From a letter to Congress from the Coalition to Preserve Arbitration, which includes the National Association of Manufacturers:

The undersigned members of the Coalition to Preserve Arbitration strongly oppose the anti-arbitration provisions in S. 3217, the “Restoring American Financial Stability Act of 2010.” These unnecessary and unwarranted provisions will harm consumers and investors, while doing nothing to protect the strength and stability of the financial system. Therefore, we urge you to oppose these anti-arbitration provisions.

S. 3217 would authorize both the Securities and Exchange Commission (SEC) and newly created Consumer Financial Protection Bureau to regulate and even prohibit the use of arbitration in the securities and consumer financial products industries. See Secs. 921, 1028. In so doing, the bill threatens a time-honored dispute resolution system that allows investors and consumers to bring many financial claims that would otherwise be too costly to pursue in court.

The full list of supporting organizations that joined the letter:

American Bankers Association
American Financial Services Association
American Health Care Association
American Tort Reform Association
Assisted Living Federation of America
Auto Alliance
Consumer Bankers Association
International Franchise Association
International Institute for Conflict Prevention & Resolution
National Association of Home Builders
National Association of Manufacturers
Property Casualty Insurers Association of America
Securities Industry and Financial Markets Association
The Financial Services Roundtable
U.S. Chamber Institute for Legal Reform
U.S. Chamber of Commerce

Sen. Russell Feingold (D-WI) last week introduced S. 931, the Arbitration Fairness Act, a bill that bans binding  (predispute) arbitration in business contracts with consumers. (Opening statement, text.) The bill came in with seven cosponsors.

Sen. Feingold and his cosponsors are also all sponsors of S. 560, the Employee Free Choice Act, a bill that mandates binding arbitration between business and outside unions that are trying to organize them.

The American Association for Justice, aka the trial lawyers’ trade association, has lobbied heavy to ban arbitration. Last week the AFL-CIO announced the AAJ’s support for the Employee Free Choice Act that mandates binding arbitration.

Mandate, ban, mandate, ban, mandate…The head spins.

The BNA Daily Labor Report (subscription needed) provides an interesting re-cap of a seminar held by NYU’s Center for Labor and Employment Law where Thomas Kochan (member of President-elect Obama’s transition team) asserts that the misleadingly named Employee Free Choice Act would “build quality labor-management relationships.”

Kochan said that he sees “no significant differences found between settlements reached through arbitration or through bargaining” in public sector collective bargaining. No difference? Unfortunately there will be clear difference in collective bargaining agreements negotiated in good faith in the private sector compared to the terms imposed on businesses by a Federal bureaucrat as this legislation would allow.

Andrew Kramer, an attorney at the firm of Jones Day reminds us that “that the government is not in the business of imposing terms and conditions,” under concepts held in current labor law. Unfortunately this bill would be a radical overhaul of our current legal system that does nothing to encouraging cooperation between employers and labor unions.

The Senate Judiciary Commitee yesterday reported out S.2838, the Fairness in Nursing Home Arbitration Act, which would abrogate pre-dispute arbitration clauses in nursing home contracts.

Trial lawyers have launched a major lobbying attack against arbitration laws this Congress, working to prevent the more affordable, expeditious and balanced outcomes that can result when you stay out of court. The plaintiff’s bar put most of its effort into the nursing home bill because the anecdotal arguments for the legislation pack more emotional and political punch, and once you get that bill passed, you have a precedent in place for the other arbitration bills.

The House version of the bill, H.R. 6126, passed out of the House Judiciary Committee at the end of July. With both bills ready for floor action, we may well see legislation sent to the President this month.

The American Health Care Association issued a news release and sent a letter to the Hill relaying broad-based opposition to the bill. From the letter:

We believe S. 2838 which is being taken up by the Senate Judiciary Committee, would establish a dangerous precedent for the entire U.S. business community by eliminating the reasonable, intelligent use of arbitration agreements.

Specifically, S. 2838 would effectively eliminate the use of pre-dispute arbitration agreements by nursing facilities, assisted living communities and all housing service providers nationwide — even if the patient, resident or their family wishes to enter into such an agreement. The inherent right of every consumer to voluntarily arbitrate disputes should not be restricted.

