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They’re Baaack! Democrats Reintroduce a Flurry of Anti-Mandatory Arbitration Bills
Posted on Categories Arbitration, Federal, Legislation, NewsTags , ,

Undaunted by the rather poor prospects of enactment, Congressional Democrats announced March 7 the reintroduction of six bills aimed at curtailing mandatory arbitration in consumer or employment contracts.

Resident futurist, Fordham Law prof, and SAC Contributing Legal Editor and Board Member George H. Friedman blogged in January and last December on this very topic, correctly predicting that anti-arbitration bills would resurface in the new Congress. We asked him to prepare this analysis, which updates his past blog posts. He apologizes that it’s a bit longer than the Alert’s typical writeup, but as he says, “I’m not the one who reintroduced a bunch of arbitration bills on the same day!” The words that follow are Professor Friedman’s. Readers of the Securities Arbitration Alert will recall that several bills were introduced in the last Congress that would have amended either the Federal Arbitration Act (“FAA”) or specific federal laws to ban mandatory predispute arbitration agreements (“PDAA”) in contracts involving consumers, employees, and others. These died when the 114th Congress drew to a close in January. On March 7th Congressional Democrats held a nearly hour-long press conference to announce they were reintroducing legislation with the same objectives. This comes on the heels of bills already introduced earlier this year. The situation is fluid, with some of the proposals not yet published in the congress.gov or govtrack.us Websites, but I’ve pieced it together below as best I could. Note that for the most part I list just HR numbers, although in many instances there are companion bills in the Senate.

Bills Already Introduced Earlier this Year

Some bills were already introduced earlier this year. Where I state “reintroduced” I mean that the new bill is essentially identical to past iterations as far as I can tell.

Investor Choice Act (H.R. 585): Would amend the Securities Exchange Act of 1934 to ban the use of mandatory PDAAs by broker-dealers and investment advisers and would guarantee class action participation. Reintroduced on January 19th by Rep. Keith Ellison (D-MN) (see SAA 2017-03).

Arbitration Transparency Act (H.R. 832): Would amend the FAA to require that arbitration proceedings in certain disputes involving consumer financial products and services be open to the public. This is a new bill introduced February 2nd by Rep. Michael Capuano (D-MA) (see SAA 2017-06).

Six Bills Just Announced

These six bills were announced on March 7th. Some were specifically referenced in the Press Release; others I’ve identified based on comments made at the press conference. They are all reintroductions.

Arbitration Fairness Act (H.R. 1374): Neither a description nor text is yet available, but I’m assuming this version of the AFA is similar if not identical to the last version, which would have amended the FAA to ban mandatory arbitration of employment, consumer (including securities), antitrust, or civil rights disputes. Reintroduced by Rep. Henry C. “Hank” Johnson, Jr. (D-GA), who also introduced the last iteration of the AFA.

Court Legal Access and Student Support (CLASS) Act of 2017 (S. 553): No description or text is available, but I’m assuming this version of the CLASS Act is similar if not identical to the last one, which would have amended the FAA and the Higher Education Act of 1965 to ban PDAAs in enrollment agreements made between students and certain institutions of higher education, and prohibit class action waivers. Reintroduced by Sen. Richard Durbin (D-IL).

Justice for Victims of Fraud Act (S. 552 and H.R. 1414): Would amend the Truth in Lending Act and the Electronic Fund Transfer Act to bar arbitration of disputes involving fictitious Wells Fargo banking and credit card accounts. Reintroduced by Sen. Sherrod Brown (D-OH) and Rep. Brad Sherman (D-CA), the same legislators who introduced the 2016 iteration of the bill (see SAA 2016-45).

Justice for Telecommunications Consumers Act: I can’t find this yet, but from the description I’m surmising this is a reintroduction of the last version, which would have amended the FAA to ban mandatory PDAAs in a wide range of telecommunications contracts involving consumers, such as cell phones, land lines and cable and internet service.

Justice for Servicemembers Act: Another one I can’t find yet, but I assume it's a reintroduction of the 2016 version also introduced by Rep. David Cicilline (D-RI). That bill would have amended the Uniformed Services Employment and Reemployment Rights Act of 1994 (“USERRA”), 38 U.S.C. 4301 et seq., to: “make any agreement to arbitrate a claim under such provisions unenforceable unless all parties consent to arbitration after a complaint on the specific claim has been filed in court or with the Merit Systems Protection Board and all parties knowingly and voluntarily consent to have that particular claim subjected to arbitration” (emphasis added) (see SAA 2016-46).

Restoring Statutory Rights Act (H.R. 1396): Again, at press time no description or text was available, but I’m guessing this version of the RSRA is similar if not identical to the last version, which would have amended the FAA as to individuals, those bringing representative actions, and small businesses to: 1) ban PDAAs covering claims for damages – and injunctive relief – involving federal statutory rights and those derived from state Constitutions; 2) amend section 2 of the FAA to include, under the “grounds as exist at law or in equity for the revocation of any contract” basis for resisting a PDAA a state or federal statute or court ruling “that prohibits the agreement to arbitrate on grounds that the agreement is unconscionable, invalid because there was no meeting of the minds, or otherwise unenforceable as a matter of contract law or public policy;” and 3) state that arbitrability issues are to be resolved by courts, not arbitrators (SAA 2016-05). Reintroduced by Rep. Cicilline.

Quick Analysis

I continue to think there’s virtually no chance any of the bills aimed at broadly amending the FAA have any chance of being passed by this Congress or signed by President Trump. In the “nice try” category are the Investor Choice Act, the Justice for Victims of Fraud Act, and the Telecommunications Act, which instead try to amend other federal statutes to bar PDAAs. These would comport with Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991), and CompuCredit Corp. v. Greenwood, 132 S.Ct. 665 (2012), which hold that, where a federal statute expressly bars arbitration, the FAA’s presumption of PDAA validity and enforcement will yield to that statute’s proscription of arbitration. I say “nice try” because, while they are more focused, I still don’t see them being enacted.

The lone bill I think has a chance is the Justice for Servicemembers Act, not only because it is narrowly focused (again, it would amend the USERRA, not the FAA), but also because the last bill actually garnered Republican support – unlike any of the other bills introduced in the last Congress. I think a bill perceived as protecting servicemembers will have bipartisan appeal and President Trump clearly supports the military. Thus, this bill might have a chance at becoming law. I say “perceived as” immediately above, because I don’t agree with the premise that arbitration is an inferior form of justice. After all, SCOTUS requires that claimants in arbitration be able to effectively vindicate their statutory rights.

Why Now?

I think I’ve figured out why there is this sudden great interest in arbitration. Sen. Franken (starting at video marker 3:40) referred at the press conference to the upcoming confirmation hearings for Supreme Court nominee Neil Gorsuch, and said: “Americans can’t afford a judge who hides behind Originalism to side with big business over every day Americans.” It seems clear to me the Democrats are going to make an issue of Judge Gorsuch’s pro-arbitration court decisions, a subject I blogged on very recently. Perhaps the Democrats read it!

(ed: *Thanks, Prof! **Whew! ***We will provide official links and cites when we find them.) (SAC Ref. No. 2017-10-01)

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