Washington, D.C. — Today, House Judiciary Committee Chairman Jerrold Nadler (D-NY) delivered the following floor statement in support of H.R. 1423, the Forced Arbitration Injustice Repeal Act (FAIR Act):
“I rise in strong support of H.R. 1423, the ‘Forced Arbitration Injustice Repeal Act,’ or the ‘FAIR Act.’
“This critical legislation would restore access to justice for millions of Americans who are currently locked out of the court system and are forced to settle their disputes against companies in a private system of arbitration that is often skewed in the company’s favor over the individual.
“Nearly a century ago, Congress enacted the Federal Arbitration Act to allow merchants to resolve run-of-the-mill contract disputes in a system of private arbitration that would be legally enforceable. The system that Congress envisioned was to be used voluntarily and only between merchants of equal bargaining power.
“However, the Supreme Court over the past 40 years has issued a series of decisions that have expanded the use of arbitration far beyond Congress’s original intent or a fair reading of the text of the Arbitration Act—creating the unjust system we see today.
“Private arbitration has been transformed from a voluntary forum for companies to resolve commercial disputes into a legal nightmare for millions of consumers, employees, and others who are forced into arbitration and are unable to enforce certain fundamental rights in court.
“Many companies use forced arbitration as a tool to protect themselves from consumers and workers who seek to hold them accountable for wrongdoing. By burying a forced arbitration clause deep in the fine print of take-it-or-leave-it consumer and employment contracts, companies can evade the court system, where plaintiffs have far greater legal protections, and hide behind a one-sided process that is tilted in their favor.
“For example, arbitration generally limits discovery, does not adhere to the Federal Rules of Civil Procedure, can prohibit class actions, which it almost always does, and deny the right of appeal. Worse yet, arbitration allows the proceedings—and often even the results—to stay secret, thereby permitting companies to avoid public scrutiny of potential misconduct.
“For millions of consumers and employees, the pre-condition—whether they know it or not—of obtaining a basic service or product, such as a bank account, a cell phone, a credit card, or even a job, is that they must agree to resolve any disputes in private arbitration.
“We used to refer to these as contracts of adhesion, where one party with all the power dictates the terms to the other party in a take-it-or-leave it contract. The next time you apply for a credit card, try crossing out the term in the fine print requiring you to agree to arbitration and see if you still get that credit card. You will be denied without a moment’s hesitation.
“These are classic contracts of adhesion, which were once clearly disfavored under the law, but which now seem to have been blessed by the Supreme Court as standard operating procedures in the corporate world.
“For individuals who have no choice but to agree to these contracts, that means that their ability to enforce civil rights, consumer, labor, and antitrust laws are subject to the whims of a private arbitrator—often selected by the companies themselves. These private arbitrators are not required to provide plaintiffs any of the fundamental protections guaranteed in the courts, and their further employment can depend on building a good reputation with the companies that hire them. Unsurprisingly, then, arbitration has become a virtual get-out-of-jail-free card many companies use to circumvent the basic rights of consumers and workers.
“H.R. 1423, the FAIR Act, reverses this disastrous trend by prohibiting the enforcement of forced arbitration clauses in consumer, labor, antitrust, and civil rights disputes. Importantly, this legislation does not preclude parties from agreeing to arbitrate a claim after the dispute arises, which will ensure that arbitration agreements are truly voluntary and transparent.
“It does, however, prevent unsuspecting consumers and employees from being forced to give up their right to seek justice in court.
“I urge my colleagues to support this vital legislation, and I reserve the balance of my time.”