We also believe that S. 2838 would weaken the Federal Arbitration Act (FAA), which has been in place for more than 80 years. The FAA appropriately recognizes the strong national interest in disputes being resolved in a forum other than the courts when both parties choose to do so

And on the other side of that national interest is a pecuniary one. The most recent (2Q) lobbying report for the American Association for Justice lists the following bills the group has lobbied:

• H.R. 3010/S. 1782 (Arbitration Fairness Act; to prohibit mandatory binding arbitration agreements in consumer contracts.)
• H.R. 1519 (American Homebuyers Protection Act; relating ot the inclusion of mandatory binding arbitration in homebuilding contracts.)
• H.R. 3512 (Automobile Arbitration Fairness Act); relating ot the use of arbitration agreements to resolve disputes arising under motor vehicle consumer sales or lease contracts.
• HR. 6124 (Food, Conservation and Energy Act; the Farm Bill); specific interest in lanugage in enrolled bill (now Public Law 110-246) relating to the use of arbitration to resolve controversies arising under livestock or poultry contracts; also similar language in H.R. 2419.
   

Peter List at EmployerReport.com has put together a good list of legislation that could become law if the stars align on the left side of the political hemisphere after the November election. One could quibble, but all in all, it’s representative of organized labor’s electoral and then legislative priorities:

• Employee Free Choice Act (no-vote unionism and binding arbitration 120 days after unionization)
• Elimination of Right-to-Work states (making all 50 states forced unionization states)
• Ledbetter Fair Pay Act (eliminates statutes of limitations on pay discrimination claims)
• Healthy Families Act (mandates seven paid sick days for employers with more than 15 workers)
• Expanding FMLA to include parenting responsibilities (i.e., parent-teacher conferences) and literacy training
• Arbitration Fairness Act (eliminates PRE-dispute arbitration agreements)
• Public Employee-Employer Cooperation Act (unionizes EMS, Fire & Police at the local and state levels)
• WARN Act expansion to smaller companies
• ADA Restoration Act (expands the definition of disability)
• Protecting America’s Workers Act (increases penalties–to include prison time–for employers guilty of “willfully” OSHA)
• Legalizing undocumented workers…and, of course,
• Nationalization of America’s Health Care System 

(Hat tip: Jim Gray)

Below we listed the various pieces of legislation with anti-arbitration provisions that the American Association for Justice, the trial lawyers association, lobbied on in the second quarter. Included was H.R. 6124, the farm bill.

Doggone it if the language didn’t make it into the law: Public Law 110-234

Section 210 includes provisions that allow livestock and poultry producers to refuse contract provisions requiring arbitration.

`(a) In General.--Any livestock or poultry contract that contains a
provision requiring the use of arbitration to resolve any controversy
that may arise under the contract shall contain a provision that allows
a producer or grower, prior to entering the contract to decline to be
bound by the arbitration provision.

Bit by bit, you can chip away at arbitration and produce more litigation.

The full section is in the extended entry.

(continue reading…)

The House Judiciary Committee yesterday reported out H.R. 6126, the Fairness in Nursing Home Arbitration Act, which would vitiate pre-dispute arbitration provisions in nursing home contracts. The Senate Judiciary has just begun a business meeting to mark up a bevy of bills, including S. 2838, the Senate version of the nursing home arbitration bill. (Sen. Specter just said that Republicans want to hold over the bill, however.)

As we’ve noted before, there’s a full-scale campaign by trial lawyers against arbitration, with the nursing home bills being for the advance guard. The ultimate goal is to drive more disputes into the courtroom.

We note the American Association for Justice’s lobbying disclosure report for the second quarter, 2008, available here, listed the following bills as being lobbied by the group.

• H.R. 3010/S. 1782, Arbitration Fairness Act, to prohibit mandatory binding arbitration agreements in consumer contracts.
• H.R. 1519, American Homebuyers Protection Act, relating to the including of mandatory binding arbitration in homebuilding contracts.
• H.R. 3512, Automobile Arbitration Fairness Act, relating to the use of arbitration agreements to resolve disputes involving nursing home care and nursing home contracts.
• H.R. 6126/S. 2838, Nursing Home Arbitration Act, relating to the use of arbitration agreements to resolve disputes involving nursing home care and nursing home contracts.
• H.R. 6124, the farm bill, specific interest in language in enrolled bill (PL 110-246) relating to the use of arbitration to resolve controversies arising under livestock or poultry contracts; also similar language in H.R. 2419.

When you spend $1.74 million on lobbying for the quarter, you can cover a lot of bills.

