CL&P Blog

House Passes Financial Reform, 237-192

Brian Beutler has the details at Talking Points Memo:

By a vote of 237-192, the House of Representatives this afternoon voted to pass final legislation dramatically changing the rules that govern the financial industry. Nineteen Democrats joined 173 Republicans in opposing the legislation, which, in addition to limiting the risky practices that lead to the 2008 collapse, will create a new federal agency dedicated to protecting consumers from predatory financial products, and bring to a close the Troubled Asset Relief Plan -- the bailout program created by the Congress in the midst of the financial crisis. Three Republicans voted for the bill, and four members (two Democrats, two Republicans) did not vote. The Senate is set to take up identical legislation shortly after they return from next week's Independence Day recess.

The NY Times story is here.

Forced Arbitration and the Kagan Hearings

by Deepak Gupta

 The forced arbitration of claims arising out of statutory protections for consumers and employees has become a hot topic at the Kagan hearings. The parade of comments by Senators started even before the hearings began, with a written statement by Senator Leahy criticizing the Supreme Court's 5-4 decision in Rent-a-Center v. Jackson, and similar remarks on the Senator floor by Senator Franken (video of which we've already posted here). The topic was raised again in Senator Whitehouse's opening statement on Monday and in an extended colloquy between Franken and Kagan this morning.

In his statement, Leahy called the Rent-a-Center decision "a blow to our nation’s civil rights laws and the protections that American workers have long enjoyed under those laws." He noted that "more than one hundred million Americans work under binding mandatory arbitration agreements" and that "most Americans are not even aware that they have waived their constitutional right to a jury trial when they accept a job to provide for their families."

Congress worked for years on a bipartisan basis to pass laws to protect workers from race discrimination, gender discrimination and age discrimination.  . . . Rent-a-Center is unfortunately just the latest in a line of divisive and devastating Supreme Court decisions where five justices have, in effect, gutted those statutory protections. ... Congress should now take a closer look at the way in which binding mandatory arbitration is creating a legal underground where American workers are left without protection. 

There is no rule of law in arbitration. There are no juries or independent judges in the arbitration industry. There is no appellate review. There is no transparency. And as a result of today’s divisive ruling, there will likely be no justice for millions of American workers and their families.  The courthouse doors have simply been closed to them.  Today’s opinion also gives big business a disincentive to treat their employees fairly and will no doubt lead to virtually all companies requiring their employees to sign one-sided arbitration agreements as a condition of employment.

Senator Whitehouse's opening statement at the Kagan hearings struck a similar chord:

Unfortunately, the conservative wing of the current Supreme Court has departed from [the Court's] great institutional traditions. Precedents, whether of old or recent vintage, have been discarded at a startling rate. Statutes passed by Congress have been tossed aside with little hesitation, and constitutional questions of enormous import have been taken up hastily and needlessly. Only last week, the Rent-A-Center decision concluded that an employee who challenges as unconscionable an arbitration demand must have that challenge decided by the arbitrator. And the Citizens United decision -- yet another 5-4 decision -- created a constitutional right for corporations to spend unlimited money in American elections, opening our democratic system to a massive new threat of corruption and corporate control. There is an unmistakable pattern. For all the talk of umpires and balls and strikes at the Supreme Court, the strike zone for corporations gets better every day.

Finally, Senator Franken this morning used the hearings as an opportunity to sharply critique not only the recent Rent-a-Center decision, but also the Court's 2001 decision in Circuit City v. Adams, which rewrote the Federal Arbitration Act to include most employee claims.  The relevant portion of the transcript form this morning's hearings is available after the jump.

Does the Dodd-Frank Financial Reform Bill Still Have 60 Votes in the Senate?

According to today's Wall Street Journal, because of the recent death of Senator Robert Byrd and a few Senators who are threatening to switch their votes, the legislation's fate may be in doubt even though a similar bill earlier cleared the Senate and House-Senate conferees reached a deal last Friday.

San Francisco Requires Cell Phone Retailers to Inform Customers About Radiation Emissions

As the Washington Post explains in today's edition, "[l]ast week, the [San Francisco] Board of Supervisors passed a law -- the first in the nation -- requiring retailers to inform their customers how much radiation the cellphones on their shelves emit, so shoppers can figure out how close the devices come to the upper limits on radiation set by the Federal Communications Commission."

You can read the San Francisco ordinance here. Here's the full Post story, which discusses the dispute over whether cell phone use causes cancer. Another story from the ABC affiliate in San Francisco has more information and links to related articles. In retaliation, the trade group for the industry (CTIA - The Wireless Association) has announced that it will stop holding its fall trade show in the City by the Bay.

Prof. David Cole on the Supreme Court's First Amendment Jurisprudence

Georgetown law professor David Cole maintains in this N.Y. Review of Books piece that when the Supreme Court engages in "strict scrutiny" of legislative regulation of corporate speech (as in the Citizens United case), the Court is really strict, but when national security is the governmental interest, "strict scrutiny" is something altogether different.

