[House Report 110-894]
[From the U.S. Government Publishing Office]






110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     110-894

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



 
            FAIRNESS IN NURSING HOME ARBITRATION ACT OF 2008

                                _______
                                

 September 26, 2008.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

    Mr. Conyers, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 6126]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on the Judiciary, to whom was referred the bill 
(H.R. 6126) to amend chapter 1 of title 9 of United States Code 
with respect to arbitration, having considered the same, 
reports favorably thereon without amendment and recommends that 
the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for the Legislation..........................     2
Hearings.........................................................     6
Committee Consideration..........................................     6
Committee Votes..................................................     6
Committee Oversight Findings.....................................    10
New Budget Authority and Tax Expenditures........................    11
Congressional Budget Office Cost Estimate........................    11
Performance Goals and Objectives.................................    12
Constitutional Authority Statement...............................    12
Advisory on Earmarks.............................................    12
Section-by-Section Analysis......................................    12
Agency Views.....................................................    13
Changes in Existing Law Made by the Bill, as Reported............    17
Minority Views...................................................    19

                          Purpose and Summary

    H.R. 6126 amends the Federal Arbitration Act to make 
unenforceable any agreement to arbitrate a dispute arising out 
of a contract between a long-term care facility and a resident, 
if the agreement was made before the dispute arose.

