House Judiciary Committee Issues Report on Forced Arbitration Injustice Repeal Act (Part 1 of 2)

WASHINGTON, Sept. 17 -- The House Judiciary Committee issued a report (H.Rpt. 116-204) on legislation (H.R. 1423) to amend title 9 of the U.S. Code with respect to arbitration. The report was advanced by Rep. Jerrold Nadler, D-New York, on Sept. 13.

Excerpts of the report follow:

Purpose and Summary

H.R. 1423, the "Forced Arbitration Injustice Repeal Act" or the "FAIR Act," would prohibit the enforcement of mandatory, pre-dispute arbitration ("forced arbitration") provisions in contracts involving consumer, employment, antitrust, and civil rights disputes. This critically important measure 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 often favors the company over the individual. H.R. 1423 is supported by a broad coalition of more than 70 public interest, labor, and advocacy organizations, including Public Citizen, Consumer Reports, the American Association of Justice, the Communications Workers of America, the Leadership Conference on Civil Rights, and the American Antitrust Institute.1

1 Partners, Fair Arbitration NOW, https://fairarbitrationnow.org/ coalition/ (last visited on Sept. 5, 2019); Letter from Fair Arbitration Now, Advocacy Coalition, to Reps. David N. Cicilline (D- RI), Chairman, and F. James Sensenbrenner (R-WI), Ranking Member, Subcomm. on Antitrust, Commercial & Admin. Law of the H. Comm. on the Judiciary (May 16, 2019), https://docs.house.gov/meetings/JU/JU05/ 20190516/109484/HHRG-116-JU05-20190516-SD009.pdf.

Background and Need for the Legislation

Over the past several decades, forced arbitration clauses have become virtually ubiquitous in everyday contracts.2 Often buried deep within the fine print of employment and consumer contracts, forced arbitration deprives millions of Americans of their day in court to enforce state and federal rights.3 Because arbitration lacks the transparency and precedential guidance of the justice system, there is no guarantee that the relevant law will be applied to these disputes or that fundamental notions of fairness and equity will be upheld in the process.4

2 Jessica Silver-Greenberg & Robert Gebeloff, Arbitration Everywhere, Stacking Deck of Justice, N.Y. Times (Nov. 1, 2015), https://nyti.ms/2k6cZ1z ("[B]y inserting individual arbitration clauses into a soaring number of consumer and employment contracts, companies . . . devised a way to circumvent the courts and bar people from joining together in class-action lawsuits, realistically the only tool citizens have to fight illegal or deceitful business practices.").

3 Consumer Fin. Prot. Bureau, Arbitration Study Rep. to Cong., Pursuant to Dodd Frank Wall Street Reform and Consumer Protection Act 1028(a) (2015), http://files.consumerfinance.gov/f/ 201503_cfpb_arbitration-study-report-to-congress-2015.pdf.

4 See, e.g., Myriam Gilles, The Day Doctrine Died: Private Arbitration and the End of Law, 2016 U. Ill. L. Rev. 371 (2016).

Unlike the judicial system--in which courts' decisions are generally public and, by building on precedent, cumulatively create a body of law--the results of arbitration disputes are often secret.5 For example, the arbitration protocols for the American Arbitration Association state that the arbitrators of consumer disputes must "maintain the privacy of the hearing to the extent permitted by applicable law."6 A coalition of state attorneys general--representing all 50 states, the District of Columbia, and several U.S. territories--have similarly noted that, within the context of the application of forced arbitration to workplace sexual harassment claims, the "veil of secrecy" required by arbitration may prevent similarly situated persons from learning of illegal conduct and seeking relief,7 referring to this phenomenon as a "culture of silence that protects perpetrators at the cost of their victims."8

5 Justice Denied: Forced Arbitration and the Erosion of our Legal System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before the Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the Judiciary, 116th Cong. 3-4 (2019) (statement of Gretchen Carlson; statement of Professor Myriam Gilles, Paul R. Verkuil Chair in Pub. Law, Benjamin N. Cardozo Sch. of Law, at 10).

6 Consumer Due Process Protocol, Principle 12.2, Am. Arbitration Ass'n, https://www.adr.org/sites/default/files/document_repository/ Consumer%20Due%20Process%20Protocol%20(1).pdf.

7 Letter from Nat'l Ass'n of Att'ys Gen. to Cong. Leadership (Feb. 12, 2018), http://myfloridalegal.com/webfiles.nsf/WF/HFIS-AVWMYN/$file/ NAAG+letter+to+Congress+Sexual+Harassment+Mandatory+Arbitration.pdf.

8 Id.

Forced arbitration also lacks many of the procedural safeguards of the justice system.9 For example, in forced arbitration, a company may increase the expense of bringing a claim,10 limit discovery,11 or eliminate protections related to the geographic proximity of the resolution forum,12 formal civil procedure rules, access to counsel,13 and the right to bring similar claims jointly.14 The company imposing arbitration often selects the presiding arbitrator or arbitration provider,15 creating a conflict of interest in which the purportedly neutral arbitrator may be motivated by the prospect of obtaining repeat business from the company rather than focused on fairly assessing the claim.16

9 Id.

10 Arbitration clauses may impose high costs on consumers such as requiring travel to a distant forum or selection of a high-fee arbitrator, possible expenses which a plaintiff filing in a local court would not have to incur. See Lisa B. Bingham, Control over Dispute- System Design and Mandatory Commercial Arbitration, 67 Law & Contemp. Probs. 221, 234-35 (July 31, 2004).

11 See Katherine Palm, Note, Arbitration Clauses in Nursing Home Admission Agreements: Framing the Debate, 14 Elder L.J. 453, 478 n.172 (2006).

12 See Ziva Branstetter, Nursing Home Policy Challenged, Tulsa World (Mar. 4, 2002), https://www.tulsaworld.com/archives/nursing-home- policy-challenged/article_6131212f-481c-59c4-af51- 7c2a188e37f9.html (Oklahoma nursing home's arbitration clause requires residents to travel to New Mexico at their own expense for arbitration proceeding).

13 The lower probability of victory and legal fees may discourage some attorneys from representing individuals in arbitration proceedings. See Charles L. Knapp, Taking Contracts Private: The Quiet Revolution in Contract Law, 71 Fordham L. Rev. 761, 783-84 (2002).

14 See Jean R. Sternlight, As Mandatory Binding Arbitration Meets the Class Action, Will the Class Action Survive?, 42 Wm. & Mary L. Rev. 1, 6 (2000).

