicilline. One final thing I would like to do before we 
adjourn is just take a moment to recognize several people who 
have traveled from all over the country to attend today's 
hearing.
    Tanuja Gupta, who has organized and led the Googlers for 
Ending Forced Arbitration and Google walk-out movements, which 
culminated in Google's decision to end its use of forced 
arbitration earlier this year.
    Richard Heggens, a former Chipotle employee who is also 
with us today. Richard was forced to work off the clock without 
pay by his employer, along with several thousand other 
employees. Richard's attempt to hold his employer accountable 
for wage theft has been forced into individual arbitration.
    Tara Zoumer, who is a former employee of WeWork, an office 
leasing start-up, who was fired for refusing to sign a forced 
arbitration clause in her employment contract. Since then, she 
has fought for the rights of millions of workers against forced 
arbitration.
    Tom Troy, who is also with us. Tom is a partner at the 
Starbucks coffee company who filed an age discrimination 
complaint against the company and has fought to bring awareness 
to the public and other employees at Starbucks about the 
company's use of forced arbitration.
    Finally, Molly Coleman, who is a student at Harvard Law 
School, who co-founded the Pipeline Parity Project, which has 
led a campaign to end forced arbitration at many of the biggest 
law firms in the world.
    Very finally, Emanuel Schorsch, who works for Google and 
was part of Googlers for Ending Forced Arbitration, collecting, 
comparing, and analyzing arbitration clauses in employee 
contracts for companies across the tech industry.
    I want to welcome you and thank you for being here.
    This concludes today's hearing.
    Again, I want to thank our witnesses for their very helpful 
testimony.
    Without objection, all Members will have 5 legislative days 
to submit additional written questions for the witnesses or 
additional materials for the record.
    This hearing is adjourned.
    [Whereupon, at 11:43 a.m., the hearing was adjourned.]
      

                                APPENDIX

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


    QUESTION FOR THE RECORD FOR ANDREW PINCUS SUBMITTED BY 
                    REPRESENTATIVE KEN BUCK

    The Supreme Court case AT&T Mobility v. Concepcion was 
raised during the hearing by Representative Raskin. I know that 
you argued that case on behalf of AT&T. Please provide a full 
discussion of the case, including its underlying facts, what 
the Supreme Court decided, and how the ruling relates to the 
use of arbitration today.
    The Concepcion case clearly illustrates the benefits to all 
parties of consumer arbitration agreements, especially when 
compared with the class-action system.

     The Concepcion Lawsuit and District-Court Proceedings

    The plaintiffs in Concepcion, Vincent and Liza Concepcion, 
were wireless customers of AT&T Mobility LLC who filed a 
putative class action against the company in the United States 
District Court for the Southern District of California in 2006. 
At that time, customers of most wireless carriers, including 
AT&T, typically purchased cell phones and subscribed to 
wireless service in a bundled transaction, in which the phone 
was free or steeply discounted in exchange for a commitment to 
maintain service for a specified term (often one or two years). 
But California law required that sales tax be paid on the full 
retail value of a phone when it is sold as part of a bundled 
transaction.\1\ Despite this legal requirement, when the 
Concepcions were charged sales tax based on the full retail 
price of phones that were free or discounted, they sued AT&T, 
alleging that in addition to violating several common-law 
doctrines, AT&T had violated California's Unfair Competition 
Law (``UCL''),\2\ False Advertising Law (``FAL''),\3\ and 
Consumer Legal Remedies Act (``CLRA''),\4\ and should be 
required to pay damages and restitution to consumers and 
attorneys' fees and costs to the Concepcions' lawyers.
---------------------------------------------------------------------------
    \1\ Cal. Code Regs. tit. 18, Sec. Sec. 1585(a)(4), (b)(3).
    \2\ Cal. Bus. & Prof. Code Sec. Sec. 17200 et seq.
    \3\ Cal. Bus. & Prof. Code Sec. Sec. 17500 et seq.
    \4\ Cal. Civ. Code Sec. Sec. 1750 et seq.
---------------------------------------------------------------------------
    The Concepcions' legal claims were of dubious merit.\5\ 
That is not unusual. Large companies frequently are targeted by 
consumer class actions by the plaintiffs' bar, on the theory 
that even claims with a low probability of success can be used 
to coerce what Judge Friendly famously characterized as a 
``blackmail settlement'' from the company because of the sheer 
size of the aggregate potential liability.\6\
---------------------------------------------------------------------------
    \5\ The California State courts dismissed a copycat class action 
for failure to State a claim--holding that the claim was legally 
insufficient. Yabsley v. Cingular Wireless, LLC, 98 Cal. Rptr. 3d 657 
(Ct. App. 2009) (affirming order granting demurrer), review granted, 
219 P.3d 151 (Cal. 2009), review dismissed, 328 P.3d 67 (2014); see 
also Loefler v. Target Corp., 324 P.3d 50, 53 (Cal. 2014) (holding that 
``consumer-protection statutes . . . cannot be employed'' to challenge 
collection of ``sales taxes'' by retailers).
    \6\ Henry J. Friendly, Federal Jurisdiction: A General View 120 
(1973).
---------------------------------------------------------------------------
    AT&T responded to the lawsuit by seeking to enforce the 
arbitration provision in AT&T's contracts with customers, 
including the Concepcions. That arbitration provision required 
that arbitration proceed in its traditional form--on a one-to-
one, individual basis. And the provision included a number of 
features designed to make arbitration convenient and attractive 
for consumers with small claims:

      Cost-free arbitration: AT&T committed to pay all 
of the filing, administrative, and arbitrator costs for any 
claim that the arbitrator did not find to be frivolous under 
the same Federal Rule of CivilProcedure 11(b) standard 
applicable in federal court;
      Independent arbitration administrator: 
Arbitration would be administered by the independent non-profit 
American Arbitration Association, using rules it had designed 
to make arbitration easy for consumers, and its roster of 
retired judges and experienced arbitrators;
      Convenient hearings: Arbitration would take place 
in the county of the customer's billing address, and the 
customer had the sole right to choose whether the arbitrator 
would conduct an in-person hearing, a hearing by telephone, or 
dispense with a hearing and rule on the basis of the documents 
submitted by the parties;
      Small claims court option: Either party could 
bring a claim in small claims court in lieu of arbitration;
      Full remedies: The arbitrator could award the 
customer any form of individual relief (including statutory 
attorneys' fees, statutory or punitive damages, and 
injunctions) that a court could award;
      Possibility to earn large bonus recovery: If the 
arbitrator awarded a customer relief that was greater than 
AT&T's last written settlement offer before the arbitrator was 
appointed, the customer's minimum recovery would be either 
$5,000 or (if greater) the jurisdictional maximum for the 
customer's local small claims court (which at the time in 
California was $7,500); and
      Possibility to earn double attorneys' fees: If 
the arbitrator awarded a customer more than AT&T's last written 
settlement offer, then AT&T also would pay the customer's 
attorney, if any, twice the amount of attorneys' fees, and 
reimburse any expenses, that were reasonably accrued for 
investigating, preparing, and pursuing the claim in 
arbitration.