                Background and Need for the Legislation

    Arbitration has been used as a means of dispute resolution 
for thousands of years.\1\ It may offer benefits over the 
traditional litigation process. For example, the agreed upon 
arbitration process can offer the parties flexibility in the 
discovery process and the scheduling of the hearing. Further, 
when the subject matter of a dispute is highly technical, the 
parties to that dispute may choose an arbitrator with relevant 
expertise in the area. Because the arbitrator does not need to 
learn a new subject area, the arbitration hearing may be held 
sooner than a trial in court. Additionally, because there are 
less avenues to appeal or delay an arbitration decision, a 
party to the dispute can enforce a decision much quicker. Thus, 
the entire arbitration process can result in a swifter and, 
therefore, less costly resolution than traditional litigation 
in the courts.
---------------------------------------------------------------------------
    \1\Jean R. Sternlight, Creeping Mandatory Arbitration: Is it Just?, 
57 Stan. L. Rev. 1631, 1635 (Apr. 2005).
---------------------------------------------------------------------------
    On February 12, 1925, Congress codified the use of 
arbitration through the Federal Arbitration Act.\2\ Title 9 was 
adopted as a means to put arbitration agreements on the same 
footing as other contracts, and as a way to avoid the sometimes 
costly and time consuming litigation process.\3\ Arbitration 
law establishes alternative dispute resolution procedures for 
certain types of disputes with an eye towards helping parties 
who so desire keep those disputes out of court, thereby 
facilitating efficient resolution.\4\ The Act supersedes all 
State laws in conflict with the Act.\5\ In order to encourage 
the use of arbitration, Title 9 provides a strong presumption 
that courts will enforce arbitration decisions. The grounds for 
seeking judicial review of arbitration determinations are 
limited, and seldom have parties been successful in overturning 
such determinations. The Supreme Court has upheld arbitration 
clauses in a wide array of contracts by recognizing Congress' 
expansive powers under the Commerce Clause.\6\
---------------------------------------------------------------------------
    \2\9 U.S.C. Sec. 1 et seq.
    \3\See H.R. Rep. No. 96, 68th Cong., 1st Sess., 1 (1924).
    \4\See Matthew Parrott, Is Compulsory Court-Annexed Medical 
Malpractice Arbitration Constitutional? How the Debate Reflects a Trend 
Towards Compulsion in Alternative Dispute Resolution, 75 Fordham L. 
Rev. 2685, 2692. (Apr. 2007).
    \5\Preston v. Ferrer, 128 S. Ct. 978, 987 (2008) (``When parties 
agree to arbitrate all questions arising under a contract, the [Federal 
Arbitration Act] supersedes state laws . . .'').
    \6\See, e.g., Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 
U.S. 265 (1995); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 
(1991).
---------------------------------------------------------------------------
    Notwithstanding the benefits arbitration can provide to the 
parties of a dispute, a party with overwhelming negotiating 
leverage can unfairly advantage itself by imposing arbitration 
clauses as a condition of doing business.\7\ For example, in a 
business-consumer relationship, the business can impose a 
mandatory arbitration clause on the consumer, who likely is not 
in a strong negotiating position.
---------------------------------------------------------------------------
    \7\See, e.g., Ann E. Krasuski, Comment, Mandatory Arbitration 
Agreements Do Not Belong in Nursing Home Contracts with Residents, 8 
DePaul J. Health Care L. 263, 267 (2004); Harry Stoffer, Ban is 
``Bittersweet'' for 2 Dealers; Survivors of Mandatory Binding 
Arbitration are Happy That Colleagues Will Be Spared Ordeal, Automotive 
News, Jan. 27, 2003, at 14i. (``Arbitration can be a good thing, . . . 
[but it's] the `mandatory' and the `binding,' hanging together that 
make it objectionable.'')
---------------------------------------------------------------------------
    Businesses have imposed these clauses in a variety of 
standard-form consumer contracts, such as through inserts with 
a billing statement,\8\ in credit card agreements,\9\ in long-
term care admission agreements,\10\ and in contracts to 
purchase a house.\11\ Virtually all securities firms require 
investors to agree to arbitration.\12\ An employer may impose 
an arbitration clause on its employees by inserting it in its 
employee handbooks or by including it in its employment 
applications.\13\ Similarly, franchisors may require disputes 
to be resolved through arbitration by including arbitration 
clauses in their franchise agreements.\14\
---------------------------------------------------------------------------
    \8\See Ting v. AT&T, 319 F.3d 1126, 1134 (9th Cir. 2003).
    \9\See Credit Card Practices: Fees, Interest Rates, and Grace 
Periods: Hearing Before the Subcomm. on Investigations of the S. Comm. 
on Homeland Sec. and Governmental Affairs, 110th Cong. (2007) (prepared 
statement of Alys Cohen, Staff Attorney, National Consumer Law Center).
    \10\See Krasuski, 8 DePaul J. Health Care L. at 268 n.41.
    \11\See Cyrus Dugger and Jordan Fogal, Why an Ultra-Conservative 
Texas Grandmother Hates the GOP, May 15, 2007. Available at http://
www.alternet.org/rights/51885.
    \12\Edward S. O'Neal and Daniel R. Solin, Mandatory Arbitration of 
Securities Disputes: A Statistical Analysis of How Claimants Fare, June 
2007. A copy of the report is available at http://www.slcg.com.
    \13\See Circuit City v. Adams, 532 U.S. 105, 109-110, 113 (2001).
    \14\See Nagrampa v. Mailcoups, Inc., 469 F.3d 1257 (9th Cir. 2006); 
Indep. Ass'n of Mailbox Ctr. Owners, Inc. v. Superior Court of San 
Diego County, 133 Cal. App. 4th 396 (2005).
---------------------------------------------------------------------------
    If an individual even becomes aware of and understands the 
mandatory arbitration clause within the contract, he or she may 
reject the clause. However, the business usually then severs 
the current or anticipated relationship: a credit card company 
may cancel the consumer's credit card; a nursing home may not 
admit the prospective resident; or the employer may fire the 
employee. Thus, individuals have little practical choice but to 
accept a mandated arbitration clause. By imposing on consumers, 
employees, and franchisees contracts on a ``take-it-or-leave-
it'' basis,\15\ businesses and employers are bypassing the 
congenial nature of a fair and voluntary alternative dispute 
resolution technique that Congress intended.\16\
---------------------------------------------------------------------------
    \15\Critics of arbitration label it ``mandatory,'' ``compelled,'' 
or even ``cram down'' arbitration. See, e.g., Carrie Menkel-Meadow, Do 
the ``Haves'' Come Out Ahead in Alternative Judicial Systems?: Repeat 
Players in ADR, 15 Ohio St. J. on Disp. Resol. 19, 39 (1999); David S. 
Schwartz, Enforcing Small Print to Protect Big Business: Employee and 
Consumer Rights Claims in an Age of Compelled Arbitration, 1997 Wis. L. 
Rev. 33; Jean R. Sternlight, Panacea or Corporate Tool?: Debunking the 
Supreme Court's Preference for Binding Arbitration, 74 Wash. U. L.Q. 
637, 638 (1996). In contrast, proponents of arbitration suggest 
``mandatory'' is unfair because consumers always have the option to 
refuse the services or products connected to binding arbitration. 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 Di sp. Resol. 777, 780 (2003); Stephen 
J. Ware, Consumer Arbitration as Exceptional Consumer Law (With a 
Contractualist Reply to Carrington & Haagen), 29 McGeorge L. Rev. 195, 
201 (1998) (``The consumer is free to put the pen down without signing 
the form. There is no duress in the typical `adhesion' contract. A 
consumer who contracts in such circumstances does so voluntarily.'').
    \16\During the passage of the Federal Arbitration Act, Congress did 
not even intend to allow individuals to be bound by arbitration 
agreements if the contracts were between parties of unequal bargaining 
power. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 414 
(1967) (Black, J. dissenting) (citing Hearing on S. 4213 and S. 4214 
Before the Subcomm. of the S. Comm. on the Judiciary, 67th Cong., 9-11 
(1923)).
---------------------------------------------------------------------------
    Because arbitration avoids the public court system in favor 
of a private industry of arbitration groups,\17\ individuals 
lose some of the benefits and constitutional rights associated 
with traditional litigation.\18\ These benefits and rights 
include lower initial financial hurdles,\19\ pretrial 
discovery,\20\ formal civil procedure rules,\21\ proximity to 
the resolution forum,\22\ access to counsel,\23\ class action 
options,\24\ and fairness.\25\ Mandatory binding arbitration 
clauses may even negate the protection of some Federal 
statutes.\26\
---------------------------------------------------------------------------
    \17\These groups include the American Arbitration Association, the 
National Arbitration Forum, and JAMS, which set their own procedures, 
contract with agencies and companies to arbitrate future disputes, and 
provide arbitrators and panels to hear disputes.
    \18\Unfortunately, proponents of pre-dispute mandatory arbitration 
may view these losses as necessary to minimize frivolous lawsuits. See 
David Sherwyn, Arbitration of Employment-Discrimination Lawsuits: 
Legalities, Practicalities, and Realities, Cornell Hotel & Rest. Admin. 
Q. (Dec. 2002).
    \19\Arbitration clauses often impose high costs on consumers such 
as requiring travel to a distant forum or selection of a high-fee 
arbitrator, possible expenses which a plaintiff filing in a local court 
would not have to incur. See Lisa B. Bingham, Control over Dispute-
System Design and Mandatory Commercial Arbitration, Law & Contemp. 
Probs., Winter/Spring 2004, 221. Nonetheless, proponents of pre-dispute 
mandatory arbitration contend that arbitration keeps costs lower for 
the parties, although businesses alone are the likely recipients of 
those savings. See http://www.arbitrationfaq.com/.
    \20\See Katherine Palm, Note, Arbitration Clauses in Nursing Home 
Admission Agreements: Framing the Debate, 14 Elder L.J. 453, 478 n.172 
(2006).
    \21\See Ziva Branstetter, Nursing Home Policy Challenged, Tulsa 
World, March 4, 2002, at 1 (Oklahoma nursing home's arbitration clause 
requires residents to travel to New Mexico at their own expense for 
arbitration proceedings).
    \22\See id.
    \23\The lower probability of victory and legal fees may discourage 
some attorneys from representing individuals in arbitration 
proceedings. See Donna Harris, Hudson: Arbitration defuses lawsuits; We 
can work it out--or not, Automotive News, Feb. 6, 2006, at 56. 
(``arbitration provisions in consumer contracts keep some plaintiffs' 
lawyers at bay.''). See also Charles L. Knapp, Taking Contracts 
Private: The Quiet Revolution in Contract Law, 71 Fordham L. Rev. 761, 
783-784 (2002).
    \24\Arbitration clauses may bar individuals from joining with 
others to form a class action, which has been a means by which 
plaintiffs have been able to pool resources to spread out the costs in 
time, attorney fees, and expenses. See Jean R. Sternlight, As Mandatory 
Binding Arbitration Meets the Class Action, Will the Class Action 
Survive?, 42 Wm. & Mary L. Rev. 1 (2000). A recent study concludes that 
the increase in mandatory binding arbitration clauses in consumer 
contracts is part of a broader initiative by businesses to limit class 
action litigation. Theodore Eisenberg, et al, Arbitration's Summer 
Soldiers: An Empirical Study of Arbitration Clauses in Consumer and 
Nonconsumer Contracts, 41 U. Mich. J.L. Reform 871, 895 (2008).
    \25\Arbitration has introduced the ``repeat provider'' phenomenon. 
Advocates posit that arbitration organizations favor ruling on behalf 
of businesses because of the financial incentive to ensure that 
businesses are pleased with the results of the arbitration and thus 
hire the arbitration organization repeatedly. See Carrie Menkel-Meadow, 
Do the ``Haves'' Come Out Ahead in Alternative Judicial Systems?: 
Repeat Players in ADR, 15 Ohio St. J. on Disp. Resol. 19, 35-37 (1999). 
See also Stephen Landsman, ADR and the Cost of Compulsion, 57 Stan. L. 
Rev. 1593, 1614-1615 (Apr. 2005).
    \26\See Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 89-92 
(2000) (where court held that a right guaranteed by the Truth in 
Lending Act was prevented by an adhesion arbitration clause). See also 
Garrett v. Circuit City Stores, Inc., 449 F.3d 672, 677 (5th Cir. 2006) 
(where court held that USERRA does not preempt the terms of an 
employment agreement containing an arbitration clause).
---------------------------------------------------------------------------
    Mandatory arbitration clauses, especially in consumer 
contracts, are becoming ubiquitous. Approximately one-third of 
important consumer transactions may be covered by arbitration 
clauses.\27\ Some consumers have agreed to mandatory 
arbitration clauses simply by receiving them in envelope 
inserts\28\ and in product boxes.\29\ A consumer may even be 
bound by an arbitration clause he or she may not have ever 
received.\30\ An employee may be similarly bound.\31\ Some 
companies have utilized mandatory binding arbitration to obtain 
default judgments against consumers.\32\
---------------------------------------------------------------------------
    \27\Linda J. Demaine and Deborah R. Hensler, ``Volunteering'' to 
Arbitrate Through Predispute Arbitration Clauses: The Average 
Consumer's Experience, Law & Contemp. Probs., Winter/Spring 2004, 55. 
``Important'' consumer transactions include automobile purchases, 
telephone services, and health care coverages.
    \28\See Ting, 319 F.3d at 1134.
    \29\See Hill v. Gateway 2000, Inc., 105 F.3d 1147 (7th Cir. 1997).
    \30\See Marsh v. First USA Bank, 103 F. Supp. 2d 909, 916-918 (N.D. 
Tex. 2000).
    \31\See Tinder v. Pinker Security, 305 F.3d 728, 730-733 (7th Cir. 
2002).
    \32\See National Consumer Law Center Inc., New Trap Door for 
Consumers: Card Issuers Use Rubber-Stamp Arbitration to Rush Debts into 
Default Judgments, Feb. 17, 2005. Available at http://
www.consumerlaw.org/initiatives/model/content/ArbitrationNAF.pdf. Also 
see The Arbitration Trap: How Credit Card Companies Ensnare Consumers, 
Public Citizen, September 2007. Available at http://www.citizen.org/
documents/Final_wcover.pdf.
---------------------------------------------------------------------------
    Another concern is that arbitration is conducted in a 
secretive setting in which no public records are produced.\33\ 
The secrecy of arbitration may keep important information out 
of the view of individuals who would use it to make informed 
choices based on safety records.\34\ For example, prospective 
residents of long-term care facilities would benefit from 
knowing the history of safe treatment of residents at the 
facilities they are considering.\35\ Arbitration enables the 
long-term care industry to keep more of this information 
secret, avoiding media exposure and hampering government 
oversight.\36\
---------------------------------------------------------------------------
    \33\See Russel Myles and Kelly Reese, Arbitration: Avoiding the 
Runaway Jury, 23 Am. J. Trial Advoc. 129, 141 (1999).
    \34\The secrecy may also detract from the development of law, see 
Richard M. Alderman, Pre-Dispute Mandatory Arbitration in Consumer 
Contracts: A Call for Reform, 38 Hous. L. Rev. 1237, 1246-49 (2001), or 
be incompatible with democracy, see Richard C. Reuben, Democracy and 
Dispute Resolution: The Problem of Arbitration, 67 Law & Contemp. 
Probs. 279, 298-303 (2004).
    \35\From 1999 until February 2005, the Centers for Medicare and 
Medicaid Services--the Federal agency which oversees compliance with 
Federal nursing home standards--cited 15.5% to 29.3% of nursing homes 
for actual harm or immediate jeopardy to their residents. U.S Gov. 
Accountability Off., Nursing Homes: Despite Increased Oversight, 
Challenges Remain in Ensuring High-Quality Care and Resident Safety, 
GAO-06-117 (Dec. 2005). The most recent report reveals that about 1 in 
5 nursing homes have serious deficiencies. U.S Gov. Accountability 
Off., Nursing Homes: Federal Monitoring Surveys Demonstrate Continued 
Understatement of Serious Care Problems and CMS Oversight Weaknesses, 
GAO-08-517 (May 2008). Although this information is generally 
available, these numbers reflect responses to sporadic surveys, which 
likely do not include all relevant information.
    \36\See Krasuski, at 300 nn.262-263.
---------------------------------------------------------------------------
    Although informed consumers might theoretically be expected 
to reject one-sided arbitration clauses by opting for long-term 
care at facilities that do not impose them, residents and their 
families often do not have much time, as a practical matter, to 
conduct a thorough examination to compare contracts at each 
facility in their vicinity.\37\ The resident's and his or her 
family's focus is understandably on the quality and assortment 
of provided services offered. When residents are being 
admitted, they and their families are typically under a lot of 
stress, and few are in a state of mind to give much thought to 
the fine print in the admission materials.\38\ If a resident 
even becomes aware of the mandatory arbitration clause, he or 
she may not understand the clause.\39\ And even the relatively 
few who might see it and understand it are forced to accept it 
anyway or be denied admission into the long-term care facility.
---------------------------------------------------------------------------
    \37\See Denese A. Vlosky, ``Say-so'' as a Predictor of Nursing Home 
Readiness, 93 J. Fam. Consumer Sci. 59 (2001).
    \38\See Howell v. NHC Healthcare-Fort Sanders, 109 S.W.3d 731 (Tenn 
Ct. App. 2003); Raiteri ex rel Cox v. NHC Healthcare/Knoxville, Inc., 
No. E2003-00068-COA-R9-CV, 2003 WL 23094413, at 2 (Tenn. Ct. App. Dec. 
30, 2003). See also Robert Hornstein, The Fiction of Freedom of 
Contract--Nursing Home Admission Contract Arbitration Agreements: A 
Primer on Preserving the Right of Access to Court Under Florida Law, 16 
St. Thomas L. Rev. 319, 320 (2003); Maureen Armour, A Nursing Home's 
Good Faith Duty to Care: Redefining a Fragile Relationship Using the 
Law of Contract, 39 St. Louis U. L.J. 217, 226 n.37 (1994).
    \39\See Romano ex rel. Romano v. Manor Care, Inc., 861 So.2d 59, 61 
(Fla. App. 2003), reh'g denied, Manor Care, Inc. v. Romano, 874 So.2d 
1192 (Fla. 2004) (where even the nursing home administrator did not 
understand the meaning of the arbitration clause).
---------------------------------------------------------------------------
    In these conditions, arbitration is no longer voluntary; it 
is mandatory. Individuals are left with little choice but to 
accept arbitration to resolve future disputes.
    In fact, the controversy surrounding arbitrating personal 
injury disputes involving residents and long-term care 
facilities has caused some arbitration providers to refuse to 
arbitrate such disputes unless ordered by a court to do so.\40\ 
These arbitration providers include the American Arbitration 
Association and the American Health Lawyers Association.\41\
---------------------------------------------------------------------------
    \40\See ``Healthcare Due Process Protocol,'' American Arbitration 
Association/American Bar Association/American Medical Association 
Commission on Healthcare Dispute Resolution, Final Report, July 27, 
1998, available at http://www.adr.org/sp.asp?id=28633; Elise Dunitz 
Brennan, Commentary, Board Modification to the Rules of the Alternative 
Dispute Resolution Service of American Health Lawyers Association, 
Health Lawyers News, Jan. 2004, at 21-22.
    \41\The Arbitration Fairness Act of 2007: Hearing on H.R. 3010 
Before the Subcomm. on Comm. and Admin. Law of the H. Comm. on the 
Judiciary, 110th Cong. (2007) (response by Richard Naimark, Senior Vice 
President of the American Arbitration Association, to a question posed 
by Rep. Linda T. Sanchez, on why AAA no longer arbitrates health care 
disputes). See also Joelle Babula, Valley Health Care: Group Won't 
Arbitrate Medical Cases, Las Vegas Rev. J., Aug. 7, 2003, at 1-B.
---------------------------------------------------------------------------
    H.R. 6126 amends the Federal Arbitration Act to make 
mandatory arbitration clauses in contracts between long-term 
care facilities and residents except when they are agreed to 
after the dispute involved has arisen. H.R. 6126 simply gives 
back to residents and their families their legal options on how 
to resolve disputes should they arise.