15 The major arbitration providers include the American Arbitration Association and JAMS, which set their own procedures, contract with agencies and companies to arbitrate future disputes, and provide arbitrators and panels to hear disputes. Katherine V.W. Stone & Alexander J.S. Colvin, Econ. Policy Inst., The Arbitration Epidemic: Mandatory Arbitration Deprives Workers and Consumers of Their Rights 17 (EPI Briefing Paper No. 414, 2015), https://www.epi.org/publication/ the-arbitration-epidemic/.

16 See Carrie Menkel-Meadow, Do the "Haves" Come Out Ahead in Alternative Judicial Systems?: Repeat Players in ADR, 15 Ohio St. J. on Disp. Resol. 19, 35-37 (1999).

As a result of the decline of enforcement of state and federal statutory protections, forced arbitration makes it more likely that corporate harms and abuse will go unchallenged. As Professor Myriam Gilles of Benjamin N. Cardozo School of Law testified at the hearing on forced arbitration before the Judiciary Committee's Subcommittee on Antitrust, Commercial, and Administrative Law (ACAL), many companies' arbitration clauses specifically identify federal protections that cannot be enforced in court, such as rights under the Civil Rights Act of 1964 and the Family Medical Leave Act.17 In this respect, as Professor Gilles observes, "forced arbitration is not an alternative regime for resolving claims, it is a means of suppressing legal claims altogether." 18 Judge William G. Young, who was appointed by President Ronald Reagan, likewise stated that the proliferation of forced arbitration clauses means that "business has a good chance of opting out of the legal system altogether and misbehaving without reproach." 19 Deepak Gupta, a leading public interest attorney, similarly testified that forced arbitration has undermined the enforcement of statutory rights.20 He explained:

17 Justice Denied: Forced Arbitration and the Erosion of our Legal System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before the Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the Judiciary, 116th Cong. 7 (2019) (statement of Myriam Gilles, Paul R. Verkuil Chair in Pub. Law, Benjamin N. Cardozo Sch. of Law).

18 Arbitration in America: Hearing Before the S. Comm. on the Judiciary, 116th Cong. 1 (2019) (Responses to Questions for the Record of Professor Myriam Gilles, Paul R. Verkuil Chair in Pub. Law, Benjamin N. Cardozo Sch. of Law).

19 Jessica Silver-Greenberg & Robert Gebeloff, Arbitration Everywhere, Stacking Deck of Justice, N.Y. Times (Oct. 31, 2015), https://nyti.ms/2k6cZ1z ("[B]y inserting individual arbitration clauses into a soaring number of consumer and employment contracts, companies . . . devised a way to circumvent the courts and bar people from joining together in class-action lawsuits, realistically the only tool citizens have to fight illegal or deceitful business practices.").

20 Justice Denied: Forced Arbitration and the Erosion of our Legal System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before the Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the Judiciary, 116th Cong. 2 (2019) (statement of Deepak Gupta, Founding Principal, Gupta Wessler PLLC).

As the U.S. Supreme Court has itself acknowledged, the presence of a forced arbitration clause often means that Americans will have no effective method of asserting their rights or getting justice under federal laws that could otherwise have been enforced in a court--consumer protection or antitrust laws, for example, or prohibitions on sex or race discrimination. If Congress passes laws that can't be enforced in the real world, what good are those laws? 21

21 Id.

Although proponents of arbitration claim that it decreases litigation costs for consumers, consumers often do not receive any benefit of reduced costs through forced arbitration.22 Instead, arbitration clauses appear to dissuade consumers from adjudicating disputes altogether.23 Moreover, the lower probability of victory, and meager legal fees associated with forced arbitration may also discourage attorneys from representing individuals in arbitration proceedings.24 As Justice Stephen G. Breyer explained:

22 Consumer Fin. Prot. Bureau, Arbitration Study Rep. to Cong., Pursuant to Dodd-Frank Wall Street Reform and Consumer Protection Act 1028(a), at 10 (2015), http://files.consumerfinance.gov/f/ 201503_cfpb_arbitration-study-report-to-congress-2015.pdf ("Using two measures of credit offered, we did not find any statistically significant evidence that companies that eliminated arbitration provisions reduced the credit they offered.").

23 Justice Denied: Forced Arbitration and the Erosion of our Legal System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before the Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the Judiciary, 116th Cong. 3 4 (2019) (statement of Deepak Gupta, Founding Principal, Gupta Wessler PLLC).

24 See Charles L. Knapp, Taking Contracts Private: The Quiet Revolution in Contract Law, 71 Fordham L. Rev. 761, 783 84 (2002).

What rational lawyer would have signed on to represent the [plaintiffs] in litigation for the possibility of fees stemming from a $30.22 claim . . . ? The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.25

25 AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 365 (2011) (Breyer, J. dissenting).

Supporters of forced arbitration also argue that doing away with it would lead to more class action lawsuits, the costs of which would ultimately be borne by consumers.26 For example, Alan Kaplinsky, a senior prtner and Practice Leader at the Consumer Financial Services Group at Ballard Spahr LLP, who testified before the Senate Judiciary Committee on April 2, 2019,27 cited a study by the Consumer Financial Protection Bureau estimating that a proposed rule limiting arbitration clauses would cost financial services providers between $2.62 and $5.23 billion over a five-year period.28 Professor Gilles, however, rejected this concern, noting that large companies that do not use forced arbitration in their consumer contracts such as Capital One and Bank of America have not experienced significant upticks in litigation.29 Furthermore, businesses concerned with additional liability risk could address this concern by adhering to state and federal law.

26 Alan S. Kaplinsky & Mark J. Levin, The CFPB's Final Arbitration Rule Run Amok, THE REG. REV. (Sep. 11, 2017), https:// www.theregreview.org/2017/09/11/kaplinsky-levin-cfpb-arbitration-rule/ siness/dealbook/in-arbitration-a-privatization-of-the-justice- system.html.

27 Arbitration in America: Hearing Before the S. Comm on the Judiciary, 116th Cong. 6 (2019) (statement of Alan S. Kaplinsky, Partner, Ballard Spahr LLP).

28 Id. at 4.

29 Justice Denied: Forced Arbitration and the Erosion of our Legal System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before the Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the Judiciary, 116th Cong. 11 n.59 (2019) (statement of Professor Myriam Gilles, Paul R. Verkuil Chair in Pub. Law, Benjamin N. Cardozo Sch. of Law).

