On Arbitration Fairness: Stop the ABA From Taking the Corporate Side Against Civil Rights and Consumers

by Paul Bland

I’ve gotten caught up in scores of e-mails and requests from angry lawyers asking "what can I do about the ABA getting hijacked?" This blog post has my answer.

It’s a pretty well-recognized phenomenon that lawyers who principally represent individuals against corporations have their own organizations, such as the American Association for Justice, state Associations for Justice and trial lawyers’ associations, the National Association for Consumer Advocates, and the like. Lawyers who generally represent corporations against individuals have their own organizations as well, such as the Defense Research Institute. In theory, the American Bar Association ("ABA") is supposedly an umbrella organization that welcomes all lawyers, and largely doesn’t take sides in the battles between plaintiffs’ lawyers and defense lawyers.

It sounds like all that’s right about to change. In the last week or so, the Leadership Council of the ABA Section on Dispute Resolution, has decided to inject the ABA into a major political battle entirely on the side of defense lawyers and their clients and entirely against plaintiffs’ lawyers and their clients. This Leadership Council has decided that the ABA should come in 100% against the civil rights community, every consumer rights organization in the United States, and a variety of other public interest organizations, and be 100% on the side of the American Bankers’ Association, the cell phone industry, and similar groups.

Background: The Battle Over Arbitration Fairness

The battle centers around the Arbitration Fairness Act ("AFA"), which would prohibit pre-dispute binding mandatory arbitration clauses in all contracts involving employment, consumer transactions, medical care, and franchise disputes. In the U.S. Senate, the lead sponsor of the AFA is Senator Russ Feingold (D-Wis.), and in the House, it is Rep. Hank Johnson (D-Ga). The legislation had more than 100 co-sponsors in the House. It is strongly supported by a large coalition of civil rights and consumer groups.  As the enforcement of fundamental civil rights laws and consumer protection laws has been increasingly undermined by pre-dispute binding arbitration, a large and rapidly growing number of persons have come to see this as one of the central civil rights issues of our time. There has been extensive testimony at Congressional hearings, extensive academic commentary, and a growing tide of rage from consumers and employees who are angry at the rapidly expanding use of mandatory arbitration.

The industry has fought back, of course. The Chamber of Commerce and its various allies have commissioned polls (which generally use extremely misleading questions to imply that the consumers, not the credit card companies and nursing homes, will be selecting the arbitration companies), have hired tons of lobbyists, and have funded studies designed to show that credit card companies are pushing their consumers into arbitration for their consumers’ own benefit.

The leading political strategy of the Chamber has been legislation introduced by Sen. Jefferson Sessions (R-Citibank) that supposedly is a "compromise." Leading bank defense lawyer Alan Kaplinsky has openly spoken of having drafted this legislation at several public events. The gist of the Sessions Bill is to permit corporations to continue to use pre-dispute binding mandatory arbitration (and particularly to use arbitration to ban class actions by consumers or employees), but to require (a) that a technical opportunity be given to "opt-out" of arbitration in advance; and (b) to list several vague procedural protections to make arbitration fairer.

It is safe to say that nearly every lawyer who represents individual consumers and employees strongly supports the AFA, and strongly opposes the window dressing Sessions bill. It is safe to say that the Chamber of Commerce strongly supports the Sessions bill, and that no defense lawyer eager to have any clients can speak out in favor of the AFA.

The ABA Dispute Resolution Section Steps Into the Fray

Amazingly--rather than staying neutral in the battle between corporate America and the civil rights and consumer community, rather than stay neutral in this battle between the defense and plaintiffs’ bar--the Dispute Resolution Section of the ABA has suddenly decided to weigh in and throw the weight of the entire ABA against the AFA and for the Sessions approach.

I’ve had several dozen plaintiffs’ attorneys tell me bluntly that if the ABA does, in fact, take the corporate position and oppose the civil rights community, that they will immediately resign from the ABA. It’s hard to say how many lawyers will actually resign from the ABA. For one thing, the corporate power grab is not yet that well known. But if the ABA follows the lead of the leadership of its Section on Dispute Resolution, it’s safe to say that the ABA will become less of an organization that can claim to represent and be comprised of lawyers of all stripes, and the ABA will become an organization of corporate defense lawyers. (Since the Defense Research Institute already serves that role, a good question at that point will start to be "what is the purpose of the ABA at all?")

Without notice to members, the leadership council of the Section on Dispute Resolution has adopted a resolution opposing the AFA. While the actual text is still being kept a secret, members have reported that the resolution says the AFA goes too far and instead endorses an alternative approach that would allow mandatory arbitration if and only if (1) consumers et al are given a pre-dispute chance to opt out and (2) Congress passes legislation regulating the fairness of the mandatory arbitration. The Section intends to put this resolution before the full ABA, in August, and seek approval from the ABA at that time. In short, the resolution will attack Sen. Feingold’s legislation, approve the approach set forth by Sen. Sessions (without necessarily endorsing the legislative language drafted by Alan Kaplinsky, it will embrace his approach), and the ABA will pick a side in one of the most heated controversies dividing left and right, plaintiffs and defendants, the civil rights community and the credit card issuers.