                                Hearings

    The Committee on the Judiciary Committee's Subcommittee on 
Commercial and Administrative Law held a hearing on H.R. 6126 
on June 10, 2008. Testimony was received from William J. Hall, 
MD, who appeared on behalf of AARP; Linda Stewart, RN, a nurse 
from Texas; Gavin J. Gadberry, Esq., an attorney with 
Underwood, Wilson, Berry, Stein and Johnson, PC, who appeared 
on behalf of the American Health Care Association and the 
National Center for Assisted Living; and Ken Connor, an 
attorney with Wilkes & McHugh, P.A.

                        Committee Consideration

    On June 15, 2008, the Subcommittee on Commercial and 
Administrative Law met in open session and ordered the bill 
H.R. 6126 favorably reported, without amendment, by a vote of 5 
to 4, a quorum being present. On July 30, 2008, the Committee 
met in open session and ordered the bill H.R. 6126 favorably 
reported without amendment, by a rollcall vote of 17 to 10, a 
quorum being present.

                            Committee Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
following rollcall votes occurred during the Committee's 
consideration of H.R. 6126:
    1. An amendment offered by Mr. Feeney to cap and limit 
attorneys fees paid to attorneys representing plaintiffs. The 
amendment would also require the Comptroller General to conduct 
a study of the average hourly fees paid to plaintiffs' lead 
counsel in all class action cases. The amendment failed by a 
vote of 11 to 15.

                                                 ROLLCALL NO. 1
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Conyers, Jr., Chairman......................................                              X
Mr. Berman......................................................
Mr. Boucher.....................................................
Mr. Nadler......................................................                              X
Mr. Scott.......................................................                              X
Mr. Watt........................................................                              X
Ms. Lofgren.....................................................
Ms. Jackson Lee.................................................
Ms. Waters......................................................
Mr. Delahunt....................................................
Mr. Wexler......................................................                              X
Ms. Sanchez.....................................................                              X
Mr. Cohen.......................................................                              X
Mr. Johnson.....................................................                              X
Ms. Sutton......................................................                              X
Mr. Gutierrez...................................................
Mr. Sherman.....................................................                              X
Ms. Baldwin.....................................................                              X
Mr. Weiner......................................................                              X
Mr. Schiff......................................................                              X
Mr. Davis.......................................................
Ms. Wasserman Schultz...........................................                              X
Mr. Ellison.....................................................                              X
Mr. Smith, Ranking Member.......................................              X
Mr. Sensenbrenner, Jr...........................................
Mr. Coble.......................................................              X
Mr. Gallegly....................................................              X
Mr. Goodlatte...................................................
Mr. Chabot......................................................
Mr. Lungren.....................................................
Mr. Cannon......................................................              X
Mr. Keller......................................................
Mr. Issa........................................................              X
Mr. Pence.......................................................
Mr. Forbes......................................................              X
Mr. King........................................................              X
Mr. Feeney......................................................              X
Mr. Franks......................................................              X
Mr. Gohmert.....................................................              X
Mr. Jordan......................................................              X
                                                                 -----------------------------------------------
    Total.......................................................             11              15
----------------------------------------------------------------------------------------------------------------

    2. An amendment offered by Mr. Cannon to exclude from the 
Act pre-dispute arbitration agreements which do not condition 
admission based on such agreements, provide at least a 30-day 
opt-out provision of such agreements, and preserve state laws 
regulating such agreements. The amendment failed by a vote of 9 
to 14.

                                                 ROLLCALL NO. 2
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Conyers, Jr., Chairman......................................                              X
Mr. Berman......................................................
Mr. Boucher.....................................................
Mr. Nadler......................................................                              X
Mr. Scott.......................................................                              X
Mr. Watt........................................................                              X
Ms. Lofgren.....................................................
Ms. Jackson Lee.................................................                              X
Ms. Waters......................................................
Mr. Delahunt....................................................
Mr. Wexler......................................................                              X
Ms. Sanchez.....................................................                              X
Mr. Cohen.......................................................
Mr. Johnson.....................................................                              X
Ms. Sutton......................................................                              X
Mr. Gutierrez...................................................
Mr. Sherman.....................................................                              X
Ms. Baldwin.....................................................                              X
Mr. Weiner......................................................                              X
Mr. Schiff......................................................                              X
Mr. Davis.......................................................
Ms. Wasserman Schultz...........................................                              X
Mr. Ellison.....................................................
Mr. Smith, Ranking Member.......................................              X
Mr. Sensenbrenner, Jr...........................................
Mr. Coble.......................................................              X
Mr. Gallegly....................................................              X
Mr. Goodlatte...................................................
Mr. Chabot......................................................
Mr. Lungren.....................................................
Mr. Cannon......................................................              X
Mr. Keller......................................................
Mr. Issa........................................................
Mr. Pence.......................................................
Mr. Forbes......................................................              X
Mr. King........................................................              X
Mr. Feeney......................................................              X
Mr. Franks......................................................
Mr. Gohmert.....................................................              X
Mr. Jordan......................................................              X
                                                                 -----------------------------------------------
    Total.......................................................              9              14
----------------------------------------------------------------------------------------------------------------

    3. An amendment offered by Mr. Cannon to exclude from the 
Act any pre-dispute arbitration agreements which cover services 
provided essentially by medical and health-related employees of 
the long-term care facility. The amendment failed by a vote of 
10 to 14.