In sum, forced arbitration has transferred the rights of workers and consumers to a secretive, closed, and private system designed by corporate interests to evade oversight and accountability.30 Unsurprisingly, 84% of Americans across the political spectrum support ending forced arbitration in employment and consumer disputes.31

30 Jessica Silver-Greenberg & Robert Gebeloff, In Arbitration, 'A Privatization of the Justice System,' N.Y. Times (Nov. 1, 2015), https://www.nytimes.com/2015/11/02/business/dealbook/in-arbitration-a- privatization-of-the-justice-system.html.

31 See Guy Molyneux & Geoff Garin, National Survey on Required Arbitration, Hart Research Assocs. (Feb. 28, 2019), https:// www.justice.org/sites/default/files/2.28.19%20Hart%20poll%20memo.pdf.

RECENT CASE LAW IGNORES THE LEGISLATIVE INTENT OF THE FEDERAL ARBITRATION ACT

On February 12, 1925, Congress codified the use of arbitration through the Federal Arbitration Act (FAA).32 The FAA was adopted to put arbitration agreements on equal footing with other contracts in certain disputes.33 The legislative history of the FAA suggests that the law was intended to narrowly apply to disputes between merchants, not between a business and its consumers or workers.34 In 1967, the Supreme Court characterized the FAA as "plainly designed" to include protections against "captive customers or employees."35 The Court noted that it was clear from congressional debate on the Act that Congress did not intend for parties with unequal bargaining power to be forced to arbitrate claims on a "take- it-or-leave-it basis":

32 Pub. L. No. 68-401, 43 Stat. 883 (1925) (codified at 9 U.S.C. Sec. Sec. 1-16 (2019)).

33 H.R. Rep. No. 68-96, at 1 (1924) ("The purpose of this bill is to make valid and enforcible [sic] agreements for arbitration . . . in the Federal courts.").

34 See, e.g., H.R. Rep No. 68-96, at 1 (1924); Christopher R. Leslie, The Arbitration Bootstrap, 94 Tex. L. Rev. 265, 305 (2015) ("The most important fact about the testimony, hearings, and reports leading up to congressional enactment of the FAA is that every witness, every Senator, and every Representative discussed one issue and one issue only: arbitration of contract disputes between merchants.").

35 Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 414 (1967).

On several occasions [Members of Congress] expressed opposition to a law which would enforce even a valid arbitration provision contained in a contract between parties of unequal bargaining power. Senator Walsh cited insurance, employment, construction, and shipping contracts as routinely containing arbitration clauses and being offered on a take-it-or-leave-it basis to captive customers or employees. He noted that such contracts "are really not voluntarily (sic) things at all" because "there is nothing for the man to do except to sign it; and then he surrenders his right to have his case tried by the court." He was emphatically assured by the supporters of the bill that it was not their intention to cover such cases.36

36 Id. (quoting Sales and Contracts to Sell in Interstate and Foreign Commerce, and Federal Commercial Arbitration: Hearing on S. 4213 and S. 4214 Before the Subcomm. of the S. Comm. on the Judiciary, 67th Cong. 6 (1923) [hereinafter 1923 Hearing on S. 4213 and S. 4214] (statement of Senator Walsh)).

Furthermore, the Court emphasized that not only was the Act intended to apply only to merchant disputes, it was also intended to narrowly apply to "simpler questions of law" involving the routine performance of contracts, such as the passage of title or the existence of warranties.37 Arbitration would not be used to resolve questions of statutory law, which would remain within the clear purview of courts.

37 Prima Paint Corp., 388 U.S. at 415 n.13 (quoting Julius Henry Cohen & Kenneth Dayton, The New Federal Arbitration Law, 12 VA. L. REV. 265, 281 (1926)).

Indeed, the drafters of the FAA had made clear that arbitration was not appropriate for substantive questions of law. Julius Henry Cohen, the law's architect, emphasized that it was "not the proper method for deciding points of law of major importance involving constitutional questions or policy in the application of statutes."38 Arbitration was also rarely invoked in state courts because it was widely considered not to preempt state law.39 This consensus was supported by the legislative history of the FAA. During hearings on the measure, Cohen testified that "there is no disposition therefore by means of the Federal bludgeon to force an individual State into an unwilling submission to arbitration enforcement."40

38 Andrea Cann Chandrasekher & David Horton, Arbitration Nation: Data from Four Providers, 107 Cal. L. Rev. 1, 11 n.67 (2019) (quoting Julius Henry Cohen & Kenneth Dayton, The New Federal Arbitration Law, 12 VA. L. REV. 265, 281 (1926)).

39 David Horton, The Federal Arbitration Act and Testamentary Instruments, 90 N.C. L. Rev. 1027, 1039 (2012).

40 Id. at 1039 n.55 (citing Arbitration of Interstate Commercial Disputes: Joint Hearings on S. 1005 and H.R. 646 Before the Subcomms. of the Comms. on the Judiciary, 68th Cong. 40 (1924)).

In a series of decisions beginning in the 1980s,41 however, the Supreme Court drastically expanded the applicability of the FAA to arbitration clauses to everyday contracts, "push[ing] arbitration into the mainstream."42 The Court has upheld the enforcement of arbitration clauses even when doing so prevents an individual from vindicating a state or federal statutory right.43 Furthermore, by imposing arbitration on a "take-it-or-leave-it" basis, large companies have eviscerated the congressional intent of arbitration as a voluntary process agreed to between parties of equal bargaining power.44

41 See, e.g., Moses H. Cone Mem'l Hosp. v. Mercury Constr., 460 U.S. 1 (1983); Justice Denied: Forced Arbitration and the Erosion of Our Legal System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before the Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm. On the Judiciary, 116th Cong. 25 29 (2019) (statement of Deepak Gupta, Founding Principal, Gupta Wessler PLLC).

42 Andrea Cann Chandrasekher & David Horton, Arbitration Nation: Data from Four Providers, 107 Cal. L. Rev. 1, 12 (2019).

43 See, e.g., Preston v. Ferrer, 552 U.S. 346, 349 (2008) ("When parties agree to arbitrate all questions arising under a contract, the [Federal Arbitration Act] supersedes state laws . . . ."); Allied- Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991).

44 During the passage of the Federal Arbitration Act, Congress did not even intend to allow binding arbitration agreements on individuals if the contracts were between parties of unequal bargaining power. Prima Paint Corp., 388 U.S. at 414 (1967) (Black, J., dissenting) (citing 1923 Hearing on S. 4213 and S. 4214).

