On February 12, 2009, legislation was introduced in the U.S. House of Representatives and referred to the Committee on the Judiciary that would invalidate pre-dispute arbitration agreements for employment, consumer, and franchise disputes. The Arbitration Fairness Act of 2009 (Bill) makes invalid and unenforceable any pre-dispute arbitration agreement for several categories of disputes. Rep. Hank Johnson (D-Ga.), one of the Bill’s co-sponsors, contends, “This is not an anti-business bill, but a pro-consumer bill.”
The Bill would limit the scope of the Federal Arbitration Act of 1925 (FAA), excluding from its coverage:
If enacted in its present form, the Bill would make void pre-dispute arbitration agreements or agreements to arbitrate disputes that have not yet arisen at the time of making the agreement. As many financial services institutions have pre-dispute arbitration clauses in their contracts, including provisions waiving the ability to pursue class actions in arbitrations, this Bill could have a significant impact on the financial services industry. Accordingly, businesses and employers should follow this Bill’s progress closely and consult with their counsel regarding any changes needed to pre-dispute arbitration agreements.
Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and our colleagues. If you have any questions about this update or would like to discuss this topic further, please contact your Foley attorney or the following:
Michael C. Lueder
Chair, Consumer Financial Services Litigation Practice
Michael D. Leffel
Christi R. Adams