[House Report 116-204]
[From the U.S. Government Publishing Office]


116th Congress }                                             { Report
                        HOUSE OF REPRESENTATIVES
 1st Session   }                                             { 116-204

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

 
                FORCED ARBITRATION INJUSTICE REPEAL ACT

                                _______
                                

 September 13, 2019.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

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

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 1423]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 1423) to amend title 9 of the United States Code 
with respect to arbitration, having considered the same, report 
favorably thereon with an amendment and recommend that the bill 
as amended do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     4
Background and Need for the Legislation..........................     4
Hearings.........................................................    15
Committee Consideration..........................................    16
Committee Votes..................................................    16
Committee Oversight Findings.....................................    24
New Budget Authority and Tax Expenditures and Congressional 
  Budget Office Cost Estimate....................................    24
Duplication of Federal Programs..................................    24
Performance Goals and Objectives.................................    24
Advisory on Earmarks.............................................    24
Section-by-Section Analysis......................................    24
Changes in Existing Law Made by the Bill, as Reported............    26
Dissenting Views.................................................    29

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Forced Arbitration Injustice Repeal 
Act'' or the ``FAIR Act''.

SEC. 2. PURPOSES.

  The purposes of this Act are to--
          (1) prohibit predispute arbitration agreements that force 
        arbitration of future employment, consumer, antitrust, or civil 
        rights disputes, and
          (2) prohibit agreements and practices that interfere with the 
        right of individuals, workers, and small businesses to 
        participate in a joint, class, or collective action related to 
        an employment, consumer, antitrust, or civil rights dispute.

SEC. 3. ARBITRATION OF EMPLOYMENT, CONSUMER, ANTITRUST, AND CIVIL 
                    RIGHTS DISPUTES.

  (a) In General.--Title 9 of the United States Code is amended by 
adding at the end the following:

``CHAPTER 4--ARBITRATION OF EMPLOYMENT, CONSUMER, ANTITRUST, AND CIVIL 
                            RIGHTS DISPUTES

``401. Definitions.
``402. No validity or enforceability.

``Sec. 401. Definitions

  ``In this chapter--
          ``(1) the term `antitrust dispute' means a dispute--
                  ``(A) arising from an alleged violation of the 
                antitrust laws (as defined in subsection (a) of the 
                first section of the Clayton Act) or State antitrust 
                laws; and
                  ``(B) in which the plaintiffs seek certification as a 
                class under rule 23 of the Federal Rules of Civil 
                Procedure or a comparable rule or provision of State 
                law;
          ``(2) the term `civil rights dispute' means a dispute--
                  ``(A) arising from an alleged violation of--
                          ``(i) the Constitution of the United States 
                        or the constitution of a State;
                          ``(ii) any Federal, State, or local law that 
                        prohibits discrimination on the basis of race, 
                        sex, age, gender identity, sexual orientation, 
                        disability, religion, national origin, or any 
                        legally protected status in education, 
                        employment, credit, housing, public 
                        accommodations and facilities, voting, veterans 
                        or servicemembers, health care, or a program 
                        funded or conducted by the Federal Government 
                        or State government, including any law referred 
                        to or described in section 62(e) of the 
                        Internal Revenue Code of 1986, including parts 
                        of such law not explicitly referenced in such 
                        section but that relate to protecting 
                        individuals on any such basis; and
                  ``(B) in which at least 1 party alleging a violation 
                described in subparagraph (A) is one or more 
                individuals (or their authorized representative), 
                including one or more individuals seeking certification 
                as a class under rule 23 of the Federal Rules of Civil 
                Procedure or a comparable rule or provision of State 
                law;
          ``(3) the term `consumer dispute' means a dispute between--
                  ``(A) one or more individuals who seek or acquire 
                real or personal property, services (including services 
                related to digital technology), securities or other 
                investments, money, or credit for personal, family, or 
                household purposes including an individual or 
                individuals who seek certification as a class under 
                rule 23 of the Federal Rules of Civil Procedure or a 
                comparable rule or provision of State law; and
                  ``(B)(i) the seller or provider of such property, 
                services, securities or other investments, money, or 
                credit; or
                  ``(ii) a third party involved in the selling, 
                providing of, payment for, receipt or use of 
                information about, or other relationship to any such 
                property, services, securities or other investments, 
                money, or credit;
          ``(4) the term `employment dispute' means a dispute between 
        one or more individuals (or their authorized representative) 
        and a person arising out of or related to the work relationship 
        or prospective work relationship between them, including a 
        dispute regarding the terms of or payment for, advertising of, 
        recruiting for, referring of, arranging for, or discipline or 
        discharge in connection with, such work, regardless of whether 
        the individual is or would be classified as an employee or an 
        independent contractor with respect to such work, and including 
        a dispute arising under any law referred to or described in 
        section 62(e) of the Internal Revenue Code of 1986, including 
        parts of such law not explicitly referenced in such section but 
        that relate to protecting individuals on any such basis, and 
        including a dispute in which an individual or individuals seek 
        certification as a class under rule 23 of the Federal Rules of 
        Civil Procedure or as a collective action under section 16(b) 
        of the Fair Labor Standards Act, or a comparable rule or 
        provision of State law;
          ``(5) the term `predispute arbitration agreement' means an 
        agreement to arbitrate a dispute that has not yet arisen at the 
        time of the making of the agreement; and
          ``(6) the term `predispute joint-action waiver' means an 
        agreement, whether or not part of a predispute arbitration 
        agreement, that would prohibit, or waive the right of, one of 
        the parties to the agreement to participate in a joint, class, 
        or collective action in a judicial, arbitral, administrative, 
        or other forum, concerning a dispute that has not yet arisen at 
        the time of the making of the agreement.

``Sec. 402. No validity or enforceability

  ``(a) In General.--Notwithstanding any other provision of this title, 
no predispute arbitration agreement or predispute joint-action waiver 
shall be valid or enforceable with respect to an employment dispute, 
consumer dispute, antitrust dispute, or civil rights dispute.
  ``(b) Applicability.--
          ``(1) In general.--An issue as to whether this chapter 
        applies with respect to a dispute shall be determined under 
        Federal law. The applicability of this chapter to an agreement 
        to arbitrate and the validity and enforceability of an 
        agreement to which this chapter applies shall be determined by 
        a court, rather than an arbitrator, irrespective of whether the 
        party resisting arbitration challenges the arbitration 
        agreement specifically or in conjunction with other terms of 
        the contract containing such agreement, and irrespective of 
        whether the agreement purports to delegate such determinations 
        to an arbitrator.
          ``(2) Collective bargaining agreements.--Nothing in this 
        chapter shall apply to any arbitration provision in a contract 
        between an employer and a labor organization or between labor 
        organizations, except that no such arbitration provision shall 
        have the effect of waiving the right of a worker to seek 
        judicial enforcement of a right arising under a provision of 
        the Constitution of the United States, a State constitution, or 
        a Federal or State statute, or public policy arising 
        therefrom.''.
  (b) Technical and Conforming Amendments.--
          (1) In general.--Title 9 of the United States Code is 
        amended--
                  (A) in section 1 by striking ``of seamen,'' and all 
                that follows through ``interstate commerce,'' and 
                inserting in its place ``of individuals, regardless of 
                whether such individuals are designated as employees or 
                independent contractors for other purposes'',
                  (B) in section 2 by inserting ``or as otherwise 
                provided in chapter 4'' before the period at the end,
                  (C) in section 208--
                          (i) in the section heading by striking 
                        ``chapter 1; residual application'' and 
                        inserting ``application'', and
                          (ii) by adding at the end the following: 
                        ``This chapter applies to the extent that this 
                        chapter is not in conflict with chapter 4.'', 
                        and
                  (D) in section 307--
                          (i) in the section heading by striking 
                        ``chapter 1; residual application'' and 
                        inserting ``application'', and
                          (ii) by adding at the end the following: 
                        ``This chapter applies to the extent that this 
                        chapter is not in conflict with chapter 4.''.
          (2) Table of sections.--
                  (A) Chapter 2.--The table of sections of chapter 2 of 
                title 9, United States Code, is amended by striking the 
                item relating to section 208 and inserting the 
                following:

``208. Application.''.

                  (B) Chapter 3.--The table of sections of chapter 3 of 
                title 9, United States Code, is amended by striking the 
                item relating to section 307 and inserting the 
                following:

``307. Application.''.

          (3) Table of chapters.--The table of chapters of title 9, 
        United States Code, is amended by adding at the end the 
        following:

``4. Arbitration of employment, consumer, antitrust, and civil rights 
disputes''.

SEC. 4. EFFECTIVE DATE.

  This Act, and the amendments made by this Act, shall take effect on 
the date of enactment of this Act and shall apply with respect to any 
dispute or claim that arises or accrues on or after such date.

                          Purpose and Summary

    H.R. 1423, the ``Forced Arbitration Injustice Repeal Act'' 
or the ``FAIR Act,'' would prohibit the enforcement of 
mandatory, pre-dispute arbitration (``forced arbitration'') 
provisions in contracts involving consumer, employment, 
antitrust, and civil rights disputes. This critically important 
measure would restore access to justice for millions of 
Americans who are currently locked out of the court system and 
are forced to settle their disputes against companies in a 
private system of arbitration that often favors the company 
over the individual. H.R. 1423 is supported by a broad 
coalition of more than 70 public interest, labor, and advocacy 
organizations, including Public Citizen, Consumer Reports, the 
American Association of Justice, the Communications Workers of 
America, the Leadership Conference on Civil Rights, and the 
American Antitrust Institute.\1\
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    \1\Partners, Fair Arbitration NOW, https://fairarbitrationnow.org/
coalition/ (last visited on Sept. 5, 2019); Letter from Fair 
Arbitration Now, Advocacy Coalition, to Reps. David N. Cicilline (D-
RI), Chairman, and F. James Sensenbrenner (R-WI), Ranking Member, 
Subcomm. on Antitrust, Commercial & Admin. Law of the H. Comm. on the 
Judiciary (May 16, 2019), https://docs.house.gov/meetings/JU/JU05/
20190516/109484/HHRG-116-JU05-20190516-SD009.pdf.
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                Background and Need for the Legislation

    Over the past several decades, forced arbitration clauses 
have become virtually ubiquitous in everyday contracts.\2\ 
Often buried deep within the fine print of employment and 
consumer contracts, forced arbitration deprives millions of 
Americans of their day in court to enforce state and federal 
rights.\3\ Because arbitration lacks the transparency and 
precedential guidance of the justice system, there is no 
guarantee that the relevant law will be applied to these 
disputes or that fundamental notions of fairness and equity 
will be upheld in the process.\4\
---------------------------------------------------------------------------
    \2\Jessica Silver-Greenberg & Robert Gebeloff, Arbitration 
Everywhere, Stacking Deck of Justice, N.Y. Times (Nov. 1, 2015), 
https://nyti.ms/2k6cZ1z (``[B]y inserting individual arbitration 
clauses into a soaring number of consumer and employment contracts, 
companies . . . devised a way to circumvent the courts and bar people 
from joining together in class-action lawsuits, realistically the only 
tool citizens have to fight illegal or deceitful business 
practices.'').
    \3\Consumer Fin. Prot. Bureau, Arbitration Study Rep. to Cong., 
Pursuant to Dodd Frank Wall Street Reform and Consumer Protection Act 
1028(a) (2015), http://files.consumerfinance.gov/f/
201503_cfpb_arbitration-study-report-to-congress-2015.pdf.
    \4\See, e.g., Myriam Gilles, The Day Doctrine Died: Private 
Arbitration and the End of Law, 2016 U. Ill. L. Rev. 371 (2016).
---------------------------------------------------------------------------
    Unlike the judicial system--in which courts' decisions are 
generally public and, by building on precedent, cumulatively 
create a body of law--the results of arbitration disputes are 
often secret.\5\ For example, the arbitration protocols for the 
American Arbitration Association state that the arbitrators of 
consumer disputes must ``maintain the privacy of the hearing to 
the extent permitted by applicable law.''\6\ A coalition of 
state attorneys general--representing all 50 states, the 
District of Columbia, and several U.S. territories--have 
similarly noted that, within the context of the application of 
forced arbitration to workplace sexual harassment claims, the 
``veil of secrecy'' required by arbitration may prevent 
similarly situated persons from learning of illegal conduct and 
seeking relief,\7\ referring to this phenomenon as a ``culture 
of silence that protects perpetrators at the cost of their 
victims.''\8\
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    \5\Justice Denied: Forced Arbitration and the Erosion of our Legal 
System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before the 
Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the 
Judiciary, 116th Cong. 3-4 (2019) (statement of Gretchen Carlson; 
statement of Professor Myriam Gilles, Paul R. Verkuil Chair in Pub. 
Law, Benjamin N. Cardozo Sch. of Law, at 10).
    \6\Consumer Due Process Protocol, Principle 12.2, Am. Arbitration 
Ass'n, https://www.adr.org/sites/default/files/document_repository/
Consumer%20Due%20Process%20Protocol%20(1).pdf.
    \7\Letter from Nat'l Ass'n of Att'ys Gen. to Cong. Leadership (Feb. 
12, 2018), 
http://myfloridalegal.com/webfiles.nsf/WF/HFIS-AVWMYN/$file/
NAAG+letter+to+Congress+Sexual+Harassment+Mandatory+Arbitration.pdf.
    \8\Id.
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    Forced arbitration also lacks many of the procedural 
safeguards of the justice system.\9\ For example, in forced 
arbitration, a company may increase the expense of bringing a 
claim,\10\ limit discovery,\11\ or eliminate protections 
related to the geographic proximity of the resolution 
forum,\12\ formal civil procedure rules, access to counsel,\13\ 
and the right to bring similar claims jointly.\14\ The company 
imposing arbitration often selects the presiding arbitrator or 
arbitration provider,\15\ creating a conflict of interest in 
which the purportedly neutral arbitrator may be motivated by 
the prospect of obtaining repeat business from the company 
rather than focused on fairly assessing the claim.\16\
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    \9\Id.
    \10\Arbitration clauses may 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, 67 Law & Contemp. 
Probs. 221, 234-35 (July 31, 2004).
    \11\See Katherine Palm, Note, Arbitration Clauses in Nursing Home 
Admission Agreements: Framing the Debate, 14 Elder L.J. 453, 478 n.172 
(2006).
    \12\See Ziva Branstetter, Nursing Home Policy Challenged, Tulsa 
World (Mar. 4, 2002), https://www.tulsaworld.com/archives/nursing-home-
policy-challenged/article_6131212f-481c-59c4-af51-
7c2a188e37f9.html (Oklahoma nursing home's arbitration clause requires 
residents to travel to New Mexico at their own expense for arbitration 
proceeding).
    \13\The lower probability of victory and legal fees may discourage 
some attorneys from representing individuals in arbitration 
proceedings. See Charles L. Knapp, Taking Contracts Private: The Quiet 
Revolution in Contract Law, 71 Fordham L. Rev. 761, 783-84 (2002).
    \14\See Jean R. Sternlight, As Mandatory Binding Arbitration Meets 
the Class Action, Will the Class Action Survive?, 42 Wm. & Mary L. Rev. 
1, 6 (2000).
    \15\The major arbitration providers include the American 
Arbitration Association and JAMS, which set their own procedures, 
contract with agencies and companies to arbitrate future disputes, and 
provide arbitrators and panels to hear disputes. Katherine V.W. Stone & 
Alexander J.S. Colvin, Econ. Policy Inst., The Arbitration Epidemic: 
Mandatory Arbitration Deprives Workers and Consumers of Their Rights 17 
(EPI Briefing Paper No. 414, 2015), https://www.epi.org/publication/
the-arbitration-epidemic/.
    \16\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).
---------------------------------------------------------------------------
    As a result of the decline of enforcement of state and 
federal statutory protections, forced arbitration makes it more 
likely that corporate harms and abuse will go unchallenged. As 
Professor Myriam Gilles of Benjamin N. Cardozo School of Law 
testified at the hearing on forced arbitration before the 
Judiciary Committee's Subcommittee on Antitrust, Commercial, 
and Administrative Law (ACAL), many companies' arbitration 
clauses specifically identify federal protections that cannot 
be enforced in court, such as rights under the Civil Rights Act 
of 1964 and the Family Medical Leave Act.\17\ In this respect, 
as Professor Gilles observes, ``forced arbitration is not an 
alternative regime for resolving claims, it is a means of 
suppressing legal claims altogether.'' \18\ Judge William G. 
Young, who was appointed by President Ronald Reagan, likewise 
stated that the proliferation of forced arbitration clauses 
means that ``business has a good chance of opting out of the 
legal system altogether and misbehaving without reproach.'' 
\19\ Deepak Gupta, a leading public interest attorney, 
similarly testified that forced arbitration has undermined the 
enforcement of statutory rights.\20\ He explained:
---------------------------------------------------------------------------
    \17\Justice Denied: Forced Arbitration and the Erosion of our Legal 
System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before the 
Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the 
Judiciary, 116th Cong. 7 (2019) (statement of Myriam Gilles, Paul R. 
Verkuil Chair in Pub. Law, Benjamin N. Cardozo Sch. of Law).
    \18\Arbitration in America: Hearing Before the S. Comm. on the 
Judiciary, 116th Cong. 1 (2019) (Responses to Questions for the Record 
of Professor Myriam Gilles, Paul R. Verkuil Chair in Pub. Law, Benjamin 
N. Cardozo Sch. of Law).
    \19\Jessica Silver-Greenberg & Robert Gebeloff, Arbitration 
Everywhere, Stacking Deck of Justice, N.Y. Times (Oct. 31, 2015), 
https://nyti.ms/2k6cZ1z (``[B]y inserting individual arbitration 
clauses into a soaring number of consumer and employment contracts, 
companies . . . devised a way to circumvent the courts and bar people 
from joining together in class-action lawsuits, realistically the only 
tool citizens have to fight illegal or deceitful business 
practices.'').
    \20\Justice Denied: Forced Arbitration and the Erosion of our Legal 
System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before the 
Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the 
Judiciary, 116th Cong. 2 (2019) (statement of Deepak Gupta, Founding 
Principal, Gupta Wessler PLLC).

