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Chairman Nadler Statement for the Markup of H.R. 1423, the Forced Arbitration Injustice Repeal Act

Washington, September 10, 2019

Washington, D.C. – Today, House Judiciary Committee Chairman Jerrold Nadler (D-NY) delivered the following opening remarks during a markup of  H.R. 1423, the Forced Arbitration Injustice Repeal Act (FAIR Act): 

“H.R. 1423, the ‘Forced Arbitration Injustice Repeal Act,’ or the ‘FAIR Act,’ 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. 

“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

“However, over the past 40 years, the Supreme Court has issued a series of decisions that have expanded the use of arbitration far beyond Congress’s original intent—creating the unjust system we see today. 

“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 Federal Rules of Civil Procedure, can prohibit class actions, which it almost always does, and deny the right of appeal.  Worse yet, arbitration allows the proceedings—and often even the results—to stay secret, thereby permitting companies to avoid public scrutiny of potential misconduct.

“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, a cell phone, a credit card, or even a job, is that they must agree to resolve any disputes in private arbitration. 

“We used to refer to these as contracts of adhesion, where one party with all the power dictates the terms to the other party in a take-it-or-leave it contract.  The next time you apply for a credit card, try crossing out the term in the fine print requiring you to agree to arbitration and see if you still get that credit card. You will be denied without a moment’s hesitation.

“This are classic contracts of adhesion, which were once thought to be disfavored under the law, but which now seem to be standard operating procedure in the corporate world. 

“For individuals who have no choice but to agree to these contracts, that means that their ability to enforce civil rights, consumer, labor, and antitrust laws are subject to the whims of a private arbitrator—often selected by the companies themselves.  These private arbitrators are not required to provide plaintiffs any of the fundamental protections guaranteed in the courts, and their further employment can depend on building a good reputation with the companies that hire them. And for many companies, arbitration has become a virtual get-out-of-jail-free card to circumvent the basic rights of consumers and workers.  

“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 individuals can be stripped of this fundamental right and be forced into private arbitration proceedings without the safeguards our judicial system affords. Yet, that is where we find ourselves today. 

“During an oversight hearing on arbitration in the Antitrust, Commercial, and Administrative Law Subcommittee, a panel of leading academic experts and practitioners, and people affected by forced arbitration testified in support of ending this shameful practice. 

“For example, Deepak Gupta, a prominent public interest attorney, testified that forced arbitration has eroded countless fundamental rights established by Congress by rendering them virtually unenforceable. 

“As he explained during the hearing, ‘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?’ 

“H.R. 1423, the ‘Forced Arbitration Injustice Repeal Act’ or the ‘FAIR Act,’ reverses this disastrous trend by prohibiting the enforcement of forced arbitration clauses in consumer, labor, antitrust, and civil rights disputes. Importantly, this legislation does not preclude parties from agreeing to arbitrate a claim after the dispute arises, which will ensure that arbitration agreements are truly voluntary and transparent. 

“I applaud the Gentleman from Georgia, Mr. Johnson, for his leadership on this legislation, which currently has 216 cosponsors. This measure is also supported by a broad coalition of more than 70 public-interest, labor, and advocacy organizations, including Public Citizen, Consumer Reports, the Communications Workers of America, the Leadership Conference on Civil Rights, and the American Association of Justice. In addition, 84% of Americans across the political spectrum support ending forced arbitration in employment and consumer disputes, according to recent polling data. 

“It is up to Congress to end this secretive and unfair practice. I urge my colleagues to support the FAIR Act, and to restore access to justice for millions of Americans."
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