With respect to labor unions, the Supreme Court held in Epic Systems Corp. v. Lewis that the National Labor Relations Act (NLRA), which guarantees workers the right to organize unions and utilize collective bargaining, does not reflect a clearly expressed congressional intent to displace the FAA and to prohibit class and collective action waivers.45 The Court held that arbitration agreements must be enforced as written and that "[w]hile Congress is of course always free to amend this judgment, we see nothing suggesting it did so in the NLRA."46 Justice Ginsburg, in a dissent joined by Justices Breyer, Sotomayor, and Kagan, said the majority was "egregiously wrong," and noted that the decision "subordinates employee-protective labor legislation to the Arbitration Act . . . . Congress, when it enacted the NLRA, likely meant to protect employees" joining together to engage in collective litigation."47

45 Epic Sys. Corp. v. Lewis, 138 S.Ct. 1612, 1622-25 (2018).

46 Id. at 1632.

47 Id. at 1633, 1641 (Ginsburg, J., dissenting).

Forced Arbitration Undermines the Rights of Consumers

Forced arbitration is now widespread in consumer contracts.48 In many cases, consumers are unaware of forced arbitration clauses in the contracts of commonly used goods and services.49 These clauses are hidden inside of envelopes,50 delivery boxes,51 and privacy policies.52 Because nearly 90% of mobile phone services contain a forced arbitration clause, it is virtually impossible to avoid them and still use a mobile phone.53 This is also true for many financial services and products, such as student loans and credit cards.54 As a result, if the consumer wants to use the service or product, accepting the arbitration clause is mandatory.55

48 Justice Denied: Forced Arbitration and the Erosion of Our Legal System: Hearing On H.R. 1423, H.R. 7109, and H.R. 2631 Before the Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the Judiciary, 116th Cong. 1-2 (2019) (statement of Deepak Gupta, Founding Principal, Gupta Wessler PLLC).

49 See Wash. Mut. Fin. Grp. v. Bailey, 364 F.3d 260, 264-66 (5th Cir. 2004) (holding that an arbitration agreement was enforceable against illiterate consumers, even though they had no knowledge of the arbitration requirement); Am. Gen. Fin. Servs., Inc. v. Griffin, 327 F. Supp. 2d 678, 683 (N.D. Miss. 2004) (upholding arbitration agreement even though blind consumer had no knowledge of agreement); Marsh v. First USA Bank, N.A., 103 F. Supp. 2d 909, 916-18 (N.D. Tex. 2000) (finding that inserting an arbitration clause in monthly billing statements constituted sufficient notice).

50 See Ting v. AT&T, 319 F.3d 1126, 1134 (9th Cir. 2003).

51 See Hill v. Gateway 2000, Inc., 105 F.3d 1147, 1148 (7th Cir. 1997).

52 See Stephanie Strom, When 'Liking' a Brand Online Voids the Right to Sue, N.Y. Times (Apr. 16, 2014), https://www.nytimes.com/2014/ 04/17/business/when-liking-a-brand-online-voids-the-right-to-sue.html.

53 Brian Hardingham, The FCC Should Stop Cell Phone Giants from Using Forced Arbitration Clauses as a Get out of Jail Free Card, Pub. Justice: Blog (Jan. 13, 2017), https://www.publicjustice.net/fcc-stop- cell-phone-giants-using-forced-arbitration-clauses-get-jail-free-card/.

54 Credit Card Practices: Fees, Interest Rates, and Grace Periods: Hearing Before the Permanent Subcomm. on Investigations of the S. Comm. on Homeland Sec. and Governmental Affairs, 110th Cong. (2007) (statement of Alys Cohen, Staff Att'y, Nat'l Consumer Law Ctr.).

55 Critics of arbitration label it "mandatory," "compelled," or even "cram down" arbitration. See, e.g., Carrie Menkel-Meadow, Do the "Haves" Come Out Ahead in Alternative Judicial Systems?: Repeat Players in ADR, 15 Ohio St. J. on Disp. Resol. 19, 39 (1999).; David S. Schwartz, Enforcing Small Print to Protect Big Business: Employee and Consumer Rights Claims in an Age of Compelled Arbitration, 1997 Wis. L. Rev. 33 (1997); Jean R. Sternlight, Panacea or Corporate Tool?: Debunking the Supreme Court's Preference for Binding Arbitration, 74 Wash. U. L.Q. 637, 638 (1996).

In 2015, the Consumer Financial Protection Bureau (CFPB) released a congressionally-mandated study on forced arbitration in financial products and services.56 The study, which is the most comprehensive empirical study of arbitration to date,57 found "[n]o evidence of arbitration clauses leading to lower prices for consumers."58 Instead, the CFPB found that arbitration has undermined the ability of consumers to seek redress for abusive, anti-consumer practices.59 Richard Cordray, then-Director of the CFPB, explained that based on this research, the CFPB had concluded that "any prospect of meaningful relief for groups of consumers is effectively extinguished by forcing them to fight their legal disputes as lone individuals."60 As he stated, in recent years "many businesses have sought to use arbitration clauses not simply as an alternative means of resolving disputes, but effectively to insulate themselves from accountability by blocking group claims," exceeding the original purpose of the Federal Arbitration Act.61

56 Consumer Fin. Prot. Bureau, Arbitration Study Rep. to Cong., Pursuant to Dodd-Frank Wall Street Reform and Consumer Protection Act Sec. 1028(a) (2015), http://files.consumerfinance.gov/f/ 201503_cfpb_arbitration-study-report-to-congress-2015.pdf.

57 Justice Denied: Forced Arbitration and the Erosion of our Legal System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before the Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the Judiciary, 116th Cong. 15 (2019) (statement of Deepak Gupta, Founding Principal, Gupta Wessler PLLC).

58 Consumer Fin. Prot. Bureau, Factsheet, Consumer Financial Protection Bureau Study Finds That Arbitration Agreements Limit Relief for Consumers 3 (Mar. 10, 2015), https://files.consumerfinance.gov/f/ 201503_cfpb_factsheet_arbitration-study.pdf.

59 Id. at 2.

60 Richard Cordray, Dir., Consumer Fin. Prot. Bureau, Remarks at Field Hearing on Arbitration Clauses (May 5, 2016), https:// www.consumerfinance.gov/about-us/newsroom/prepared-remarks-cfpb- director-richard-cordray-field-hearing-arbitration-clauses/.

