Text of the Arbitration Fairness Act of 2009

The text of the bill below is as of Apr 29, 2009 (Introduced).

Source: GPO

II

111th CONGRESS

1st Session

S. 931

IN THE SENATE OF THE UNITED STATES

April 29, 2009

(for himself, Mr. Durbin, Mr. Kerry, Mr. Whitehouse, Mr. Wyden, Mr. Udall of New Mexico, Mr. Merkley, and Mr. Kennedy) introduced the following bill; which was read twice and referred to the Committee on the Judiciary

A BILL

To amend title 9 of the United States Code with respect to arbitration.

1.

Short title

This Act may be cited as the Arbitration Fairness Act of 2009.

2.

Findings

The Congress finds the following:

(1)

The Federal Arbitration Act (now enacted as chapter 1 of title 9 of the United States Code) was intended to apply to disputes between commercial entities of generally similar sophistication and bargaining power.

(2)

A series of United States Supreme Court decisions have changed the meaning of the Act so that it now extends to disputes between parties of greatly disparate economic power, such as consumer disputes and employment disputes. As a result, a large and rapidly growing number of corporations are forcing millions of consumers and employees to give up their right to have disputes resolved by a judge or jury, and instead submit their claims to binding arbitration.

(3)

Most consumers and employees have little or no meaningful option whether to submit their claims to arbitration. Few people realize or understand the importance of the deliberately fine print that strips them of rights, and because entire industries are adopting these clauses, people increasingly have no choice but to accept them. They must often give up their rights as a condition of having a job, getting necessary medical care, buying a car, opening a bank account, getting a credit card, and the like. Often times, they are not even aware that they have given up their rights.

(4)

Private arbitration companies are sometimes under great pressure to devise systems that favor the corporate repeat players who decide whether those companies will receive their lucrative business.

(5)

Mandatory arbitration undermines the development of public law for civil rights and consumer rights because there is no meaningful judicial review of arbitrators’ decisions. With the knowledge that their rulings will not be seriously examined by a court applying current law, arbitrators enjoy near complete freedom to ignore the law and even their own rules.

(6)

Mandatory arbitration is a poor system for protecting civil rights and consumer rights because it is not transparent. While the American civil justice system features publicly accountable decision makers who generally issue public, written decisions, arbitration often offers none of these features.

(7)

Many corporations add to arbitration clauses unfair provisions that deliberately tilt the systems against individuals, including provisions that strip individuals of substantive statutory rights, ban class actions, and force people to arbitrate their claims hundreds of miles from their homes. While some courts have been protective of individuals, too many courts have erroneously upheld even egregiously unfair mandatory arbitration clauses in deference to a supposed Federal policy favoring arbitration over the constitutional rights of individuals.

3.

Arbitration of employment, consumer, franchise, and civil rights disputes

(a)

In general

Title 9 of the United States Code is amended by adding at the end the following:

4

Arbitration of employment, consumer, franchise, and civil rights disputes

Sec.

401. Definitions.

402. Validity and enforceability.

401.

Definitions

In this chapter—

(1)

the term civil rights dispute means a dispute—

(A)

arising under—

(i)

the Constitution of the United States or the constitution of a State; or

(ii)

a Federal or State statute that prohibits discrimination on the basis of race, sex, disability, religion, national origin, or any invidious basis in education, employment, credit, housing, public accommodations and facilities, voting, or program funded or conducted by the Federal Government or State government, including any statute enforced by the Civil Rights Division of the Department of Justice and any statute enumerated in section 62(e) of the Internal Revenue Code of 1986 (relating to unlawful discrimination); and

(B)

in which at least 1 party alleging a violation of the Constitution of the United States, a State constitution, or a statute prohibiting discrimination is an individual;

(2)

the term consumer dispute means a dispute between a person other than an organization who seeks or acquires real or personal property, services (including services relating to securities and other investments), money, or credit for personal, family, or household purposes and the seller or provider of such property, services, money, or credit;

(3)

the term employment dispute means a dispute between an employer and employee arising out of the relationship of employer and employee as defined in section 3 of the Fair Labor Standards Act of 1938 (29 U.S.C. 203);

(4)

the term franchise dispute means a dispute between a franchisee with a principal place of business in the United States and a franchisor arising out of or relating to contract or agreement by which—

(A)

a franchisee is granted the right to engage in the business of offering, selling, or distributing goods or services under a marketing plan or system prescribed in substantial part by a franchisor;

(B)

the operation of the franchisee’s business pursuant to such plan or system is substantially associated with the franchisor’s trademark, service mark, trade name, logotype, advertising, or other commercial symbol designating the franchisor or its affiliate; and

(C)

the franchisee is required to pay, directly or indirectly, a franchise fee; and

(5)

the term predispute arbitration agreement means any agreement to arbitrate a dispute that had not yet arisen at the time of the making of the agreement.

402.

Validity and enforceability

(a)

In general

Notwithstanding any other provision of this title, no predispute arbitration agreement shall be valid or enforceable if it requires arbitration of an employment, consumer, franchise, or civil rights dispute.

(b)

Applicability

(1)

In general

An issue as to whether this chapter applies to an arbitration agreement shall be determined under Federal law. The applicability of this chapter to an agreement to arbitrate and the validity and enforceability of an agreement to which this chapter applies shall be determined by the court, rather than the arbitrator, irrespective of whether the party resisting arbitration challenges the arbitration agreement specifically or in conjunction with other terms of the contract containing such agreement.

(2)

Collective bargaining agreements

Nothing in this chapter shall apply to any arbitration provision in a contract between an employer and a labor organization or between labor organizations, except that no such arbitration provision shall have the effect of waiving the right of an employee to seek judicial enforcement of a right arising under a provision of the Constitution of the United States, a State constitution, or a Federal or State statute, or public policy arising therefrom.

.

(b)

Technical and conforming amendments

(1)

In general

Title 9 of the United States Code is amended—

(A)

in section 1, by striking of seamen, and all that follows through interstate commerce;

(B)

in section 2, by inserting or as otherwise provided in chapter 4 before the period at the end;

(C)

in section 208—

(i)

in the section heading, by striking Chapter 1; residual application and inserting Application; and

(ii)

by adding at the end the following: This chapter applies to the extent that this chapter is not in conflict with chapter 4.; and

(D)

in section 307—

(i)

in the section heading, by striking Chapter 1; residual application and inserting Application; and

(ii)

by adding at the end the following: This chapter applies to the extent that this chapter is not in conflict with chapter 4..

(2)

Table of sections

(A)

Chapter 2

The table of sections for chapter 2 of title 9, United States Code, is amended by striking the item relating to section 208 and inserting the following:

208. Application.

.

(B)

Chapter 3

The table of sections for chapter 3 of title 9, United States Code, is amended by striking the item relating to section 307 and inserting the following:

307. Application.

.

(3)

Table of chapters

The table of chapters for title 9, United States Code, is amended by adding at the end the following:

4. Arbitration of employment, consumer, franchise, and civil rights disputes401

.

4.

Effective date

This Act, and the amendments made by this Act, shall take effect on the date of enactment of this Act and shall apply with respect to any dispute or claim that arises on or after such date.