    Despite these consumer-friendly features, the Concepcions 
resisted enforcement of their arbitration agreement on the 
ground that it was unconscionable under California law because 
it prohibited class procedures in arbitration.
    In ruling on AT&T's motion, the district court noted the 
powerful incentives under the agreement for consumers to 
arbitrate individual claims: ``If [AT&T] denies an informal 
claim''--that is, a complaint submitted to the legal department 
prior to the commencement of an arbitration, which can be as 
simple as a one-page letter--``or offers less than the 
[California] consumer requests,'' then ``the amount of the 
consumer's award upon prevailing at arbitration jumps to $7,500 
. . . , plus double attorney's fees, if the consumer is 
represented by counsel.'' \7\ For the Concepcions, who were 
seeking only $30 in damages--the amount of the sales tax on 
their phone--AT&T's arbitration provision gave them ``the 
potential to recover two hundred fifty times [their] actual 
damages[.]'' \8\
---------------------------------------------------------------------------
    \7\ Laster v. T-Mobile USA, Inc.3, 2008 WL 52162555, at *10 (S.D. 
Cal. Aug. 11, 2008), affirmed sub nom. Laster v. AT&T Mobility LLC, 584 
F.3d 849 (9th Cir. 2009), rev'd sub nom. AT&T Mobility LLC v. 
Concepcion, 563 U.S. 333 (2011).
    \8\ Id.
---------------------------------------------------------------------------
    The district court also noted the corresponding incentives 
for AT&T to resolve claims. Because the agreement committed 
AT&T to pay all arbitration costs and obligated it to pay 
heightened recoveries to customers who recover more in 
arbitration than AT&T had offered to settle, the agreement 
``prompts [AT&T] to accept liability . . . during the informal 
claims process'' that precedes arbitration, ``even for claims 
of questionable merit and for claims it does not owe.'' \9\ As 
a consequence, under AT&T's arbitration provision, the district 
court found that ``nearly all consumers who pursue the informal 
claims process are very likely to be compensated promptly and 
in full,'' with customers ``virtually guaranteed a payment by 
[AT&T].'' \10\
---------------------------------------------------------------------------
    \9\ Id. at at *11.
    \10\ Id.
---------------------------------------------------------------------------
    By contrast, the district court found, ``consumers who are 
Members of a class [action] do not fare as well.'' \11\ The 
court noted ``studies that show class Members rarely receive 
more than pennies on the dollar for their claims, and that few 
class Members (approximately 1-3%) bother to file a claim when 
the amount they would receive is small.'' \12\ The court found 
that ``the record . . . establishes that a reasonable consumer 
may well prefer quick informal resolution with likely full 
payment over class litigation that could take months, if not 
years, and which may merely yield an opportunity to submit a 
claim for recovery of a small percentage of a few dollars.'' 
\13\ The court held that AT&T's arbitration provision 
``sufficiently incentivizes consumers'' to pursue ``small 
dollar'' claims and ``is an adequate substitute for class 
arbitration[.]'' \14\
---------------------------------------------------------------------------
    \11\ Id.
    \12\ Id.
    \13\ Id. at *12.
    \14\ Id. at *11-12.
---------------------------------------------------------------------------
    The district court nonetheless held that AT&T's arbitration 
provision is unenforceable under California law. Under 
California's Discover Bank rule--named for the California 
Supreme Court decision that had announced it (Discover Bank v. 
Superior Court) \15\--``[f]aithful adherence to California's 
stated policy of favoring class litigation and arbitration to 
deter fraudulent conduct in cases involving large numbers of 
consumers with small amounts of damages[] compel[ed] the Court 
to invalidate'' AT&T's arbitration provision.\16\ The district 
court also rejected AT&T's arguments that the Federal 
Arbitration Act (``FAA'') preempts California's Discover Bank 
rule.\17\
---------------------------------------------------------------------------
    \15\ 113 P.3d 1100 (Cal. 2005).
    \16\ Laster, 2008 WL 5216255, at *14.
    \17\ Id. at *14 n.11.
---------------------------------------------------------------------------

      AT&T's Appeal to the Ninth Circuit and Supreme Court

    AT&T appealed the denial of its motion to compel 
arbitration. A three-judge panel of the Ninth Circuit affirmed 
the district court's rulings that California's Discover Bank 
Rule invalidates AT&T's arbitration provision and that the FAA 
does not preempt the Discover Bank rule.\18\ The Ninth Circuit 
concluded that although AT&T's arbitration provision 
``essentially guaranteed that the company will make any 
aggrieved customer whole who files a claim,'' this was 
insufficient to comply with California law because class 
proceedings were unavailable in arbitration.\19\ And the Ninth 
Circuit held that California's Discover Bank Rule was 
consistent with the FAA because it was ``simply a refinement of 
the unconscionability analysis applicable to contracts 
generally in California'' and therefore did not discriminate 
against arbitration agreements in violation of the FAA.\20\
---------------------------------------------------------------------------
    \18\ Laster v. AT&T Mobility LLC, 584 F.3d 849 (9th Cir. 2009), 
rev'd sub nom. AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011).
    \19\ Id. at 856 & n.10.
    \20\ Id. at 857-58.
---------------------------------------------------------------------------
    The Supreme Court then granted review to determine whether 
the FAA preempts California's Discover Bank rule. The Court 
then reversed the Ninth Circuit's decision.\21\
---------------------------------------------------------------------------
    \21\ Concepcion, 563 U.S. 351.
---------------------------------------------------------------------------
    The Supreme Court began by noting that Congress enacted the 
FAA ``in response to widespread judicial hostility to 
arbitration agreements.'' \22\ Section 2 of the FAA requires 
that written arbitration agreements be deemed to be ``valid, 
irrevocable, and enforceable, save upon such grounds as exist 
at law or in equity for the revocation of any contract.'' \23\ 
The Supreme Court explained that this nondiscrimination 
principle means that arbitration agreements may ``be 
invalidated by `generally applicable contract defenses, such as 
fraud, duress, or unconscionability,' but not by defenses that 
apply only to arbitration or that derive their meaning from the 
fact that an agreement to arbitrate is at issue.'' \24\ In 
other words, courts cannot deem inherent characteristics of 
arbitration agreements--such as the lack of ``judicially 
monitored discovery'' or ``disposition by jury''--to be 
unconscionable or against public policy.\25\ The Court observed 
that these ``examples are not fanciful, since the judicial 
hostility towards arbitration that prompted the FAA had 
manifested itself in a `great variety' of `devices and 
formulas' declaring arbitration against public policy.'' \26\
---------------------------------------------------------------------------
    \22\ Id. at 339.
    \23\ 9 U.S.C. Sec. 2.
    \24\ Concepcion, 563 U.S. at 339 (quoting Doctor's Assocs., Inc. v. 
Casarotto, 517 U.S. 681, 687 (1996)).
    \25\ Id. at 341-42.
    \26\ Id. at 342 (quoting Robert Lawrence Co. v. Devonshire Fabrics, 
Inc., 271 F.2d 402, 406 (2d Cir. 1959)).
---------------------------------------------------------------------------
    The Supreme Court then held that California's Discover Bank 
Rule contravened this principle, because ``[r]equiring the 
availability of classwide arbitration interferes with 
fundamental attributes of arbitration and thus creates a scheme 
inconsistent with the FAA.'' \27\
---------------------------------------------------------------------------
    \27\ Id. at 344.
---------------------------------------------------------------------------
    First, the Court explained, ``the switch from bilateral'' 
(i.e., individual) ``to class arbitration sacrifices the 
principle advantage of arbitration--its informality--and makes 
the process slower, more costly, and more likely to generate 
procedural morass than final judgment.'' \28\ For example, in a 
class proceeding, the arbitrator must decide ``whether the 
class itself may be certified, whether the named parties are 
sufficiently representative and typical, and how discovery for 
the class should be conducted.'' \29\
---------------------------------------------------------------------------
    \28\ Id. at 348.
    \29\ Id.
---------------------------------------------------------------------------
    Second, the Court noted, ``class arbitration requires 
procedural formality,'' with class arbitration procedures 
``mimic[king] the Federal Rules of Civil Procedure for class 
litigation.'' \30\
---------------------------------------------------------------------------
    \30\ Id. at 349.
---------------------------------------------------------------------------
    Third, ``class arbitration greatly increases risks to 
defendants.'' \31\ The Court explained that ``[a]rbitration is 
poorly suited to the higher stakes of class litigation'' 
because judicial review of arbitral decisions is sharply 
limited under the FAA.\32\ Accordingly, the Court concluded, 
``[w]e find it hard to believe that defendants would bet the 
company with no effective means of review,'' and so if the 
Discover Bank Rule were allowed to persist, it would lead to 
the abandonment of arbitration, frustrating the FAA's purpose 
of ``promot[ing] arbitration.'' \33\
---------------------------------------------------------------------------
    \31\ Id. at 350.
    \32\ Id.
    \33\ Id. at 345, 351.
---------------------------------------------------------------------------
    The Court therefore concluded that the class arbitration 
mandated by California's Discover Bank Rule ``is not 
arbitration as envisioned by the FAA, lacks its benefits, and 
therefore may not be required by State law.'' \34\
---------------------------------------------------------------------------
    \34\ Id. at 351.
---------------------------------------------------------------------------
    Finally, the Court rejected the criticism that ``class 
proceedings are necessary to prosecute small-dollar claims that 
might otherwise slip through the legal system.'' \35\ The Court 
explained that ``States cannot require a procedure that is 
inconsistent with the FAA, even if it is desirable for 
unrelated reasons.'' \36\ Moreover, the Court explained, given 
the pro-consumer features of AT&T's arbitration provision, AT&T 
customers ``were better off under their arbitration agreement 
with AT&T than they would have been as participants in a class 
action, which could take months, if not years, and which may 
merely yield an opportunity to submit a claim for recovery of a 
small percentage of a few dollars.'' \37\
---------------------------------------------------------------------------
    \35\ Id.
    \36\ Id.
    \37\ Id. at 352 (internal quotation marks omitted).
---------------------------------------------------------------------------