61 Id.

Heidi Shierholz, an economist at the Economic Policy Institute, notes that "not only do companies win the overwhelming majority of claims when consumers are forced into arbitration--they win big."62 While consumers win nine percent of their disputes, companies win 93 percent of the arbitration claims they bring.63 Strikingly, in arbitration involving financial institutions, "[b]ecause consumers win so rarely, the average consumer ends up paying financial institutions in arbitration-a whopping $7,725."64

62 Heidi Shierholz, Econ. Policy Inst., Forced Arbitration is Bad for Consumers (2017), https://www.epi.org/publication/forced- arbitration-is-bad-for-consumers/.

63 Id.

64 Id.

Forced Arbitration Deprives Employees of Fundamental Protections

According to a 2017 report by the Economic Policy Institute, 60.1 million workers the majority of non-union employees in the private sector have signed away their rights through forced arbitration clauses.65 As this report notes, this trend has "weakened the position of workers whose rights are violated, barring access to the courts for all types of legal claims, including those based on Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Family and Medical Leave Act, and the Fair Labor Standards Act."66

65 Alexander J.S. Colvin, Econ. Policy Inst., The Growing Use of Mandatory Arbitration 2 (2017), https://www.epi.org/files/pdf/ 135056.pdf.

66 Id. at 1.

When employees work under forced arbitration clauses, they are less likely to win in disputes with their employers,67 or even to bring them at all.68 Workers that do enforce their rights in the workplace receive less in damages in arbitration than would have been available in court.69

67 Id. at 3.

68 Id. at 5-6.

69 Id.

Worse still, forced arbitration clauses in employment contracts are often coupled with non-disclosure agreements,70 ensuring minimal scrutiny of corporate misconduct. For example, the claims of hundreds of workers at Sterling Jewelers the parent company of Jared Jewelers and Kay Jewelers who were victims of "groping and sexual coercion and sexual degradation and rape" in the workplace over a period of years were forced into arbitration.71 More than 200 women filed statements describing "an atmosphere in which female employees endured unwanted sexual advances from male superiors at the company."72 These statements from women across the country alleged, among other egregious forms of abuse and harassment, that male supervisors coerced their female subordinates into performing sexual favors for them in order to receive better jobs or higher pay.73

70 Laura Lawless Robertson, Sexual Harassment Claims Put Non- Disclosure and Arbitration Agreements Under Scrutiny, Resulting in a Flurry of Legislative Action, Nat'l L. Rev. (Dec. 7, 2017), https:// www.natlawreview.com/article/sexual-harassment-claims-put-non- disclosure-and-arbitration-agreements-under ("Many employers require employees to sign [non-disclosure agreements] as a condition of employment in order to prevent the dissemination and misuse of companies' confidential and proprietary information.").

71 Taffy Brodesser-Akner, The Company that Sells Love to America Had a Dark Secret, N.Y. Times Mag. (Apr. 23, 2019), https:// www.nytimes.com/2019/04/23/magazine/kay-jewelry-sexual-harassment.html.

72 Rebecca Hersher, Parent Company of Kay Jewelers Accused of Wage Discrimination Against Women, NPR: The Two-Way (Mar. 1, 2017), https:// www.npr.org/sections/thetwo-way/2017/03/01/517684117/thousands-allege- wage-and-promotion-discrimination-by-sterling-jewelers.

73 Drew Harwell, Hundreds Allege Sex Harassment, Discrimination at Kay and Jared Jewelry Company, Wash. Post. (Feb. 27, 2017), https:// www.washingtonpost.com/business/economy/hundreds-allege-sex-harassment- discrimination-at-kay-and-jared-jewelry-company/2017/02/27/8dcc9574- f6b7-11e6-bf01-d47f8cf9b643_story.html.

The claims of these women and nearly 70,000 others who were part of a class action against Sterling were subject to forced arbitration,74 however, denying their access to justice. Sterling, like many other American companies, subjects its employees to forced arbitration, requiring them to waive their rights to pursue their claims in court, including claims of discrimination and sexual harassment.75 According to a New York Times investigation, this secretive process minimized the company's exposure to additional claims or public scrutiny.76 As the report explains:

74 Id.

75 Id.

76 Taffy Brodesser-Akner, The Company that Sells Love to America Had a Dark Secret, N.Y. Times Mag. (Apr. 23, 2019), https:// www.nytimes.com/2019/04/23/magazine/kay-jewelry-sexual-harassment.html.

Arbitration meant that instead of being heard in a public court, they had to proceed privately in Sterling's in-house system, called Resolve. The first step of Resolve was an internal investigation. If the employee wasn't satisfied by the results of that investigation, he or she could ask to be heard by a panel of the employee's peers and an employment lawyer, all selected by Sterling. If the employee was still dissatisfied, the case was sent to arbitration. Sterling paid the arbitrator. The hearing's proceedings were carried out with judicial oversight, but they were done in private, and their outcome was sealed. Afterward, if there was a settlement, the employee often had to sign a nondisclosure agreement that prohibited the employee from speaking about the case again. The benefit of arbitration to the employee was that the claim was usually resolved more speedily. The benefit to the company was that it was resolved in secret. The secrecy was the point . . . . [I]n arbitration, the proceedings are so secretive that the lawyers weren't allowed to tell other women in the suit what had happened to them.77

77 Id. (emphasis added).

In light of these concerns, a coalition of state attorneys general--from all 50 states, the District of Columbia, and several U.S. territories have written Congress in support of ending forced arbitration in workplace disputes involving claims of sexual harassment.78 As this bipartisan coalition notes, "Ending mandatory arbitration of sexual harassment claims would help to put a stop to the culture of silence that protects perpetrators at the cost of their victims."79

78 Letter from Nat'l Ass'n of Att'ys Gen. to Cong. Leadership (Feb. 12, 2018), http://myfloridalegal.com/webfiles.nsf/WF/HFIS-AVWMYN/ $file/NAAG+letter+to+Congress+Sexual+Harassment+Mandatory+Arbitration.pdf.

79 Id.

Following a series of high-profile disputes involving sexual and racial harassment, some companies have chosen to voluntarily limit the use of forced arbitration in employment contracts. Earlier this year, Google announced that it would no longer include forced arbitration clauses in its employment contracts, following a worldwide walkout to protest the company's handling of sexual harassment claims.80

80 Alexia Fernandez Campbell, Why Thousands of Google Employees Are Protesting Across the World, VOX, (Nov. 1, 2018), https:// www.vox.com/2018/11/1/18051884/google-employee-walkouts-explained; Nitasha Tiku, Google Ends Forced Arbitration After Employee Protest, Wired (Feb. 21, 2019), https://www.wired.com/story/google-ends-forced- arbitration-after-employee-protest/.