          As the U.S. Supreme Court has itself acknowledged, 
        the presence of a forced arbitration clause often means 
        that Americans will have no effective method of 
        asserting their rights or getting justice under federal 
        laws that could otherwise have been enforced in a 
        court--consumer protection or antitrust laws, for 
        example, or prohibitions on sex or race discrimination. 
        If Congress passes laws that can't be enforced in the 
        real world, what good are those laws? \21\
---------------------------------------------------------------------------
    \21\Id.

    Although proponents of arbitration claim that it decreases 
litigation costs for consumers, consumers often do not receive 
any benefit of reduced costs through forced arbitration.\22\ 
Instead, arbitration clauses appear to dissuade consumers from 
adjudicating disputes altogether.\23\ Moreover, the lower 
probability of victory, and meager legal fees associated with 
forced arbitration may also discourage attorneys from 
representing individuals in arbitration proceedings.\24\ As 
Justice Stephen G. Breyer explained:
---------------------------------------------------------------------------
    \22\Consumer Fin. Prot. Bureau, Arbitration Study Rep. to Cong., 
Pursuant to Dodd-Frank Wall Street Reform and Consumer Protection Act 
1028(a), at 10 (2015), http://files.consumerfinance.gov/f/
201503_cfpb_arbitration-study-report-to-congress-2015.pdf (``Using two 
measures of credit offered, we did not find any statistically 
significant evidence that companies that eliminated arbitration 
provisions reduced the credit they offered.'').
    \23\Justice Denied: Forced Arbitration and the Erosion of our Legal 
System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before the 
Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the 
Judiciary, 116th Cong. 3 4 (2019) (statement of Deepak Gupta, Founding 
Principal, Gupta Wessler PLLC).
    \24\See Charles L. Knapp, Taking Contracts Private: The Quiet 
Revolution in Contract Law, 71 Fordham L. Rev. 761, 783 84 (2002).

          What rational lawyer would have signed on to 
        represent the [plaintiffs] in litigation for the 
        possibility of fees stemming from a $30.22 claim . . . 
        ? The realistic alternative to a class action is not 17 
        million individual suits, but zero individual suits, as 
        only a lunatic or a fanatic sues for $30.\25\
---------------------------------------------------------------------------
    \25\AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 365 (2011) 
(Breyer, J. dissenting).

    Supporters of forced arbitration also argue that doing away 
with it would lead to more class action lawsuits, the costs of 
which would ultimately be borne by consumers.\26\ For example, 
Alan Kaplinsky, a senior prtner and Practice Leader at the 
Consumer Financial Services Group at Ballard Spahr LLP, who 
testified before the Senate Judiciary Committee on April 2, 
2019,\27\ cited a study by the Consumer Financial Protection 
Bureau estimating that a proposed rule limiting arbitration 
clauses would cost financial services providers between $2.62 
and $5.23 billion over a five-year period.\28\ Professor 
Gilles, however, rejected this concern, noting that large 
companies that do not use forced arbitration in their consumer 
contracts such as Capital One and Bank of America have not 
experienced significant upticks in litigation.\29\ Furthermore, 
businesses concerned with additional liability risk could 
address this concern by adhering to state and federal law.
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    \26\Alan S. Kaplinsky & Mark J. Levin, The CFPB's Final Arbitration 
Rule Run Amok, THE REG. REV. (Sep. 11, 2017), https://
www.theregreview.org/2017/09/11/kaplinsky-levin-cfpb-arbitration-rule/
siness/dealbook/in-arbitration-a-privatization-of-the-justice-
system.html.
    \27\Arbitration in America: Hearing Before the S. Comm on the 
Judiciary, 116th Cong. 6 (2019) (statement of Alan S. Kaplinsky, 
Partner, Ballard Spahr LLP).
    \28\Id. at 4.
    \29\ Justice Denied: Forced Arbitration and the Erosion of our 
Legal System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before the 
Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the 
Judiciary, 116th Cong. 11 n.59 (2019) (statement of Professor Myriam 
Gilles, Paul R. Verkuil Chair in Pub. Law, Benjamin N. Cardozo Sch. of 
Law).
---------------------------------------------------------------------------
    In sum, forced arbitration has transferred the rights of 
workers and consumers to a secretive, closed, and private 
system designed by corporate interests to evade oversight and 
accountability.\30\ Unsurprisingly, 84% of Americans across the 
political spectrum support ending forced arbitration in 
employment and consumer disputes.\31\
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    \30\Jessica Silver-Greenberg & Robert Gebeloff, In Arbitration, `A 
Privatization of the Justice System,' N.Y. Times (Nov. 1, 2015), 
https://www.nytimes.com/2015/11/02/business/dealbook/in-arbitration-a-
privatization-of-the-justice-system.html.
    \31\See Guy Molyneux & Geoff Garin, National Survey on Required 
Arbitration, Hart Research Assocs. (Feb. 28, 2019), https://
www.justice.org/sites/default/files/2.28.19%20Hart%20poll%20memo.pdf.
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     RECENT CASE LAW IGNORES THE LEGISLATIVE INTENT OF THE FEDERAL 
                            ARBITRATION ACT

    On February 12, 1925, Congress codified the use of 
arbitration through the Federal Arbitration Act (FAA).\32\ The 
FAA was adopted to put arbitration agreements on equal footing 
with other contracts in certain disputes.\33\ The legislative 
history of the FAA suggests that the law was intended to 
narrowly apply to disputes between merchants, not between a 
business and its consumers or workers.\34\ In 1967, the Supreme 
Court characterized the FAA as ``plainly designed'' to include 
protections against ``captive customers or employees.''\35\ The 
Court noted that it was clear from congressional debate on the 
Act that Congress did not intend for parties with unequal 
bargaining power to be forced to arbitrate claims on a ``take-
it-or-leave-it basis'':
---------------------------------------------------------------------------
    \32\Pub. L. No. 68-401, 43 Stat. 883 (1925) (codified at 9 U.S.C. 
Sec. Sec. 1-16 (2019)).
    \33\H.R. Rep. No. 68-96, at 1 (1924) (``The purpose of this bill is 
to make valid and enforcible [sic] agreements for arbitration . . . in 
the Federal courts.'').
    \34\See, e.g., H.R. Rep No. 68-96, at 1 (1924); Christopher R. 
Leslie, The Arbitration Bootstrap, 94 Tex. L. Rev. 265, 305 (2015) 
(``The most important fact about the testimony, hearings, and reports 
leading up to congressional enactment of the FAA is that every witness, 
every Senator, and every Representative discussed one issue and one 
issue only: arbitration of contract disputes between merchants.'').
    \35\Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 
414 (1967).

          On several occasions [Members of Congress] expressed 
        opposition to a law which would enforce even a valid 
        arbitration provision contained in a contract between 
        parties of unequal bargaining power. Senator Walsh 
        cited insurance, employment, construction, and shipping 
        contracts as routinely containing arbitration clauses 
        and being offered on a take-it-or-leave-it basis to 
        captive customers or employees. He noted that such 
        contracts ``are really not voluntarily (sic) things at 
        all'' because ``there is nothing for the man to do 
        except to sign it; and then he surrenders his right to 
        have his case tried by the court.'' He was emphatically 
        assured by the supporters of the bill that it was not 
        their intention to cover such cases.\36\
---------------------------------------------------------------------------
    \36\Id. (quoting Sales and Contracts to Sell in Interstate and 
Foreign Commerce, and Federal Commercial Arbitration: Hearing on S. 
4213 and S. 4214 Before the Subcomm. of the S. Comm. on the Judiciary, 
67th Cong. 6 (1923) [hereinafter 1923 Hearing on S. 4213 and S. 4214] 
(statement of Senator Walsh)).

    Furthermore, the Court emphasized that not only was the Act 
intended to apply only to merchant disputes, it was also 
intended to narrowly apply to ``simpler questions of law'' 
involving the routine performance of contracts, such as the 
passage of title or the existence of warranties.\37\ 
Arbitration would not be used to resolve questions of statutory 
law, which would remain within the clear purview of courts.
---------------------------------------------------------------------------
    \37\Prima Paint Corp., 388 U.S. at 415 n.13 (quoting Julius Henry 
Cohen & Kenneth Dayton, The New Federal Arbitration Law, 12 VA. L. REV. 
265, 281 (1926)).
---------------------------------------------------------------------------
    Indeed, the drafters of the FAA had made clear that 
arbitration was not appropriate for substantive questions of 
law. Julius Henry Cohen, the law's architect, emphasized that 
it was ``not the proper method for deciding points of law of 
major importance involving constitutional questions or policy 
in the application of statutes.''\38\ Arbitration was also 
rarely invoked in state courts because it was widely considered 
not to preempt state law.\39\ This consensus was supported by 
the legislative history of the FAA. During hearings on the 
measure, Cohen testified that ``there is no disposition 
therefore by means of the Federal bludgeon to force an 
individual State into an unwilling submission to arbitration 
enforcement.''\40\
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    \38\Andrea Cann Chandrasekher & David Horton, Arbitration Nation: 
Data from Four Providers, 107 Cal. L. Rev. 1, 11 n.67 (2019) (quoting 
Julius Henry Cohen & Kenneth Dayton, The New Federal Arbitration Law, 
12 VA. L. REV. 265, 281 (1926)).
    \39\David Horton, The Federal Arbitration Act and Testamentary 
Instruments, 90 N.C. L. Rev. 1027, 1039 (2012).
    \40\Id. at 1039 n.55 (citing Arbitration of Interstate Commercial 
Disputes: Joint Hearings on S. 1005 and H.R. 646 Before the Subcomms. 
of the Comms. on the Judiciary, 68th Cong. 40 (1924)).
---------------------------------------------------------------------------
    In a series of decisions beginning in the 1980s,\41\ 
however, the Supreme Court drastically expanded the 
applicability of the FAA to arbitration clauses to everyday 
contracts, ``push[ing] arbitration into the mainstream.''\42\ 
The Court has upheld the enforcement of arbitration clauses 
even when doing so prevents an individual from vindicating a 
state or federal statutory right.\43\ Furthermore, by imposing 
arbitration on a ``take-it-or-leave-it'' basis, large companies 
have eviscerated the congressional intent of arbitration as a 
voluntary process agreed to between parties of equal bargaining 
power.\44\
---------------------------------------------------------------------------
    \41\See, e.g., Moses H. Cone Mem'l Hosp. v. Mercury Constr., 460 
U.S. 1 (1983); Justice Denied: Forced Arbitration and the Erosion of 
Our Legal System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before 
the Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm. 
On the Judiciary, 116th Cong. 25 29 (2019) (statement of Deepak Gupta, 
Founding Principal, Gupta Wessler PLLC).
    \42\Andrea Cann Chandrasekher & David Horton, Arbitration Nation: 
Data from Four Providers, 107 Cal. L. Rev. 1, 12 (2019).
    \43\See, e.g., Preston v. Ferrer, 552 U.S. 346, 349 (2008) (``When 
parties agree to arbitrate all questions arising under a contract, the 
[Federal Arbitration Act] supersedes state laws . . . .''); Allied-
Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995); Gilmer v. 
Interstate/Johnson Lane Corp., 500 U.S. 20 (1991).
    \44\During the passage of the Federal Arbitration Act, Congress did 
not even intend to allow binding arbitration agreements on individuals 
if the contracts were between parties of unequal bargaining power. 
Prima Paint Corp., 388 U.S. at 414 (1967) (Black, J., dissenting) 
(citing 1923 Hearing on S. 4213 and S. 4214).
---------------------------------------------------------------------------
    With respect to labor unions, the Supreme Court held in 
Epic Systems Corp. v. Lewis that the National Labor Relations 
Act (NLRA), which guarantees workers the right to organize 
unions and utilize collective bargaining, does not reflect a 
clearly expressed congressional intent to displace the FAA and 
to prohibit class and collective action waivers.\45\ The Court 
held that arbitration agreements must be enforced as written 
and that ``[w]hile Congress is of course always free to amend 
this judgment, we see nothing suggesting it did so in the 
NLRA.''\46\ Justice Ginsburg, in a dissent joined by Justices 
Breyer, Sotomayor, and Kagan, said the majority was 
``egregiously wrong,'' and noted that the decision 
``subordinates employee-protective labor legislation to the 
Arbitration Act . . . . Congress, when it enacted the NLRA, 
likely meant to protect employees'' joining together to engage 
in collective litigation.''\47\
---------------------------------------------------------------------------
    \45\Epic Sys. Corp. v. Lewis, 138 S.Ct. 1612, 1622-25 (2018).
    \46\Id. at 1632.
    \47\Id. at 1633, 1641 (Ginsburg, J., dissenting).
---------------------------------------------------------------------------

