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Chairman Nadler Statement for the Subcommittee Hearing on “Justice Denied: Forced Arbitration and the Erosion of Our Legal System”

Washington, May 16, 2019

Washington, D.C. – Today, House Judiciary Committee Chairman Jerrold Nadler (D-NY) delivered the following opening remarks during a Subcommittee on Antitrust, Commercial, and Administrative Law hearing on forced arbitration:

“Thank you, Mr. Chairman, for holding today’s important hearing on forced arbitration. Nearly a century ago, Congress enacted the Federal Arbitration Act to allow merchants to resolve run-of-the-mill contract disputes in a system of private arbitration that would be legally enforceable.  The system that Congress envisioned was to be used voluntarily and only between merchants of equal bargaining power.

“Thanks to a series of disastrous Supreme Court decisions, however, this system has been turned entirely on its head. Private arbitration has been transformed from a voluntary forum for companies to resolve commercial disputes into a legal nightmare for millions of consumers, employees, and others who are forced into arbitration and are unable to enforce certain fundamental rights in court.

“Many companies use forced arbitration as a tool to protect themselves from consumers and workers who seek to hold them accountable for alleged wrongdoing.  By burying a forced arbitration clause deep in the fine print of take-it-or-leave-it consumer and employment contracts, companies can evade the court system, where plaintiffs have far greater legal protections, and hide behind a one-sided process that is tilted in their favor.

“For example, arbitration generally limits discovery, does not adhere to the rules of civil procedure, can prohibit class actions, may have no right of appeal, and the proceedings—and often even the results—must stay secret.

“For millions of consumers and employees, the pre-condition—whether they know it or not—of obtaining a basic service or product, such as a bank account or a cell phone, or even a job, is that they must agree to resolve any disputes in private arbitration.  That means that their ability to enforce civil rights, consumer, labor, and antitrust laws are subject to the whims of a private arbitrator, who is not required to provide plaintiffs any of the fundamental protections guaranteed in the courts.

“We have a bedrock principle in this country, and that is that all Americans deserve their day in court.  We make a mockery of this principle, however, when we allow individuals to be stripped of this right and to be forced into private arbitration proceedings without the safeguards our judicial system affords. Yet that is where we find ourselves today.

“This problem began in earnest in the 1980s, with a series of Supreme Court decisions that misapplied the clear legislative intent of Congress and dramatically expanded the ability of companies to limit the rights of consumers and workers through forced arbitration.

“In 1984, the Court granted corporations the right to enforce arbitration clauses even when state law rendered them void.  And strikingly, in 1985 the Court allowed arbitration proceedings to be used not just to settle contracts—but also to interpret laws enacted by Congress that implicate fundamental rights.

“Justice Sandra Day O’Connor criticized the Supreme Court’s decision allowing arbitration clauses to preempt state law as a form of ‘judicial revisionism’ that is ‘unfaithful to congressional intent, unnecessary, and inexplicable.’

“Similarly, Professor Margaret Moses, a leading scholar in the field of commercial arbitration, has observed, ‘The Court has, step by step, built a house of cards that has almost no resemblance to the structure envisioned by the original statute.’

“Most recently, a conservative majority on the Supreme Court reached new heights in misreading what Congress intended.  Last year, in a 5 to 4 decision in the Epic Systems case, the Court held that employers can combine forced arbitration clauses with class action bans to prevent workers from banding together to hold law-breaking employers accountable, despite clear authority for workers to bring their claims under the National Labor Relations Act.

“That is why, yesterday, I reintroduced the ‘Restoring Justice for Workers Act,’ legislation that would end forced arbitration in employment contracts and protect workers’ rights to pursue work-related claims in court.  As Justice Ruth Bader Ginsburg stated in her dissent in Epic Systems, a congressional correction is “urgently in order.”  I strongly agree.

“That is why I also strongly support H.R. 1423, the ‘Forced Arbitration Injustice Repeal Act’, or ‘FAIR Act’, introduced by the Gentleman from Georgia, Mr. Johnson, which would prohibit forced arbitration in consumer, employment, civil rights, and antitrust disputes.  I applaud Congressman Johnson for his leadership on this legislation, and I look forward to working with him, and other Members who have introduced legislation addressing the crisis of forced arbitration, to ensure that individuals can once again enforce the laws that Congress enacts.

“The widespread use of forced arbitration is a serious threat to our entire legal system and the basic tenets of our democracy.  For many companies, arbitration has become a get-out-jail-free card to circumvent the basic rights of consumers and workers.   

“It is up to Congress to reverse this dangerous trend, and I look forward to hearing from our distinguished panel of witnesses about how best to address this important issue. I thank the Chairman for holding today’s hearing, and I yield back the balance of my time.”

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