FORCED ARBITRATION DEPRIVES AMERICANS OF THEIR CIVIL RIGHTS

According to an analysis of corporate legal settlements of civil rights complaints, U.S. corporations have paid more than $2.7 billion since 2000,81 although the cases that reach settlement may only represent "the tip of [the] iceberg of corporate abuses."82 Many victims of civil rights violations are unable to pursue their claims in court due to forced arbitration provisions imposed on them as a condition of employment or for using everyday goods and services.83 The Leadership Conference on Civil and Human Rights, a coalition representing more than 200 civil rights groups,84 explains:

81 Michelle Chen, Corporations Have Paid Out at Least $2.7 Billion in Civil-Rights and Labor Lawsuits Since 2000, The Nation (Feb. 1, 2019), https://www.thenation.com/article/corporations-lawsuits-civil- rights/ (citing Philip Mattera, Good Jobs First, Big Business Bias: Employment Discrimination and Sexual Harassment at Large Corporations, (2019), https://www.goodjobsfirst.org/sites/default/files/docs/pdfs/ BigBusinessBias.pdf.

82 Id.

83 Heidi Shierholz, Econ. Policy Inst, Forced Arbitration is Bad for Consumers (2017), https://www.epi.org/publication/forced- arbitration-is-bad-for-consumers/.

84 Our Common Purpose, Leadership Conf. on Civil & Human Rights (last visited on Sept. 5, 2019), https://civilrights.org/about/the- coalition/.

Civil and human rights are especially vulnerable to the dangerous impact of forced arbitration. Forced arbitration clauses often preclude consumers and employees joining together to form a class action to enforce their civil rights, which results in claim suppression. Moreover, forced arbitration does not allow public scrutiny of alleged discrimination, nor does it allow for the creation of judicial opinions that help develop the law and provide further guidance on emerging trends. As a result, landmark civil rights laws such as those protecting employees from race, gender, and age discrimination have been rendered meaningless.85

85 Letter from Leadership Conf. on Civil & Human Rights to U.S. Senators (Feb. 3, 2016), http://civilrightsdocs.info/pdf/Arbitration- Letter.pdf.

In addition to precluding the enforcement of the civil rights laws, the opacity of forced arbitration prevents others from learning of widespread misconduct. As Terri Gerstein, the Director of the State and Local Enforcement Project at the Harvard Law School Labor and Worklife Program, noted, the secretive nature of arbitration "has allowed outrageous violations, in some cases years of sexual harassment and predation, to remain hidden from view and therefore to continue."86 For example, Massage Envy, the country's largest massage chain, has forced hundreds of women's allegations of sexual assault into arbitration.87 In one case, a customer who has alleged that she was sexually assaulted by one of the company's therapists attempted for over a year to cancel her monthly membership to Massage Envy, but was refused unless she agreed to forced arbitration.88 As one sexual assault survivor said, "I was mortified . . . . It's just horrifying that they would allow this to happen and then take steps to cover up what is happening" through forced arbitration.89 As Gretchen Carlson, an advocate and former Fox News commentator, noted in her testimony during the ACAL Subcommittee's hearing on forced arbitration:

86 Terri Gerstein, Forced Arbitration is Unjust and Deeply Unpopular. Can Congress End It?, Slate (Mar. 1, 2019), https:// slate.com/news-and-politics/2019/03/congress-forced-arbitration-fair- act.html.

87 See Brooks Jarosz, Fears Loom that Sexual Assault Cases Involving Massage Envy Will Remain Private, Fox KVTU (Dec. 21, 2018), http://www.ktvu.com/news/fears-loom-sexual-assault-cases-involving- massage-envy-will-remain-private.

88 Terri Gerstein, Forced Arbitration is Unjust and Deeply Unpopular. Can Congress End It?, Slate (Mar. 1, 2019), https:// slate.com/news-and-politics/2019/03/congress-forced-arbitration-fair- act.html.

89 Brooks Jarosz, Fears Loom that Sexual Assault Cases Involving Massage Envy Will Remain Private, Fox KVTU (Dec. 21, 2018), http:// www.ktvu.com/news/fears-loom-sexual-assault-cases-involving-massage- envy-will-remain-private.

These women put their trust into a company and its employees, only to suffer the trauma of being sexually assaulted and then continue to suffer as the company did little to help them and instead tried to silence them. Now that these women are seeking public accountability in court, the company is trying to force them into arbitration, because hidden in the fine print of the terms and conditions of the company's app and iPads (used to check in for services) was a forced arbitration clause."90

90 Justice Denied: Forced Arbitration and the Erosion of our Legal System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before the Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the Judiciary, 116th Cong. 2-3 (2019) (statement of Gretchen Carlson, advocate and former Fox News commentator).

FORCED ARBITRATION UNDERMINES THE ENFORCEMENT OF THE ANTITRUST LAWS

Forced arbitration clauses have also undermined the enforcement of the antitrust laws.91 As Deepak Gupta noted during the ACAL Subcommittee's hearing on forced arbitration, "[t]roublingly, firms that possess monopoly power can enact a sort of 'double punch' by imposing arbitration terms that insulate their abuse of that same power."92 In 2013, the Supreme Court dictated this result in American Express Co. v. Italian Colors Restaurant.93 In that case, a small but successful restaurant in Oakland, California banded with fellow merchants in a class-action lawsuit to challenge alleged anticompetitive conduct of American Express, including its exorbitantly high and hidden fees--as much as 30 percent more than other card companies.94 The small businesses alleged that American Express's conduct violated Section 1 of the Sherman Act.95 In response, American Express moved to compel individual arbitration under the Federal Arbitration Act.96

91 Justice Denied: Forced Arbitration and the Erosion of our Legal System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before the Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the Judiciary, 116th Cong. 21 (2019) (statement of Deepak Gupta, Founding Principal, Gupta Wessler PLLC).

92 Id. at 20.

93 Am. Express. Co. v. Italian Colors Rest., 570 U.S. 228, 231 (2013) (holding that the Federal Arbitration Act compels the enforcement of a contractual waiver of a plaintiff's claim under a federal statute).

94 Luke Tsai, Supreme Court Rules Against Oakland Restaurant in AmEx Suit, East Bay Express (June 25, 2013), https:// www.eastbayexpress.com/WhatTheFork/archives/2013/06/25/supreme-court- rules-against-oakland-restaurant-in-amex-suit.