                                                 ROLLCALL NO. 3
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Conyers, Jr., Chairman......................................                              X
Mr. Berman......................................................                              X
Mr. Boucher.....................................................
Mr. Nadler......................................................                              X
Mr. Scott.......................................................                              X
Mr. Watt........................................................                              X
Ms. Lofgren.....................................................
Ms. Jackson Lee.................................................
Ms. Waters......................................................
Mr. Delahunt....................................................
Mr. Wexler......................................................
Ms. Sanchez.....................................................                              X
Mr. Cohen.......................................................                              X
Mr. Johnson.....................................................                              X
Ms. Sutton......................................................                              X
Mr. Gutierrez...................................................
Mr. Sherman.....................................................                              X
Ms. Baldwin.....................................................                              X
Mr. Weiner......................................................                              X
Mr. Schiff......................................................                              X
Mr. Davis.......................................................
Ms. Wasserman Schultz...........................................                              X
Mr. Ellison.....................................................
Mr. Smith, Ranking Member.......................................              X
Mr. Sensenbrenner, Jr...........................................
Mr. Coble.......................................................              X
Mr. Gallegly....................................................              X
Mr. Goodlatte...................................................
Mr. Chabot......................................................              X
Mr. Lungren.....................................................
Mr. Cannon......................................................              X
Mr. Keller......................................................
Mr. Issa........................................................
Mr. Pence.......................................................
Mr. Forbes......................................................              X
Mr. King........................................................              X
Mr. Feeney......................................................              X
Mr. Franks......................................................
Mr. Gohmert.....................................................              X
Mr. Jordan......................................................              X
                                                                 -----------------------------------------------
    Total.......................................................             10              14
----------------------------------------------------------------------------------------------------------------

    4. A vote on the question of the motion to report H.R. 6126 
favorably was approved 17 to 4.

                                                 ROLLCALL NO. 4
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Conyers, Jr., Chairman......................................              X
Mr. Berman......................................................
Mr. Boucher.....................................................              X
Mr. Nadler......................................................              X
Mr. Scott.......................................................              X
Mr. Watt........................................................              X
Ms. Lofgren.....................................................              X
Ms. Jackson Lee.................................................              X
Ms. Waters......................................................              X
Mr. Delahunt....................................................
Mr. Wexler......................................................              X
Ms. Sanchez.....................................................              X
Mr. Cohen.......................................................
Mr. Johnson.....................................................
Ms. Sutton......................................................              X
Mr. Gutierrez...................................................
Mr. Sherman.....................................................              X
Ms. Baldwin.....................................................              X
Mr. Weiner......................................................              X
Mr. Schiff......................................................              X
Mr. Davis.......................................................
Ms. Wasserman Schultz...........................................              X
Mr. Ellison.....................................................              X
Mr. Smith, Ranking Member.......................................                              X
Mr. Sensenbrenner, Jr...........................................                              X
Mr. Coble.......................................................                              X
Mr. Gallegly....................................................
Mr. Goodlatte...................................................
Mr. Chabot......................................................
Mr. Lungren.....................................................
Mr. Cannon......................................................
Mr. Keller......................................................                              X
Mr. Issa........................................................
Mr. Pence.......................................................
Mr. Forbes......................................................
Mr. King........................................................
Mr. Feeney......................................................
Mr. Franks......................................................
Mr. Gohmert.....................................................
Mr. Jordan......................................................
                                                                 -----------------------------------------------
    Total.......................................................             17               4
----------------------------------------------------------------------------------------------------------------

    5. Noting the apparent absence of a quorum, the Chair 
called for a quorum. The vote to report H.R. 6126 favorably was 
retaken, and was approved 17 to 10.

                                                 ROLLCALL NO. 5
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Conyers, Jr., Chairman......................................              X
Mr. Berman......................................................
Mr. Boucher.....................................................
Mr. Nadler......................................................              X
Mr. Scott.......................................................              X
Mr. Watt........................................................
Ms. Lofgren.....................................................              X
Ms. Jackson Lee.................................................              X
Ms. Waters......................................................              X
Mr. Delahunt....................................................              X
Mr. Wexler......................................................              X
Ms. Sanchez.....................................................              X
Mr. Cohen.......................................................
Mr. Johnson.....................................................              X
Ms. Sutton......................................................              X
Mr. Gutierrez...................................................
Mr. Sherman.....................................................              X
Ms. Baldwin.....................................................              X
Mr. Weiner......................................................              X
Mr. Schiff......................................................              X
Mr. Davis.......................................................
Ms. Wasserman Schultz...........................................              X
Mr. Ellison.....................................................              X
Mr. Smith, Ranking Member.......................................                              X
Mr. Sensenbrenner, Jr...........................................                              X
Mr. Coble.......................................................                              X
Mr. Gallegly....................................................
Mr. Goodlatte...................................................                              X
Mr. Chabot......................................................
Mr. Lungren.....................................................                              X
Mr. Cannon......................................................
Mr. Keller......................................................                              X
Mr. Issa........................................................
Mr. Pence.......................................................
Mr. Forbes......................................................                              X
Mr. King........................................................                              X
Mr. Feeney......................................................                              X
Mr. Franks......................................................
Mr. Gohmert.....................................................
Mr. Jordan......................................................                              X
                                                                 -----------------------------------------------
    Total.......................................................             17              10
----------------------------------------------------------------------------------------------------------------

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee advises that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives is inapplicable because this legislation does 
not provide new budgetary authority or increased tax 
expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, H.R. 6126, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, September 2, 2008.
Hon. John Conyers, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 6126, the Fairness 
in Nursing Home Arbitration Act of 2008.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Leigh Angres, 
who can be reached at 226-2860.
            Sincerely,
                                           Peter R. Orszag,
                                                  Director.

Enclosure

cc:
        Honorable Lamar S. Smith.
        Ranking Member
H.R. 6126--Fairness in Nursing Home Arbitration Act of 2008.
    H.R. 6126 would make certain pre-dispute arbitration 
agreements between the operators of long-term care facilities 
and their residents invalid or unenforceable. In a pre-dispute 
arbitration agreement, the parties agree to arbitrate a 
potential dispute rather than seek redress through the courts. 
The bill would apply to agreements entered into or modified on 
or after the date of the bill's enactment. Under current law, 
the operators of long-term care facilities can include clauses 
in contracts with residents that provide for mandatory 
arbitration if a dispute should arise.
    Under the bill, CBO expects that the majority of disputes 
that could arise between a resident and a facility operator 
would be litigated in State courts and, therefore, would not 
substantially affect the caseload of the Federal court system. 
Cases challenging the nullification of a particular arbitration 
agreement would be addressed in a Federal court, but CBO 
expects that any such cases would have an insignificant effect 
on the overall workload of the courts. Therefore, CBO estimates 
that implementing H.R. 6126 would have no significant cost over 
the next 5 years. Enacting the bill would have no effect on 
direct spending or revenues.
    By restricting the provisions that could be included in 
contracts between long-term care facilities and residents of 
such facilities (or their representatives), H.R. 6126 would 
impose an intergovernmental and private-sector mandate as 
defined in the Unfunded Mandates Reform Act (UMRA). Based on 
information from industry sources, CBO estimates that the 
direct cost to comply with the mandate to State, local, and 
tribal governments and the private sector would fall below the 
annual thresholds established in UMRA for intergovernmental and 
private-sector mandates ($68 million and $136 million, 
respectively, in 2008, adjusted annually for inflation).
    The CBO staff contacts for this estimate are Leigh Angres 
(for Federal costs), who can be reached at 226-2860, Melissa 
Merrell (for the State and local impact), who can be reached at 
225-3220, and Paige Piper/Bach (for the private-sector impact), 
who can be reached at 226-2940. This estimate was approved by 
Peter H. Fontaine, Assistant Director for Budget Analysis.

                    Performance Goals and Objectives

    The Committee states that pursuant to clause 3(c)(4) of 
rule XIII of the Rules of the House of Representatives, H.R. 
6126 amends the Federal Arbitration Act to make unenforceable 
agreements to arbitrate disputes arising out of a contract 
between a long-term care facility and a resident, if that 
agreement was made before the dispute arose.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in article I, section 8 of the Constitution.

                          Advisory on Earmarks

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 6126 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(d), 9(e), or 9(f) of Rule XXI.

                      Section-by-Section Analysis

    The following discussion describes the bill as reported by 
the Committee.
    Sec. 1. Short Title. Section 1 sets forth the short title 
of the bill as the ``Fairness in Nursing Home Arbitration Act 
of 2008.''
    Sec. 2. Amendments. Section 2 amends the Federal 
Arbitration Act by adding a new section, Section 17, to the 
Act. Section 2 defines a ``long-term care facility'' to include 
any facility which is reimbursed for services by Medicare or 
Medicaid, or is an assisted living facility, or is an adult 
foster care facility, but excludes adult day care facilities. 
Section 2 also states that pre-dispute arbitration agreements 
between a long-term care facility and a resident of such a 
facility are invalid or unenforceable, whether they were 
entered into at any time during or after the admission process.
    Sec. 3. Effective Date; Application of Amendments. Section 
3 provides that the amendments made by this legislation will 
apply only to contracts made, amended, altered, modified, 
renewed, or extended on or after the enactment of this 
legislation.

                              Agency Views

    A July 29, 2008 letter from the Department of Health and 
Human Services on H.R. 6126 is set forth below. In his letter 
Secretary Leavitt asserts incorrectly that H.R. 6126 would 
``deprive patients and providers of the opportunity to agree 
voluntarily to resolve their disputes through arbitration.'' 
H.R. 6126 would only make unenforceable pre-dispute mandatory 
arbitration agreements.


    A July 30, 2008 letter from the Office of Legislative 
Affairs of the Department of Justice on S. 2838, a similar but 
not identical bill to H.R. 6126, is set forth below. Principal 
Deputy Assistant Attorney General Nelson asserts incorrectly 
that the bill would provide ``a blanket prohibition against 
enforcing arbitration agreements in all situations.'' H.R. 6126 
would only make unenforceable pre-dispute mandatory arbitration 
agreements.




         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italics and existing law in which no change is 
proposed is shown in roman):

                      TITLE 9, UNITED STATES CODE



           *       *       *       *       *       *       *
                     CHAPTER 1--GENERAL PROVISIONS

Sec.
1. ``Maritime transactions'' and ``commerce'' defined; exceptions to 
          operation of title.
     * * * * * * *
17. Validity and enforcement.