  The Impact of Concepcion on Consumer Arbitration Agreements

    The Supreme Court's decision in Concepcion is significant 
to consumer arbitration in a number of respects.
    First, although the Court held that the FAA preempts 
California's Discover Bank rule, the Court emphasized the 
continued ability of courts to police consumer arbitration 
agreements for unfairness. ``Generally applicable contract 
defenses,'' such as ``fraud'' and ``unconscionability,'' remain 
available to courts to prevent overreaching by drafters of 
consumer arbitration agreements.\38\ Today, courts routinely 
invalidate one-sided arbitration agreements or sever unfair 
provisions that impose excessive costs on consumers, unfairly 
limit a consumer's remedies, or improperly give the company 
control over the selection of the arbitrator.\39\
---------------------------------------------------------------------------
    \38\ Id. at 339 (internal quotation marks omitted).
    \39\ See, e.g., Ridgeway v. Nabors Completion & Prods. Servs. Co., 
725 F. App'x 472, 474 (9th Cir. 2018) (holding that limitation on 
arbitrator's ability to award prevailing plaintiff discovery and expert 
witness costs must be severed from arbitration agreement); Zaborowski 
v. MHN Gov't Servs., Inc., 601 F. App'x 461, 463-64 (9th Cir. 2014) 
(affirming denial of motion to compel arbitration under agreement that 
limited remedies and allowed the company to select the arbitrators).
---------------------------------------------------------------------------
    Second, the decision in Concepcion encouraged companies to 
adopt more consumer-friendly arbitration programs, such as 
AT&T's provision, under which consumers may arbitrate most 
claims for free and might obtain greater remedies in 
arbitration than a court could award.
    Specifically, a number of other companies have followed 
AT&T's lead and given consumers special rights in arbitration 
that are unavailable in court. For example, a number of 
companies give prevailing customers the right to recover their 
attorneys' fees.\40\ By contrast, consumers who win a breach-
of-contract claim in court generally cannot recover their 
attorneys' fees, because under the American rule, each party 
pays for its own attorneys unless an applicable fee-shifting 
statute applies.\41\ Other companies have agreed to pay 
heightened minimum recoveries to consumers to whom an 
arbitrator awards greater relief than the company's last 
settlement offer.\42\ And many companies fully subsidize the 
cost of arbitration for consumers, paying the consumer's 
already low filing fee under the consumer fee schedules of the 
American Arbitration Association or JAMS.
---------------------------------------------------------------------------
    \40\ See, e.g., http://www.t-mobile.com/responsibility/legal/terms-
and-conditions-aug-22-2018 +Dispute%20Resolution.
    \41\ See, e.g., Baker Botts L.L.P. v. ASARCO LLC, 135 S. Ct. 2158, 
2164 (2015).
    \42\ See, e.g., http://www.verizonwireless.com/legal/notices/
customer-agreement (minimum recovery of $5,00 and reasonable attorneys' 
fees and expenses to customers who best Verizon Wireless's settlement 
offer in arbitration); http://www.frontier.com//media/corporate/terms/
general-arbitration-provision.ashx (minimum recovery of $5,000 to 
customers who best Frontier Communication's settlement offer in 
arbitration); http://www.microsoft.com/en-us/servicesagreement (minimum 
recovery of $1,00 and attorneys' fees and expenses to customers who 
best Microsoft's settlement offer in arbitration).
---------------------------------------------------------------------------
    The ease and simplicity of using these arbitration programs 
to resolve disputes--which frequently result in mutually 
agreeable settlements, without the consumer having to go to the 
bother of actually commencing an arbitration--makes it easier 
than ever for consumers with small claims to obtain relief. 
Indeed, plaintiffs' lawyers are increasingly agreeing to 
represent consumers in arbitration. And businesses have formed 
to help consumers bring arbitrations.
    As Concepcion points out--rightly--consumers and businesses 
both benefit from the ``informality,'' and inexpensive, 
``efficient,'' and ``streamlined procedures'' of 
arbitration.\43\ Indeed, as the Supreme Court explained in a 
previous case, without arbitration, the ``typical consumer who 
has only a small damages claim (who seeks, say, the value of 
only a defective refrigerator or television set),'' would be 
left ``without any remedy but a court remedy, the costs and 
delays of which could eat up the value of an eventual small 
recovery.''\44\
---------------------------------------------------------------------------
    \43\ Concepcion, 563 U.S. at 344-45.
    \37\ Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 281 
(1995).
---------------------------------------------------------------------------

