Senator Franken introduces Arbitration Fairness Act to protect consumers’ rights

A group of U.S. Congressmen, including Minnesota’s Al Franken, introduced a new bill that would eliminate forced arbitration clauses in employment, consumer, and civil rights contracts. The impetus behind the proposed law appears to be the recent U.S. Supreme Court decision in AT&T v. Concepcion. In Concepcion, consumers sued AT&T for false advertising. Because the value of their case was only $30, it was consolidated into a class action. AT&T tried to stop the lawsuit by activating the mandatory arbitration clause in the service contract, which not only required the case to be heard in a behind-closed-doors private arbitration forum, but also banned class actions altogether. This contractual language was buried in the fine print of the consumers’ contract and, like most consumer contracts, was not negotiable and offered on a take-it-or-leave-it basis. Both lower courts rejected AT&T’s argument and struck down the arbitration clause in the contract as unconscionable because it severely limited the consumers’ rights.

In an already notorious 5-4 decision, the U.S. Supreme Court struck down these lower court decisions. The Court applied the Federal Arbitration Act to uphold the contractual ban on class actions and forced arbitration. Although the FAA was originally passed to ensure that courts enforced commercial arbitration agreements between two companies, the Court’s decision expands the scope of the FAA and effectively allows companies to insulate themselves from liability when they defraud a large number of customers of a relatively small amount of money.

Because the Court’s decision involved interpretation of a federal statute and not the Constitution, it can essentially be overturned through legislation, which is where Franken’s bill comes in. From the press release:

What the Arbitration Fairness Act Does:

  • Restores the original intent of the FAA by clarifying the scope of its application.
  • Amends the FAA by adding a new chapter invalidating agreements that require the arbitration of employment, consumer, or civil rights disputes made before the dispute arises.
  • Restores the rights of workers and consumers to seek justice in our courts.
  • Ensures transparency in civil litigation.
  • Protects the integrity of the Civil Rights Act, the Equal Pay Act, the Americans with Disabilities Act, and the Age Discrimination in Employment Act, among others.

“Workers and consumers should never be forced to give up their rights to get hired for a job, or to get a cell phone,” said Senator Franken.“I’ve introduced the Arbitration Fairness Act to ensure that workers and consumers have the right to choose arbitration over litigation, instead of being forced into it by corporations.”

Press Release | May 17, 2011