Some Seeming Disappointments in the CFPB Bill

by Jeff Sovern

I haven't read the conference Dodd-Frank bill yet, so take this with a grain of salt, but judging by Gretchen Morgenson's column in today's Times, it is a long way from a complete victory for consumers. Of course, the auto dealers won their carve-out, and Morgenson's column indicates that the conferees went with the Senate version of preemption, meaning that the OCC can declare state consumer protection laws preempted even if federal law does not provide for corresponding protection, and the Financial Stability Oversight Council can override CFPB rules.  I'm sure the bill is still worth supporting, but losing on all three of those is disappointing.

NY Times Editorial on Forced Arbitration and the Supreme Court

Today's New York Times contains this terrific editorial, linking to Public Citizen's research on mandatory arbitration outcomes, criticizing the Supreme Court's recent decision in Rent-a-Center v. Jackson, and endorsing intervention by Congress:

Beware the Fine Print

Buried in the fine print of most contracts for cellphones, health insurance and credit cards is a clause requiring that all disputes be decided by binding arbitration, rather than a court. Businesses love these provisions, because arbitrators act quickly and almost always rule in their favor, and many employers are requiring new hires to sign similar agreements.

All of this sounds pretty unfair, but apparently not unfair enough for the Supreme Court, which has now made the arbitration process even more onerous. The court ruled last Monday there was nothing wrong with requiring that the fairness of an arbitration clause be determined by — an arbitrator. To appreciate the absurdity, consider the case at hand, which was brought by Antonio Jackson, a black account manager for Rent-A-Center in Nevada who tried to sue the company for racial discrimination after being denied repeated promotions.

Mr. Jackson had earlier signed an employment agreement saying that all employee discrimination claims had to be arbitrated but a host of claims brought by Rent-A-Center against employees could go before a judge. Any challenge to the fairness of the arbitration clause would also have to go before an arbitrator.

A federal judge dismissed Mr. Jackson’s lawsuit because of the arbitration clause, but the Ninth Circuit Appeals Court revived it, saying courts could rule when arbitration agreements were “unconscionable.” That decision was reversed by Justice Antonin Scalia and the four other conservative members of the Supreme Court.

By challenging the entire arbitration agreement as lopsided and unfair, the majority said, Mr. Jackson triggered the need for arbitration and could not seek court relief. Justice John Paul Stevens, in one of his final fervent dissents, described that notion as “fantastic.” If a contract is invalid, he said, how can the arbitration clause it contains still be valid?

There are many ways in which an arbitration clause might be considered “unconscionable.” What if an employer inserts a provision that the employee has to pay all arbitration fees? Or that the employer gets to pick the arbitrator? In one famous case, a contract between the Hooters restaurant chain and its employees allowed the company to select two members of a three-arbitrator panel. That contract was struck down. Unless Congress changes the rules, these cases may never get back to the courts, where they have a chance for a fair resolution.

Here's The Dodd-Frank Wall Street Reform And Consumer Protection Act

As we previously reported, the Wall Street Reform legislation has emerged from the House-Senate conference committee. The conference report -- that is, the legislation that the two houses will now be asked to okay -- is 2315 pages. It's called the Dodd-Frank Wall Street Reform and Consumer Protection Act after Sen. Chris Dodd and Rep. Barney Frank, who spearheaded the legislation. (They are pictured to the right with President Obama.)

Here is every last word of the bill. If you don't have time for every page right now, just check out this handy comprehensive 10-page summary.  Go here to read the legislation title by title. Title X is the Consumer Financial Protection Act of 2010, which establishes the new Bureau of Consumer Financial Protection, the brainchild of Prof. Elizabeth Warren (pictured below).

Senator Franken Condemns 5-4 Decision in Rent-a-Center v. Jackson

On the Senate floor, Senator Al Franken condemned the Supreme Court’s decision in Rent-A-Center v. Jackson (in which a 5-4 majority of the Court upheld the power of arbitration agreements to remove even threshold questions of validity from review by a court) and discussed how the case of Jamie Leigh Jones illustrates the effect of cases like Circuit City Stores v. Adams. 

“Clearly this is a ruling that Congress needs to fix and I look forward to working with my colleagues to do so,” said Franken. “Sometimes it’s easy to forget that Supreme Court matters to average people, to our neighbors and our kids."

 

More Details on the Financial Reform Legislation Conference Deal

As we explained yesterday, a deal on the financial reform legislation has been reached by the House-Senate conference committee. The bill must now go back to each chamber for final passage of the conference-approved deal and signature by President Obama. Today's Washington Post has several useful articles: this overview;  this piece discussing consumer advocates' reactions to the legislation; and this interactive guide that explains how the legislation would work in five key areas: consumer protection; too big to fail; derivatives; risk to the financial system; and regulator shopping.