    QUESTIONS FOR THE RECORD FOR ANDREW PINCUS SUBMITTED BY 
             REPRESENTATIVE F. JAMES SENSENBRENNER

    1. Several witnesses asserted that arbitration agreements 
prevent the disclosure of wrongdoing, but you testified that 
arbitration agreements cannot prevent injured parties from 
speaking publicly about their claims or discussing their claims 
with law enforcement officials. Please explain why you believe 
the other witnesses are wrong.
    The other witnesses have their facts wrong. Courts have 
consistently held that arbitration agreements cannot prevent 
employees or consumers from talking publicly about their claims 
(with the possible exception of claims brought by a high- 
ranking employee) or prevent anyone from informing government 
officials of alleged wrongdoing.\1\ And those government 
officials can pursue claims in court--including on behalf of 
consumers and employees--if they wish. Indeed, almost two 
decades ago, the Supreme Court held that arbitration agreements 
do not forbid government entities--in that case, the Equal 
Employment Opportunity Commission--from seeking relief on 
behalf of one of the parties to the agreement.\2\
---------------------------------------------------------------------------
    \1\ See, e.g., Davis v. O'Melveny & Myers, 485 F.3d 1066, 1078 (9th 
Cir. 2007), overruled on other grounds by Kilgore v. KeyBank, Nat'l 
Ass'n, 673 F.3d 947 (9th Cir. 2012); Longnecker v. Am. Express Co., 23 
F. Supp. 3d 1099, 1110 (D. Ariz. 2014); DeGraff v. Perkins Coie LLP, 
2012 WL 3074982, at *4(N.D. Cal. July 30, 2012).
    \2\ EEOC v. Waffle House, Inc., 534 U.S. 279 (2002).
---------------------------------------------------------------------------
    And the same is true about the results of the arbitration: 
If an arbitration agreement does require parties to keep the 
results of arbitration confidential, courts have the power to 
sever a confidentiality provision or, if it cannot be severed, 
to invalidate the arbitration agreement. And courts have not 
hesitated to do so.\3\
---------------------------------------------------------------------------
    \3\ See, e.g., Pokorny v. Quixtar, Inc., 601 F.3d 987, 1002 (9th 
Cir. 2010) (invalidating confidentiality provision in arbitration 
agreement); Davis, 485 F.3d at 1078-79 (same in employment agreement); 
Ting v. AT&T, 319 F.3d 1126, 1151-52 (9th Cir. 2003) (same in consumer 
arbitration agreement).
---------------------------------------------------------------------------
    Arbitral confidentiality relates only to the proceeding 
before the arbitrator-- not to the claim or the arbitrator's 
decision. As one commentator has noted, ``while arbitrators 
themselves may be bound to a general obligation of 
confidentiality, the parties (and their counsel) are generally 
not so restricted, absent agreement or arbitral order.'' \4\
---------------------------------------------------------------------------
    \4\ Steven C. Bennett, Confidentiality Issues in Arbitration, 68 
Disp. Resol. J. 1, 1 (2013) (footnotes omitted).
---------------------------------------------------------------------------
    It is true that arbitrators--just like judges--can enter 
protective orders requiring certain matters to be sealed, but 
those orders are typically limited to protecting an 
individual's private information or trade secrets or sensitive 
intellectual property--not allegations of wrongdoing. And no 
one disputes that courts can and do have the exact same power 
to enter protective orders, and that they do so routinely.\5\
---------------------------------------------------------------------------
    \5\ See, e.g., Fed. R. Civ. P. 26(c)(1)(D)-(H).
---------------------------------------------------------------------------
    Finally, some of the rhetoric about secrecy that the 
witnesses were testifying about has nothing to do with 
arbitration and everything to do with non-disclosure provisions 
in settlement agreements. For decades, it has been common for 
parties who have reached settlement agreements--whether in 
court or in arbitration--to agree that the terms and nature of 
the settlement be kept confidential. That is something that 
parties agree to after a negotiation; it is not something 
inherent to the arbitration process. Indeed, when individual 
consumer and employee lawsuits in court are settled, plaintiffs 
and their lawyers routinely enter into confidentiality and non-
disclosure agreements.
    2. You testified about a new study indicating that 
employees who arbitrate their claims win more often and on 
average are awarded larger damages than employees who pursue 
claims in federal court. Are there other studies comparing 
outcomes in arbitration and litigation? Please provide the 
Subcommittee with information regarding the results of those 
studies.
    Yes, there are a number of other studies examining the 
outcomes of cases decided in arbitration versus litigation. And 
these studies, as one commentator has put it, demonstrate that 
``there is no evidence that plaintiffs fare significantly 
better in litigation. In fact, the opposite may be true.'' \6\
---------------------------------------------------------------------------
    \6\ David Sherwyn et al., Assessing the Case for Employment 
Arbitration: A New Path for Empirical Research, 57 Stan. L. Rev. 1557, 
1578 (Apr. 2005); see also, e.g., Theodore J. St. Antoine, Labor and 
Employment Arbitration Today: Mid-Life Crisis or New Golden Age?, 32 
Ohio St. J. on Disp. Resol. 1, 16 (2017).
---------------------------------------------------------------------------
    One empirical analysis showed that employees who arbitrate 
are more likely to win their disputes than those who litigate 
in federal court (46% in arbitration as compared to 34% in 
litigation); that the median arbitral awards that the employees 
obtained were typically the same as, or larger than, the amount 
obtained in court; and their arbitrations were resolved 33% 
faster than in court.\7\
---------------------------------------------------------------------------
    \7\ Michael Delikat & Morris M. Kleiner, An Empirical Study of 
Dispute Resolution Mechanisms: Where Do Plaintiffs Better Vindicate 
Their Rights?, 58 Disp. Resol. J. 56, 58 (Nov. 2003-Jan. 2004).
---------------------------------------------------------------------------
    Another study examined American Arbitration Association 
awards in employment disputes and compared them to litigation 
outcomes. It determined that, for higher-income employees' 
claims, there was no statistically significant difference in 
win rates or amounts between discrimination and non-
discrimination claims.\8\ For lower-income employees' claims, 
that study did not attempt to draw comparisons between 
arbitration and in litigation, because lower-income employees 
appeared to lack meaningful access to the courts--and therefore 
don't have the ability to bring a sufficient volume of court 
cases to provide a baseline for comparison.\9\
---------------------------------------------------------------------------
    \8\ Theodore Eisenberg & Elizabeth Hill, Arbitration and Litigation 
of Employment Claims: An Empirical Comparison, 58 Disp. Resol. J. 44, 
45-50 (Nov. 2003/Jan. 2004).
    \9\ Id.
---------------------------------------------------------------------------
    Studies of consumer arbitration have reached similar 
conclusions. For example, a 2010 study found that consumers won 
relief 53.3% of the time in arbitration, compared with a 
success rate of roughly 50% in court.\10\ And just as in court, 
plaintiffs who win in arbitration are able to recover not only 
compensatory damages but also ``other types of damages, 
including attorneys' fees, punitive damages, and interest.'' 
\11\
---------------------------------------------------------------------------
    \10\ Christopher R. Drahozal & Samantha Zyontz, An Empirical Study 
of AAA Consumer Arbitrations, 25 Ohio St. J. on Disp. Resol. 843, 896-
904 (2010); Theodore Eisenberg et al., Litigation Outcomes in State and 
Federal Courts: A Statistical Portrait, 19 Seattle U. L. Rev. 433, 437 
(1996); see also Christopher R. Drahozal & Samantha Zyontz, Creditor 
Claims in Arbitration and in Court, 7 Hastings Bus. L.J. 77, 80 (2011); 
Ernst & Young, Outcomes of Arbitration: An Empirical Study of Consumer 
Lending Cases (2005).
    \11\ Drahozal & Zyontz, Empirical Study, supra note 10, at 902.
---------------------------------------------------------------------------
    In the healthcare industry, the Kaiser Foundation Health 
Plan uses arbitration to resolve disputes with its more than 8 
million California Members, and an independent review found 
that 96% of those who used the system said it was better than 
or the same as court. Awards to successful claimants ranged 