         Forced Arbitration Undermines the Rights of Consumers

    Forced arbitration is now widespread in consumer 
contracts.\48\ In many cases, consumers are unaware of forced 
arbitration clauses in the contracts of commonly used goods and 
services.\49\ These clauses are hidden inside of envelopes,\50\ 
delivery boxes,\51\ and privacy policies.\52\ Because nearly 
90% of mobile phone services contain a forced arbitration 
clause, it is virtually impossible to avoid them and still use 
a mobile phone.\53\ This is also true for many financial 
services and products, such as student loans and credit 
cards.\54\ As a result, if the consumer wants to use the 
service or product, accepting the arbitration clause is 
mandatory.\55\
---------------------------------------------------------------------------
    \48\Justice Denied: Forced Arbitration and the Erosion of Our Legal 
System: Hearing On H.R. 1423, H.R. 7109, and H.R. 2631 Before the 
Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the 
Judiciary, 116th Cong. 1-2 (2019) (statement of Deepak Gupta, Founding 
Principal, Gupta Wessler PLLC).
    \49\ See Wash. Mut. Fin. Grp. v. Bailey, 364 F.3d 260, 264-66 (5th 
Cir. 2004) (holding that an arbitration agreement was enforceable 
against illiterate consumers, even though they had no knowledge of the 
arbitration requirement); Am. Gen. Fin. Servs., Inc. v. Griffin, 327 F. 
Supp. 2d 678, 683 (N.D. Miss. 2004) (upholding arbitration agreement 
even though blind consumer had no knowledge of agreement); Marsh v. 
First USA Bank, N.A., 103 F. Supp. 2d 909, 916-18 (N.D. Tex. 2000) 
(finding that inserting an arbitration clause in monthly billing 
statements constituted sufficient notice).
    \50\See Ting v. AT&T, 319 F.3d 1126, 1134 (9th Cir. 2003).
    \51\See Hill v. Gateway 2000, Inc., 105 F.3d 1147, 1148 (7th Cir. 
1997).
    \52\See Stephanie Strom, When `Liking' a Brand Online Voids the 
Right to Sue, N.Y. Times (Apr. 16, 2014), https://www.nytimes.com/2014/
04/17/business/when-liking-a-brand-online-voids-the-right-to-sue.html.
    \53\ Brian Hardingham, The FCC Should Stop Cell Phone Giants from 
Using Forced Arbitration Clauses as a Get out of Jail Free Card, Pub. 
Justice: Blog (Jan. 13, 2017), https://www.publicjustice.net/fcc-stop-
cell-phone-giants-using-forced-arbitration-clauses-get-jail-free-card/.
    \54\Credit Card Practices: Fees, Interest Rates, and Grace Periods: 
Hearing Before the Permanent Subcomm. on Investigations of the S. Comm. 
on Homeland Sec. and Governmental Affairs, 110th Cong. (2007) 
(statement of Alys Cohen, Staff Att'y, Nat'l Consumer Law Ctr.).
    \55\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 (1997); 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 2015, the Consumer Financial Protection Bureau (CFPB) 
released a congressionally-mandated study on forced arbitration 
in financial products and services.\56\ The study, which is the 
most comprehensive empirical study of arbitration to date,\57\ 
found ``[n]o evidence of arbitration clauses leading to lower 
prices for consumers.''\58\ Instead, the CFPB found that 
arbitration has undermined the ability of consumers to seek 
redress for abusive, anti-consumer practices.\59\ Richard 
Cordray, then-Director of the CFPB, explained that based on 
this research, the CFPB had concluded that ``any prospect of 
meaningful relief for groups of consumers is effectively 
extinguished by forcing them to fight their legal disputes as 
lone individuals.''\60\ As he stated, in recent years ``many 
businesses have sought to use arbitration clauses not simply as 
an alternative means of resolving disputes, but effectively to 
insulate themselves from accountability by blocking group 
claims,'' exceeding the original purpose of the Federal 
Arbitration Act.\61\
---------------------------------------------------------------------------
    \56\Consumer Fin. Prot. Bureau, Arbitration Study Rep. to Cong., 
Pursuant to Dodd-Frank Wall Street Reform and Consumer Protection Act 
Sec. 1028(a) (2015), http://files.consumerfinance.gov/f/
201503_cfpb_arbitration-study-report-to-congress-2015.pdf.
    \57\Justice Denied: Forced Arbitration and the Erosion of our Legal 
System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before the 
Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the 
Judiciary, 116th Cong. 15 (2019) (statement of Deepak Gupta, Founding 
Principal, Gupta Wessler PLLC).
    \58\Consumer Fin. Prot. Bureau, Factsheet, Consumer Financial 
Protection Bureau Study Finds That Arbitration Agreements Limit Relief 
for Consumers 3 (Mar. 10, 2015), https://files.consumerfinance.gov/f/
201503_cfpb_factsheet_arbitration-study.pdf.
    \59\Id. at 2.
    \60\Richard Cordray, Dir., Consumer Fin. Prot. Bureau, Remarks at 
Field Hearing on Arbitration Clauses (May 5, 2016), https://
www.consumerfinance.gov/about-us/newsroom/prepared-remarks-cfpb-
director-richard-cordray-field-hearing-arbitration-clauses/.
    \61\Id.
---------------------------------------------------------------------------
    Heidi Shierholz, an economist at the Economic Policy 
Institute, notes that ``not only do companies win the 
overwhelming majority of claims when consumers are forced into 
arbitration--they win big.''\62\ While consumers win nine 
percent of their disputes, companies win 93 percent of the 
arbitration claims they bring.\63\ Strikingly, in arbitration 
involving financial institutions, ``[b]ecause consumers win so 
rarely, the average consumer ends up paying financial 
institutions in arbitration-a whopping $7,725.''\64\
---------------------------------------------------------------------------
    \62\Heidi Shierholz, Econ. Policy Inst., Forced Arbitration is Bad 
for Consumers (2017), https://www.epi.org/publication/forced-
arbitration-is-bad-for-consumers/.
    \63\Id.
    \64\Id.
---------------------------------------------------------------------------

    Forced Arbitration Deprives Employees of Fundamental Protections

    According to a 2017 report by the Economic Policy 
Institute, 60.1 million workers the majority of non-union 
employees in the private sector have signed away their rights 
through forced arbitration clauses.\65\ As this report notes, 
this trend has ``weakened the position of workers whose rights 
are violated, barring access to the courts for all types of 
legal claims, including those based on Title VII of the Civil 
Rights Act, the Americans with Disabilities Act, the Family and 
Medical Leave Act, and the Fair Labor Standards Act.''\66\
---------------------------------------------------------------------------
    \65\Alexander J.S. Colvin, Econ. Policy Inst., The Growing Use of 
Mandatory Arbitration 2 (2017), https://www.epi.org/files/pdf/
135056.pdf.
    \66\Id. at 1.
---------------------------------------------------------------------------
    When employees work under forced arbitration clauses, they 
are less likely to win in disputes with their employers,\67\ or 
even to bring them at all.\68\ Workers that do enforce their 
rights in the workplace receive less in damages in arbitration 
than would have been available in court.\69\
---------------------------------------------------------------------------
    \67\Id. at 3.
    \68\Id. at 5-6.
    \69\Id.
---------------------------------------------------------------------------
    Worse still, forced arbitration clauses in employment 
contracts are often coupled with non-disclosure agreements,\70\ 
ensuring minimal scrutiny of corporate misconduct. For example, 
the claims of hundreds of workers at Sterling Jewelers the 
parent company of Jared Jewelers and Kay Jewelers who were 
victims of ``groping and sexual coercion and sexual degradation 
and rape'' in the workplace over a period of years were forced 
into arbitration.\71\ More than 200 women filed statements 
describing ``an atmosphere in which female employees endured 
unwanted sexual advances from male superiors at the 
company.''\72\ These statements from women across the country 
alleged, among other egregious forms of abuse and harassment, 
that male supervisors coerced their female subordinates into 
performing sexual favors for them in order to receive better 
jobs or higher pay.\73\
---------------------------------------------------------------------------
    \70\Laura Lawless Robertson, Sexual Harassment Claims Put Non-
Disclosure and Arbitration Agreements Under Scrutiny, Resulting in a 
Flurry of Legislative Action, Nat'l L. Rev. (Dec. 7, 2017), https://
www.natlawreview.com/article/sexual-harassment-claims-put-non-
disclosure-and-arbitration-agreements-under (``Many employers require 
employees to sign [non-disclosure agreements] as a condition of 
employment in order to prevent the dissemination and misuse of 
companies' confidential and proprietary information.'').
    \71\Taffy Brodesser-Akner, The Company that Sells Love to America 
Had a Dark Secret, N.Y. Times Mag. (Apr. 23, 2019), https://
www.nytimes.com/2019/04/23/magazine/kay-jewelry-sexual-harassment.html.
    \72\Rebecca Hersher, Parent Company of Kay Jewelers Accused of Wage 
Discrimination Against Women, NPR: The Two-Way (Mar. 1, 2017), https://
www.npr.org/sections/thetwo-way/2017/03/01/517684117/thousands-allege-
wage-and-promotion-discrimination-by-sterling-jewelers.
    \73\Drew Harwell, Hundreds Allege Sex Harassment, Discrimination at 
Kay and Jared Jewelry Company, Wash. Post. (Feb. 27, 2017), https://
www.washingtonpost.com/business/economy/hundreds-allege-sex-harassment-
discrimination-at-kay-and-jared-jewelry-company/2017/02/27/8dcc9574-
f6b7-11e6-bf01-d47f8cf9b643_story.html.
---------------------------------------------------------------------------
    The claims of these women and nearly 70,000 others who were 
part of a class action against Sterling were subject to forced 
arbitration,\74\ however, denying their access to justice. 
Sterling, like many other American companies, subjects its 
employees to forced arbitration, requiring them to waive their 
rights to pursue their claims in court, including claims of 
discrimination and sexual harassment.\75\ According to a New 
York Times investigation, this secretive process minimized the 
company's exposure to additional claims or public scrutiny.\76\ 
As the report explains:
---------------------------------------------------------------------------
    \74\Id.
    \75\Id.
    \76\Taffy Brodesser-Akner, The Company that Sells Love to America 
Had a Dark Secret, N.Y. Times Mag. (Apr. 23, 2019), https://
www.nytimes.com/2019/04/23/magazine/kay-jewelry-sexual-harassment.html.

          Arbitration meant that instead of being heard in a 
        public court, they had to proceed privately in 
        Sterling's in-house system, called Resolve. The first 
        step of Resolve was an internal investigation. If the 
        employee wasn't satisfied by the results of that 
        investigation, he or she could ask to be heard by a 
        panel of the employee's peers and an employment lawyer, 
        all selected by Sterling. If the employee was still 
        dissatisfied, the case was sent to arbitration. 
        Sterling paid the arbitrator. The hearing's proceedings 
        were carried out with judicial oversight, but they were 
        done in private, and their outcome was sealed. 
        Afterward, if there was a settlement, the employee 
        often had to sign a nondisclosure agreement that 
        prohibited the employee from speaking about the case 
        again. The benefit of arbitration to the employee was 
        that the claim was usually resolved more speedily. The 
        benefit to the company was that it was resolved in 
        secret. The secrecy was the point . . . . [I]n 
        arbitration, the proceedings are so secretive that the 
        lawyers weren't allowed to tell other women in the suit 
---------------------------------------------------------------------------
        what had happened to them.\77\

    \77\Id. (emphasis added).

