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Why We Really Need the Arbitration Fairness Act: It's All About Separation of Powers
Abstract
Congress is currently considering the Arbitration Fairness Act, which prohibits pre-dispute mandatory arbitration clauses in consumer contracts. This article reviews the use of consumer arbitration to demonstrate that in consumer cases arbitration is used to eliminate consumer disputes, not to provide an efficient alternative forum. More importantly, it is suggested that the widespread, in fact near universal, use of consumer arbitration conflicts with the core American belief in separation of powers. Through arbitration, business can effectively divorce itself from the civil justice system, eliminating the judicial branch from consumer disputes. The only way to reverse this dangerous trend is through the prohibition contained in the Arbitration Fairness Act.
... This article uses the failure to regulate or prohibit the use of pre-dispute arbitration provisions in nursing home agreements as a means of understanding the current state of pre-dispute arbitration clauses in consumer contracts in the United States. 1 There is not a consistent American policy on whether such provisions should be enforceable. The debate over arbitration generally is drawn along partisan lines, and the debate over nursing home arbitration generally follows the same lines. ...
The United States takes a unique position in allowing binding pre-dispute arbitration clauses in consumer contracts. This article uses the failure to regulate or prohibit the use of pre-dispute arbitration provisions in nursing home agreements as a means of understanding the current state of pre-dispute arbitration clauses in consumer contracts in the United States. State laws or judicial rules that regulate arbitration clauses in nursing home contracts are routinely blocked by federal courts. Efforts in the U.S. Congress to prohibit such clauses in nursing home contracts have been unsuccessful.
... 16 This conflict arises against a backdrop of debate over all mandatory arbitration agreements between consumers and businesses. 17 Scholars and legislators alike have argued that such agreements are unjust. 18 9. ...
This Student Note addresses the unresolved question of the enforceability of arbitration agreements under the Credit Repair Organizations Act. While the Third and Eleventh Circuits have enforced such agreements, finding that the CROA does not preclude arbitration, the Ninth Circuit has refused to enforce these arbitration clauses, finding that the CROA entitles plaintiffs to a judicial forum. This conflict arises against a backdrop of debate over mandatory arbitration agreements between consumers and businesses. Scholars and legislators alike have argued that such agreements are unjust. A refusal to enforce such agreements, however, would fly in the face of the Supreme Court’s clear mandate to lower courts to enforce arbitration agreements. This Note examines the current circuit split over the enforceability of arbitration agreements under the Credit Repair Organizations Act in the context of both consumer protection law and relevant arbitration jurisprudence. Part I discusses the development of consumer protection law and the enactment of the Credit Repair Organizations Act, and examines the statute in detail. Part II describes the history and procedure of arbitration and examines the development of the Supreme Court’s policy regarding arbitration. Part III then analyzes the circuit split over the enforceability of arbitration agreements under the Credit Repair Organizations Act and the arguments for and against enforcing mandatory consumer arbitration clauses. Part IV advocates for the enforcement of such arbitration agreements, presenting several reasons why consumers will not be harmed by the enforcement of such agreements. Finally, Part IV proposes a simple solution to the problem: the elimination of credit repair organizations.
The Supreme Court describes the right to trial by jury in a civil action as a "basic and fundamental" right that is "sacred to the citizen" and therefore "should be jealously guarded by the court." But parties to a contract may agree that, in the event a dispute arises, they waive their right to a jury. If this dispute resolution right - which is fundamental, constitutional, and set forth in the Federal Rules of Civil Procedure - may be used as a bargaining chip, are there any limits on parties' ability to modify the rules of litigation in their ex ante contract? Will the courts enforce an agreement that limits discovery to an exchange of documents? That limits direct testimony to written affidavit and prohibits a witness from appearing other than for cross-examination? That sets the requisite standard of proof in a civil case as clear and convincing evidence rather than a preponderance of the evidence? That permits the parties to substitute their own rules of evidence in place of the Federal Rules of Evidence? The likely answer to each of these questions is "Yes." This Article concludes that there are very few limits on contract parties' ability to modify the rules of litigation. There is a presumption that litigation rules may be modified by an ex ante contract. If Congress has not expressly stated otherwise, parties may negotiate and modify any litigation rule by ex ante contract that the parties may waive during litigation or by electing arbitration. If the contract satisfies standard contract law requirements and (if required) was made knowingly, voluntarily, and intelligently, the contract will be subject to specific enforcement. Within these bounds, ex ante contracts to modify the rules of litigation can accomplish nearly all of the procedural benefits of arbitration. But modified litigation can be superior to arbitration. The parties get a neutral decision-maker, who is free of bias and uninhibited by the repeat-player syndrome of arbitration's judges-for-hire. The parties retain their right to full appellate review. These disputes also remain in the public domain, moving from the shadows of arbitration to the light of litigation. Finally, this freedom of contract adds value to the litigation rights. Because the litigation rights may be exchanged for consideration they are more valuable.