from $4,500-$3,469,778.\12\
---------------------------------------------------------------------------
    \12\ Office of the Independent Administrator, Annual Report of the 
Kaiser Foundation Health Plan, Inc. Mandatory Arbitration System 
(2018), https://www.oia-kaiserarb.com/2059/-reports/annual-reports/
annual-report-for-2018.
---------------------------------------------------------------------------
    Lastly, it should be noted that these studies probably 
understate the benefits of arbitration, compared with 
litigation, as a means of vindicating plaintiffs' claims, 
because of ``selection effects.'' Arbitration makes it feasible 
for consumers and employees to pursue claims that are too small 
to attract a contingency-fee lawyer and therefore cannot be 
brought in court. Thus, studies that compare the average amount 
obtained by prevailing parties in arbitration and litigation 
probably tilt in favor of litigation, where claims tend to be 
larger. And, because of arbitration's relatively streamlined 
procedures as compared with litigation, ``relatively weaker 
claims . . . are more likely to go to an arbitration hearing on 
the merits than in litigation'' given the additional procedural 
hurdles present in litigation.\13\
---------------------------------------------------------------------------
    \13\ See Samuel Estreicher et al., Evaluating Employment 
Arbitration: A Call for Better Empirical Research, 70 Rutgers U.L. Rev. 
375, 389-93 (2018).
---------------------------------------------------------------------------
    3. A number of witnesses testified about the procedures 
used in arbitration. Does an arbitrator have unfettered 
discretion to employ whatever procedures he or she wishes, or 
are there constraints on how an arbitration is conducted?
    To begin with, arbitrators are constrained by the rules of 
the organization administering the arbitration, and those rules 
have been developed with a view to ensuring fairness for 
consumers and employees. Most consumer and employment 
arbitration agreements select one of the major arbitration 
providers, such as the American Arbitration Association 
(``AAA'') or JAMS, to administer the arbitration. These 
arbitration providers have promulgated detailed procedural 
rules to govern arbitrations--and have tailored specific rules 
for consumer or employment disputes. For example, the 
arbitrator can permit online or telephonic hearings, and 
evidence is far simpler for consumers and employees to 
introduce than in court.\14\ Although parties can agree to 
modify the applicable procedures, these arbitration providers 
nonetheless require that all arbitrations they administer 
satisfy the organization's standards for fairness, such as the 
AAA's Consumer Due Process Protocol and its Employment Due 
Process Protocol.\15\
---------------------------------------------------------------------------
    \14\ See, e.g., AAA Consumer Arbitration Rule R-32(b); Id. R-34(a).
    \15\ See, e.g., AAA Consumer Arbitration Rule R-1(d); see also AAA 
Consumer Due Process Protocol, http://www.adr.org/sites/default/files/
document_respository/Consumer%20Due&20 Process%20Protocol%20(1).pdf; 
Employment Arbitration Under AAA Administration, https://www.adr.org/
employment; JAMS Consumer Arbitration Minimum Standards, http://www 
.jamsadr.com/consumer-minimum-standards.
---------------------------------------------------------------------------
    Of course, arbitrators (like judges) have some discretion 
in how to supervise the proceedings--and for good reason: This 
flexibility to tailor procedures to the needs of a particular 
case not only makes arbitration efficient, but also prevents 
consumers or employees from being tripped up by the sort of 
procedural errors that often lead to dismissal in court.
    Existing law already provides strong protections against 
the imposition of unfair procedures in arbitration. The Federal 
Arbitration Act vests courts with broad power to invalidate 
arbitration agreements that contravene generally applicable 
principles of unconscionability.\16\ Thus, an arbitration 
agreement that requires the arbitrator to apply markedly unfair 
procedures would be invalidated by courts.
---------------------------------------------------------------------------
    \16\ See, e.g., AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 343 
(2011) (FAA's ``savings clause preserves generally applicable contract 
defenses'' to enforcement of arbitration agreements).
---------------------------------------------------------------------------
    Finally, the Federal Arbitration Act provides additional 
safeguards. Courts may vacate an arbitration award if the 
arbitrator is ``guilty of misconduct in refusing to postpone 
the hearing, upon sufficient cause shown, or in refusing to 
hear evidence pertinent or material to the controversy; or of 
any other misbehavior by which the rights of any party have 
been prejudiced.'' \17\ Accordingly, in the unlikely event that 
an arbitrator excludes such evidence that a consumer or 
employee wishes to present, the court can vacate the 
arbitrator's award.
---------------------------------------------------------------------------
    \17\ 9 U.S.C. Sec. 10(a)(3).
---------------------------------------------------------------------------
    4. How realistic is the court system as a means of 
providing redress for consumers and employees given the complex 
procedures used by courts? Are small claims courts viable 
alternatives for consumer claims? How does arbitration interact 
with small claims courts?
    Our current court system is simply incapable of providing 
redress for many of the harms that employees and consumers care 
about. Those harms are usually relatively small in economic 
value and individualized.
    Litigation in court, with its formality and complicated 
procedures, simply is not a realistic option for resolving many 
of these claims. As the Supreme Court has explained, 
``[a]rbitration agreements allow parties to avoid the costs of 
litigation, a benefit that may be of particular importance in 
employment litigation, which often involves smaller sums of 
money than disputes concerning commercial contracts.'' \18\ The 
same is true of many consumer disputes. For a very large 
percentage of claims, therefore, arbitration is the only 
realistic opportunity for obtaining relief.
---------------------------------------------------------------------------
    \18\ Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 123 (2001) 
(emphasis added).
---------------------------------------------------------------------------
    For example, a study of 200 AAA employment awards concluded 
that low- income employees brought 43.5% of arbitration claims, 
most of which were low-value enough that the employees would 
not have been able to find an attorney willing to bring 
litigation on their behalf.\19\ These employees were often able 
to pursue their arbitrations without an attorney and won at the 
same rate as individuals with representation.\20\
---------------------------------------------------------------------------
    \19\ Elizabeth Hill, Due Process at Low Cost: An Empirical Study of 
Employment Arbitration Under the Auspices of the American Arbitration 
Association, 18 Ohio St. J. on Disp. Resol. 777, 794 (2003).
    \20\ Id.
---------------------------------------------------------------------------
    A key obstacle to pursuing an individualized, small-value 
claim in court is the cost of hiring counsel. Unrepresented 
parties have little hope of navigating the complex procedures 
that apply to litigation in court, yet a lawyer's hourly 
billing rate may itself exceed the amount at issue for many 
claims. In any event, many individuals do not have the 
resources to hire counsel, and those that do often face the 
added hurdle of having to locate and retain a lawyer before 
even setting foot inside a courthouse.
    Meanwhile, many lawyers, especially those working on a 
contingency basis, are unlikely to take cases when the prospect 
of a substantial payout is slim. Research demonstrates that 
lawyers accept contingent-fee cases only if the claim promises 
both a substantial recovery--and hence a substantial percentage 
of that recovery as a legal fee. Studies indicate that a claim 
must exceed $60,000, and perhaps $200,000, in order to attract 
a contingent-fee lawyer.\21\
---------------------------------------------------------------------------
    \21\ Id at 783. In some markets, this threshold may be as high as 
$200,000. Minn. State Bar Ass'n, Recommendations of the Minnesota 
Supreme Court Civil Justice Reform Task Force 11 (Dec. 23, 2011), 
perma.cc/VJ8L-RPEY.
---------------------------------------------------------------------------