           *       *       *       *       *       *       *


Sec. 17. Validity and enforceability

    (a) Definitions.--For purposes of this section:
            (1) Long-term care facility.--The term ``long-term 
        care facility'' means--
                    (A) any skilled nursing facility as defined 
                in 1819(a) of the Social Security Act;
                    (B) any nursing facility as defined in 
                1919(a) of the Social Security Act; or
                    (C) a public facility, proprietary 
                facility, or facility of a private nonprofit 
                corporation that--
                            (i) makes available to adult 
                        residents supportive services to assist 
                        the residents in carrying out 
                        activities such as bathing, dressing, 
                        eating, getting in and out of bed or 
                        chairs, walking, going outdoors, using 
                        the toilet, or obtaining or taking 
                        medication; and
                            (ii) provides a dwelling place 
                        (which may contain a full kitchen and 
                        bathroom) for residents in order to 
                        deliver supportive services described 
                        in clause (i), that includes common 
                        rooms and other facilities appropriate 
                        for the provision of such services to 
                        residents of the facility;
        but excludes a facility, or portion of a facility, that 
        either does not provide the services described in 
        clause (i) or has as its primary purpose to educate or 
        to treat substance abuse problems.
            (2) Pre-dispute arbitration agreement.--The term 
        ``pre-dispute arbitration agreement'' means any 
        agreement to arbitrate a dispute that arises after such 
        agreement is made.
    (b) Invalidity of Pre-Dispute Arbitration Agreements.--A 
pre-dispute arbitration agreement between a long-term care 
facility and a resident of such facility (or person acting on 
behalf of such resident, including a person with financial 
responsibility for such resident) shall not be valid or 
specifically enforceable.
    (c) Application to Agreements.--This section shall apply to 
any pre-dispute arbitration agreement between a long-term care 
facility and a resident of such facility (or a person acting on 
behalf of such a resident, including a person with financial 
responsibility for such resident), and shall apply to a pre-
dispute arbitration agreement entered into either at any time 
during the admission process or at any time after the admission 
process.
    (d) Application of Federal Law.--A determination as to 
whether this chapter applies to an arbitration agreement 
described in this section shall be determined under Federal 
law. Except as otherwise provided in this chapter, the validity 
or enforceability of such agreement shall be determined by the 
court, rather than the arbitrator, irrespective of whether the 
party opposing arbitration challenges such agreement 
specifically or in conjunction with any other term of the 
contract containing such agreement.

           *       *       *       *       *       *       *


                             Minority Views

                            I. INTRODUCTION

    Mandatory, pre-dispute arbitration in the nursing home and 
assisted living sectors grew out of run-away litigation abuse 
in the 1990s. Hand in hand with tort reform, the use of 
mandatory arbitration effectively brought litigation costs back 
under control. As a result, service providers that might 
otherwise have been forced to raise fees for services or close 
their doors were able to continue to provide affordable 
services. Their sustained ability to do so is imperative as our 
country's elderly and fixed-income population explodes, 
creating ever-higher demand for nursing home and assisted 
living services at sustainable costs.
    H.R. 6126 imprudently seeks to turn back the clock on 
arbitration practices in these sectors. It will render 
thousands upon thousands of arbitration agreements void and 
unenforceable, and it will prohibit the negotiation of such 
agreements in the future. No record has been established 
demonstrating that mandatory binding arbitration is unfair to 
nursing home and assisted living residents and their families. 
No record has been made that, if there is any unfairness, a 
solution cannot be found in reforming mandatory arbitration 
procedures or improving the voluntary arbitration system. And, 
perhaps most important, no record has been made demonstrating 
that the inexorable results of H.R. 6126 will not be abusive 
lawsuits, rising costs and closing facility doors. Those rising 
costs, moreover, surely will one day be placed at the door of 
the Medicare system, which already is destined for a fiscal 
crisis of epic proportions if it is not reformed.
    H.R. 6126 also is proposed precisely at the time that the 
key alternative to arbitration--the class action lawsuit--is 
under greater suspicion than ever. Some of the most prominent 
plaintiffs' class action lawyers in the country stand convicted 
of massive fraud based on the purchase and use of fabricated 
evidence. There is strong evidence, moreover, that such abuse 
is standard class-action industry practice. At the same time, 
moreover, there is potent evidence that class action awards 
frequently produce only pittances for individual members of 
plaintiff classes, while their class action lawyers harvest 
from them millions upon millions of dollars in fees. Congress' 
investigation of this scandal has just begun, and it should be 
concluded before we pass any legislation sacrificing 
arbitration to the interests of the plaintiffs trial bar.
    For all of these reasons, we strongly urge the rejection of 
H.R. 6126. The bill will surely bring profits to the 
plaintiffs' trial bar. It will surely harm, however, the 
nursing home and assisted living system and those who depend 
upon it for vital services.

                             II. BACKGROUND

A. LIncreased Use of Mandatory Binding Arbitration Clauses in Response 
        to Exploding Nursing Home Tort Liability in the 1990s
    Arbitration is the classic means of alternative dispute 
resolution available to those wishing not to bring their 
disputes before federal or state courts. The Federal 
Arbitration Act, 9 U.S.C. Sec. 1 et seq., is the principal 
federal law affecting arbitration. H.R. 6126 would amend the 
FAA.
    The thrust of the law, including federal law, has for some 
time been to encourage the use of arbitration and other 
alternative dispute resolution mechanisms that are speedier, 
less expensive and more flexible than litigation. In the 
landmark case of Southland v. Keating, 465 U.S. 1 (1984), the 
Supreme Court went so far as to declare that ``[i]n enacting 
Sec. 2 of the [Federal Arbitration] Act, Congress declared a 
national policy of favoring arbitration and withdrew the power 
of the states to require a judicial forum for the resolution of 
claims which the contracting parties agreed to resolve by 
arbitration.'' Id. at 10 (emphasis added).
    H.R. 6126 flies in the face of this consistent and 
important federal policy. It is therefore imperative to 
consider whether there is any evidence compelling a departure 
from this policy in the nursing home and assisted living 
sectors.
    The stage for H.R. 6126 was set, first and foremost, by 
increases in tort liability in the nursing home sector in the 
1990s. This trend may have been most pronounced in Florida, 
Texas and Arkansas. As the Wall Street Journal reported:

        The industry was alarmed in the late 1990s by a rash of 
        huge jury awards. In one case, $83 million was awarded 
        in the death of a Texas woman with infected bedsores; 
        $95 million went to a California woman who fractured 
        her hip and shoulder when she allegedly was dropped by 
        nursing-home staff. Both awards were knocked down by 
        the trial judges: the Texas judgment to $56 million, 
        and the California award down to $3.6 million. But 
        plaintiffs' lawyers were newly drawn to nursing-home 
        suits by the big awards.\1\
---------------------------------------------------------------------------
    \1\Nathan Koppel, Nursing Homes, in Bid to Cut Costs, Prod Patients 
to Forego Lawsuits, Wall Street Journal, p. A1 (April 11, 2008) 
(``Koppel, Nursing Homes'').