Chamber lobbyists have already begun to talk about how such a resolution, if adopted, would then be part of the lobbying efforts to derail the AFA.

The Merits of the "Opt Out" Approach

It’s a surprising turn of events. For starters, the opt-out concept has almost no support among persons who are actually familiar with the reality of pre-dispute arbitration. Many credit card companies already provide their members with "opt out" rights, and they have empirically proven to be a joke. As defense lawyers have openly said at various CLE programs, the purpose of the opt out provisions is to undermine unconscionability challenges to contract terms that ban class actions that corporations embed in arbitration clauses. The banks understand that because so few consumers (a) read the fine print; (b) understand what this language and idea is about; and (c) are motivated to take affirmative steps to opt out, only the smallest percentage of consumers notice and act upon this right.

Prof. Jeff Sovern recently had a terrific post on this blog about the opt out issue.

There is similarly a large body of literature addressing how things like the American Arbitration Association’s "due process protocols" have been ineffective. The bottom line with pre-dispute binding arbitration in the employment and consumer context (as opposed to the business-to-business context where the Federal Arbitration Act was originally intended to operate) is that the corporations writing the contracts choose the arbitration providers. The National Arbitration Forum, for example, gets this, running a series of advertisements in which it advises corporations that its system is more favorable to corporations than that of the AAA (which is why more and more banks, nursing homes and the like use the notorious NAF, and AAA is disappearing from many consumer contracts). So long as one side to disputes – the stronger side, the side drafting the contracts – gets to pick the entity that will decide the disputes, the resulting systems will always favor the stronger side. The consumer and civil rights community understand this reality, and have consistently taken the position that due process-type protocols – so vague as to be unenforceable, ignored in many cases by the arbitration companies, and ineffective on many levels – are no replacement for the approach of the AFA.

What ABA Members Can Do

For ABA members who represent individuals against corporations for at least some of their practice who feel strongly about pre-dispute binding arbitration, and for ABA members who otherwise are strongly opposed to seeing the ABA take the side of corporate defendants against the civil rights community, there is one thing you can do rather than just wait for the worst in August and then quit the ABA. You can contact the leadership of the ABA, and you can contact the leadership of the Section on Dispute Resolution.

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The American Bar Association is poised to make the jump to becoming the "Corporate Defense Chamber of Commerce Bar Association." If it goes through with this self-destructive and unbelievably divisive approach, it will hemmorage members and lose a great deal. It’s easy to see why some members of the Section on Dispute Resolution want to de-rail the AFA – Gary Kaplan, for example, who is chairman of the "Arbitration Committee’s Legislative Subcommittee," is an NAF arbitrator who announces on his Linked-In page that lawsuits are "inevitably wasteful." (I’m sure that would have come as a surprise to Thurgood Marshall when he was working on Brown v. Board of Education.)  But it’s hard to see why the broader ABA would want to do this.

A large number of ABA members have asked me what they can do. Here’s my answer: look through the "Leadership Directory," and make your voices heard.

Comments

[Mark]

Ditto the sentiments expressed by Tim in response to Mr. Kaplan's post. Mr. Kaplan's outrage is either feigned or he's unable to rationally accept his role in preventing access to the courts to seek redress for civil rights violations, fraud against uneducated consumers, etc.

[Tim]

"The notion that either I, or my views, stand in opposition to the civil rights movement or Thurgood Marshall's efforts in Brown v. Board of Education is both offensive and defamatory."

But you're perfectly content with a system of mandatory arbitration that prevents people from accessing the courts to vindicate their rights under the signature legislative accomplishment of the civil rights era--the Civil Rights Act of 1964 (and Title VII in particular).

[Gary L Kaplan]

The correct link is: http://www.linkedin.com/in/garylkaplan

[Gary L Kaplan]

For any readers interested in a truthful description of my background, as compared to Mr. Bland's misrepresentations, I'd encourage you to actually read my linked in profile at http://www.linkedin.com/pub/a/49a/ab1. The full sentence from my linked in profile quoted by Mr. Bland actually reads: "Although some lawsuits are necessary, they are inevitably costly and wasteful." The notion that either I, or my views, stand in opposition to the civil rights movement or Thurgood Marshall's efforts in Brown v. Board of Education is both offensive and defamatory.

Gary Kaplan

[Deepak]

I meant to say "Those sections, *unlike* the Dispute Resolution Section..."

[Deepak]

I'd suggest folks contact members of the *other* ABA sections. Those sections, like the Dispute Resolution Section, do not consist primarily of people who make their money from arbitration. A majority of representatives of the many other sections have to agree to the resolution in the 555-member ABA House of Delegates for it to pass.

[KCJones]

Contact members of ABA Dispute Resolution Section.

[Rick Johnson]

Why not start an online petition?