    Arbitration empowers individuals because it is possible to 
realistically bring a claim in arbitration without the help of 
a lawyer.\22\ Although a party always has the choice to retain 
an attorney, arbitration procedures are sufficiently simple and 
streamlined that in many cases no attorney is necessary. As one 
academic observer of employment arbitration has put it, in an 
arbitral forum, ``it is feasible for employees to represent 
themselves or use the help of a fellow layperson or a totally 
inexperienced young lawyer.'' \23\
---------------------------------------------------------------------------
    \22\ While one study found that pro se plaintiffs ``struggle'' in 
arbitration, see Andrea Cann Chandrasekher & David Horton, Arbitration 
Nation: Data From Four Providers, 107 California L. Rev. 1, 52 (2019), 
a pro se plaintiff who can afford a lawyer is nonetheless far better 
off in arbitration than litigation.
    \23\ St. Antoine, supra note 6, at 15.
---------------------------------------------------------------------------
    To initiate an arbitration with the AAA, for instance, a 
plaintiff need only a brief statement explaining the nature of 
the dispute and why she is entitled to relief.\24\ Indeed, 
studies show that parties who represent themselves in 
arbitration do as well, if not better, than represented 
parties. A study by two prominent law professors observed that 
in consumer arbitration, ``self-represented plaintiffs were 
seven times more likely than represented plaintiffs to get an 
AAA arbitrator's decision in their favor''--reinforcing the 
authors' conclusion that ``hiring an attorney offers little 
value to a [claimant in arbitration] and is often 
unnecessary.'' \25\
---------------------------------------------------------------------------
    \24\ AA Consumer Arbitration Rule R-2(a).
    \25\ Jason Scott Johnston & Todd Zywicki, The Consumer Financial 
Protection Bureau's Arbitration Study: A Summary and Critique 25-26 
(Mercatus Center at George Mason Univ., Working Paper, Aug. 2015) 
(emphasis added).
---------------------------------------------------------------------------
    Even when claimants do retain a lawyer, moreover, 
arbitration's streamlined procedures mean that the cost to the 
claimant is often less than if the employee had brought the 
same claim in court. For example, the AAA limits the fees paid 
by consumers and employees to $200 for consumers and $300 for 
employees--amounts that are less than the filing fee in federal 
court.\26\
---------------------------------------------------------------------------
    \26\ See AAA Consumer Arbitration Rules, Costs of Arbitration, 
https://www.adr.org/sites/default/files/Consumer_Fee_Schedule_0.pdf; 
AAA Employment/Workplace Fee Schedule, https://www.adr.org/sites/
default/files/Employment_Fee_Schedule1Nov19.pdf.
---------------------------------------------------------------------------
    In sum, ``a substantial number of'' individuals, 
``particularly those with small financial claims, have a 
realistic opportunity to pursue their rights through mandatory 
arbitration that otherwise would not exist.'' \27\
---------------------------------------------------------------------------
    \27\ St. Antoine, supra note 6, at 16.
---------------------------------------------------------------------------
    Notably, many, if not most, arbitration agreements also 
allow a consumer or employee to file a claim in small claims 
court as an alternative to arbitration.\28\ Businesses are 
amenable to resolving disputes in small claims courts because 
those courts are set up to offer parties some of the same 
procedural flexibility as arbitration. To be sure, small claims 
courts are somewhat less accessible to consumers than 
arbitration, given that many have overcrowded dockets. But they 
provide an alternative to arbitration for consumers or 
employees who personally prefer court litigation to 
arbitration.
---------------------------------------------------------------------------
    \28\ See Arbitration Agreements, 81 Fed. Reg. 32,830, 32,867 (May 
24, 2016).
---------------------------------------------------------------------------
    5. Professor Gilles and Mr. Gupta testified that class 
actions provide significant benefits to class Members in the 
employment and consumer contexts. Does the evidence support 
their position?
    No. Studies have shown time and again that most class 
actions are resolved with no benefit to class Members--the 
percentage of class actions resolved in this way was 87% in one 
study, 66% in another, and 60-80% in a third.\29\ And even in 
the small percentage of cases that settle on a classwide basis, 
the benefits provided to individual class Members are usually 
paltry.
---------------------------------------------------------------------------
    \29\ Consumer Fin. Prot. Bureau, Arbitration Study: Report to 
Congress 2015 37 (Mar. 2015), perma.cc/8AX5-AYWN (``CFPB Study''); 
Mayer Brown LLP, Do Class Actions Benefit Class Members? An Empirical 
Analysis of Class Actions (Dec. 11, 2013), goo.gl/3B27FQ (``Mayer Brown 
Study''); Jason Scott Johnston, High Cost, Little Compensation, No Harm 
to Deter: New Evidence on Class Actions Under Federal Consumer 
Protection Statutes, 2017 Colum. Bus. L. Rev. 1 (2017).
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    Most class action settlements do not involve automatic 
distribution of settlement payments to absent class Members. 
Settlements therefore routinely require a class member to 
affirmatively submit a claim form to receive any settlement 
payment. The vast majority of class Members do not file claims 
for payment from these settlement funds.
    Both the CFPB and the FTC reported a ``weighted average 
claims rate'' and ''weighted mean'' claims rate in class 
actions of just 4%.\30\ That figure comports with academic 
studies, which regularly conclude that only ``very small 
percentages of class Members actually file and receive 
compensation from settlement funds.''\31\
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    \30\ CFPB Study at section 8, page 30; Fed. Trade Comm'n, Consumers 
and Class Actions: A retrospective and Analysis of Settlement Campaigns 
11 (Sept. 2019), https://perma.cc/CM66-ZVCX; see also Mayer Brown Study 
at 7 & n.20 (in the handful of cases where statistics were available, 
and excluding one outlier case involving individual claims worth, on 
average, over $2.5 million, the claims rates were minuscule: 0.000006%, 
0.33%, 1.5%, 9.66%, and 12%).
    \31\ Linda Mullenix, Ending Class Actions as We Know Them: 
Rethinking the American Class Action, 64 Emory L.J. 399, 419 (2014).
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    Thus, the available evidence confirms that even in the 
small fraction of class actions that settle on a class-wide 
basis, most class Members receive no benefit--because they do 
not file claims to receive a settlement payment. A recent 
empirical study explains that ``[a]lthough 60 percent of the 
total monetary award may be available to class Members, in 
reality, they typically receive less than 9 percent of the 
total.'' The author concluded that class actions ``clearly do[] 
not achieve their compensatory goals . . . . Instead, the costs 
. . . are passed on to consumers in the form of higher prices, 
lower product quality, and reduced innovation.'' \32\
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    \32\ Joanna Shepherd, An Empirical Study of No-Injury Class Actions 
2, 5 (Emory Univ. Sch. of L., Legal Studies Research Paper Series No. 
16-402, Feb. 1, 2016), perma.cc/TU9R-UDSM.
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    Moreover, class actions typically take significantly longer 
to resolve than arbitrations. That means consumers and 
employees must wait much longer to obtain relief.
    One study found that class actions that actually produced a 
class-wide settlement took an average of nearly two years to 
resolve.\33\ And that two-year average duration, moreover, may 
not even include the time needed for class Members to submit 
claims and receive payment after a settlement is reached. 
Another study found that 14% of the class actions were still 
pending four years after they were filed, with no end in 
sight.\34\ Arbitrations, by contrast, have been resolved on 
average in three and one-half months.\35\
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    \33\ CFPB Study at section 8, page 37.
    \34\ Mayer Brown Study at 1.
    \35\ See Cal. Dispute Resolution Inst., Consumer and Employment 
Arbitration in California: A Review of Website Data Posted Pursuant to 
Section 1281.96 of the Code of Civil Procedure 19 (Aug. 2004).