95 Italian Colors Rest., 570 U.S. at 231.

96 Id.

Notwithstanding the establishment of a private right of action in the Clayton Act, the Court held that the Federal Arbitration Act required the arbitration of claims under the antitrust laws.97 As the Court noted, the antitrust laws do not "'evince an intention to preclude a waiver' of class- action procedure."98 Justice Elena Kagan, in a dissent joined by Justices Ginsburg and Breyer, warned that the majority's interpretation of the FAA allows the monopolist "to use its monopoly power to insist on a contract effectively depriving its victims of all legal recourse."99 As she explained, the Court's decision would have sweeping ramifications for the vindication of rights established by statute:

97 Id. at 234.

98 Id. (quoting Mitsubishi Motors Corp. v. Soler Chrysler- Plymouth, Inc., 473 U.S. 614, 628 (1985)).

99 Italian Colors Rest., 570 U.S. at 240 (Kagan, J., dissenting).

In the hands of today's majority, arbitration threatens to become . . . a mechanism easily made to block the vindication of meritorious federal claims and insulate wrongdoers from liability. The Court thus undermines the FAA no less than it does the Sherman Act and other federal statutes providing rights of action.100

100 Id. at 253.

Critics of the Italian Colors decision similarly note that it has "created the possibility that an entity engaging in monopolistic behavior could encourage and strengthen such behavior" by implementing forced arbitration clauses with merchants.101 Now that such clauses are enforceable, entities engaged in monopolistic behavior can insulate themselves from virtually any risk of antitrust liability.102 As Mr. Gupta explained at the ACAL Subcommittee's hearing on forced arbitration, this behavior has two consequences.103 First, antitrust enforcement suffers as a whole due to the decline of private enforcement.104 Second, this decline also results in a wealth transfer from low-income to high-income individuals in the absence of open and competitive markets.105

101 Robert Ward, Note, Divide & Conquer: How the Supreme Court Used the Fed. Arbitration Act to Threaten Statutory Rights & the Need to Codify the Effective Vindication Rule, 39 Seton Hall Legis. J. 149, 162 (2015).

102 See id.

103 Justice Denied: Forced Arbitration and the Erosion of our Legal System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before the Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the Judiciary, 116th Cong. 21 (2019) (statement of Deepak Gupta, Founding Principal, Gupta Wessler PLLC).

104 Id.

105 Id.

Alan Carlson, the owner of the Italian Colors Restaurant and the lead plaintiff in the case, urged Congress to "pass the FAIR Act to restore equal access to justice for small businesses and consumers."106 As he observed, forced arbitration "makes it impossible for businesses to hold large corporations publicly accountable."107 The FAIR Act, he concluded, "would give back to small businesses the right to go before a judge and jury against big corporations instead of being locked into a forced arbitration system that is too expensive to use."108

106 Justice Denied: Forced Arbitration and the Erosion of our Legal System: Hearing on H.R. 1423, H.R. 7109, and H.R. 2631 Before the Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the Judiciary, 116th Cong. 6 (2019) (statement of Alan S. Carlson, Owner, Italian Colors Rest.).

107 Id. at 5.

108 Id. at 5-6.

A coalition of antitrust law professors similarly note that the FAIR Act is essential to protecting consumers and small businesses by restoring the private enforcement of the antitrust laws. They explain:

Billions of dollars are lost by U.S. consumers and businesses to criminal antitrust conspirators, many of which are foreign corporations . . . While criminal enforcement is important for punishing and deterring antitrust conspiracies, private enforcement provides virtually the only way to compensate businesses and consumers that are victims of antitrust violations. . . . The FAIR Act would protect consumers and small businesses from being forced into individual, private arbitration for antitrust disputes. It would help preserve the strong private enforcement scheme that Congress established to protect competition and allow honest businesses to thrive.109

109 Letter from Robert H. Lande, Professor, University of Baltimore School of Law, et al., to Reps. Jerrold Nadler (D-NY), Chair, & Doug Collins (R-GA), Ranking Member, Comm. on the Judiciary (Sept. 5, 2019) (on file with Majority staff of the H. Comm. on the Judiciary).

The American Antitrust Institute and a coalition of other public interest organizations add that in the absence of legislation to end forced arbitration, "the proliferation of class action waivers in mandatory arbitration clauses will destroy a wide swath of the private antitrust rights afforded to the most vulnerable economic actors in the United States."110

110 Letter from the American Antitrust Institute, et al., to Reps. Jerrold Nadler (D-NY), Chair, & Doug Collins (R-GA), Ranking Member, H. Comm. on the Judiciary (Sept. 6, 2019) (on file with Majority staff of the H. Comm. on the Judiciary).

Hearings

For the purposes of section 103(i) of H. Res. 6 of the 116th Congress, the following hearing was used to develop H.R. 1423: Justice Denied: Forced Arbitration and the Erosion of Our Legal System, which was held on May 16, 2019 by the Committee's Subcommittee on Antitrust, Commercial, and Administrative Law. The hearing examined the rise of forced arbitration in disputes involving workers, consumers, small businesses, and victims of civil rights violations, among others, and the effect of forced arbitration on the vindication of state and federal statutory rights. The following witnesses testified in support of the measure: Gretchen Carlson; Professor Myriam Gilles, Professor of Law, Paul R. Verkuil Chair in Public Law, Benjamin N. Cardozo School of Law; Deepak Gupta, Founding Principal, Gupta Wessler PLLC; and Kevin Ziober, Lieutenant, U.S. Navy Reserves.111

111 Justice Denied: Forced Arbitration and the Erosion of our Legal System: Hearing Before the Subcomm. on Antitrust, Commercial, and Admin. Law of the H. Comm on the Judiciary, 116th Cong. (2019).

Committee Consideration

On September 10, 2019, the Committee met in open session and ordered the bill, H.R. 1423, favorably reported with an amendment, by a rollcall vote of 22 to 14, a quorum being present.

Committee Votes

In compliance with clause 3(b) of rule XIII of the Rules of the House of Representatives, the Committee advises that the following rollcall votes occurred during the Committee's consideration of H.R. 1423:

1. An amendment by Mr. Jordan of Ohio to strike from the bill the exemption for collectively bargained agreements was defeated by a rollcall vote of 15 to 20.

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2. An amendment by Mr. Sensenbrenner of Wisconsin to exempt from the bill a predispute arbitration agreement and a predispute joint-action waiver providing certain disclosures regarding attorneys' fees for the plaintiff's counsel are submitted to the court was defeated by a rollcall vote of 14 to 20.