According to the plaintiffs' lawyer in that same California 
case, ``Every joker and their brother got into the nursing-home 
area[.]''\2\
---------------------------------------------------------------------------
    \2\Id.
---------------------------------------------------------------------------
    In response to this trend, the nursing home sector 
increasingly turned to the use of mandatory binding arbitration 
clauses in the contracts they signed with residents or their 
families.\3\ In some states, these clauses were struck down by 
state courts.\4\ Often, they were struck down on the ground 
that they were signed under duress.\5\ Other times they were 
struck down as too unfavorable to plaintiffs or because they 
were not adequately explained when they were bargained for.\6\
---------------------------------------------------------------------------
    \3\See, e.g., AON Global, Long Term Care: 2008 General Liability 
and Professional Liability Actuarial Analysis at 4, 8 (May 12, 2008) 
(``Long Term Care'').
    \4\Koppel, Nursing Homes.
    \5\Id.
    \6\Id.
---------------------------------------------------------------------------
    In other states, however, the courts upheld the use of 
mandatory binding arbitration clauses.\7\ In Ohio, for example, 
a court upheld in 2007 an agreement with a mandatory binding 
arbitration clause that was entered into by ``a woman who had 
entered a home from a hospital and was suffering bouts of 
confusion.''\8\ Although the court considered the nursing 
home's use of the clause ``troubling,'' and that the clause had 
been offered during ``an extremely stressful time for elderly 
persons of diminished health,'' it found the contract fair and 
upheld it.\9\
---------------------------------------------------------------------------
    \7\Id.
    \8\Id.
    \9\Id.
---------------------------------------------------------------------------
    According to a 2007 study performed for the nursing home 
industry, the move to arbitration is beginning to curb awards 
effectively. As reported in the Wall Street Journal, the study 
found that ``after years of rising, average payouts per claim 
began to edge down for nursing-home cases resolved in 2004 and 
2005, in part due to the rise of arbitration and tort-reform 
measures.''\10\ Looking to the future, the study estimates that 
``with legal fees included, homes' average costs per claim will 
drop to about $146,000 for incidents that took place in 2006, 
from about $226,000 for 1999 incidents.''\11\ According to one 
of the authors of the study, ``we are seeing the elimination of 
large runaway awards'' in a number of states.\12\
---------------------------------------------------------------------------
    \10\Id.; see also Long Term Care at 4-6, 13-19, 23-25.
    \11\Koppel, Nursing Home.
    \12\Id.
---------------------------------------------------------------------------
    Two clear effects should result from these developments. 
First, the return to more reasonable awards will help assure 
that runaway awards do not force providers out of business. For 
example, Skilled Healthcare Group, Inc., a company operating 75 
nursing homes in six states, filed for bankruptcy in 2001, in 
part because of a $6 million judgment against the company.\13\ 
The company survived bankruptcy, and by 2007 had 
``significantly reduced [its] liability exposure'' through the 
use of arbitration clauses.\14\ According to the company's 
general counsel, as a result of the company's use of mandatory 
arbitration, it has found in virtually every case that it can 
come to a reasonable settlement, because both sides understand 
that ``the possibility of a highly emotionally driven verdict 
is unlikely.''\15\
---------------------------------------------------------------------------
    \13\Id.
    \14\Id.
    \15\Id.
---------------------------------------------------------------------------
    Second, and in a similar way, arbitration in the same way 
helps companies to lower costs. This is, of course, beneficial 
to consumers, many of whom must sign up for long-term care at 
nursing homes. This also promises to be beneficial to the 
Medicare system, which often pays for nursing home services. 
The increased use of arbitration thus stands to benefit not 
only the family fisc, but the federal fisc, and with it every 
taxpayer. This is no small thing, considering the looming 
Medicare funding crisis fueled by exploding health care costs 
for an increasingly aging society.
    We acknowledge that there may be occasional cases in which 
the arbitration system may produce unsatisfactory results. Much 
the same can be said, however, of the court system. The 
question, therefore, is whether the arbitration system on the 
whole is functioning well, when compared to the litigation 
system. We also acknowledge that there will be cases in which a 
resident may suffer illness, injury or, in the extreme case, 
death, from poor quality nursing home or assisted living care, 
and in which that resident may not have fully appreciated that 
his or her contract would prevent the case from going to a jury 
trial. But the question remains the same--does the arbitration 
system nevertheless generally produce satisfactory results, 
when compared to litigation?
    In the evidence brought to the Committee in hearings on 
H.R. 6126, we saw no proof that the arbitration system is 
commonly failing. Accordingly, far more important than 
protecting against the occasional arbitration misfire or a 
small subset of patients' access to jury trials is the need to 
keep awards and the overall costs of services within reasonable 
limits. This will benefit both the increasingly strained 
Medicare system and the increasingly tight average family 
budget. Moreover, we are acutely aware of information showing 
that awards in class action lawsuits too often pay pennies on 
the dollar to plaintiffs, while generating multi-million-dollar 
fee awards for the plaintiffs' lawyers. These litigation horror 
stories surely offset the anecdotal evidence we have heard 
about alleged failures in individual arbitration cases.\16\
---------------------------------------------------------------------------
    \16\It has been reported, for example, that in class action 
litigation over exploding tires and rollovers associated with the Ford 
Explorer, class members recovered only a $500 certificate towards the 
purchase of a new Ford Explorer or a $300 certificate towards the 
purchase of any other Ford, Mercury or Lincoln vehicle. Both 
certificates were good for just 12 months. The plaintiff class's 
lawyers, meanwhile, obtained $25 million in fees. Similarly, in a class 
action consumer suit against Sears over charges for wheel alignments, 
the individual consumers recovered less than $6.50 each, while their 
class action lawyers recovered $1.1 million in fees. Those fees 
represented 99.8 percent of the total settlement of $1,102,402.
---------------------------------------------------------------------------
B. LTrends in the Evolution of Arbitration Clauses In Nursing Home and 
        Assisted Living Contracts
    Adding to the above factors, the nursing home and assisted 
living sectors have been moving toward extremely fair 
arbitration clause practices. According to Gavin Gadberry, the 
drafter of these sectors' model arbitration clause and a 
witness at the legislative hearing on H.R. 6126:

        Over the course of the past ten years arbitration has 
        became a more widely used alternative in long term 
        care. This growth has been across the board for long 
        term care providers--from single owner facilities to 
        national chain facilities; and for non-proprietary and 
        for-profit organizations. As a service to our member 
        facilities and the residents they serve, in 2002 [the 
        American Health Care Association and the National 
        Center for Assisted Living] developed a model 
        arbitration agreement form for possible use in the 
        admission process.

This model agreement in no way alters the rights or remedies 
available to a resident under state tort law. It states in 
plain English that entering into the arbitration agreement is 
not a condition of admission into the facility. Further, the 
model form provides a 30-day window for the resident or their 
representative to reconsider and, in writing, rescind the 
arbitration agreement. This 30-day ``cooling off period'' far 
exceeds the period of time found on most arbitration 
clauses.\17\
---------------------------------------------------------------------------
    \17\Statement of Gavin Gadberry on behalf of the American Health 
Care Association and National Center for Assisted Living.

    With this type of model practice taking firm hold, we are 
of the view that Congress's goal should be to support the 
continued use of mandatory binding arbitration in the nursing 
home and assisted living sectors, not to wipe it out.
C. LLarger Trends in Consumer Arbitration Contracts
    H.R. 6126, of course, also is proposed against the backdrop 
of general trends in the use of arbitration. In addition, it is 
proposed as the leading edge of a number of trial-lawyer-backed 
proposals to erode arbitration. It is therefore worth 
considering general trends in arbitration as well. These trends 
point strongly to the conclusion that arbitration generally 
benefits consumers.
            1. LArbitration Generally
    As discussed at the outset, arbitration is the classic 
means of alternative dispute resolution, and federal law has 
strongly promoted it for decades. One would particularly expect 
the accessibility and relative efficiency of arbitration to be 
useful in the many areas of consumer contracts. Consumers, on 
the one hand, stand to benefit from this quicker, less 
cumbersome and less expensive way of bringing often smaller-
scale disputes to resolution. In fact, it is often arbitration 
that levels the playing field between consumers and 
companies.\18\ Providers of goods and services, meanwhile, 
stand to benefit from these same advantages. Indeed, they 
benefit all the more because these claims can be fairly 
repetitive and may be large in number. In the end, both 
consumers and providers stand to benefit from decreases in the 
costs of goods and services that can stem from the use of 
arbitration.
---------------------------------------------------------------------------
    \18\See, e.g., Christine Varney, Arbitration Works Better than 
Lawsuits, Wall Street Journal (July 14, 2008).
---------------------------------------------------------------------------
    The recent rise of mandatory binding arbitration clauses, 
however, seems to stem less from these general factors than 
from one particular factor. That factor is abuse of a 
competing, judicial form of consumer dispute resolution--the 
tort suit, particularly the class action tort suit. 
Particularly in response to the actual or perceived abuse of 
class action tort cases and class action lending disclosure 
suits, and due to the web of inconsistent substantive law and 
civil procedure in competing jurisdictions entertaining such 
suits, companies in numerous sectors of our economy have more 
and more resorted to the use of mandatory binding arbitration 
clauses. In this way, companies have sought to introduce a more 
orderly, less expensive, and more consistent set of rules for 
the resolution of their disputes with their customers. The 
movement to mandatory binding arbitration in the nursing home 
and assisted living sectors is just one part of this larger 
trend.
            2. LTheories of Advocates for and Against Mandatory, 
                    Binding Arbitration Clauses
    Some consumer advocates suggest that consumers often lack 
the sophistication or bargaining power to understand and 
negotiate away from contracts containing mandatory binding 
arbitration clauses. These advocates also suggest that 
mandatory binding arbitration may be unfair in other ways, 
including: allegedly higher costs to consumers of initiating 
arbitration rather than litigation; companies' alleged use of 
initial arbitration costs as a barrier to consumer-initiated 
disputes; arbitrators' alleged tendency to favor businesses 
over consumers in their rulings; and businesses' alleged 
tendency to require arbitration predominantly for those claims 
in which arbitration is more likely to benefit them.
    Based on these and other arguments, consumer advocates 
claim that the use of mandatory binding arbitration clauses 
should be curtailed. They also claim that mandatory binding 
arbitration clauses unfairly curtail consumer access to class 
actions.
    Those who support the use of mandatory binding arbitration, 
by contrast, argue that its elimination could leave small 
claimants with no effective legal recourse, and that strong 
institutional and market forces bearing on the use of 
arbitration in consumer contracts help to assure that consumers 
are fairly treated.\19\ For example, companies in competitive 
market sectors have interests in offering clauses that are 
framed in terms fair to consumers, in order to out-compete 
their rivals. Consumers, meanwhile, have incentives to seek out 
more favorable contract language offered by competing 
providers.
---------------------------------------------------------------------------
    \19\See, e.g., Testimony of Stephen J. Ware, Professor of Law, 
Joint Hearing on ``S.2838, the Fairness in Nursing Home Arbitration 
Act,'' Senate Committee on the Judiciary, Subcommittee on Antitrust, 
Competition and Consumer Rights and Senate Special Committee on Aging 
at 1-4 (June 18, 2008); Alan S. Kaplinsky and Mark J. Levin, Consumer 
Arbitration: If the FAA ``Ain't Broke,'' Don't Fix It,'' The Business 
Lawyer, Vol. 63, No. 3 (May 2008); Testimony of Mark J. Levin, Esq., 
``Hearing on Mandatory Binding Arbitration Agreements: Are They Fair 
for Consumers,'' Subcommittee on Commercial and Administrative Law, 
House Judiciary Committee (June 12, 2007) (``Levin Testimony'').
---------------------------------------------------------------------------
    Members of the arbitration sector, whose services will be 
used in disputes arising under arbitration clauses, likewise 
have competitive interests in offering services that are 
structured and delivered fairly to all participants, including 
consumers. This is particularly true in light of the ability of 
consumers to initiate arbitration.
    Courts, meanwhile, also place healthy pressures on the 
arbitration system. The courts review mandatory binding 
arbitration clauses for their validity and enforceability, and 
they can throw out clauses that violate contract and 
arbitration law. Courts have strong interests, moreover, in 
assuring that arbitration proceedings that will occur under the 
authority of their decisions are fair and capable of delivering 
just results for all concerned.
    Finally, the Federal Arbitration Act provides a statutory 
framework in which arbitration will take place. As a result, 
the arbitration system operates under a constant threat of 
congressional correction of abuses. This threat, of course, 
helps to curb the potential for abuse in the first place.
            3. LThe General Evidence for Mandatory Binding Arbitration 
                    Clauses
    The debate between proponents of these competing views is 
vigorous. Given the many strong forces acting to assure that 
mandatory binding arbitration clauses and the arbitrations 
pursuant to them are fair, however, it is perhaps not 
surprising that recent and growing evidence bears out the 
theory of those supporting the use of mandatory binding 
arbitration.
    Consumer-oriented companies, for example, have increasingly 
fostered consumer protection by offering so-called ``fair 
clauses.'' In these clauses, the rules of mandatory binding 
arbitration are fashioned so as to prevent undue advantages to 
companies. Such clauses increasingly are crafted to include 
provisions that: comply with the consumer ``due process'' 
procedures of the major arbitrating services; allow either 
party to invoke arbitration; provide for the payment of the 
difference between court and arbitration fees; allow for fee-
shifting to losing companies; permit requests from indigent 
consumers that companies pay the costs of arbitration, win or 
lose; and furnish off-ramps to small claims court for claims 
that would qualify for those fora.\20\ In addition, consumer 
contracts increasingly include opt-out clauses that allow 
consumers, for a time after entering into a contract, to opt-
out of mandatory binding arbitration clauses while preserving 
the rest of the bargain represented in their contract. The 
nursing home and assisted living sectors' model clause provides 
a good example of this, as it gives a generous, 30-day opt-out 
period.
---------------------------------------------------------------------------
    \20\See, e.g., Levin Testimony at 11-14.
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    Evidence from empirical studies also points to the 
conclusion that institutional and market forces are adequately 
assuring fairness to consumers. A study by Navigant Consulting 
published in 2008, for example, found that arbitration provides 
a substantial advantage to consumers. Analyzing results in 
California debt collection cases, the study found that 
consumers were four times more likely to lose in court than in 
arbitration.\21\ Our attention also has been drawn to a study 
by the California Dispute Resolution Institute, which is part 
of the University of San Francisco's Leo T. McCarthy Center for 
Public Service and the Common Good. This study found that 
arbitration produces a win for consumers more than 70 percent 
of the time. The study also found that arbitration resolved 
disputes in an average of 100 days, while litigation, by 
contrast, averaged two years.\22\
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    \21\Navigant Consulting, Memorandum re: National Arbitration Forum: 
California Consumer Arbitration Data at 1-4 (available at http://
www.instituteforlegalreform.com/issues/docload.cfm?docId=1212); U.S. 
Institute for Legal Reform, U.S. Chamber of Commerce, Arbitration 
Better than Court for Consumer Debtors, Study Shows at 1-2 (July 15, 
2008).
    \22\Letter from American Health Care Association, et al. to Reps. 
Linda Sanchez and Chris Cannon at 1 (July 14, 2008); Letter from U.S. 
Chamber of Commerce to Reps. Linda Sanchez and Chris Cannon at 1 (July 
14, 2008).
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    Consistent with this evidence, the National Arbitration 
Forum recently published a synopsis of independent studies and 
surveys concerning the benefits of consumer arbitration. The 
results of these studies, as concerns consumer interests, can 
be summarized as follows:

