Dovetailing with current trends at the state level, Senate Democrats have recently introduced legislation that would reform arbitration. The bill, dubbed the “FAIR” Act, pushed primarily by Senator Richard Blumenthal of Connecticut, would seek to eliminate arbitration clauses in employment and consumer cases.

On April 2nd, the Senate Judiciary Committee, still controlled by Senate Republicans, held testimony from a wide-ranging panel of attorneys expressing divergent views on America’s current arbitration system with a focus on the costs and benefits it presents to businesses and consumers. Some panelists argued that arbitration in employment and consumer contracts is utilized primarily by companies and employers to avoid costly and time-consuming litigation. While Alan Kaplinsky and Victor Schwartz had the opportunity to explain to the committee how arbitration clauses in such contracts helps to contain legal costs for all parties.

Victor Schwartz, who co-chairs the public policy group for Shook, Hardy & Bacon, presented arbitration as an efficient means of resolving disputes. In his testimony, Schwartz explained that a voluntary contract is unfair by reason of it including a “take it or leave it” provision ignores the simple fact that potential employees and consumers can just “leave it”. In addition, the forum setting of arbitration proceedings affords individuals a degree of privacy often not granted by the courts who may otherwise wish to avoid the potential harm a public hearing would have on themselves or their loved ones. After all, confidentiality is not a benefit that only companies can derive a benefit from.

Addressing the myth that the high “win” rate of businesses at arbitration proceedings shows that they are biased against claimants, Mr. Schwartz explained that parties often settle cases for reasons independent of the claim’s actual merits, such as nuisance value, before even reaching the formal arbitration proceedings. And as a result, cases that reach formal arbitration are often relatively low-merit claims. Legislation such as the misleadingly named “FAIR” Act would actually shift increased litigation costs onto all consumers and employees and deprive everyone of a swift method of resolving contractual disputes.

Contributed by:  Anthony Zelich – NJCJI Law Clerk