    In light of these concerns, a coalition of state attorneys 
general--from all 50 states, the District of Columbia, and 
several U.S. territories have written Congress in support of 
ending forced arbitration in workplace disputes involving 
claims of sexual harassment.\78\ As this bipartisan coalition 
notes, ``Ending mandatory arbitration of sexual harassment 
claims would help to put a stop to the culture of silence that 
protects perpetrators at the cost of their victims.''\79\
---------------------------------------------------------------------------
    \78\Letter from Nat'l Ass'n of Att'ys Gen. to Cong. Leadership 
(Feb. 12, 2018), http://myfloridalegal.com/webfiles.nsf/WF/HFIS-AVWMYN/
$file/
NAAG+letter+to+Congress+Sexual+Harassment+Mandatory+Arbitration.pdf.
    \79\Id.
---------------------------------------------------------------------------
    Following a series of high-profile disputes involving 
sexual and racial harassment, some companies have chosen to 
voluntarily limit the use of forced arbitration in employment 
contracts. Earlier this year, Google announced that it would no 
longer include forced arbitration clauses in its employment 
contracts, following a worldwide walkout to protest the 
company's handling of sexual harassment claims.\80\
---------------------------------------------------------------------------
    \80\Alexia Fernandez Campbell, Why Thousands of Google Employees 
Are Protesting Across the World, VOX, (Nov. 1, 2018), https://
www.vox.com/2018/11/1/18051884/google-employee-walkouts-explained; 
Nitasha Tiku, Google Ends Forced Arbitration After Employee Protest, 
Wired (Feb. 21, 2019), https://www.wired.com/story/google-ends-forced-
arbitration-after-employee-protest/.
---------------------------------------------------------------------------

      FORCED ARBITRATION DEPRIVES AMERICANS OF THEIR CIVIL RIGHTS

    According to an analysis of corporate legal settlements of 
civil rights complaints, U.S. corporations have paid more than 
$2.7 billion since 2000,\81\ although the cases that reach 
settlement may only represent ``the tip of [the] iceberg of 
corporate abuses.''\82\ Many victims of civil rights violations 
are unable to pursue their claims in court due to forced 
arbitration provisions imposed on them as a condition of 
employment or for using everyday goods and services.\83\ The 
Leadership Conference on Civil and Human Rights, a coalition 
representing more than 200 civil rights groups,\84\ explains:
---------------------------------------------------------------------------
    \81\Michelle Chen, Corporations Have Paid Out at Least $2.7 Billion 
in Civil-Rights and Labor Lawsuits Since 2000, The Nation (Feb. 1, 
2019), https://www.thenation.com/article/corporations-lawsuits-civil-
rights/ (citing Philip Mattera, Good Jobs First, Big Business Bias: 
Employment Discrimination and Sexual Harassment at Large Corporations, 
(2019), https://www.goodjobsfirst.org/sites/default/files/docs/pdfs/
BigBusinessBias.pdf.
    \82\Id.
    \83\Heidi Shierholz, Econ. Policy Inst, Forced Arbitration is Bad 
for Consumers (2017), https://www.epi.org/publication/forced-
arbitration-is-bad-for-consumers/.
    \84\Our Common Purpose, Leadership Conf. on Civil & Human Rights 
(last visited on Sept. 5, 2019), https://civilrights.org/about/the-
coalition/.

          Civil and human rights are especially vulnerable to 
        the dangerous impact of forced arbitration. Forced 
        arbitration clauses often preclude consumers and 
        employees joining together to form a class action to 
        enforce their civil rights, which results in claim 
        suppression. Moreover, forced arbitration does not 
        allow public scrutiny of alleged discrimination, nor 
        does it allow for the creation of judicial opinions 
        that help develop the law and provide further guidance 
        on emerging trends. As a result, landmark civil rights 
        laws such as those protecting employees from race, 
        gender, and age discrimination have been rendered 
        meaningless.\85\
---------------------------------------------------------------------------
    \85\Letter from Leadership Conf. on Civil & Human Rights to U.S. 
Senators (Feb. 3, 2016), http://civilrightsdocs.info/pdf/Arbitration-
Letter.pdf.

    In addition to precluding the enforcement of the civil 
rights laws, the opacity of forced arbitration prevents others 
from learning of widespread misconduct. As Terri Gerstein, the 
Director of the State and Local Enforcement Project at the 
Harvard Law School Labor and Worklife Program, noted, the 
secretive nature of arbitration ``has allowed outrageous 
violations, in some cases years of sexual harassment and 
predation, to remain hidden from view and therefore to 
continue.''\86\ For example, Massage Envy, the country's 
largest massage chain, has forced hundreds of women's 
allegations of sexual assault into arbitration.\87\ In one 
case, a customer who has alleged that she was sexually 
assaulted by one of the company's therapists attempted for over 
a year to cancel her monthly membership to Massage Envy, but 
was refused unless she agreed to forced arbitration.\88\ As one 
sexual assault survivor said, ``I was mortified . . . . It's 
just horrifying that they would allow this to happen and then 
take steps to cover up what is happening'' through forced 
arbitration.\89\ As Gretchen Carlson, an advocate and former 
Fox News commentator, noted in her testimony during the ACAL 
Subcommittee's hearing on forced arbitration:
---------------------------------------------------------------------------
    \86\Terri Gerstein, Forced Arbitration is Unjust and Deeply 
Unpopular. Can Congress End It?, Slate (Mar. 1, 2019), https://
slate.com/news-and-politics/2019/03/congress-forced-arbitration-fair-
act.html.
    \87\See Brooks Jarosz, Fears Loom that Sexual Assault Cases 
Involving Massage Envy Will Remain Private, Fox KVTU (Dec. 21, 2018), 
http://www.ktvu.com/news/fears-loom-sexual-assault-cases-involving-
massage-envy-will-remain-private.
    \88\Terri Gerstein, Forced Arbitration is Unjust and Deeply 
Unpopular. Can Congress End It?, Slate (Mar. 1, 2019), https://
slate.com/news-and-politics/2019/03/congress-forced-arbitration-fair-
act.html.
    \89\Brooks Jarosz, Fears Loom that Sexual Assault Cases Involving 
Massage Envy Will Remain Private, Fox KVTU (Dec. 21, 2018), http://
www.ktvu.com/news/fears-loom-sexual-assault-cases-involving-massage-
envy-will-remain-private.

          These women put their trust into a company and its 
        employees, only to suffer the trauma of being sexually 
        assaulted and then continue to suffer as the company 
        did little to help them and instead tried to silence 
        them. Now that these women are seeking public 
        accountability in court, the company is trying to force 
        them into arbitration, because hidden in the fine print 
        of the terms and conditions of the company's app and 
        iPads (used to check in for services) was a forced 
        arbitration clause.''\90\
---------------------------------------------------------------------------
    \90\Justice Denied: Forced Arbitration and the Erosion of our Legal 
System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before the 
Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the 
Judiciary, 116th Cong. 2-3 (2019) (statement of Gretchen Carlson, 
advocate and former Fox News commentator).

  FORCED ARBITRATION UNDERMINES THE ENFORCEMENT OF THE ANTITRUST LAWS

    Forced arbitration clauses have also undermined the 
enforcement of the antitrust laws.\91\ As Deepak Gupta noted 
during the ACAL Subcommittee's hearing on forced arbitration, 
``[t]roublingly, firms that possess monopoly power can enact a 
sort of `double punch' by imposing arbitration terms that 
insulate their abuse of that same power.''\92\ In 2013, the 
Supreme Court dictated this result in American Express Co. v. 
Italian Colors Restaurant.\93\ In that case, a small but 
successful restaurant in Oakland, California banded with fellow 
merchants in a class-action lawsuit to challenge alleged 
anticompetitive conduct of American Express, including its 
exorbitantly high and hidden fees--as much as 30 percent more 
than other card companies.\94\ The small businesses alleged 
that American Express's conduct violated Section 1 of the 
Sherman Act.\95\ In response, American Express moved to compel 
individual arbitration under the Federal Arbitration Act.\96\
---------------------------------------------------------------------------
    \91\Justice Denied: Forced Arbitration and the Erosion of our Legal 
System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before the 
Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the 
Judiciary, 116th Cong. 21 (2019) (statement of Deepak Gupta, Founding 
Principal, Gupta Wessler PLLC).
    \92\Id. at 20.
    \93\Am. Express. Co. v. Italian Colors Rest., 570 U.S. 228, 231 
(2013) (holding that the Federal Arbitration Act compels the 
enforcement of a contractual waiver of a plaintiff's claim under a 
federal statute).
    \94\Luke Tsai, Supreme Court Rules Against Oakland Restaurant in 
AmEx Suit, East Bay Express (June 25, 2013), https://
www.eastbayexpress.com/WhatTheFork/archives/2013/06/25/supreme-court-
rules-against-oakland-restaurant-in-amex-suit.
    \95\Italian Colors Rest., 570 U.S. at 231.
    \96\Id.
---------------------------------------------------------------------------
    Notwithstanding the establishment of a private right of 
action in the Clayton Act, the Court held that the Federal 
Arbitration Act required the arbitration of claims under the 
antitrust laws.\97\ As the Court noted, the antitrust laws do 
not ```evince an intention to preclude a waiver' of class-
action procedure.''\98\ Justice Elena Kagan, in a dissent 
joined by Justices Ginsburg and Breyer, warned that the 
majority's interpretation of the FAA allows the monopolist ``to 
use its monopoly power to insist on a contract effectively 
depriving its victims of all legal recourse.''\99\ As she 
explained, the Court's decision would have sweeping 
ramifications for the vindication of rights established by 
statute:
---------------------------------------------------------------------------
    \97\Id. at 234.
    \98\Id. (quoting Mitsubishi Motors Corp. v. Soler Chrysler-
Plymouth, Inc., 473 U.S. 614, 628 (1985)).
    \99\Italian Colors Rest., 570 U.S. at 240 (Kagan, J., dissenting).

          In the hands of today's majority, arbitration 
        threatens to become . . . a mechanism easily made to 
        block the vindication of meritorious federal claims and 
        insulate wrongdoers from liability. The Court thus 
        undermines the FAA no less than it does the Sherman Act 
        and other federal statutes providing rights of 
        action.\100\
---------------------------------------------------------------------------
    \100\Id. at 253.

    Critics of the Italian Colors decision similarly note that 
it has ``created the possibility that an entity engaging in 
monopolistic behavior could encourage and strengthen such 
behavior'' by implementing forced arbitration clauses with 
merchants.\101\ Now that such clauses are enforceable, entities 
engaged in monopolistic behavior can insulate themselves from 
virtually any risk of antitrust liability.\102\ As Mr. Gupta 
explained at the ACAL Subcommittee's hearing on forced 
arbitration, this behavior has two consequences.\103\ First, 
antitrust enforcement suffers as a whole due to the decline of 
private enforcement.\104\ Second, this decline also results in 
a wealth transfer from low-income to high-income individuals in 
the absence of open and competitive markets.\105\
---------------------------------------------------------------------------
    \101\Robert Ward, Note, Divide & Conquer: How the Supreme Court 
Used the Fed. Arbitration Act to Threaten Statutory Rights & the Need 
to Codify the Effective Vindication Rule, 39 Seton Hall Legis. J. 149, 
162 (2015).
    \102\See id.
    \103\ Justice Denied: Forced Arbitration and the Erosion of our 
Legal System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before the 
Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the 
Judiciary, 116th Cong. 21 (2019) (statement of Deepak Gupta, Founding 
Principal, Gupta Wessler PLLC).
    \104\ Id.
    \105\ Id.
---------------------------------------------------------------------------
    Alan Carlson, the owner of the Italian Colors Restaurant 
and the lead plaintiff in the case, urged Congress to ``pass 
the FAIR Act to restore equal access to justice for small 
businesses and consumers.''\106\ As he observed, forced 
arbitration ``makes it impossible for businesses to hold large 
corporations publicly accountable.''\107\ The FAIR Act, he 
concluded, ``would give back to small businesses the right to 
go before a judge and jury against big corporations instead of 
being locked into a forced arbitration system that is too 
expensive to use.''\108\
---------------------------------------------------------------------------
    \106\ Justice Denied: Forced Arbitration and the Erosion of our 
Legal System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before the 
Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the 
Judiciary, 116th Cong. 6 (2019) (statement of Alan S. Carlson, Owner, 
Italian Colors Rest.).
    \107\ Id. at 5.
    \108\ Id. at 5-6.
---------------------------------------------------------------------------
    A coalition of antitrust law professors similarly note that 
the FAIR Act is essential to protecting consumers and small 
businesses by restoring the private enforcement of the 
antitrust laws. They explain:

          Billions of dollars are lost by U.S. consumers and 
        businesses to criminal antitrust conspirators, many of 
        which are foreign corporations . . . While criminal 
        enforcement is important for punishing and deterring 
        antitrust conspiracies, private enforcement provides 
        virtually the only way to compensate businesses and 
        consumers that are victims of antitrust violations. . . 
        . The FAIR Act would protect consumers and small 
        businesses from being forced into individual, private 
        arbitration for antitrust disputes. It would help 
        preserve the strong private enforcement scheme that 
        Congress established to protect competition and allow 
        honest businesses to thrive.\109\
---------------------------------------------------------------------------
    \109\Letter from Robert H. Lande, Professor, University of 
Baltimore School of Law, et al., to Reps. Jerrold Nadler (D-NY), Chair, 
& Doug Collins (R-GA), Ranking Member, Comm. on the Judiciary (Sept. 5, 
2019) (on file with Majority staff of the H. Comm. on the Judiciary).

The American Antitrust Institute and a coalition of other 
public interest organizations add that in the absence of 
legislation to end forced arbitration, ``the proliferation of 
class action waivers in mandatory arbitration clauses will 
destroy a wide swath of the private antitrust rights afforded 
to the most vulnerable economic actors in the United 
States.''\110\
---------------------------------------------------------------------------
    \110\Letter from the American Antitrust Institute, et al., to Reps. 
Jerrold Nadler (D-NY), Chair, & Doug Collins (R-GA), Ranking Member, H. 
Comm. on the Judiciary (Sept. 6, 2019) (on file with Majority staff of 
the H. Comm. on the Judiciary).
---------------------------------------------------------------------------

                                Hearings

    For the purposes of section 103(i) of H. Res. 6 of the 
116th Congress, the following hearing was used to develop H.R. 
1423: Justice Denied: Forced Arbitration and the Erosion of Our 
Legal System, which was held on May 16, 2019 by the Committee's 
Subcommittee on Antitrust, Commercial, and Administrative Law. 
The hearing examined the rise of forced arbitration in disputes 
involving workers, consumers, small businesses, and victims of 
civil rights violations, among others, and the effect of forced 
arbitration on the vindication of state and federal statutory 
rights. The following witnesses testified in support of the 
measure: Gretchen Carlson; Professor Myriam Gilles, Professor 
of Law, Paul R. Verkuil Chair in Public Law, Benjamin N. 
Cardozo School of Law; Deepak Gupta, Founding Principal, Gupta 
Wessler PLLC; and Kevin Ziober, Lieutenant, U.S. Navy 
Reserves.\111\
---------------------------------------------------------------------------
    \111\Justice Denied: Forced Arbitration and the Erosion of our 
Legal System: Hearing Before the Subcomm. on Antitrust, Commercial, and 
Admin. Law of the H. Comm on the Judiciary, 116th Cong. (2019).
---------------------------------------------------------------------------

                        Committee Consideration

    On September 10, 2019, the Committee met in open session 
and ordered the bill, H.R. 1423, favorably reported with an 
amendment, by a rollcall vote of 22 to 14, 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. 1423:
    1. An amendment by Mr. Jordan of Ohio to strike from the 
bill the exemption for collectively bargained agreements was 
defeated by a rollcall vote of 15 to 20.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    2. An amendment by Mr. Sensenbrenner of Wisconsin to exempt 
from the bill a predispute arbitration agreement and a 
predispute joint-action waiver providing certain disclosures 
regarding attorneys' fees for the plaintiff's counsel are 
submitted to the court was defeated by a rollcall vote of 14 to 
20.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    3. An amendment by Mr. Sensenbrenner of Wisconsin to make 
the bill applicable to agreements entered into following the 
enactment of the bill was defeated by a rollcall vote of 14 to 
21.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    4. Motion to report H.R. 1423, as amended, favorably was 
agreed to by a rollcall vote of 22 to 14.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      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 and Congressional Budget 
                          Office Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the Rules of the House of Representatives and section 
308(a) of the Congressional Budget Act of 1974 and with respect 
to requirements of clause (3)(c)(3) of rule XIII of the Rules 
of the House of Representatives and section 402 of the 
Congressional Budget Act of 1974, the Committee has requested 
but not received a cost estimate for this bill from the 
Director of Congressional Budget Office. The Committee has 
requested but not received from the Director of the 
Congressional Budget Office a statement as to whether this bill 
contains any new budget authority, spending authority, credit 
authority, or an increase or decrease in revenues or tax 
expenditures.

