FEDA Joins Business Groups in Urging Congress to Protect Arbitration

Despite its status as a vital alternative means of resolving disputes for 100 years, Congress is now considering numerous bills that would dismantle the arbitration system in favor of bringing claims through the class-action litigation system.

In response to those legislative proposals, FEDA has joined a coalition of business advocacy groups and trade associations in signing a letter urging Congress to preserve arbitration as an effective and fair dispute-resolution mechanism. The letter notes that individualized contract-based arbitration is efficient, effective and less expensive for consumers, employees and businesses. Additionally, studies have shown that those bringing claims in arbitration do just as well or, in many circumstances, better than in court. By contrast, class action settlements frequently provide less restitution to class members, as the bulk of the payouts end up going to class action attorneys.

There are many benefits to arbitration, as noted by the letter. Rules require that arbitrators be neutral and give both parties an equal say in selecting the arbitrator. Further, the fees paid by employees and consumers are limited to $350 and $225, respectively — equal to or less than the filing fee in federal court. The arbitration process also requires that damages, punitive damages and attorneys’ fees are awarded to the claimant to the same extent as through the court process.

Despite those advantages, multiple bills and amendments have been introduced that would reduce the availability of arbitration and class action waivers for issues such as employment disputes, consumer contracts, data privacy, discrimination claims, and antitrust challenges. “If successful, these legislative efforts would declare unenforceable potentially millions of arbitration provisions that allow for the orderly and economical resolution of disputes,” the letter warns. “These attacks on arbitration are inaccurate, unnecessary, and would undermine an important alternative to litigation that has benefited consumers, employees, and businesses for decades, and on which many of them now rely.”

The full letter is available here.