Legal Update: Arbitration – Key Cases and Pending Legislation

In recent years, more and more companies rely on arbitration agreements to avoid being sued in a court of law.

This system has become vast, as companies increasingly require customers, employees, investors, patients, and other consumers to agree in advance to arbitrate any disputes that arise in in their dealings with a company. For a more detailed look at arbitration agreements and their effect on consumers, please read this series:

In the last five years, the United States Supreme Court has upheld these types of arbitration agreements in two separate lawsuits: AT&T Mobility v. Concepcion and American Express v. Italian Colors Restaurant.

Recently, a bill sponsored by Sens. Leahy (D-VT) and Franken (D-MN), seeks to undo the Supreme Court’s recent rulings. The Restoring Statutory Rights Act states that the 1925 Federal Arbitration Act “did not, and should not have been interpreted to, supplant or nullify the legislatively created rights and remedies which Congress…has granted to the people of the United States for resolving disputes in State and Federal Courts.”

It would create an exception in the Arbitration Act for disputes involving individuals and small businesses. The only way individuals would enter into arbitration is if they agreed to do so after the dispute has been filed. That’s very different from the current process, which automatically shunts all customer disputes into binding arbitration. The bill also seeks to resurrect the authority of state law precedents in states that had previously held certain types of arbitration clauses as unconscionable.

“Congress must act to stop these abuses,” says Leahy in a statement. “The Restoring Statutory Rights Act will ensure that critical State and Federal laws can actually be effective, by ensuring that citizens cannot be stripped of their ability to enforce their rights using our independent justice system. It will also ensure that when States take action to address forced arbitration, they are not preempted by an over-broad reading of our Federal arbitration laws.”

The Consumer Financial Protection Bureau is also looking at regulations designed to limit arbitrations involving finance products.

For further information regarding arbitration or to speak with experienced Orange County civil attorneys, contact Ford & Diulio PC at 714-384-5540 or