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3. An amendment by Mr. Sensenbrenner of Wisconsin to make the bill applicable to agreements entered into following the enactment of the bill was defeated by a rollcall vote of 14 to 21.

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4. Motion to report H.R. 1423, as amended, favorably was agreed to by a rollcall vote of 22 to 14.

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Committee Oversight Findings

In compliance with clause 3(c)(1) of rule XIII of the Rules of the House of Representatives, the Committee advises that the findings and recommendations of the Committee, based on oversight activities under clause 2(b)(1) of rule X of the Rules of the House of Representatives, are incorporated in the descriptive portions of this report.

New Budget Authority and Tax Expenditures and Congressional Budget Office Cost Estimate

With respect to the requirements of clause 3(c)(2) of rule XIII of the Rules of the House of Representatives and section 308(a) of the Congressional Budget Act of 1974 and with respect to requirements of clause (3)(c)(3) of rule XIII of the Rules of the House of Representatives and section 402 of the Congressional Budget Act of 1974, the Committee has requested but not received a cost estimate for this bill from the Director of Congressional Budget Office. The Committee has requested but not received from the Director of the Congressional Budget Office a statement as to whether this bill contains any new budget authority, spending authority, credit authority, or an increase or decrease in revenues or tax expenditures.

Duplication of Federal Programs

No provision of H.R. 1423 establishes or reauthorizes a program of the federal government known to be duplicative of another federal program, a program that was included in any report from the Government Accountability Office to Congress pursuant to section 21 of Public Law 111-139, or a program related to a program identified in the most recent Catalog of Federal Domestic Assistance.

Performance Goals and Objectives

The Committee states that pursuant to clause 3(c)(4) of rule XIII of the Rules of the House of Representatives, H.R. 1423 would promote access to justice by prohibiting: (1) the use of forced arbitration clauses in certain consumer, employment, antitrust, and civil rights disputes; and (2) agreements and practices that interfere with the right of individuals, workers, and small businesses to participate in a joint, class, or collective action related to an employment, consumer, antitrust, or civil rights dispute.

Advisory on Earmarks

In accordance with clause 9 of rule XXI of the Rules of the House of Representatives, H.R. 1423 does not contain any congressional earmarks, limited tax benefits, or limited tariff benefits as defined in clause 9(d), 9(e), or 9(f) of rule XXI.

Section-by-Section Analysis

The following discussion describes the bill as reported by the Committee.

Sec. 1. Short Title. Section 1 sets forth the short title of the bill as the "Forced Arbitration Injustice Repeal Act" or the "FAIR Act."

Sec. 2. Purposes. Section 2 states that the purposes of the FAIR Act are to: (1) prohibit pre-dispute arbitration agreements that force arbitration of future employment, consumer, antitrust, or civil rights disputes, and (2) prohibit practices that interfere with the right of individuals and small businesses to participate in joint class or collective action related to an employment, consumer, antitrust, or civil rights dispute.

Sec. 3. Arbitration of Employment, Consumer, Antitrust, and Civil Rights Disputes. Section 3(a) amends title 9 of the United States Code by adding at the end "Chapter 4-- Arbitration of Employment, Consumer, Antitrust, and Civil Rights Disputes."

New Section 401 defines various terms used under new chapter 4.

The term "antitrust dispute" is defined as a dispute arising from an alleged violation of the antitrust laws, as defined in the first section the Clayton Act or State antitrust laws, and in which the plaintiffs seek certification under Rule 23 of the Federal Rules of Civil Procedure or a comparable state law.

The term "civil rights dispute" is defined as a dispute arising from an alleged violation of the Constitution of the United States or the constitution of a State or any Federal, State or local law that prohibits discrimination on the basis of race, sex, age, gender identity, sexual orientation, disability, religion, national origin, or any legally protected status in education, employment, credit, housing, public accommodations and facilities, voting, veterans or servicemembers services, health care, or a program funded or conducted by the Federal Government or a State Government, in which at least one party is one or more individuals, including individuals seeking class certification under Federal or State law.

The term "consumer dispute" is defined as a dispute between (A) one or more individuals who seek or acquire real or personal property, services . . . securities or other investments, money, or credit for personal, family, or household purposes, including individuals seeking class certification under Federal or State law, and (B) a seller or provider of such listed services, or a third party involved in the selling, providing of, payment for, receipt or use of information about, or other relationship to any such property, services, securities or other investments, money, or credit.

The term "employment dispute" is defined as a dispute between one or more individuals and a person arising out of or related to the work relationship or prospective work relationship, regardless of whether the individual is or would be classified as an employee or an independent contractor with respect to such work.

The term "pre-dispute arbitration agreement" is defined as an agreement to arbitrate a dispute that has not yet arisen at the time of the making the agreement, and the term "pre- dispute joint-action waiver" as an agreement, made before the dispute has arisen, that would prohibit, or waive the right of, one of the parties to participate in a joint, class or collective action concerning the dispute.

New Section 402 first provides that no pre-dispute arbitration agreement or pre-dispute joint-action waiver shall be valid or enforceable with respect to an employment dispute, consumer dispute, antitrust dispute, or civil rights dispute. It further provides that a court, and not an arbitrator, shall determine, under federal law, whether this chapter applies to an agreement to arbitrate, and the enforceability of that agreement. Section 402 also specifies that this chapter does not apply to any arbitration provision between an employee and a labor organization or between labor organizations, except that no such arbitration provision shall have the effect of waiving the right of a worker 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.

Section 3(b) makes a number of technical and conforming amendments to Title 9 U.S.C.

Sec. 4. Effective Date. Section 4 provides that the legislation takes effect on the date of enactment and applies to any dispute or claim that arises or accrues on or after the date of enactment.

Changes in Existing Law Made by the Bill as Reported

In compliance with clause 3(e) of rule XIII of the Rules of the House of Representatives, changes in existing law made by the bill, H.R. 1423 as reported, are shown as follows:

Changes in Existing Law Made by the Bill, as Reported

In compliance with clause 3(e) of rule XIII of the Rules of the House of Representatives, changes in existing law made by the bill, as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, and existing law in which no change is proposed is shown in roman):

TITLE 9, UNITED STATES CODE

Continues with Part 2 of 2

TARGETED NEWS SERVICE, Harwood Place, Springfield, Virginia, USA: Myron Struck, editor; 703/304-1897; [email protected]; https://targetednews.com