Rep. Johnson requests House Judiciary hearing on arbitration

WASHINGTON, D.C. – Today, Rep. Hank Johnson (GA-04) sent a letter to House Judiciary Committee Chairman Bob Goodlatte requesting a full hearing to carefully review the issue of pre-dispute (“forced”) arbitration clauses that appear in millions of consumer contracts – from employment to automobile sales and from nursing-home admission to cell phone service.

The letter, cosigned by Judiciary Ranking Member John Conyers (D-Michigan), comes on the heels of a powerful three-part investigative series in The New York Times examining the alarming rise by corporations of including forced arbitration clauses in consumer contracts that block consumers’ access to the courts, and also their right to participate in class-action lawsuits.

According to the series, forced arbitration falls woefully short as a fair and just system for consumers seeking to hold corporations accountable when a dispute arises.

“Simply put, pre-dispute, forced arbitration deprives consumers of their day in court, and is a secretive, abusive and unfair process that favors corporations,” Johnson said. “With forced arbitration stacking the deck against the consumer, corporate overreach can’t be checked. The Seventh Amendment to the Constitution guarantees to people the right to a jury trial in a court of law before an impartial judge; in a trial that is open and fair. In stark contrast, The New York Times has resoundingly established that forced arbitration is a closed, unjust, and discriminatory system.”

Congressman Hank Johnson (GA-04) is the author of the Arbitration Fairness Act and ranking member of the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law, which exercises jurisdiction over issues of arbitration.

Letter:

The Honorable Bob Goodlatte

Chairman, Committee on the Judiciary

2138 Rayburn House Office Building

Washington, DC

Dear Chairman Goodlatte:

We write to call your attention to the recent publication of “Beware the Fine Print,” a groundbreaking investigative series in The New York Times examining the alarming use of pre-dispute (“forced”) arbitration in millions of contracts, and request that you convene hearings on the relevant issues as they relate to arbitration matters within the Judiciary Committee’s jurisdiction.

According to this three-part series, forced arbitration falls woefully short as a fair and just system for parties of unequal bargaining power. Part one of the series documents the rise and dramatic spread of forced arbitration clauses. The series reveals that forced arbitration has enabled companies to disable “consumer challenges to practices like predatory lending, wage theft and discrimination.” U.S. Judge William G. Young, who was appointed by President Ronald Reagan, states that the dramatic upward trend of forced arbitration “is among the most profound shifts in our legal history,” providing business with “a good chance of opting out of the legal system altogether and misbehaving without reproach.”

Examining thousands of court records and conducting hundreds of interviews with lawyers, judges, arbitrators, corporate executives, and plaintiffs, The New York Times also found that the process for forced arbitration is secretive and discriminatory, undermining the rights of untold American consumers, workers, and small businesses. Part two of the series examines how the practices of forced arbitration often occurs behind closed doors, without due consideration of the rules of evidence or applicable law:

Behind closed doors, proceedings can devolve into legal free-for-alls. Companies have paid employees to testify in their favor. A hearing that lasted six hours cost the plaintiff $150,000. Arbitrations have been conducted in the conference rooms of lawyers representing the companies accused of wrongdoing. Winners and losers are decided by a single arbitrator who is largely at liberty to determine how much evidence a plaintiff can present and how much the defense can withhold. To deliver favorable outcomes to companies, some arbitrators have twisted or outright disregarded the law, interviews and records show.

In the third installment of this series, The New York Times explores the far-reaching power of forced arbitration clauses by investigating the use of arbitration in religious tribunals involving secular claims like wrongful death or financial fraud. As the investigation notes, while religious tribunals have traditionally been reserved for non-secular claims, courts have upheld religious arbitration of even non-secular claims because “the terms of arbitration are detailed in binding contracts signed by both parties.”

Following this investigative series, the Times’ editorial board has called for an end to forced arbitration. Specifically noting that “Congress has looked the other way” on the issue, the Times editorial board expressed dismay that many people “did not realize that their right to sue had been lost until they needed it.” “A common refrain,” the Times’ editorial board notes, “was the disbelief that this could happen in America.”

Simply put, this private, secretive, and abusive system of institutionalized discrimination and corporate immunity is inimical to the foundations of the American justice system. Enshrined in the Seventh Amendment to the Constitution, the Framers adopted the right to a civil jury trial to ensure an open, fair, and impartial justice system. In stark contrast, The New York Times has resoundingly demonstrated that forced arbitration is a closed, unjust, and discriminatory system.

The House Judiciary Committee has jurisdiction over this matter. Accordingly, we strongly believe that these issues warrant review by the Committee, and that hearings are the appropriate means for a careful review of this subject.

Sincerely,

Henry C. “Hank” Johnson, Jr.

Ranking Member

Subcommittee on Regulatory Reform,

Commercial and Antitrust Law

Committee on the Judiciary

John Conyers, Jr.

Ranking Member

Committee on the Judiciary

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