Consumer Law & Policy Blog

Baltimore Sun Article on CFPB's Forthcoming Look at Arbitration

Here.  An excerpt:

[N]ot every company inserts arbitration clauses in contracts, but it's nearly impossible for consumers to avoid them altogether.

"You would have to live in a cave somewhere," says Amalia Kessler, a professor of law and legal history at Stanford University. "You can opt out of society. That's how you can opt out of these things."

Jill Gross on AT&T Mobility

Jill Gross

 of Pace has written At&T Mobility and FAA Preemption, forthcoming in the Penn State Dickinson School of Law Yearbook on Arbitration and Mediation.  Here's the abstract:

The Supreme Court's recent arbitration law decisions reflect the Court's strong support for arbitration agreements, but also severely limit the states’ powers to police the fairness of arbitration. In particular, the Court’s decision in AT&T Mobility v. Concepcion, LLC expands the FAA preemption doctrine beyond its prior boundaries, signaling how far the Court is willing to go to support arbitration clauses at the expense of states’ rights and the values of federalism. This article explores the impact of AT&T Mobility on the preemption of state arbitration law, and the concomitant impact on the balance between state and federal power in the arbitration arena. This article argues that AT&T Mobility results in FAA over-preemption, as it unduly shifts arbitration law-making power away from the states, in violation of the FAA’s savings clause.

Arbitration and Agencies

Bloomberg's Carter Dougherty has a comprehensive story this morning reporting on steps by two agencies, the CFPB and the SEC, to study the use of mandatory arbitration clauses in consumer contracts, as mandated by the Dodd-Frank Act, with a view to possible regulation. This piece represents the most in-depth reporting on the issue so far. Read it here.

One thing missing from the story (presumably because it's outside Doughtery's beat) is a discussion of developments in the employment context--specifically, the NLRB's recent decision in D.R. Horton, which declares the use of class-action bans in arbitration clauses to be an unfair labor practice under federal law, the pending challenge to that ruling, and the NLRB's even more recent efforts to enforce the ruling in specific cases.

Jeff Gelles Column: How Arbitration Clauses Enable Businesses to Thumb Their Noses at Consumer Protections

Here.  A very interesting illustration. 

Florida Supreme Court Hears Post-Concepcion Challenge to Class-Action Ban in Payday Contract

The Florida Supreme Court heard oral arguments on Wednesday in Betts v. McKenzie Check Advance of Florida, a challenge to a class-action ban in a payday loan contract. 

Public Justice attorney and CL&P co-blogger Paul Bland argued on behalf of plaintiff Wendy Betts, defending a lower-court decision holding that the class-action ban violated public policy by preventing consumers from obtaining competent counsel. The attorney for the lender, McKenzie Check Advance, contended that Bland's argument was foreclosed by AT&T v. Concepcion:

"At this point it's not an issue of whether arbitration's good or bad, but it's an issue of the supremacy clause," said Jamie Bianchi, a lawyer for McKenzie.

Justice Barbara Pariente acknowledged Bianchi had a strong argument.

"It would seem - and maybe this is sort of a friendly question for you - that Concepcion really takes the certified question and really obviates it," Pariente said. "Right or wrong, we're bound to follow the U.S. Supreme Court."

"We agree with that, your honor," Bianchi replied.

Pariente later added, "So much for state's rights, huh?"

F. Paul Bland, a lawyer representing Wendy Betts and other McKenzie customers, argued the Concepcion ruling does not prevent the state justices from affirming the 4th District's ruling.

Bland said the decision did not invalidate prior U.S. Supreme Court rulings saying consumers must be able to effectively vindicate their rights.

"A procedure that ends up gutting the rights effectively is enough to render the clause unenforceable," Bland said.

Pariente, though, asked how he could argue "with a straight face" that the U.S. Supreme Court would void the class action ban simply on the basis of testimony from three consumer advocate lawyers who said they wouldn't take the McKenzie cases.

Bland argued they included a legal aid lawyer who offered broader evidence of being unable to find lawyers willing to take a large number of cases, some involving military members.

Read more here: http://www.miamiherald.com/2012/05/09/2791094/fla-supreme-court-hears-class.html#storylink=cpy

[Miami Herald]

Empirical Study of Predispute Mandatory Arbitration Clauses in Social Media Terms of Service Agreements

Michael L. Rustad,

Richard Buckingham,

Diane D'Angelo, and

Katherine Durlacher, all of Suffolk, have written An Empirical Study of Predispute Mandatory Arbitration Clauses in Social Media Terms of Service Agreements, forthcoming in the University of Arkansas at Little Rock Law Review.  Here's the abstract:

With predispute mandatory arbitration clauses, a large and growing number of social networking sites (SNSs) are depriving users of their consumer rights. SNS users across the globe are required to agree to predispute mandatory arbitration as a condition of accessing content. Consumers that enter into clickwrap or browsewrap agreements waive their right to a jury trial, discovery, and appeal, likely without being aware that they are losing these important rights. The U.S. Supreme Court’s arbitration jurisprudence has made it difficult to challenge these troublesome contractual clauses and practices. The Roberts Court’s recent decisions, including AT & T Mobility, LLC v. Concepcion (2011) and CompuCredit Corp. v. Greenwood (2012), make it clear that the Court favors a broad enforcement of consumer arbitration agreements stripping the state of the ability to police these documents. These decisions are, in effect, a federal takeover of arbitration, preventing state efforts to protect consumers against one-sided and oppressive consumer arbitration clauses. This Article is the first empirical study of the use of predispute mandatory arbitration clauses by SNSs and sheds light on whether SNSs have used arbitration clauses strategically in order to achieve a “liability-free” zone in cyberspace. Our empirical findings reveal that SNS arbitration clauses contravene many of the principles deemed necessary for a fundamentally fair process for consumers to resolve disputes.

CL&P Blog Founder Deepak Gupta on the Future of Class Actions

Here. Deepak is perhaps better known for having argued Concepcion in the Supreme Court while he was with Public Citizen.  He has recently left the CFPB to concentrate on appellate litigation.  An excerpt:

Since wide-ranging legislation in unlikely, given corporations’ political influence, Gupta said, more targeted work by federal governmental agencies is needed to protect class actions.

 According to Gupta, an individual federal regulatory agency has the ability to interpret its own statutes and can take up the issues of arbitration and class action within its own jurisdiction.

The current case to watch, Gupta said, is a January decision in which the National Labor Relations Board ruled that a class-action ban in employment contracts is an unfair labor practice. D.R. Horton Inc. and Cuda, No. 12-CA-25764, 357 NLRB No. 184, 2012 WL 36274 (N.L.R.B. Jan. 3, 2012).

 

 

Cardozo Concepcion Conference . . .

. . . on April 26.  More information here.  It looks like a terrific list of speakers, including CL&P blogger Paul Bland, once and future CL&P blogger Deepak Gupta, a representative from the CFPB, and an impressive list of law professors, including my colleague Adam Zimmerman.

Michael Helfand Paper Reads Concepcion Narrowly

Michael A. Helfand 

of Pepperdine has written Purpose, Precedent, and Politics: Why Concepcion Covers Less than You Think, 4 Yearbook on Arbitration & Mediation (2012).  Here's the abstract:

This article sketches some possible limitations on the impact AT&T Mobility v. Concepcion will have going forward. While many have seen the Supreme Court’s decision as simultaneously signaling an end to the viability of class action lawsuits and undermining principles of federalism, there may be reasons to believe that it will not have implications quite so far reaching. Specifically, this article proposes three reasons why Concepcion’s impact may be limited. First, the decision lends itself to a more narrow reading, which simply demands that courts take the entire of an arbitration agreement into account before deploying common law defenses to render them invalid. Second, Justice Thomas’s concurrence may limit the precedential value of Concepcion by narrowing the Court’s holding to cases where the defense speaks to the revocation of an otherwise valid agreement as opposed to where the defense speaks to a failure of the agreement’s formation. Third, state courts may demonstrate increasing willingness to chip away at Concepcion by narrowly construing its holding. Such a willingness may flow from a recognition that Concepcion’s five-justice majority is deeply divided on the applicability of the Federal Arbitration Act to state courts, making it unlikely that the Court would ever reverse state court decisions that employed aggressive use of state laws to invalidate an arbitration agreement.

Paper on the Proposed Arbitration Fairness Act

John Wood

 of the Natural Resources Defense Council has written Opening the Door to Justice: Amending the Federal Arbitration Act to Remedy the Unjust Use of Predispute Arbitration Agreements.  Here's the abstract:

This paper assesses the Arbitration Fairness Act’s proposed amendments to the Federal Arbitration Act, as well as the possibility of contracting for heightened judicial review of arbitration awards. In brief, I support the amendments as well as the possibility of review.

Section 2(b) of the AFA would prohibit the enforcement of predispute arbitration agreements that require arbitration of employment, consumer, or franchise disputes or disputes arising under any statute intended to protect civil rights. I demonstrate why the prevailing practice of summarily enforcing predispute arbitration agreements is unjust in these contexts, and why Congressional amendment, rather than State law or contract-based remedies, is necessary to fix the problem. Section 2(c) of the AFA would render the validity and enforceability of arbitration agreements subject to the determination of the court rather than an arbitrator. I claim the doctrine of separability and the distinction between substantive and procedural arbitrability should be abolished, and that this amendment does so. Lastly, parties should be free to contract for heightened judicial review of arbitration awards. If neither amendment is feasible, improvements in the world of arbitration could still be attained by relaxing the currently severe restraints on arbitral review.