                    Duplication of Federal Programs

    No provision of H.R. 1423 establishes or reauthorizes a 
program of the federal government known to be duplicative of 
another federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111-139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

                    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. 
1423 would promote access to justice by prohibiting: (1) the 
use of forced arbitration clauses in certain consumer, 
employment, antitrust, and civil rights disputes; and (2) 
agreements and practices that interfere with the right of 
individuals, workers, and small businesses to participate in a 
joint, class, or collective action related to an employment, 
consumer, antitrust, or civil rights dispute.

                          Advisory on Earmarks

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 1423 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 ``Forced Arbitration Injustice Repeal Act'' 
or the ``FAIR Act.''
    Sec. 2. Purposes. Section 2 states that the purposes of the 
FAIR Act are to: (1) prohibit pre-dispute arbitration 
agreements that force arbitration of future employment, 
consumer, antitrust, or civil rights disputes, and (2) prohibit 
practices that interfere with the right of individuals and 
small businesses to participate in joint class or collective 
action related to an employment, consumer, antitrust, or civil 
rights dispute.
    Sec. 3. Arbitration of Employment, Consumer, Antitrust, and 
Civil Rights Disputes. Section 3(a) amends title 9 of the 
United States Code by adding at the end ``Chapter 4--
Arbitration of Employment, Consumer, Antitrust, and Civil 
Rights Disputes.''
    New Section 401 defines various terms used under new 
chapter 4.
    The term ``antitrust dispute'' is defined as a dispute 
arising from an alleged violation of the antitrust laws, as 
defined in the first section the Clayton Act or State antitrust 
laws, and in which the plaintiffs seek certification under Rule 
23 of the Federal Rules of Civil Procedure or a comparable 
state law.
    The term ``civil rights dispute'' is defined as a dispute 
arising from an alleged violation of the Constitution of the 
United States or the constitution of a State or any Federal, 
State or local law that prohibits discrimination on the basis 
of race, sex, age, gender identity, sexual orientation, 
disability, religion, national origin, or any legally protected 
status in education, employment, credit, housing, public 
accommodations and facilities, voting, veterans or 
servicemembers services, health care, or a program funded or 
conducted by the Federal Government or a State Government, in 
which at least one party is one or more individuals, including 
individuals seeking class certification under Federal or State 
law.
    The term ``consumer dispute'' is defined as a dispute 
between (A) one or more individuals who seek or acquire real or 
personal property, services . . . securities or other 
investments, money, or credit for personal, family, or 
household purposes, including individuals seeking class 
certification under Federal or State law, and (B) a seller or 
provider of such listed services, or a third party involved in 
the selling, providing of, payment for, receipt or use of 
information about, or other relationship to any such property, 
services, securities or other investments, money, or credit.
    The term ``employment dispute'' is defined as a dispute 
between one or more individuals and a person arising out of or 
related to the work relationship or prospective work 
relationship, regardless of whether the individual is or would 
be classified as an employee or an independent contractor with 
respect to such work.
    The term ``pre-dispute arbitration agreement'' is defined 
as an agreement to arbitrate a dispute that has not yet arisen 
at the time of the making the agreement, and the term ``pre-
dispute joint-action waiver'' as an agreement, made before the 
dispute has arisen, that would prohibit, or waive the right of, 
one of the parties to participate in a joint, class or 
collective action concerning the dispute.
    New Section 402 first provides that no pre-dispute 
arbitration agreement or pre-dispute joint-action waiver shall 
be valid or enforceable with respect to an employment dispute, 
consumer dispute, antitrust dispute, or civil rights dispute. 
It further provides that a court, and not an arbitrator, shall 
determine, under federal law, whether this chapter applies to 
an agreement to arbitrate, and the enforceability of that 
agreement. Section 402 also specifies that this chapter does 
not apply to any arbitration provision between an employee and 
a labor organization or between labor organizations, except 
that no such arbitration provision shall have the effect of 
waiving the right of a worker to seek judicial enforcement of a 
right arising under a provision of the Constitution of the 
United States, a State constitution, or a Federal or State 
statute, or public policy arising therefrom.
    Section 3(b) makes a number of technical and conforming 
amendments to Title 9 U.S.C.
    Sec. 4. Effective Date. Section 4 provides that the 
legislation takes effect on the date of enactment and applies 
to any dispute or claim that arises or accrues on or after the 
date of enactment.

          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, H.R. 1423 as reported, are shown as follows:

         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 (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                      TITLE 9, UNITED STATES CODE



Chap.                                                               Sec.
      General provisions...............................................1
      Convention on the Recognition and Enforcement of Foreign Arbitral 
        Awards.......................................................201
      Inter-American Convention on International Commercial Arbitrati301
      Arbitration of employment, consumer, antitrust, and civil rights .
        disputes........................................................

CHAPTER 1--GENERAL PROVISIONS

           *       *       *       *       *       *       *



Sec. 1. ``Maritime transactions'' and ``Commerce'' defined; exceptions 
                    to operation of title

   ``Maritime transactions'', as herein defined, means charter 
parties, bills of lading of water carriers, agreements relating 
to wharfage, supplies furnished vessels or repairs to vessels, 
collisions, or any other matters in foreign commerce which, if 
the subject of controversy, would be embraced within admiralty 
jurisdiction; ``commerce'', as herein defined, means commerce 
among the several States or with foreign nations, or in any 
Territory of the United States or in the District of Columbia, 
or between any such Territory and another, or between any such 
Territory and any State or foreign nation, or between the 
District of Columbia and any State or Territory or foreign 
nation, but nothing herein contained shall apply to contracts 
of employment of seamen, railroad employees, or any other class 
of workers engaged in foreign or interstate commerce.

Sec. 2. Validity, irrevocability, and enforcement of agreements to 
                    arbitrate

  A written provision in any maritime transaction or a contract 
evidencing a transaction involving commerce to settle by 
arbitration a controversy thereafter arising out of such 
contract or transaction, or the refusal to perform the whole or 
any part thereof, or an agreement in writing to submit to 
arbitration an existing controversy arising out of such a 
contract, transaction, or refusal, shall be valid, irrevocable, 
and enforceable, save upon such grounds as exist at law or in 
equity for the revocation of any contract or as otherwise 
provided in chapter 4.

           *       *       *       *       *       *       *


  CHAPTER 2--CONVENTION ON THE RECOGNITION AND ENFORCEMENT OF FOREIGN 
                            ARBITRAL AWARDS


Sec.
201. Enforcement of Convention.
     * * * * * * *
[208. Chapter 1; residual application.]
208. Application.

           *       *       *       *       *       *       *


Sec. 208. [Chapter 1; residual application] APPLICATION

  Chapter 1 applies to actions and proceedings brought under 
this chapter to the extent that chapter is not in conflict with 
this chapter or the Convention as ratified by the United 
States. This chapter applies to the extent that this chapter is 
not in conflict with chapter 4.

   CHAPTER 3--INTER-AMERICAN CONVENTION ON INTERNATIONAL COMMERCIAL 
                              ARBITRATION


Sec.
301. Enforcement of Convention.
     * * * * * * *
[307. Chapter 1; residual application.]
307. Application.

           *       *       *       *       *       *       *


Sec. 307. [Chapter 1; residual application] APPLICATION

  Chapter 1 applies to actions and proceedings brought under 
this chapter to the extent chapter 1 is not in conflict with 
this chapter or the Inter-American Convention as ratified by 
the United States. This chapter applies to the extent that this 
chapter is not in conflict with chapter 4.

 CHAPTER 4--ARBITRATION OF EMPLOYMENT, CONSUMER, ANTITRUST, AND CIVIL 
                            RIGHTS DISPUTES

401. Definitions.
402. No validity or enforceability.

Sec. 401. Definitions

  In this chapter--
          (1) the term ``antitrust dispute'' means a dispute--
                  (A) arising from an alleged violation of the 
                antitrust laws (as defined in subsection (a) of 
                the first section of the Clayton Act) or State 
                antitrust laws; and
                  (B) in which the plaintiffs seek 
                certification as a class under rule 23 of the 
                Federal Rules of Civil Procedure or a 
                comparable rule or provision of State law;
          (2) the term ``civil rights dispute'' means a 
        dispute--
                  (A) arising from an alleged violation of--
                          (i) the Constitution of the United 
                        States or the constitution of a State;
                          (ii) any Federal, State, or local law 
                        that prohibits discrimination on the 
                        basis of race, sex, age, gender 
                        identity, sexual orientation, 
                        disability, religion, national origin, 
                        or any legally protected status in 
                        education, employment, credit, housing, 
                        public accommodations and facilities, 
                        voting, veterans or servicemembers, 
                        health care, or a program funded or 
                        conducted by the Federal Government or 
                        State government, including any law 
                        referred to or described in section 
                        62(e) of the Internal Revenue Code of 
                        1986, including parts of such law not 
                        explicitly referenced in such section 
                        but that relate to protecting 
                        individuals on any such basis; and
                  (B) in which at least 1 party alleging a 
                violation described in subparagraph (A) is one 
                or more individuals (or their authorized 
                representative), including one or more 
                individuals seeking certification as a class 
                under rule 23 of the Federal Rules of Civil 
                Procedure or a comparable rule or provision of 
                State law;
          (3) the term ``consumer dispute'' means a dispute 
        between--
                  (A) one or more individuals who seek or 
                acquire real or personal property, services 
                (including services related to digital 
                technology), securities or other investments, 
                money, or credit for personal, family, or 
                household purposes including an individual or 
                individuals who seek certification as a class 
                under rule 23 of the Federal Rules of Civil 
                Procedure or a comparable rule or provision of 
                State law; and
                  (B)(i) the seller or provider of such 
                property, services, securities or other 
                investments, money, or credit; or
                  (ii) a third party involved in the selling, 
                providing of, payment for, receipt or use of 
                information about, or other relationship to any 
                such property, services, securities or other 
                investments, money, or credit;
          (4) the term ``employment dispute'' means a dispute 
        between one or more individuals (or their authorized 
        representative) and a person arising out of or related 
        to the work relationship or prospective work 
        relationship between them, including a dispute 
        regarding the terms of or payment for, advertising of, 
        recruiting for, referring of, arranging for, or 
        discipline or discharge in connection with, such work, 
        regardless of whether the individual is or would be 
        classified as an employee or an independent contractor 
        with respect to such work, and including a dispute 
        arising under any law referred to or described in 
        section 62(e) of the Internal Revenue Code of 1986, 
        including parts of such law not explicitly referenced 
        in such section but that relate to protecting 
        individuals on any such basis, and including a dispute 
        in which an individual or individuals seek 
        certification as a class under rule 23 of the Federal 
        Rules of Civil Procedure or as a collective action 
        under section 16(b) of the Fair Labor Standards Act, or 
        a comparable rule or provision of State law;
          (5) the term ``predispute arbitration agreement'' 
        means an agreement to arbitrate a dispute that has not 
        yet arisen at the time of the making of the agreement; 
        and
          (6) the term ``predispute joint-action waiver'' means 
        an agreement, whether or not part of a predispute 
        arbitration agreement, that would prohibit, or waive 
        the right of, one of the parties to the agreement to 
        participate in a joint, class, or collective action in 
        a judicial, arbitral, administrative, or other forum, 
        concerning a dispute that has not yet arisen at the 
        time of the making of the agreement.

Sec. 402. No validity or enforceability

  (a) In General.--Notwithstanding any other provision of this 
title, no predispute arbitration agreement or predispute joint-
action waiver shall be valid or enforceable with respect to an 
employment dispute, consumer dispute, antitrust dispute, or 
civil rights dispute.
  (b) Applicability.--
          (1) In general.--An issue as to whether this chapter 
        applies with respect to a dispute shall be determined 
        under Federal law. The applicability of this chapter to 
        an agreement to arbitrate and the validity and 
        enforceability of an agreement to which this chapter 
        applies shall be determined by a court, rather than an 
        arbitrator, irrespective of whether the party resisting 
        arbitration challenges the arbitration agreement 
        specifically or in conjunction with other terms of the 
        contract containing such agreement, and irrespective of 
        whether the agreement purports to delegate such 
        determinations to an arbitrator.
          (2) Collective bargaining agreements.--Nothing in 
        this chapter shall apply to any arbitration provision 
        in a contract between an employer and a labor 
        organization or between labor organizations, except 
        that no such arbitration provision shall have the 
        effect of waiving the right of a worker to seek 
        judicial enforcement of a right arising under a 
        provision of the Constitution of the United States, a 
        State constitution, or a Federal or State statute, or 
        public policy arising therefrom.

                            Dissenting Views


                            I. Introduction

    H.R. 1423, the ``Forced Arbitration Injustice Repeal Act,'' 
introduced by Rep. Hank Johnson, would render unenforceable 
provisions in millions of consumer, employment and other 
contracts that require, pre-dispute, mandatory binding 
arbitration of consumer, employment, civil-rights, or antitrust 
disputes between the parties, or that prohibit or waive the 
right of one of the parties to the agreement to participate in 
judicial, arbitral or administrative class actions. The bill is 
the latest iteration of the former ``Arbitration Fairness 
Act,'' sponsored by Rep. Johnson in the 110th through the 115th 
Congresses. Each of these bills has sought to render 
unenforceable consumer and other broad classes of pre-dispute 
mandatory binding arbitration contracts, undermining freedom of 
contract and leaving those with relevant claims to judicial 
class actions or more costly individual judicial proceedings to 
resolve their claims. Eschewing the possibility of narrower 
reforms that on a bipartisan basis could preserve and improve 
the arbitration process for these categories of cases, the bill 
would wipe out the availability of arbitration while doing 
nothing to curtail the abuse of class actions which gave rise 
to increased use of arbitration in the first place.

