Imre Stephen Szalai is the Judge John D. Wessel Distinguished Professor of Social Justice at Loyola University New Orleans College of Law. He is a nationally recognized expert regarding arbitration and serves on the board of the Employee Rights Advocacy Institute for Law and Policy. He wrote the below article for The Hill.
I applaud the New York Times for recently showcasing in a series of articles one of the greatest stains on America’s civil justice system: the forced arbitration of millions of consumer and employment disputes. However, in some respects, these articles do not go far enough to convey how problematic forced arbitration is. And in other respects, these articles go too far and fail to recognize the potential value of arbitration.
There are serious constitutional concerns with forced arbitration. If a corporation or employer drafts an arbitration clause with several one-sided provisions, such as requiring hearings in distant locations, banning all discovery, or requiring a consumer or employee to pay all arbitration expenses, courts could invalidate such provisions a few years ago. However, today, with more sophisticated drafting of agreements and as a result of recent, flawed, pro-business Supreme Court decisions, courts routinely enforce such agreements, despite the existence of one-sided provisions which unfairly tilt the playing field in favor of the stronger party. With a lack of meaningful consent, which is supposed to be the theoretical and legal basis for arbitration, and with the disappearing judicial scrutiny of arbitration clauses, America’s judiciary is now sending people into a sham system. Courts today are in effect rubberstamping whatever one-sided, harsh arbitration language companies are inserting into their contracts.
In pushing its arbitration agenda, the Supreme Court has been relying on the 1925 Federal Arbitration Act. Unfortunately, the Supreme Court, since the 1980s, has been re-writing and grossly expanding this statute far beyond its original intent. The statute was originally designed to cover commercial, contractual disputes and apply solely in federal court proceedings. However, since the 1980s, the Supreme Court has twisted the statute and held it applies in state and federal courts and covers employment and statutory disputes. Through these flawed rulings, the Supreme Court is unconstitutionally eroding and displacing the power of the states to create their own systems of dispute resolution. Also, the Supreme Court is sending critical statutory claims of a public nature, such as civil rights claims and wage claims, into a secretive system, thereby destroying the creation of precedent, which is fundamental to our common law legal system. Congress never intended the federal arbitration statute to have these effects.
It’s a shame the Supreme Court has hijacked and corrupted arbitration. Through arbitration, consenting parties can design their own procedures to resolve disputes and take ownership and control over resolving their own claims. Arbitration, when used as intended, respects party autonomy and promotes democracy. Furthermore, arbitration, when based on meaningful consent between parties, has served virtually every society going back to the beginnings of recorded history. For example, merchants and trade groups in New York have successfully used arbitration to resolve disputes in an efficient manner, and arguably with better results from knowledgeable, respected, agreed-upon decision makers, from pre-Revolutionary War days continuing to the present time. When the British occupied New York City during the Revolutionary War, the New York Chamber of Commerce’s arbitration system was the sole functioning tribunal for disputes in the city.
The recent New York Times articles fail to recognize that the problem is not with arbitration. When used as intended, arbitration can be invaluable and fits perfectly with our democratic values as a society. The problem is with the Supreme Court’s tortured, flawed readings of the federal law governing arbitration and corporate America’s abuse of arbitration. Together, a majority of the Court and corporate America have perpetrated one of the greatest cons on the American people, who are often unaware that their constitutional rights have been stripped away.