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    This difference matters in assessing whether and to what 
extent class Members benefit because, as one court has 
explained, even when a class action actually results in 
monetary relief, a long ``delay . . . [can] make the relief 
eventually awarded the class worth much less in present-value 
terms.'' \36\ A rational assessment of arbitration and class 
actions must therefore account for the long duration of class 
actions.
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    \36\ Reynolds v. Beneficial Nat'l Bank, 288 F.3d 277, 284 (7th Cir. 
2002).
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    In sum, the supposed benefits of class actions are in large 
part illusory. And to the extent they are not, any benefits do 
not come close to outweighing the advantages of arbitration--in 
particular the ability of employees to vindicate many more 
claims than they could if required to go to court.
    6. Some witnesses suggested that invalidating pre-dispute 
arbitration agreements would give consumers and employees a 
choice between proceeding in arbitration or filing a lawsuit in 
court, and that employees and consumers could then decide which 
dispute resolution method they wished to use. Are they correct 
that employees and consumers would retain the ability to 
utilize arbitration whenever they wished?
    Those witnesses are wrong. Without enforceable pre-dispute 
arbitration agreements, arbitration would not realistically be 
available at all. That is because, as commentators have 
recognized, post-dispute agreements to arbitrate are ``rare.'' 
\37\
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    \37\ Stephen J. Ware, The Centrist Case for Enforcing Adhesive 
Arbitration Agreements, 23 Harv. Negot. L. Rev. 29, 31 (2017); see 
also, e.g., Scott Baker, A Risk-Based Approach to Mandatory 
Arbitration, 83 Or. L. Rev. 861, 895 (2004) (same). One commentator who 
examined 301 arbitrations found that only 3.7% arose from post-dispute 
arbitration agreements. Christopher R. Drahozal & Samantha Zyontz, 
Private Regulation of Consumer Arbitration, 79 10n. L. Rev. 289, 346 
(2012).
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    The reason is a common-sense one: Once a dispute has arisen 
(and perhaps a lawsuit has been filed), the parties have become 
adversaries and suspicious of the other's intentions. If one 
party then proposes entering a post-dispute arbitration 
agreement, the other party inevitably will be skeptical, 
fearing that entering the agreement would mean ceding some 
advantage. It is only before the dispute has arisen--before the 
parties have become adversarial--that parties can readily 
contract for arbitration of disputes.
    7. Opponents of arbitration sometimes point to the number 
of arbitrations as evidence that arbitration does not provide a 
realistic remedy. Is that a fair measure of arbitration's 
effectiveness?
    No. The contention that a large number of consumer or 
employee arbitrations is the only proof that arbitration is an 
effective method of dispute resolution is just as mistaken as 
assuming that a high number of hospitalizations is the only 
proof that a health-care system is effective. An effective 
arbitration system is one that resolves disputes before 
arbitration--just as an effective health-care system forestalls 
the need for hospitalizations.
    The Supreme Court addressed this issue in AT&T Mobility LLC 
v. Concepcion \38\ when discussing AT&T's consumer arbitration 
program. As the Court explained, because AT&T must pay the cost 
of arbitration and committed itself to ``pay claimants a 
minimum of $7,5000 and twice their attorneys' fees if they 
obtain an arbitration award greater than AT&T's last settlement 
offer,'' AT&T has a powerful incentive to ``immediately 
settle[]'' any colorable claim.\39\ In other words, customers 
``would be essentially guarantee[d] to be made whole.'' \40\ 
Under that system, informal settlements before the filing of an 
arbitration demand are common and disputes that go all the way 
to arbitration are relatively rare, because AT&T (and companies 
with similar provisions) have powerful incentives to resolve 
claims quickly. For example, AT&T has explained that in a 
single year, it had provided over $1.3 billion in credits to 
resolve customer complaints.\41\
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    \38\ 38 563 U.S. 333 (2011).
    \39\ Id. at 351.
    \40\ Id. (internal quotation marks omitted).
    \41\ Laster v. T-Mobile USA, Inc., 2008 WL 5216255, at *3 (S.D. 
Cal. Aug. 1, 2008), aff'd sub nom.Laster v. AT&T Mobility LLC, 584 F.3d 
849 (9th Cir. 2009), rev'd sub nom. AT&T Mobility LLC v.Concepcion, 563 
U.S. 333 (2011).
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    8. At the hearing, the view was expressed the companies 
``get to choose the arbitrator, the Rule of law does not 
necessarily apply, and there is no right to appeal the 
decision.'' How do you respond to each of these contentions?
    All of these assertions are false, misleading, or both.
    First, both parties typically are entitled to participate 
in choosing the arbitrator. Under existing law, courts can and 
do set aside any arbitration agreement that unfairly allows one 
side to pick the arbitrator.\42\ That is because the FAA 
authorizes courts to apply ``generally applicable contract 
defenses''--including ``uncon- scionability''--to arbitration 
agreements.\43\ It is true that the party who drafts the 
agreement often identifies an arbitration organization to 
administer the arbitration (such as the AAA or JAMS), but that 
is not the same thing at all--contrary to the misleading 
implications of some of arbitration's opponents. Identifying 
the organization that will administer the arbitration is akin 
to identifying who will serve as the administrative clerk of a 
court; it is not the same as picking a judge.
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    \42\ Zaborowski v. MHN Gov't Servs., Inc., 601 F. App'x 461, 463-64 
(9th Cir. 2014) (affirming denial of motion to compel arbitration under 
agreement that limited remedies and allowed the company to select the 
arbitrators).
    \43\ Concepcion, 563 U.S. at 339 (quoting Doctor's Assocs., Inc. v. 
Casarotto, 517 U.S. 681, 687 (1996)).
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    In addition, it is well settled that arbitrators must 
follow the same governing law that courts do. In fact, if an 
arbitrator deliberately disregards applicable law, the FAA 
authorizes courts to set aside the award as an ``exce[ss]'' of 
the arbitrator's ``powers.'' \44\ As the Supreme Court has 
explained, when an ``arbitrator strays from'' applicable law 
``and effectively `dispense[s] his own brand of industrial 
justice,''' the arbitrator's award is ``unenforceable.'' \45\ 
To be sure, parties might disagree about whether an arbitrator 
properly interpreted the law or applied the law to the facts 
correctly. But the same is true of lawyers who lose a decision 
in court; one side or another often thinks that the judge got 
it wrong.
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    \44\ 9 U.S.C. Sec. 10(a)(4); see also, e.g., Oxford.
    \45\ Major League Baseball Players Ass'n v. Garvey, 532 U.S. 504, 
509 (2001) (quoting Steelworkers v. Enter. Wheel & Car Corp., 363 U.S. 
593, 597 (1960)).
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    Finally, the assertion that there is no right to appeal an 
arbitrator's decision is overstated. Although judicial review 
of arbitral awards is limited, the FAA empowers courts to set 
aside an award in four circumstances: (1) If it was ``procured 
by corruption, fraud, or undue means''; (2) if ``there was 
evident partiality or corruption in the arbitrator[]''; (3) if 
the arbitrator was ``guilty of misconduct in refusing to 
postpone the hearing, upon sufficient cause shown, or in 
refusing to hear evidence pertinent or material to the 
controversy; or of any other misbehavior by which the rights of 
any party have been prejudiced; or (4) if the ``arbitrators 
exceeded their powers,'' such as by manifestly disregarding the 
law.\46\
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    \46\ 9 U.S.C. Sec. 10(a).
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    9. Many at the hearing referenced the question of 
``secrecy'' in arbitration. Is arbitration truly a secret 
process? To the extent that arbitration may be shielded from 
public view, how can Congress best address the confidential 
nature of any proceedings?
    No, arbitration is not a ``secret'' process. As discussed 
above (in response to question 1), courts consistently 
invalidate arbitration agreements that impose any kind of 
secrecy requirement on individual consumers or employees--the 