                             II. Background


                              A. GENERALLY

    Arbitration is the classic alternative dispute mechanism 
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. (FAA), is the principal federal law affecting 
arbitration.
    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 as speedier, less 
expensive and more flexible means of dispute resolution than 
litigation. Indeed, 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)
    One would expect the accessibility and relative efficiency 
of arbitration to be particularly useful in the realm of 
consumer contracts and other smaller-claim disputes. Consumers 
and other small claimants, on the one hand, stand to benefit 
from this quicker, less cumbersome and less expensive way of 
bringing disputes to resolution. Corporate and other 
defendants, meanwhile, stand to benefit from these same 
advantages, all the more so because consumer and other smaller 
claims often are likely to be fairly repetitive and may be 
large in number.
    The rise of mandatory binding arbitration clauses in 
consumer and other contracts in recent years, however, seems to 
stem less from these factors than from abuses of a competing, 
judicial form of consumer dispute resolution--the class action. 
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 began more and more to resort to the use of 
pre-dispute, mandatory binding arbitration clauses in their 
contracts. In this way, companies sought to introduce a more 
orderly, less expensive and more consistent set of rules for 
the resolution of their disputes with their customers, 
employees and other smaller claimants.
    Some consumer, employee and other advocates suggest that 
consumers, employees and other small claimants often lack the 
sophistication or bargaining power to understand and negotiate 
away from contracts containing mandatory binding arbitration 
clauses. Thus, they advocate that the use of such clauses 
should be curtailed.
    The concerns of these advocates, however, do not appear to 
be well founded. For example, due in large part to competitive 
pressures in intensely competitive sectors, such as the credit 
card and auto sales sectors, companies have increasingly 
offered consumers enhanced protections in arbitration settings 
by offering so-called ``fair clauses.'' In these clauses, the 
rules of mandatory binding arbitration are fashioned to prevent 
undue advantages to companies. Thus, mandatory binding 
arbitration 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 a losing company; permit requests from indigent 
consumers that companies pay the costs of arbitration, win or 
lose; and furnish an off-ramp to small claims court for claims 
that would qualify for those fora. In addition, consumer 
contracts are reported increasingly to include opt-out clauses 
that allow consumers, for a time after entering into a contract 
(e.g., 45 days), to opt-out of mandatory binding arbitration 
clauses while preserving the rest of the bargain represented in 
their contract.

  B. RECENT SUPREME COURT DECISIONS REINFORCING THE ARBITRATION SYSTEM

    The FAA was enacted in 1925, and since then has been 
considered by the federal courts in numerous cases. This 
includes a recent spate of cases in the Supreme Court, 
including at least ten since 2010. The case law in general, and 
throughout this recent string of Supreme Court precedents, has 
consistently preserved the arbitration system and espoused a 
favorable view towards it as a fair and important adjunct to 
the judicial system. Decisions from the most recent Supreme 
Court decisions, for example, included the following holdings:

Class waivers are enforceable under the FAA

     In AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 
131 S. Ct. 1740 (2011), the Court held that the FAA bars States 
from refusing to enforce arbitration agreements that contain 
class action waivers.
     In American Express Co. v. Italian Colors 
Restaurant, 570 U.S. 228, 133 S. Ct. 2304 (2013), the Court 
held that nothing in the Sherman Act overrides the FAA's 
protection of the enforceability of class waivers in 
arbitration agreements.
     In Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 
(2018), the Court held that nothing in the National Labor 
Relations Act overrides the FAA's protection of the 
enforceability of class waivers in arbitration agreements.

Decisions overturning state law restrictions on arbitration agreements

     In Kindred Nursing Centers Limited Partnership v. 
Clark, 137 S. Ct. 1421 (2017), the Court held preempted by the 
FAA a state law rule imposing more stringent requirements for a 
power of attorney authorizing the holder of the power of 
attorney to enter into an arbitration agreement than state law 
required for that holder to enter into other types of 
contracts.
     In DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463 
(2015), the Court held that the FAA preempts a state law 
interpretation of the phrase ``law of your state'' to mean 
state law without considering the preemptive effect of federal 
law, when that interpretation was adopted to invalidate an 
arbitration agreement.
     In Marmet Health Care Center, Inc. v. Brown, 565 
U.S. 530, 132 S. Ct. 1201 (2012), the Court held preempted by 
the FAA a state law rule invalidating arbitration agreements 
encompassing wrongful death and personal injury claims (in this 
specific case, claims against nursing homes).

Decisions relating to class arbitration

     In Stolt-Nielsen S. A. v. AnimalFeeds Int'l Corp., 
559 U.S. 662, 130 S. Ct. 1758 (2010), the Court held that an 
arbitration agreement cannot be interpreted to require class 
arbitration based on the policy preferences of the arbitrator; 
rather, the parties must agree to class arbitration.
     In Oxford Health Plans LLC v. Sutter, 569 U.S. 
564, 133 S. Ct. 2064 (2013), the Court held that an 
arbitrator's determination that an agreement authorized class 
arbitration could not be set aside under the FAA's standard for 
limited judicial review of an arbitrator's decisions.
     In Lamps Plus, Inc. v. Varela, 203 L.Ed.2d 636 
(2019), the Court held that under the FAA an ambiguous 
agreement cannot provide the necessary contractual basis for 
concluding that the parties agreed to submit to class 
arbitration.
    As one can see, the run of holdings in these cases evinces 
a vigorous disposition to protect the arbitration system 
against unwarranted incursions of various kinds. That being 
said, the Court has also not hesitated to hold that claims fall 
outside the arbitration system when that result clearly is 
required by the FAA. See New Prime, Inc. v. Oliveira (2019) 
(unanimous holding that the FAA's exclusion for contracts of 
employment of certain transportation industry workers applied 
to those employed as independent contractors as well as 
ordinary employees).

                 C. CONSUMER AND EMPLOYMENT ARBITRATION

    Consumer arbitration has historically been the main focal 
point of the Committee's oversight and legislative activity 
concerning arbitration. Employment arbitration, either broadly 
or in specific sub-contexts, has also been examined on multiple 
occasions.

         1. Empirical and Other Evidence on Consumer Arbitration

    Empirical and other evidence concerning consumer 
arbitration points to the conclusion that the use of mandatory 
binding arbitration in consumer settings neither ``denies 
justice'' nor ``erodes'' our legal system. On the contrary, it 
benefits both consumers and companies, providing effective 
legal relief to both consumers and businesses, reducing the 
delay, expense and poor recovery performance that litigation--
and particularly class action litigation--tends to yield.

a. The Searle Study--Phase 1

    Perhaps the most important empirical evidence to date 
concerning consumer arbitration comes from a study published by 
Prof. Christopher Drahozal of the University of Kansas School 
of Law and the Consumer Arbitration Task Force of the Searle 
Civil Justice Institute. This study is entitled ``Consumer 
Arbitration Before the American Arbitration Association.'' It 
was the first phase of a two-part study performed by the Searle 
Institute in the late 2000s.\1\
---------------------------------------------------------------------------
    \1\A full reproduction of the Phase 1 study is available at https:/
/masonlec.org/site/rte_uploads/files/
Consumer%20Arbitration%20Before%20the%20AAA%20-
%20Preliminary%20Rpt.pdf.
---------------------------------------------------------------------------
    The Searle study reviewed a sample of American Arbitration 
Association case files involving consumer arbitrations; the 
primary dataset consisted of 301 AAA consumer arbitrations 
closed by award between April and December of 2007. Nearly ten 
percent of the cases in the sample concerned credit card 
disputes. Roughly 200 variables in the cases were examined by 
standard statistical methods; included among the variables were 
the characteristics of the arbitration clauses governing the 
cases. When complete, the study was both peer-reviewed by 
independent academic experts and reviewed by the Searle 
Institute's Board of Overseers, which included general counsel, 
plaintiffs' lawyers, defense lawyers, academics, and state and 
federal judges.
    Phase 1 of the Searle study covered the two broadest sets 
of issues about credit card and other consumer arbitration: (1) 
the expense, speed and results associated with arbitration; and 
(2) the degree to which ``Consumer Due Process'' protocols are 
met in arbitration.
            i. Arbitration expenses
    As Prof. Drahozal testified before the Subcommittee in 
2009, the Searle study's results support the case for 
preserving mandatory binding arbitration in credit card and 
other consumer contexts. For example, with respect to costs, 
Prof. Drahozal's written testimony stated as follows:
    The Searle study found that the fees assessed to consumer 
claimants bringing small claims are on average below the levels 
specified in the AAA fee schedule, as a result of businesses 
agreeing in the arbitration agreement to pay a greater share of 
the costs and arbitrators reallocating consumer fees to 
businesses in the award. In cases with claims of less than 
$10,000, consumer claimants were assessed an average of $96 ($1 
administrative fee plus $95 arbitrator fees). In cases with 
claims of between $10,000 and $75,000, consumer claimants were 
assessed an average of $219 ($15 administrative fees plus $204 
arbitrator fees). Thus, the effective fees for consumer 
arbitration in these cases were less than indicated in the 
applicable arbitration rules, and may have been less than court 
filing fees.\2\
---------------------------------------------------------------------------
    \2\Statement of Christopher R. Drahozal. House Judiciary Committee 
Subcommittee on Commercial and Administrative Law Hearing on the 
``Federal Arbitration Act: Is the Credit Card Industry Using the Act to 
Slam Shut the Courthouse Door?'' at 3-4 (May 5, 2009).
---------------------------------------------------------------------------
    This information rebuts one of the key criticisms of 
consumer arbitration, which is that the up-front fees 
associated with arbitration are too high, as compared to the 
up-front costs of litigation. Obviously, fees at this level are 
not prohibitive either up front or in total; moreover, they are 
remarkably low compared to the costs of litigation. While it is 
true that the Searle study figures included administrative and 
arbitrator's fees, not attorney's fees, the latter must be paid 
in either arbitration or litigation, and likely mount higher in 
litigation.
            ii. Procedural fairness
    Modern-day arbitration clauses often incorporate procedural 
``due process'' protocols, such as the protocol crafted by the 
American Arbitration Association. These protocols typically 
call for independent, impartial arbitrators; manageable costs; 
the provision of fora convenient to consumers; and the 
availability of remedies comparable to those that consumers 
could obtain in litigation. The due process protocols are taken 
quite seriously; AAA, for example, long ago committed to reject 
arbitration under arbitration clauses that do not comport with 
the AAA's due process protocol.
    The Searle study found that 76.6 percent of consumer 
arbitration clauses in the sample complied fully with the AAA's 
Consumer Due Process Protocol at the time of filing. In 
addition, in virtually all cases in which initial non-
compliance was found, the non-compliance was cured following 
AAA intervention (for example, through waiver or revision of 
the offending clause terms). Finally, the study found that over 
1,550 businesses had clauses that comply with the AAA's 
protocol, as opposed to only 647 identified businesses for 
which the AAA will not take arbitrations on account of protocol 
non-compliance. (The most common non-compliance is refusal by a 
business to pay its share of arbitration fees.)\3\
---------------------------------------------------------------------------
    \3\Id. at 5.
---------------------------------------------------------------------------
            iii. Quality of results
    The Searle study also examined the degree to which 
arbitrations produce sound results for consumers. This has been 
a particularly fractious issue in the credit card context, 
given some earlier studies suggesting that companies fare 
better in arbitration than do consumers.
    The Searle researchers, however, found that consumers 
received awards in 53.3% of the cases they filed, with average 
recoveries of $19,255. That, obviously, is a healthy recovery 
rate. The Searle study also found that business claimants won 
relief in 83.6% of the cases they filed, with average 
recoveries of $20,648. In addition, the study found that, on 
average, a successful consumer claimant recovered 52.1% of the 
amount he or she claimed, while successful business claimants 
recovered a higher average of 93% of the amounts they claimed. 
The investigators, however, found a reasonable basis for this 
difference, which is that virtually all business claims were 
for non-payment, while consumer claims more often sounded in 
the areas of non-delivery, breach-of-warranty, or violation of 
consumer protection laws. Thus, the overall picture that 
emerged was one of an arbitration system that delivered truly 
fair and reasonable results for consumers.\4\
---------------------------------------------------------------------------
    \4\Id. at 5-6.
---------------------------------------------------------------------------
            iv. Repeat-arbitrator bias
    The next concern addressed by the Searle study is the so-
called ``repeat-player'' phenomenon in consumer arbitration. 
Consumer advocates commonly claim that businesses receive 
preferential treatment from arbitrators. Their theory is that, 
because businesses tend to generate continuous streams of fee-
paying cases for arbitrators, the arbitrators reciprocate and 
grow their fee streams by skewing awards in businesses' favor.
    The Searle study, however, like previous studies, found 
that any ``repeat-player'' effect that may exist is actually 
the result of better case screening by companies who return 
again and again to arbitration. Moreover, the study found no 
statistically significant evidence of a repeat-player effect 
when applying a traditional definition of repeat-player 
business (i.e., consumers won relief in 51.8% of cases against 
businesses that had repeat appearances in the data set, and 
55.3% of cases against businesses that appeared only once). A 
very modest repeat-player effect was shown using a different 
definition of repeat-player-business, but that was largely the 
product of these players' success rates at achieving 
settlements, suggesting that the phenomenon was a result of 
better case-screening, not arbitrator bias.\5\
---------------------------------------------------------------------------
    \5\Id. at 6-7.
---------------------------------------------------------------------------
            v. Class Relief
    Finally, the Searle study did not find a major problem with 
the use of class arbitration waivers in consumer arbitration 
clauses. Overall, only 36.5% of cases arose under arbitration 
clauses containing class arbitration waivers; the remaining 
63.5% did not. In addition, the use of class action waivers 
varied significantly by sector; all credit card and cell phone 
arbitration clauses included class action waivers, few or none 
of the clauses in the mobile home, real estate and insurance 
sectors included waivers.

b. The Searle Study--Phase 2

    Phase 2 of the Searle study focused on a comparison between 
arbitration consumer litigation cases. As a result, the 
complete study provided a sound, comparative study of both 
arbitration and litigation mechanisms for resolving consumer 
disputes.
    Following up on his appearance at the Subcommittee's May 5, 
2009 hearing, Prof. Drahozal appeared on July 22, 2009, before 
the Committee on Oversight and Government Reform's Subcommittee 
on Domestic Policy. At that hearing, Prof. Drahozal was able to 
discuss preliminary information from Phase 2 of the study. As 
Prof. Drahozal put it in that testimony, the Searle study's 
results to that date provided a preliminary basis for comparing 
arbitration and litigation:

          ``Despite . . . limitations, the preliminary findings 
        . . . appear to be inconsistent with the argument that 
        high win-rates for businesses in debt collection 
        arbitrations show that arbitration is biased in favor 
        of those businesses. Instead, the win-rates, while high 
        in absolute terms and higher than win-rates for claims 
        brought by consumers in arbitration, appear similar to 
        win-rates for comparable claims brought in court. Thus, 
        while the findings are only preliminary, they 
        nonetheless suggest that business win-rates in debt 
        collection cases may be due to the types of claims 
        being brought and not to the forum in which they are 
        adjudicated.''\6\

    \6\Arbitration or Arbitrary: The Misuse of Mandatory Arbitration to 
Collect Consumer Debts: Hearing Before the Domestic Policy Subcomm. of 
the Oversight & Government Reform Comm., 111th Cong. 1 (2009) 
(statement of Christopher R. Drahozal, Professor of Law, University of 
Kansas School of Law); see also id at 6-7 (businesses bringing debt 
collection cases in sampled federal and state court cases won relief in 
99.7% of cases going to judgment).