         LIndividuals prevail more often in arbitration 
        than in court;

         LConsumers, more specifically, prevail 20% 
        more often in arbitration than in court;

         LMonetary relief for individuals is higher in 
        arbitration than in lawsuits;

         LIndividuals receive a greater percentage of 
        the relief requested in arbitration;

         LArbitration is approximately 36% faster than 
        litigation;

         LSixty-four percent of American consumers 
        would choose arbitration over a lawsuit for monetary 
        damages; and

         LNinety-three percent of consumers using 
        arbitration find it to be fair.\23\
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    \23\National Arbitration Forum, The Case for Pre-Dispute 
Arbitration Agreements: Effective and Affordable Access to Justice for 
Consumers: Empirical Studies & Survey Results (2004).

    The results of these studies for business were similarly 
positive. For example, the NAF reported that 78% of business 
attorneys find that arbitration provides faster recovery than 
lawsuits, and 83% of business attorneys find arbitration to be 
as fair as or fairer than lawsuits.\24\
---------------------------------------------------------------------------
    \24\Id. at 2.
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    Separately, in December 2004, Ernst & Young issued a study 
of the outcomes of contractual arbitration in consumer-
initiated, lending-related cases. The results of this study 
were as follows:

         LConsumers prevailed in 55% of cases that went 
        to an arbitration hearing--the same win-rate that 
        consumers obtain in state court;

         LConsumers obtained favorable results (via 
        arbitration decision or settlement) in 79% of the cases 
        that were reviewed;

         L40% of consumers who brought arbitration 
        claims actually got their ``day in court,'' while only 
        2.8% of cases in state court ever reached trial;

         L69% of consumers surveyed indicated that they 
        were very satisfied with the arbitration process.\25\
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    \25\Ernst & Young, Outcomes of Arbitration: An Empirical Study of 
Consumer Lending Cases (2004).

    In April 2005, Harris Interactive released the results of 
an extensive survey of arbitration participants sponsored by 
the Institute for Legal Reform at the U.S. Chamber of Commerce. 
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Prominent among this study's findings were that:

         LArbitration was widely seen as faster (74%), 
        simpler (63%), and cheaper (51%) than going to court;

         LTwo-thirds (66%) of participants said they 
        would be likely to use arbitration again, with nearly 
        half (48%) saying they were extremely likely to do so;

         LEven among those who lost, one-third said 
        they were at least somewhat likely to use arbitration 
        again;

         LMost participants were very satisfied with 
        the arbitrator's performance, the confidentiality of 
        the process, and the length of the process;

         LPerhaps predictably, winners found the 
        process and outcome very fair and losers found the 
        outcome much less fair. Forty percent of those who 
        lost, however, remained moderately to highly satisfied 
        with the fairness of the process, and 21% were 
        moderately to highly satisfied with the outcome.\26\
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    \26\U.S. Chamber Institute for Legal Reform, Arbitration: Simple, 
Cheaper and Faster than Litigation: A Harris Interactive Study (2005).

    In short, the weight of evidence suggests that mandatory 
binding arbitration does not result in unfairness to consumers. 
If anything were likely to injure the interests that would be 
affected by H.R. 6126 or other, similar proposals, it would be 
the limitation of the availability of arbitration to consumers 
seeking to resolve their disputes. Simple, bedrock principles 
of economics tell us that when fewer services are available 
with less competition (e.g., only litigation, only in the 
courts) that inevitably prejudices the consumer. Similarly, as 
one expert who testified before us has noted, if the 
restriction of arbitration introduces an economic drag on the 
economy, it will do so at a most inopportune time, given the 
economy's current state.\27\
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    \27\Letter from Professor Peter B. Rutledge to the Honorable John 
Conyers and the Honorable Lamar Smith at 1-2 (July 14, 2008).
---------------------------------------------------------------------------
D. LThe Unfolding Class-Action Scandal
    Lastly, we must bear in mind that it is largely to the 
class-action lawsuit industry that H.R. 6126 could send nursing 
home and assisted living residents and their families. That 
industry, however, is currently being rocked by a major 
scandal. This scandal involves, among other things, fabricated 
testimony, bought and sold to support false claims. Multiple 
renowned class action lawyers have been exposed and convicted 
in the scandal. One of them, William Lerach of Milberg Weiss, 
told the press that illegal kickbacks to people recruited to 
file class action lawsuits is an ``industry practice.''\28\ He 
and fellow trial lawyer Melvin Weiss engineered a $250 million 
criminal scheme to pay people to sue companies and are now 
federal prisoners.\29\ Another of America's most prominent 
trial lawyers, Richard Scruggs of Mississippi, pled guilty 
earlier this year to bribing a state judge to obtain more legal 
fees.\30\
---------------------------------------------------------------------------
    \28\See, e.g., Peter Lattman, Closing Argument: Mr. Lerach Mulls 
Life Behind Bars--Guilty but Defiant, the Plaintiffs' Lawyer Kicks Back 
in La Jolla, Wall Street Journal at A1 (Feb. 12, 2008); Jonathan D. 
Glater, Big Penalty Set for Law Firm, but not a Trial, New York Times 
(June 17, 2008).
    \29\See, e.g., Nathan Koppel, Milberg Is Expected To Admit 
Wrongdoing in Settlement, Wall Street Journal at A4 (June 14, 2008).
    \30\See, e.g., Nathan Koppel, Class-Action Law Firm Close to a 
Settlement, Wall Street Journal at A1 (June 2, 2008).
---------------------------------------------------------------------------
    In light of the developing scandal, there has been a call 
for ``a sober discussion about how best to achieve a fairer, 
more balanced legal system through comprehensive tort 
reform.''\31\ On May 2, 2008, Minority Leader John Boehner and 
House Judiciary Committee Ranking Member Lamar Smith called on 
House Judiciary Committee Chairman John Conyers to schedule 
swift hearings on these confirmed abuses within the legal 
system.\32\ The response from the majority, however, has been 
slow in coming. Currently, a forum on this issue is planned for 
sometime in September 2008, but the majority has not enabled 
hearings.
---------------------------------------------------------------------------
    \31\``A Fall and a Lesson,'' The Washington Post (April 9, 2008) 
(editorial).
    \32\Minority Leader Boehner's and Ranking Member Smith's letter is 
available online at http://republicanleader.house.gov/News/
DocumentSingle.aspx?DocumentID=90345.
---------------------------------------------------------------------------
    When the heads of corrupt companies such as Enron were 
exposed, concerned Republicans and Democrats alike called for 
bipartisan hearings into the accounting industry. By contrast, 
when the heads of the class-action lawsuit industry are 
exposed, the result from Democrats is not congressional 
investigation. It is bills such as H.R. 6126 that would wipe 
out important parts of the arbitration system and generate 
still more lawsuit business for trial lawyers. We firmly 
believe that to be the wrong response. Bills such as H.R. 6126 
should, at a minimum, wait until Congress has fully plumbed the 
class action scandal.