Judging by the flurry of committee action, looks like there will be a congressional vote this year on at least one anti-arbitration bill. The Senate Judiciary Committee today is marking up S.2838, Fairness in Nursing Home Arbitration Act, which would vitiate arbitration provisions in nursing home contracts.

On Tuesday, the House Judiciary Subcommittee on Commercial and Administrative Law reported out three anti-arbitration bills, including the House version of the nursing home legislation, H.R. 6126. The Naderific group, Public Citizen, issued a news release praising the action as an “important step toward protecting American consumers from companies that would take away their access to the courts.”

The bill attacking arbitration in nursing home contracts is the wedge legislation that the plaintiffs’ bar wants to employ to overturn arbitration in all sorts of contracts. They want to bring back the good old days of always going to court, no matter whether the client’s interest is being served.

You remember those good old days? Here’s a reminder from Kelley Rice-Schild, testifying in June on behalf of the American Health Care Association and National Center for Assisted Living. Rice-Schild is executive director of the Floridean Nursing & Rehabilitation Center:

In the late 1990’s, the long term care profession was subject to excessive liability costs, which were exacerbated by an increasingly litigious environment. As a result, operators of nursing facilities and assisted living residences were forced into making difficult decisions including potential closure or divestiture of facilities, and corporate restructuring. In addition to pursuing state and national tort reform legislative initiatives to enable facilities to continue to operate and provide essential long term care services in a difficult environment, the profession sought alternatives to traditional litigation including arbitration. This trend was especially true in states such as Arkansas, Texas, and my home state of Florida, where state laws fostered an exponential growth in the number of claims filed against long term care providers – even those with a history of providing the highest quality care.

As a result, there was an explosion in the cost of obtaining insurance to protect operators from the risks associated with a tort environment that often encouraged unsubstantiated claims against long term care providers. This trend included significant advertising – including highway billboards – to encourage consumers to sue their long term care provider. Even following the passage of tort reform legislation in Florida in 2001, insurance is not widely available and for most operators unaffordable, which forced several companies to no longer provide care and services to the frail elderly in my home-state.

Ah, the good old days — except for residents of long-term care facilities or their families.

From the House Digest pages for Tuesday:

Committee on the Judiciary: Subcommittee on Commercial and Administrative Law approved for full Committee action the following bills: H.R. 6126, Fairness in Nursing Home Arbitration Act of 2008; H.R. 5312, Automobile Arbitration Fairness Act of 2008; and H.R. 3010, Arbitration Fairness Act of 2007.

For more, see this Shopfloor.org post as well as this post at Point of Law.

It isn’t on the House Judiciary Committee’s website yet, but it looks like a subcommittee and then the full committee may act this week on H.R. 3010, the Arbitration Fairness Act. For “fairness” you can substitute “dead, dead, dead.” From the bill summary:

Arbitration Fairness Act of 2007 – Declares that no predispute arbitration agreement shall be valid or enforceable if it requires arbitration of: (1) an employment, consumer, or franchise dispute, or (2) a dispute arising under any statute intended to protect civil rights or to regulate contracts or transactions between parties of unequal bargaining power.

Declares, further, that the validity or enforceability of an agreement to arbitrate shall be determined by a court, under federal law, rather than an 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.

Former FTC Commissioner Christine Varney, now at Hogan & Hartson, has an op-ed in today’s Wall Street Journal, “Arbitration Works Better Than Lawsuits”: “Congress is taking up legislation this week that will wipe out arbitration provisions in hundreds of millions of consumer contracts — for everything from credit-card agreements to cell phones to health-insurance policies, even a contract for the purchase of a kitchen sink. The bill is so sweeping that it wouldn’t apply just to contracts consumers may sign in the future. It will cancel arbitration agreements agreed to in the past.”

This week’s issue of the National Journal magazine carries a story, “Trial Lawyers Mount a Comeback” (subscription only). The American Association for Justice, i.e., trial lawyers, is set on killing arbitration as one of its legislative victories this year, the magazine reports.

More from Varney (a Clinton appointee, by the way):

After years at the Federal Trade Commission, I understand the importance of ensuring that consumers can seek redress for their complaints. The Arbitration Fairness Act makes this harder.

Arbitration foes say that it puts consumers at a disadvantage, because they are forced to waive the right to proceed in court and to obtain a jury trial. This ignores reality: The average consumer with a small claim is unlikely to sue at all. Studies confirm what common sense suggests: Few, if any, lawyers will even take cases involving small potential recoveries. And without a lawyer, navigating the court system is nearly impossible.

A very good column.