    When the findings of the Searle Phase 2 study were 
published in November 2009, they reaffirmed these conclusions 
Central findings included that:
           ``[c]reditors won some relief in the court 
        cases studied as often, or more often, than in the 
        arbitration cases studied (i.e., consumers prevailed 
        more often in arbitration than in court);''
           ``[p]revailing creditors were awarded as 
        high a percentage, or a higher percentage, of what they 
        sought in the court cases studied than in the 
        arbitration cases studied (i.e., consumers fared better 
        or at least no worse by this measure in arbitration 
        than in court);''
           ``[t]he rate at which debt collection cases 
        were disposed of other than by award or judgment (e.g., 
        by dismissal, withdrawal, or settlement) did not appear 
        to differ systematically between arbitration and 
        litigation;''
           ``[t]he rate at which consumers responded 
        (i.e., did not default) also did not appear to differ 
        systematically between arbitration and litigation;'' 
        and
           ``[a]s a general matter, in the cases we 
        studied, consumers fared at least as well in 
        arbitration as in court.''\7\
---------------------------------------------------------------------------
    \7\Consumer Arbitration Task Force, Searle Civil Justice Institute, 
Creditor Claims in Arbitration and in Court: Interim Report No. 1 at 4, 
27 (Nov. 2009) (emphasis added) (available at https://masonlec.org/
site/rte_uploads/files/
Creditor%20Claims%20Interim%20Report%2011%2019%2009%20FINAL.pdf).
---------------------------------------------------------------------------
    To conclude, the two-phase Searle Study provided 
substantial evidence that consumer arbitration, is cheap, fair, 
effective, untainted by pro-business bias, and generally used 
without unfair restrictions on class action arbitration.

c. The Consumer Financial Protection Bureau study

    Subsequent to the Searle study, the Dodd-Frank Wall Street 
Reform and Consumer Protection Act, Pub. L. 111-203, required 
the newly constituted Consumer Financial Protection Bureau to 
perform a study of consumer arbitration and offer 
recommendations concerning to Congress. Perhaps most 
significantly, the CFPB's study identified facts about class-
action lawsuits that casts severe doubt over whether class-
action lawsuits will be capable of providing adequate justice 
to consumer claimants, if those claimants are denied the 
alternative of arbitration. For example, the CFPB study found 
that:
           the substantial majority of class actions 
        are resolved with no benefits flowing to absent class 
        members;\8\
---------------------------------------------------------------------------
    \8\See Consumer Financial Protection Bureau, Arbitration Study: 
Report to Congress 2015 at Section 6, p. 37 (Mar. 2015) (CFPB Report) 
(available at https://files.consumerfinance.gov/f/
201503_cfpb_arbitration-study-report-to-congress-2015.pdf).
---------------------------------------------------------------------------
           the weighted-average claims rate was only 
        four percent--i.e., the vast majority of class members 
        do not file claims for payment from class-action 
        settlement funds;\9\
---------------------------------------------------------------------------
    \9\See id. at Section 8, p. 30.
---------------------------------------------------------------------------
           the average settlement payment to class 
        members was just $32.35, while attorneys' fees averaged 
        $1 million per case;\10\
---------------------------------------------------------------------------
    \10\See id. at Section 8, pp. 27-28.
---------------------------------------------------------------------------
           the average fee paid to class-action 
        plaintiffs' lawyers, as a percentage of the announced 
        settlement, was 41%, with a median of 46%;\11\ and
---------------------------------------------------------------------------
    \11\See id. at Section 8, p. 34.
---------------------------------------------------------------------------
           class actions that produced class-wide 
        settlements took an average of nearly two years to 
        resolve.\12\
---------------------------------------------------------------------------
    \12\See id. at Section 8, p. 37.
---------------------------------------------------------------------------

d. Earlier studies of consumer arbitration

    Studies that preceded the Searle and CFPB studies also 
support conclusions favorable to arbitration. For example, 
during the 2000s, the National Arbitration Forum published a 
synopsis of independent studies and surveys concerning the 
benefits of pre-dispute consumer arbitration. The results of 
these studies, as concerns consumer interests, can be 
summarized as follows:
           individuals prevailed more often in 
        arbitration than in court;
           consumers, more specifically, prevailed 20% 
        more often in arbitration than in court;
           monetary relief for individuals was higher 
        in arbitration than in lawsuits;
           individuals received a greater percentage of 
        the relief requested in arbitration;
           arbitration was approximately 36% faster 
        than litigation;
           sixty-four percent of American consumers 
        would choose arbitration over a lawsuit for monetary 
        damages; and
           ninety-three percent of consumers using 
        arbitration found it to be fair.\13\
---------------------------------------------------------------------------
    \13\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, 78% of business attorneys found that 
arbitration provided faster recovery than lawsuits, and 83% of 
business attorneys found arbitration to be equally as fair or 
more fair than lawsuits.
    Separately, in December 2004, Ernst & Young issued a more 
targeted study of the outcomes of contractual arbitration in 
consumer-initiated, lending-related cases. The results of this 
study were as follows:
           consumers prevailed in 55% of cases that 
        went to an arbitration hearing--the same win-rate that 
        consumers obtained in state court;
           consumers obtained favorable results in 79% 
        of the cases that were reviewed;
           40% of consumers who brought arbitration 
        claims actually got their ``day in court,'' while only 
        2.8% of cases in state court ever reached trial; and
           69% of consumers surveyed indicated that 
        they were very satisfied with the arbitration 
        process.\14\
---------------------------------------------------------------------------
    \14\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 U.S. Chamber of Commerce's Institute for Legal Reform. The 
survey was conducted online among 609 adults who participated 
in a binding arbitration case (voluntarily, due to contract 
language or with strong urging by the Court, but not a court 
order) that reached a decision. The major findings were that:
           arbitration was widely seen as faster (74%), 
        simpler (63%), and cheaper (51%) than going to court;
           two-thirds (66%) of participants say they 
        would be likely to use arbitration again with nearly 
        half (48%) saying they are extremely likely;
           even among those who lost, one-third said 
        they were at least somewhat likely to use arbitration 
        again;
           most participants were very satisfied with 
        the arbitrator's performance, the confidentiality of 
        the process and its length;
           predictably, winners found the process and 
        outcome very fair and losers found the outcome much 
        less fair. However, 40% of those who lost were 
        moderately to highly satisfied with the fairness of the 
        process and 21% were moderately to highly satisfied 
        with the outcome;
           while one in five of the participants were 
        required by contract to go to arbitration, the 
        remainder were voluntary--suggested by one of the 
        parties, one of the lawyers, or the court; and
           two-thirds of the participants were 
        represented by lawyers.\15\
---------------------------------------------------------------------------
    \15\U.S. Chamber Institute for Legal Reform, Arbitration: Simpler, 
Cheaper, and Faster than Litigation--a Harris Interactive Survey (2005) 
(available at https://www.instituteforlegalreform.com/uploads/sites/1/
ArbitrationStudyFinal.pdf).
---------------------------------------------------------------------------
    Other studies have also reached results supporting the 
conclusion that arbitration provides a fair and effective 
option for consumers and others arbitrating against businesses, 
such as employees. For example, RoperASW published a study of 
legal disputes in April 2009 concluding that 64% of individuals 
would choose arbitration over court litigation, 67% believed 
court litigation takes too long, and 32% believed court 
litigation costs too much. Likewise, a report on consumer and 
employee arbitration in California found that consumers 
prevailed 71% of the time in arbitration.\16\
---------------------------------------------------------------------------
    \16\See California Dispute Resolution Institute, Consumer and 
Employment Arbitration in California: A Review of Website Data Posted 
Pursuant to Section 1281.96 of the Code of Civil Procedure (August 
2004) (available at http://www.mediate.com/cdri/cdri_print_Aug_6.pdf).
---------------------------------------------------------------------------

e. Problems in National Arbitration Forum arbitration

    On July 14, 2009, the Minnesota Attorney General sued the 
National Arbitration Forum (NAF) for a number of alleged 
infractions related to consumer debt arbitration. Allegations 
levied against the Forum included that NAF had, among other 
things:
           deceptively represented that it was 
        independent and neutral, operated like an impartial 
        court system, and was not affiliated with any party;
           paid commissions to executives to convince 
        creditors to include mandatory arbitration clauses in 
        customer agreements and use the NAF as their 
        arbitrator;
           aligned itself with creditors and against 
        consumer interests in its behind-the-scenes 
        communications with creditors;
           constructed financial ties between the NAF 
        and the debt collection industry through a web of 
        relationships with hedge funds and debt collection law 
        firms (according to the lawsuit, of the 214,000 
        consumer collection arbitration claims processed in 
        2006 by the NAF, 125,000 were filed by these law 
        firms);
           ``deselected'' from eligibility for future 
        cases arbitrators who had ruled for consumers, not 
        awarded credit card companies attorneys' fees, or 
        required creditors to introduce evidence; and
           sought out arbitrators were ``anti-
        consumer.''
    On July 17, 2009, the NAF signed a consent judgment 
resolving the lawsuit. Pursuant to that judgment, the NAF 
withdrew from its consumer arbitration business lines, 
including arbitration of credit card debt, consumer loan, 
telecommunications, utilities, health care, and consumer lease 
claims.
    Anti-arbitration advocates pointed to the NAF affair as 
evidence that consumer arbitration should be broadly restricted 
The NAF, however, disputed the argument, claiming that it 
withdrew from consumer arbitration primarily because it: (1) 
lacked sufficient resources to defend against the increasing 
challenges to arbitration, including from state attorneys 
general and the organized plaintiffs' trial bar; and (2) faced 
increased legislative uncertainty about the future of the 
arbitration system.
    The allegations against the NAF were disturbing. To date, 
however, there is no evidence that other prominent arbitration 
providers, such as the American Arbitration Association and 
JAMS, have been involved in similar practices or relationships. 
Accordingly, the most important point to be drawn from the NAF 
experience is not that mandatory binding arbitration in and of 
itself is deeply or inherently flawed. Rather, it is that the 
arbitration sector and the arbitration provider that generated 
the most complaints about mandatory binding arbitration--
consumer debt collection arbitration and the NAF--were cleaned 
up.

f. AAA moratorium on consumer debt collection arbitration and 
        subsequent consumer and employment arbitration due-process 
        protocols

            i. Moratorium on consumer debt collection arbitration
    In a related development, in June 2009, the American 
Arbitration Association (AAA) entered into a self-imposed 
moratorium on the arbitration of consumer debt collection 
cases. The AAA ascribed the moratorium to its desire to review 
and address fairness and due process concerns in the area of 
consumer debt collection arbitration.
    Significantly, the AAA placed no moratorium on its 
arbitration of any other kind of dispute. According to the AAA, 
that was because its decades-long experience in consumer 
arbitration showed that arbitration presents a good alternative 
for the resolution of consumer-related disputes.\17\ Consistent 
with this conclusion, the Searle Study highlighted that the 
AAA's ``landmark Consumer Due Process Protocol,'' created more 
than ten years ago with ``input from consumer, government, 
legal, business and academic experts . . . drawn from such 
organizations as the AARP, Consumers Union, Consumer Action, 
American Council on Consumer Interests, the Federal Trade 
Commission, the National Association of Attorneys General, and 
the National Association of Consumer Agency Administrators,'' 
works well to protect consumers.\18\ In fact, the Searle Study 
concluded that ``the AAA vigorously enforces the Protocol in 
each case, and that consumers win a majority of claims that 
they bring in arbitration before the AAA.''\19\
---------------------------------------------------------------------------
    \17\Arbitration or Arbitrary: The Misuse of Mandatory Arbitration 
to Collect Consumer Debts: Hearing Before the Domestic Policy Subcomm. 
of the Oversight & Government Reform Comm. at 8, 111th Cong. 8 (2009) 
(statement of Richard W. Naimark, Senior Vice President, American 
Arbitration Association).
    \18\Phase 1 Searle Study at 90.
    \19\Id.
---------------------------------------------------------------------------
    In light of the above, in 2009 the AAA endorsed the view 
that the NAF scandal presented a sui generis set of 
circumstances that did not support calls for broad reform of 
the arbitration system. The AAA, however, did call for reform 
of debt collection arbitration and a national policy committee 
to explore and identify solutions in that area.
            ii. Current AAA consumer and employment arbitration due 
                    process protocols
    Currently, the AAA has protocols in place for both consumer 
and employment arbitration to ensure the fairness of consumer 
arbitrations and employment arbitrations. The provisions of 
these protocols include the following:

Key Consumer Rules provisions:

     Either party may take a claim to small claims 
court in lieu of arbitration.
     A business using the AAA as an arbitral forum for 
consumer disputes must provide a copy of its contract to the 
AAA so that the AAA may review it for compliance with its rules 
and so that the contract may be publicly posted. The AAA will 
not provide a forum for arbitration of disputes unless the 
business has first complied with this requirement and the AAA 
has determined that the contract complies with AAA rules.
     In the absence of agreement by the parties on an 
arbitrator, the AAA will appoint the arbitrator.
     The arbitrator, as well as the parties and their 
representatives, must provide information to the AAA of any 
circumstances likely to raise justifiable doubt as to whether 
the arbitrator can remain impartial or independent.
     The AAA will disqualify an arbitrator who shows 
lack of independence, or partiality, or inability to perform 
the duties of an arbitrator.
     The arbitrator may require pre-hearing exchanges 
of information and identification of witnesses and exhibits, as 
well as other exchanges of information if needed to provide for 
a fundamentally fair process.
     Parties may be represented by counsel.
     The arbitral hearing may be by telephone, in 
person or based on submitted documents.
     The arbitrator's decision ``shall provide the 
concise written reasons for the decision unless the parties all 
agree otherwise.''
     Consumer's fees are capped at $200 if the consumer 
initiates a case and at $0 if the business initiates the 
case.\20\
---------------------------------------------------------------------------
    \20\American Arbitration Association, Consumer Arbitration Rules 
(2018) (available at https://www.adr.org/sites/default/files/
Consumer_Rules_Web_0.pdf).
---------------------------------------------------------------------------

Key Employment Rules provisions:

     If the parties have not agreed on an arbitrator, 
the AAA will send both sides the same list of arbitrator 
candidates, so that each party can strike names and rank the 
remaining names. The AAA will then select the arbitrator from 
the unstricken names based on the ranking. If the parties' 
submissions do not permit this process, the AAA may select the 
arbitrator from among other eligible arbitrators.
     ``Any person appointed or to be appointed as an 
arbitrator shall disclose to the AAA any circumstance likely to 
give rise to justifiable doubt as to the arbitrator's 
impartiality or independence, including any bias or any 
financial or personal interest in the result of the arbitration 
or any past or present relationship with the parties or their 
representatives.''
     ``The arbitrator shall have the authority to order 
such discovery, by way of deposition, interrogatory, document 
production, or otherwise, as the arbitrator considers necessary 
to a full and fair exploration of the issues in dispute, 
consistent with the expedited nature of arbitration.''
     The AAA will disqualify an arbitrator who shows 
lack of independence, partiality or inability to perform the 
duties of an arbitrator.
     Parties may be represented by counsel.
     Parties may waive an oral hearing.
     The award must be in writing, shall be signed by a 
majority of the arbitrators and shall provide the written 
reasons for the award unless the parties agree otherwise.
     Employee's fees are capped at $300 for claims 
filed by the employee, and employers pay all fees for claims 
filed by the employer.\21\
---------------------------------------------------------------------------
    \21\American Arbitration Association, Employment Arbitration Rules 
and Mediation Procedures (2017) (available at (https://www.adr.org/
sites/default/files/Employment Rules_Web2119.pdf).
---------------------------------------------------------------------------

g. Other studies and issues concerning credit card arbitration

            i. Public Citizen study
    In addition to the above studies, there are a number of 
analyses bearing more specifically on credit card arbitration. 
This type of arbitration has long been at the core of concerns 
over consumer arbitration.
    The first of the credit card studies was published in 2007 
by Public Citizen; it is entitled The Arbitration Trap: How 
Credit Card Companies Ensnare Consumers (available at http://
www.citizen.org/documents/ArbitrationTrap.pdf). Relying on 
disclosures by the National Arbitration Forum concerning its 
consumer arbitrations in California, Public Citizen assessed 
the results of 33,948 arbitrations from 2003 to 2007. The vast 
majority of these cases were credit card cases, virtually all 
of them were brought by businesses against consumers. According 
to the study, about 43% of these cases settled or were 
dismissed before an arbitrator could be appointed. In those 
cases in which an arbitrator was appointed, businesses won 
almost 94% of the time. In the very few consumer-filed cases in 
the sample, businesses won over 60 percent of the time. The 
sample size, however, was too small to provide any reliable 
inferences. On the basis of these results, Public Citizen 
advocated strenuously during the 2000s that consumer 
arbitration, and particularly credit card arbitration, was 
unfair to consumers.
            ii. Navigant study
    In 2008, Navigant Consulting reexamined the data on which 
Public Citizen relied, in a study entitled National Arbitration 
Forum: California Consumer Arbitration Data (July 11, 2008) 
(available at http://www.instituteforlegalreform.com/issues/
docload.cfm?docId=1212). Navigant reported that, in the 26,665 
arbitrations that did not settle, ``consumer parties were 
reported to have prevailed outright or had the case against 
them dismissed in 8,558 cases (32.1%),'' ``claims against 
consumers were reduced by NAF in an additional 4,376 cases 
(16.4%),'' ``the median reduction was $636 and the median 
percentage reduction was 8.6%,'' the consumers had to pay 
arbitration fees in virtually none of the cases in which 
arbitration fees were paid, and, in the few cases in which 
consumers paid the fees, the media fee paid was $75. Clearly, 
this information revealed a much different picture of the cases 
that Public Citizen examined.\22\
---------------------------------------------------------------------------
    \22\Navigant Consulting, Memorandum--National Arbitration Forum: 
California Consumer Arbitration Data (2008).
---------------------------------------------------------------------------
    In addition to Navigant, Professor Peter Rutledge of the 
University of Georgia School of Law criticized the Public 
Citizen study. As Professor Rutledge pointed out, Public 
Citizen's study addressed a single arbitration provider and a 
single business sector. In addition, the kinds of claims 
involved, those in debt-collection actions, tend to present 
little to dispute, and not surprisingly generate high win-rates 
for businesses. As Professor Rutledge emphasizes, ``[s]tudies 
of debt collection actions in major cities reveal that the 
lender typically wins between 96% and 99% of the time, right in 
line with the lender win-rate data cited in the Public Citizen 
Report.''\23\
---------------------------------------------------------------------------
    \23\Prof. Peter Rutledge, Arbitration--a Good Deal for Consumers: a 
Response to Public Citizen, U.S. Chamber Institute for Legal Reform 
(2008) (available at https://papers.ssrn.com/sol3/
papers.cfm?abstract_id=1811133).
---------------------------------------------------------------------------
    Accordingly, there is little reason to assign significant 
weight to the Public Citizen study, indeed, there is reason to 
believe from the Navigant and Rutledge analyses that credit 
card arbitration works relatively well for consumers and 
businesses.

       D. EMPIRICAL AND OTHER EVIDENCE ON EMPLOYMENT ARBITRATION

                1. 2019 Institute for Legal Reform Study

    The most significant recent evidence concerning employment 
arbitration is contained in a study published this month by 
INDP Analytics and funded by the U.S. Chamber of Commerce's 
Institute for Legal Reform.\24\ In this study, the authors 
analyzed over 10,000 employment arbitrations and over 90,000 
employment lawsuits in federal court between 2014 and 2018. 
This review showed that employment arbitration compares quite 
favorably with litigation as a manner of resolving employment 
disputes and actually delivers better, faster results than does 
litigation. The main results of the study are as follows:
---------------------------------------------------------------------------
    \24\INDP Analytics. Fairer, Faster, Better. An Empirical Assessment 
of Employment Arbitration (May 2019).
---------------------------------------------------------------------------
           In both arbitration and litigation, three-
        quarters of disputes were resolved by settlements, not 
        judgments.\25\
---------------------------------------------------------------------------
    \25\Id. at 4, 5.
---------------------------------------------------------------------------
           ``[W]hen cases proceeded to adjudication, 
        plaintiffs, who almost always were employees, were more 
        likely to prevail in arbitration than in 
        litigation.''\26\
---------------------------------------------------------------------------
    \26\Id.
---------------------------------------------------------------------------
           ``During 2014-18, in decided cases, 
        employee-plaintiffs prevailed in more than 32% of 
        arbitrations but only 11% of litigations.'' In other 
        words, ``[e]mployees are three times more likely to win 
        in arbitration than in court.''\27\
---------------------------------------------------------------------------
    \27\Id.
---------------------------------------------------------------------------
           ``Furthermore, prevailing employees 
        typically won twice as much money in arbitration than 
        in litigation.''
                   ``The median award to employee-
                plaintiffs was $113,818 in arbitration compared 
                to $51,866.''
                   ``The average award to employee-
                plaintiffs was $520,630 in arbitration compared 
                to $269,885 in litigation.''
                   ``Furthermore, the award of the 
                top 90 percentile was $668,998 in employment 
                arbitration compared to $539,574 in 
                litigation.''\28\
---------------------------------------------------------------------------
    \28\Id.
---------------------------------------------------------------------------
           ``Employment arbitration also was faster 
        than litigation.''
                   ``Employee-plaintiff arbitration 
                cases that were terminated with monetary awards 
                averaged 569 days (523 days in median).''
                   ``In contrast, employee-
                plaintiff litigation cases that terminated with 
                monetary awards required an average of 665 days 
                (532 days in median).\29\
---------------------------------------------------------------------------
    \29\Id.
---------------------------------------------------------------------------
    One other significant fact identified by the study bears 
special emphasis: ``79% of employees who initiated employment 
arbitration earned less than $100,000 a year.'' For employees 
in this earning range, results that are faster and higher in 
amount--i.e., results delivered by arbitration, not 
litigation--obviously are critical.

               2. Other Studies of Employment Arbitration

    In addition to the new INDP study, a study in the 1990s of 
employment arbitrations before the American Arbitration 
Association found that employees won 73% of the arbitrations 
they initiated and 64% of all employment arbitrations 
(including those initiated by employers). See Lisa B. Bingham, 
Is There a Bias in Arbitration of Nonunion Employment Disputes? 
An Analysis of Active Cases and Outcomes, 6 Int'l J. Conflict 
Management 369, 378 (1995).
    Also in the 1990s, Lewis Maltby, director of the American 
Civil Liberties Union's National Task Force on Civil Liberties 
in the Workplace, conducted a study in which he compared the 
results in employment arbitration with the results in federal 
court during the same period of time, finding that 63% of 
employees won in arbitration compared to 15% of employees who 
won in federal court. Awards to employees in arbitration were 
on average 18% of the amount demanded versus 10.4% of the 
amount demanded in court. The study also demonstrated that 
while arbitration awards to employees are on average lower than 
judgments to employees in court, the outcome for employees is 
still better in arbitration because of their higher win-rates 
of arbitration and the shorter duration of arbitration compared 
to court proceedings. See Lewis L. Maltby, Private Justice: 
Employment Arbitration and Civil Rights, 30 Colum. Hum. Rights 
L. Rev. 29, 46-48 (1998).
    Numerous other studies also have found that employees, a 
group in many ways comparable to consumers, have fared well in 
arbitration.\30\
---------------------------------------------------------------------------
    \30\See George W. Baxter, Arbitration in Litigation for Employment 
Civil Rights?, 2 Vol. of Individual Employee Rights 19 (1993-94); 
William M. Howard, Arbitrating Claims of Employment Discrimination, 
Disp. Res. J. Oct-Dec 1995, at 40-43; Theodore Eisenberg and Elizabeth 
Hill, Arbitration and Litigation of Employment Claims: An Empirical 
Comparison, Disp. Resol. J. Nov. 2003-Jan. 2004, at 44; Michael Delikat 
and Morris M. Kleiner, An Empirical Study of Dispute Resolution 
Mechanisms: Where Do Plaintiffs Better Vindicate Their Rights?, Disp. 
Resol. J. Nov. 2003-Jan. 2004, at 56; Gary Tidwell, et al., Party 
Evaluation of Arbitrators: An Analysis of Data Collected from NASD 
Regulation Arbitrations (Aug 1999), available at http://www.nasd.com/
wcb/groops/med_arb/documents/mediation_arbitration/nasdw_009528.pdf.
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           E. PROBLEMS WITH THE ALTERNATIVE OF CLASS ACTIONS

    Finally, it must be borne in mind that, if broad measures 
to preclude the use of mandatory-binding arbitration in 
consumer and other settings is adopted, for many, if not most, 
claimants of ordinary means, class-action lawsuits may be the 
only affordable alternative means of obtaining justice for any 
claims above the typically very small amounts allowed to be 
addressed in state small claims courts.\31\ As discussed above, 
the CFPB found numerous problems to be associated with reliance 
on class action lawsuits for recovery on consumer claims. But 
in addition, class action lawsuits also have presented other 
problems, including scandal involving fabricated testimony, 
bought and sold to support false claims.
---------------------------------------------------------------------------
    \31\See Rocket Lawyer, Small Claims Court Limits by State, 
available at https://www.rocketlawyer.com/article/small-claims-court-
dollar-limits-by-state.rl) (vast majority of states have small claims 
limits of $10,000 or less; most are at $5,000 or less).
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    For example, multiple renowned class action lawyers have 
been exposed and convicted of such behavior. One of them, 
William Lerach of Milberg Weiss, told the Wall Street Journal 
that illegal kickbacks to people recruited to file class action 
lawsuits is an ``industry practice.''\32\ He and fellow trial 
lawyer Melvin Weiss engineered a $250 million criminal scheme 
to pay people to sue companies, lied about it in court, and 
became federal prisoners. Another of American's most prominent 
trial lawyers, Richard Scruggs of Mississippi, pled guilty in 
March 2008 to bribing a state judge to obtain more legal 
fees.\33\
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    \32\``I Was Guilty,'' Wall Street Journal (Feb. 2, 2008) (available 
at https://www.wsj.com/articles/SB120275552784659491).
    \33\A. Jones, P. Prada, ``Richard Scruggs Pleads Guilty,'' Wall 
Street Journal () (available at https://www.wsj.com/articles/
SB120550974632936815).
---------------------------------------------------------------------------
    In light of this scandal, the Washington Post called in 
2009 for ``a sober discussion about how best to achieve a 
fairer, more balanced legal system through comprehensive tort 
reform.''\34\
---------------------------------------------------------------------------
    \34\``A Fall and a Lesson,'' The Washington Post (April 9, 2008) 
(editorial).
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                            III. Conclusion

    As the above demonstrates, the solution to concerns about 
the arbitration system is not to eliminate broad areas of 
jurisdiction from it and leave those areas to flawed class 
actions, but to improve the arbitration system further for any 
areas of jurisdiction that are of concern. To disregard the 
possibility of valuable reforms that on a bipartisan basis 
could preserve and improve the arbitration process for these 
categories of cases, rather than effectively wipe out the 
availability of arbitration without simultaneously curtailing 
the abuse of class actions, would be to deliver the worst 
result for Americans seeking justice.
                                              Doug Collins,
                                                    Ranking Member.