Possible Solutions #
The Basic Problems lays out the (mostly) uncontroversial and well sourced problems of mandatory arbitration agreements and class-action waivers. This page seeks to lay out the possible solutions: legislative or judicial.
The Supreme Court is unlikely to revise current caselaw relating to arbitration in mass contracts affecting consumers and employees. Absent federal legislative intervention, consumer arbitration will continue to take place. 1
Carving Out More Exceptions #
There have been a few carve outs to exempt specific disputes from arbitration. While such exemptions are welcome they have some downsides:
- it reduces the political pressure to eliminate consumer&employment arbitration.
- it does nothing to solve the underlying problems of arbitration. It merely reduces the sphere in which these problems occur.
Overturning Southland Corp. v. Keating #
Arbitration was intended to be a procedural rule for federal courts. In Keating the Supreme Court erroneously rules that arbitration is substantive. A simple fix here is for congress to solidify its intention explicitly.
Overturning Allied-Bruce Terminix Cos. v. Dobson #
Circuit City Stores, Inc. v. Adams #
A simple fix to much of this mess would be remove the words seamen, railroad employees, or any other class of in 9 U.S.C. §1. This would effectively overturn Circuit City Stores, Inc. v. Adams and thus eliminate arbitration from the equation in matters of employment.
I am somewhat surprised that I’ve not seen anyone else suggest this.
End the preemption of state statutes #
The most effective way to build on the work of the Restoring Justice for Workers Act is to end the preemption of state statutes. Congress could amend the FAA such that it no longer preempts state statutes singling out arbitration. Under this solution, states would be free to experiment with arbitration law and potentially derive new equitable solutions. 2
Neutrality and Qualification of arbiters #
The current standard for disqualification of an arbiter is “evident partiality”. There is no standard for who may be an arbiter. This standard is inadequate where arbiters effectively replace the judicial system. there should be two changes:
The same norms and requirements of neutrality that apply to jurists should be imposed upon arbiters. An arbitrator should not sit on a case where the same arbitrator would not be permitted to sit as a judge or a juror. 3
Jeffrey Stempel also suggests a licence system to be qualified to serve on consumer or employment4 tribunals. Such a system would be a substantial change from the current system. It would likely be a net positive from today but this document does not explore the suggestion in depth. 5
Appellate review of arbitral decisions #
Adjudication carries with it the right of appeal, including full review of the trial court’s application of the law (with limited review of the trial court’s factual determinations). Review of arbitration awards is considerably more limited. In litigation, review of trial court decisions can involve challenges to factfinding (evaluated under a “clearly erroneous” standard”), exercises of judicial discretion (evaluated under an “abuse of discretion” standard), and application of the law (evaluated by the appellate court’s “de novo” review of the law). Arbitration would be improved by replacement of the current deferential “manifest disregard” of law standard of review for arbitration awards with appellate review similar to that accorded trial court decisions. 6
Qui Tam Actions #
The FAA has been misinterpreted to preempt state level over contract law. 7 8 9 However, the state can’t be compelled to be a party to the contract. This means that statutory civil penalties for violations of consumer protection and employment laws, together with a Qui Tam mechanism to permit private enforcement of those penalties, offers an unorthodox but possibly fruitful alternative to achieving the deterrent effect of class proceedings. 10
Revocability #
One simple fix for arbitration is to allow the customer or employee to revoke their consent at any time - but not the corporation. This would allow for arbitration to remain as an option - while encouraging the agreements to become fair. This is a type of Fair cake-cutting.
I have not seen anyone else propose this change.
Footnotes #
Stempel, J. (2007). Keeping Arbitrations from Becoming Kangaroo Courts. Nevada Law Journal, 8(1). https://scholars.law.unlv.edu/nlj/vol8/iss1/12 ↩︎ ↩︎ ↩︎ ↩︎
Ryan Schimmel. (2023). A Real Right to Litigate: Dismantling Mandatory Arbitration and the Restoring Justice for Workers Act. SETON HALL LEGISLATIVE JOURNAL, 47 pp 106 ↩︎
the article refers to such cases as “mass arbitration”. However this term is more commonly used for many similar cases be directed at a single defendant. ↩︎
Cohen, J. H., & Dayton, K. (1926). The New Federal Arbitration Law. Virginia Law Review, 12(4), 265–286. https://doi.org/10.2307/1065471 pp 276 ↩︎
Schwartz, D. (2004). Correcting Federalism Mistakes in Statutory Interpretation: The Supreme Court and the Federal Arbitration Act. Law and Contemporary Problems, 67(1), 5–54. https://scholarship.law.duke.edu/lcp/vol67/iss1/2 pp 5 ↩︎
Cohen supra pp 278 ↩︎
Alexander, J. (2013). To Skin a Cat: Qui Tam Actions as a State Legislative Response to Concepcion. University of Michigan Journal of Law Reform, 46(4), 1203–1247. https://doi.org/10.36646/mjlr.46.4.skin ↩︎