The Restoring Statutory Rights Act of 2016, sponsored by Democratic Senator Patrick Leahy, was sent to congressional committee on February 4, 2016 for consideration.
The bill would place restrictions on companies’ use of arbitration clauses in agreements with consumers. Mandatory arbitration clauses have become a common — and controversial — feature of many consumer contracts. In signing agreements with banks, credit card companies, and cellular service providers, consumers frequently agree that they will arbitrate disputes, rather than sue in court. The practice of so-called “mandatory arbitration” has been widened and approved by several recent Supreme Court decisions, such as AT&T Mobility v. Concepcion and American Express Co. v. Italian Colors Restaurant. Advocates argue that arbitration clauses force consumers to give up their right to sue the company in court or participate in a class-action lawsuit. From the perspective of businesses, however, these clauses ensure that disputes will be resolved in an expedient, cost-effective forum, rather than at a lengthy and expensive trial. But the trend toward mandatory arbitration may be reversed, if the new legislation makes it through Congress.
Section 2 of the Federal Arbitration Act (FAA) currently provides that a contractual agreement to arbitrate is valid, irrevocable, and enforceable. The proposed legislation declares, however, that the FAA “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 amend Section 2 of the FAA to provide an exception to enforcement of a provision that “requires arbitration of a claim for damages or injunctive relief brought by an individual or small business concern . . . arising from the alleged violation of a Federal or State statute, the Constitution of the United States, or a constitution of a State, unless the written agreement to arbitrate is entered into by both parties after the claim has arisen and pertains solely to an existing claim.” The law would also clarify that grounds to revoke an arbitration agreement exist where the agreement is contrary to state law. Significantly, the determination of whether an agreement to arbitrate is valid would be left to the court, rather than the arbitrator — “irrespective of whether the party resisting arbitration challenges the agreement to arbitrate specifically or in conjunction with other terms of the contract containing such agreement.”
In a statement, Senator Leahy argued, “Legal fine print tips the scales against us. It is forcing consumers into private arbitration, denying us of our Constitutional right to protect ourselves in court.” But the U.S. Chamber of Commerce has already spoken out against the bill, denying that it would benefit consumers. While the bill is unlikely to be passed by the current Republican-controlled Congress, its prospects could change depending on the Congressional makeup after the 2016 election.