Reform the FAA

The New York Times had a great article on the history of the Federal Arbitration Act which is soon turning 100 years old. The Act was meant to help resolve business disputes between sophisticated businesses. President Calvin Coolidge signed the FAA on February 12, 1925. However, this archaic legislation has manipulated the Constitution and took away the jury rights of Americans.

Leo E. Strine Jr., former chief justice of the Delaware Supreme Court, in 2020 wrote that the U.S Supreme Court, in increasing the use of forced arbitration, “has allowed businesses to deny workers, consumers, and human investors their day in court and has blocked states from exercising their sovereign right to decide how best to enforce their own laws.”

Now, a hundred years later, the FAA is abused to protect all types of misconduct. This act recognized that corporations can take away your right to a jury trial if arbitration is mentioned in a contract.

● “A New Jersey couple who were badly injured when their Uber crashed were prevented from suing the company because, a court ruled last month, they had
agreed to submit any claims to arbitration by consenting on the app to the company’s terms of service.”

● “After a woman died from an allergic reaction after eating at a restaurant in a Walt Disney Parks and Resorts location, the company said her widower had waived his right to sue it when he signed up to try Disney+ years earlier. (Disney reversed itself in August after a public backlash and agreed to a trial.)”

● “In 2018, it emerged that Stormy Daniels, the adult entertainer, had signed a sweeping agreement before Donald Trump was president that any disputes
between them would be resolved by arbitration. That was in exchange for taking $130,000 to stay silent about her affair with him. She ended up going public
anyway.”

The solution is to return arbitration to its original purpose, which is to resolve contract disputes between businesses, rather than applying it to consumers.
Arbitrators can provide fast, frugal, and fair judgment. They can use relaxed rules of evidence that prevent “foot-dragging” by either side. Arbitration is often suitable for cases that would be too expensive for individual action and too “idiosyncratic to pursue as class actions.”

Although arbitration has benefits, many want their day in court, as our country’s founders intended. They don’t like to be told that they gave up this right when they clicked through the online form and gave “implied consent” through a purchase elsewhere.

The issue is that the United States has become an arbitration outlier, “We stand alone. No other country uses arbitration as expansively as we do,” said Imre Scalia, professor of social justice at Loyola University New Orellana College of Law.

In 2019, the Centers for Medicare and Medicaid Services attempted to stop nursing homes from requiring people to sign a binding arbitration agreement upon admission or through continued care. Additionally, in 2022, President Biden signed a law that ended forced arbitration in cases that involve sexual assault or harassment. The Consumer Financial Protection Bureau has also fought abuses of arbitration.

Representative Hank Johnson, Democrat of Georgia, has been seeking limitations on arbitration since he entered Congress in 2007. His bill, the Forced Arbitration Injustice Repeal Act (FAIR), has passed in the House twice but kept in the Senate. This bill would eliminate mandatory arbitration clauses in employment, consumer, and civil rights cases. Both Johnson and Senator Richard Blumenthal, Democrat of Connecticut, had reintroduced this
bill in April with more than 80 co-sponsors in the House and 37 in the Senate.

The centennial of the Federal Arbitration Act is an opportunity for reform. The FAIR Act is a step in the right direction by limiting the scope of
arbitration. Szalai, the Loyola law professor and arbitrator, wants to see the conference produce ideas to return arbitration to its original, limited purpose.

“It started out with good intentions, but were at a point of saturation,”