Tag: Arbitration

  • Protecting Public Rights

    Posted by

    Amy Schmitz

    Contracts professors, policymakers, consumer groups and others have become particularly interested in another post-AT&T Mobility LLC v. Concepcion case.
     The United States Court of Appeals for the Ninth Circuit recently agreed to an en banc rehearing
    of Kilgore v. Keybank, 673 F.3d 947 (9th Cir. 2012).  The issue in this case is whether Concepcion precludes courts from preserving judicial access for public injunctions under state consumer protection statutes by invoking the public policy exemption from the Federal Arbitration Act's ("FAA") mandate that courts enforce arbitration agreements according to their terms.  The en banc hearing is set for some time in December of this year.

    The case is important on many levels.  It raises fundamental questions about the reach of FAA preemption in the wake of Concepcion, in which the United States Supreme Court held that the FAA preempted courts from using California unconscionability law to strike a class relief waiver and order class arbitration.  Moreover, the case implicates states' power to protect individuals' access to meaningful injunctive relief in order to enforce and protect public rights under state statutes, such as consumer protection statutes.  

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  • Alternatives to Arbitration: Government ADR

    Posted by

    Adam Levitin

    The serious problems with binding mandatory arbitration (BMA) as a consumer dispute mechanism for financial services raises the question of “how can we do this better?” Any solution to financial services consumer dispute resolution must take into account four salient factors–(1) the disparity of sophistication between parties, (2) the disparity of resources between parties, (3) the repeat player interest of financial institutions, and (4) the frequently small amounts in controversy. Thus, litigation in court might do better at accounting for factor (3) than BMA, it does not deal will with factors (1), (2), and (4)–it is simply not practical for many consumers to litigate–court procedures make effective pro se representation difficult, time-consuming, and expensive, and the amounts in controversy are too small. Class actions can overcome these problems, but many disputes are not class action issues, and class actions have their own problematic dynamics. The fairness vs. practical trade-off between court and BMA isn’t very satisfactory. Fortunately, we do not live in a binary world of public litigation vs. private ADR.

    A very interesting new paper by Professor Daniel Schwarcz at the University of Minnesota School of Law raises another possibility: a public ADR system. Schwarcz’s suggestion comes from his study of the United Kingdom’s consumer dispute resolution system for insurance. In the UK the Financial Ombudsman Service (FOS) provides a dispute resolution mechanism for the entire insurance industry–it combines mediation, arbitration, and negotiation in a single scheme. The FOS (originally created by industry), is staffed primarily by non-attorneys and is separate from the insurance safety & soundness regulator, which helps guarantee its independence. And by being a public, rather than a private system, there are political checks and balances on its operations. Most important to note about the FOS, though, is that both consumers and industry are very happy with its operation.

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  • Have You Already Lost?

    Posted by

    Elizabeth Warren

    The reasons to dispute a credit charge are many–mistakes, failure to credit a return, identity theft, a lost payment that triggered penalty interest and fees, etc. Maybe the company will be nice and settle, or maybe the charge will be small an the customer will grumble and pay.  But if you had a serious dispute you wanted to pursue, have you already lost? 

    Business Week has a cover story this week about credit card disputes are settled through arbitration.  The focus is on NAF, an arbitration outfit that, by its own accounting, arbitrated 18,075 cases between a business entity and a California consumer. The score?  Business won 18,045, and consumers won 30.   

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