only realistic exception in that context is one-off arbitration 
agreements with highly-paid, high-ranking executives or similar 
employees.\47\
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    \47\ See notes 1-3, supra.
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    Arbitration claimants are free to discuss their claims 
publicly and to report alleged wrongdoing to law enforcement 
officials.\48\ If an arbitration agreement purported to impose 
a ``gag order,'' that restriction would almost certainly be 
invalidated in court.
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    \48\ See, e.g., Christopher C. Murray, No Longer Silent: How 
Accurate are Recent Criticisms of Employment Arbitration, 36 
Alternatives to the High Cost of Litigation 65, 78 (2018).
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    State laws also require disclosure of arbitration outcomes 
by arbitral forums such as the AAA,\49\ and courts consistently 
hold that the results of arbitration proceedings may be 
disclosed by either party.\50\
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    \49\ E.g., Cal. Code Civ. Proc. Sec. 1281.96.
    \50\ Courts have invalidated on unconscionability grounds 
arbitration agreement provisions requiring that outcomes be kept 
confidential. See note 1, supra; see also Larsen v. Citibank FSB, 871 
F.3d 1295, 1319 (11th Cir. 2017).
---------------------------------------------------------------------------
    In short, as a leading law professor explained, ``under 
U.S. law, the privacy of arbitration typically does not extend 
to precluding a party's disclosure of the existence of the 
arbitration or even its outcome. Instead, it means that non-
parties can be excluded from the hearing and that the 
arbitrator and arbitration provider cannot disclose information 
about the proceeding.'' \51\ Because existing law already fully 
addresses criticisms of the purportedly ``secret'' nature of 
arbitration, congressional action on this point is unnecessary.
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    \51\ Christopher R. Drahozal, FAA Preemption After Concepcion, 35 
Berkeley J. Emp. & Lab. L. 153, 167 (2014). The American Arbitration 
Association's rules provide that ``[t]he arbitrator and the AAA shall 
maintain the privacy of the hearings unless the law provides to the 
contrary.'' Am. Arbitration Ass'n, Commercial Arbitration Rules and 
Mediation Procedures 31 (Apr. 1, 1999), perma.cc/5U92-5PQF. This Rule 
applies only to the hearings themselves; nothing in the rules requires 
that the outcome be kept confidential.
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    10. Professor Gilles testified that ``forced arbitration 
strips us of our legal rights,'' particularly when class action 
waivers are present. Specifically, it was claimed that, if 
individuals cannot bring a class or collective action, 
employees will be disincentivized to pursue small class-wide 
claims because ``the game isn't worth the candle,'' and ``the 
employee rationally abandons their claim.'' How do you respond 
to that contention?
    I disagree, for two reasons. First, there are many claims 
that employees and consumers have that could not be brought as 
class actions because they turn on facts specific to the 
particular individual's situation. In those cases, arbitration 
expands, rather than restricts, employees and consumers' access 
to justice, by providing them with a cost-effective means of 
bringing their claim that is simply not available in court.
    Second, even for claims that theoretically could be 
prosecuted as part of class actions, it is simply not true that 
class actions are the only means of pursuing those claims. On 
the contrary, as Justice Kagan noted in her dissent in the 
Italian Colors case, ``non-class options abound'' for 
effectively vindicating legitimate claims in arbitration.\52\ 
Justice Kagan's dissent (in which Justices Ginsburg and Breyer 
joined) expressly recognized that individualized arbitration 
enables claimants to vindicate legitimate claims effectively as 
long as the arbitration agreement ``provide[s] an alternative 
mechanism to share, shift, or reduce the necessary costs''--
which virtually all arbitration agreements do.\53\ Many 
arbitration provisions allow for some combination of (i) 
incentive/bonus payments designed to encourage the pursuit of 
small claims, and (ii) the shifting of expert witness costs and 
attorneys' fees to defendants when the consumer or employee 
prevails on his or her claim. And those provisions that don't 
include these elements permit ``informal coordination among 
individual claimants'' to share the same lawyer, expert, or 
other elements required to prove the claim, which Justice Kagan 
also found to be sufficient.\54\
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    \52\ Am. Exp. Co. v. Italian Colors Rest., 570 U.S. 228, 251 (2013) 
(Kagan, J., dissenting).
    \53\ Id. at 249.
    \54\ Id. at 250.
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    11. A question arose during the hearing regarding whether 
arbitrators need to be trained in the law, but you did not have 
a full opportunity to respond because of time constraints. What 
is your full response to that question?
    In the context of consumer and most employment 
arbitrations, arbitrators are trained in the law. The two most 
commonly used arbitration providers in the country, the AAA and 
JAMS, both employ arbitrators of the highest caliber, including 
former judges and accomplished attorneys. The AAA, for example, 
uses a thorough application process to evaluate arbitrators, 
selecting only those candidates with substantial expertise and 
qualifications.\55\ There is no basis for suggesting that cases 
in arbitration are being decided by arbitrators who are 
unqualified to resolve the dispute.
---------------------------------------------------------------------------
    \55\ AAA, Application Process for Admittance to the AAA National 
Roster of Arbtitrators, https://www.adr.org/sites/default/files/
document_repository/application_process_for_ 
admittance_to_the_aaa_national_roster_of_arbitrators.pdf.
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    The one exception is in the distinct arena of labor 
arbitration where, under certain collective bargaining 
agreements, some parties traditionally have agreed to have a 
non-lawyer experienced in the industry decide the dispute. 
Also, in certain industries, it is common to use non-lawyer 
specialists to resolve commercial disputes.
    But outside those limited exceptions, arbitrators in 
virtually all consumer and employment arbitrations are trained 
in the law; they are either lawyers, retired lawyers, or former 
federal or State judges.
    12. At the hearing, it was pointed out that in the Supreme 
Court's Concepcion case, AT&T moved to strike down a statute 
that permitted class-wide arbitration. It was suggested that 
there is an inconsistency between employers' purported 
preference for arbitration, on the one hand, but disfavor of 
class-wide arbitration, on the other hand. You were unable to 
complete your response because of time constraints. What is 
your full response to this suggestion?
    There is no inconsistency between preferring arbitration 
and rejecting class-wide arbitration. That is because 
individualized, one-on-one proceedings are a traditional 
characteristic of arbitration.\56\ As the Supreme Court has 
explained, imposing class-wide procedures on arbitration, 
``sacrifices the principle advantage of arbitration--its 
informality--and makes the process slower, more costly, and 
more likely to generate procedural morass than final 
judgment.'' \57\
---------------------------------------------------------------------------
    \56\ Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1622 (2018).
    \57\ Concepcion, 563 U.S. at 348.
---------------------------------------------------------------------------
    In traditional individual arbitration, the parties trade 
the opportunities for review and procedures of the courtroom 
for the swiftness and efficiency of arbitration. Class-wide 
arbitration instead takes the worst features of class-action 
litigation in court--the expense, burdens, and enormous 
stakes--and combines them with the lack of plenary appellate 
review.
    Individual arbitration provides a better way of resolving 
disputes. It avoids the costs and burdens of the class-action 
system--which has an established track record of failure--while 
providing consumers and employees who have real disputes with a 
realistic opportunity to pursue their claims and achieve simple 
and inexpensive access to justice.

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