                     III. LEGISLATIVE CONSIDERATION

A. LHearings
    The Subcommittee on Commercial and Administrative Law held 
two legislative hearings relevant to H.R. 6126. First, on June 
12, 2007, the Subcommittee held a general oversight hearing on 
mandatory arbitration in consumer settings. This hearing 
focused on more typical consumer claims, such as credit-cards 
claims, but it offered strong evidence that arbitration 
generally works better and faster for consumers than does 
litigation. Much of this evidence is discussed above.\33\
---------------------------------------------------------------------------
    \33\See supra at 6-10.
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    Second, on June 10, 2008, the Subcommittee held a 
legislative hearing on H.R. 6126 itself. This hearing failed to 
show that there is any widespread abuse of arbitration in the 
nursing home and assisted living sectors. For example, while 
witnesses appearing on behalf of the trial bar and the American 
Association of Retired Persons alleged that there are quality-
of-care shortcomings in nursing homes and assisted living 
facilities, they failed to demonstrate that the arbitration 
system is producing unfair results in these sectors. Indeed, 
their evidence consisted largely of sweeping generalities and 
opinions, unsupported by hard, empirical evidence. In addition, 
they erroneously premised their testimony on the view that 
arbitration agreements are generally foisted on residents and 
their families as a condition of admission, under conditions of 
duress. This obviously ignores the widespread model arbitration 
practices in the sectors, which do not make admission 
contingent on agreement to mandatory arbitration, and which 
allow for a 30-day opt-out period so that final agreements on 
arbitration can be made upon unhurried reflection. For all of 
these reasons, their evidence largely missed the point. 
Finally, the remaining proponent of the bill, an individual 
witness who appeared to discuss her specific case, could not 
identify any unfair feature of the arbitration award rendered 
in that proceeding.
    In fact, quite contrary to showing a need to restrict 
mandatory binding arbitration, the June 2008 hearing showed 
that the model arbitration clause used in the nursing home and 
assisted living sectors is quite fair; that arbitration has 
gone a long way to control the spiraling, lawsuit-driven costs 
of operation that threatened to shutter many facilities in the 
1990s; and that, if any reforms are needed in this area, they 
should be found in efforts to make arbitration agreements and 
their negotiation still more transparent and thus better 
informed. Certainly, we should not be enacting legislation 
flying in the face of the long-standing federal promotion of 
arbitration--and nullifying the contracting rights of parties 
to thousands upon thousands of existing arbitration 
agreements--without a much more substantial showing that there 
is a systemic problem that we need to solve.
B. L Subcommittee Mark-up
    At subcommittee mark-up, Republicans offered several 
amendments to H.R. 6126. The first of these attempted to make 
the bill's provisions strictly prospective. The second carved 
out claims against doctors and other highly trained health 
professionals, while allowing the bill's provisions to apply to 
claims against facilities. Republicans also proposed to delay 
the bill's effective date until the GAO could determine whether 
the bill would drive up Medicare entitlement costs. 
Republicans' final amendment proposed to suspend the bill's 
provisions if a study of average-time-to-litigate showed that 
claims involving personal injuries were taking more than six 
months on average to work their way through the courts.
    Together, these amendments would have ameliorated a number 
of the bill's significant adverse effects. None was supported 
by the majority, however. The health professionals carve-out, 
for example, was rejected on a 6-4 party line vote, although 
the purported reasons for the bill concern disputes between 
residents and facilities, not residents and health care 
professionals. Republicans' Medicare amendment was not even 
granted a vote. Notwithstanding the fundamental importance of 
preventing undue increases in Medicare costs, the majority 
ruled Republicans' Medicare amendment non-germane. The 
Republican ``speedy judgments'' amendment was voted down, 
despite its particular importance to (1) speeding effective 
relief for Americans in their twilight years and (2) keeping 
down litigation costs for elderly, fixed-income residents. With 
regard to retroactivity, Subcommittee Chairwoman Sanchez, the 
bill's lead sponsor, did clarify that the bill was intended 
only to be prospective; the amendment was thus subsequently 
withdrawn.
C. LFull Committee Mark-up
    Again at full committee mark-up, Republicans offered a 
series of amendments aimed at preventing the bill's adverse 
effects. Again, Democrats opposed these amendments.
    Two of the Republican amendments honed in on the bill's 
sacrifice of the interests of residents and the health care 
system to the interests of the plaintiffs trial bar. Both 
allowed residents, at their option, to continue to arbitration 
their disputes. The first also limited attorneys' fees to a 
maximum of $1,000 per hour when residents chose to litigate; 
further limited fees to what lawyers would have charged for 
arbitration, when they did no better in litigation than they 
would have done in arbitration; and required the GAO to study 
hourly fees charged in class actions. The second amendment 
would have strongly policed the use of bought, sold and fake 
class-action evidence in lawsuits brought in the wake of the 
bill. It would have done this by exposing class action lawyers 
and their firms to liability for treble damages for fees and 
judgments purloined on the basis of fake, purchased evidence.
    Both of these amendments were voted down by Democrats. 
Thus, the majority opted not only to favor the interests of 
trial lawyers over the interests of residents, but to ignore 
entirely the issues brought front and center by the burgeoning 
class action scandal. Remarkably, Democrats even opposed these 
amendments as one of their members explicitly acknowledged that 
lawyers would not take residents' cases that did not promise 
big returns for lawyers--leaving hordes of small claimants out 
in the cold.\34\
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    \34\Stakeholders weighing in on H.R. 6126 also pointed us to the 
bill's potential to leave small claimants without effective recourse. 
See, e.g., Letter from American Health Care Association, et al. to 
Reps. Linda Sanchez and Chris Cannon at 2 (July 14, 2008) (``According 
to one survey, plaintiffs' employment lawyers said they would not take 
a case unless it was worth at least $60,000, on average. Therefore, 
without the option of arbitration, consumers would be faced with two 
choices-to try to navigate the legal system on their own, or to abandon 
their claim.''); Letter from U.S. Chamber of Commerce to Reps. Linda 
Sanchez and Chris Cannon at 2 (July 14, 2008) (same). Professor Stephen 
Ware of the University of Kansas School of Law submitted similar 
testimony to the Senate as it considered H.R. 6126's companion 
legislation in that chamber. See Ware Testimony at 1-4.
---------------------------------------------------------------------------
    As at subcommittee mark-up, Republicans also offered an 
amendment to delay the bill's effective date until the GAO can 
determine whether the bill will drive up Medicare entitlement 
costs. Again, Democrats shuffled this issue off the table, 
ruling the amendment non-germane. Republicans also offered 
their amendment to carve out disputes between residents and 
health care professionals. Again, Democrats voted the amendment 
down, although their purported focus was on eliminating 
arbitration between residents and facilities.
    Finally, Republicans offered an amendment to preserve 
arbitration agreements that follow the remarkably fair, leading 
edge model arbitration agreement used in the nursing home and 
assisted living sectors. Democrats claimed through the bill to 
want to restore fairness to arbitration; had they supported 
this amendment, they would have advanced both fairness and 
arbitration. They voted against the amendment, however, and 
thus set both causes back.

                             IV. CONCLUSION

    As the above reflects, no compelling case has been made 
that mandatory arbitration is generally failing to bring fair 
and effective dispute resolution to nursing home and assisted 
living residents and their families. On the contrary, 
arbitration in these sectors is characterized by extremely fair 
model practices and has a record of effectively controlling 
costs for residents and facilities. What is needed is to 
encourage arbitration, not to wipe it out. That is particularly 
so when we know that the litigation alternative--including 
class-action litigation--has a record of abuse, is sure to 
produce a vicious cycle of escalating costs, and is mired in 
scandal. For these and all of the above reasons, we oppose H.R. 
6126.

                                   Lamar Smith.
                                   Chris Cannon.
                                   Jim Jordan.

                                 
