Interpreting the Federal Arbitration Act to Control the Poor and Empower the Rich

SIMON MORALES – The Supreme Court’s broad interpretation of the Federal Arbitration Act has allowed rich corporate giants to subjugate the most economically disadvantaged populations. Arbitration agreements have been upheld in all but the most egregious of cases. Today, the rich and powerful can force employees and consumers to arbitrate their claims in front of an arbitrator and in secret. Arbitration agreements have been extended to: consumer contracts; employment contracts; debt settlement contracts; private loan contracts; and more.[1]

While arbitration proceedings pose challenges of their own, the Supreme Court has complicated matters by: limiting judicial review of arbitral awards[2]; approving class action waivers[3]; and making it difficult for consumers to avoid arbitration on grounds of economic hardship.[4]

Moreover, studies show that arbitration agreements are most often used in transactions of goods and services directed at low-income individuals and in low-level employee contracts.[5] These contracts include, among others, credit cards, payday loans, prepaid cards, private loans, student loans, and auto loans.[6] Furthermore, mandatory arbitration clauses are used in a broad range of lower-level positions—primarily in the service and retail industries.[7]

Change is necessary to protect the individual rights of the working class. While Congress is attempting to generate change, various governmental agencies and the President of the United States have enacted measures to curb unfair arbitration practices in certain industries.[8] However, if these changes linger, the FAA’s persistent expansion will continue to control the poor and empower the rich.

[1] Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991) (holding that an age discrimination claim brought under the Age Discrimination in Employment Act was subject to arbitration); Circuit City Stores v. Adams, 532 U.S. 105 (2001) (concluding that all employment contracts—other than those of transportation workers—come within the purview of the FAA); Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) (finding that the contract’s validity should be considered by an arbitrator, not a court because respondent’s challenged the contract as a whole and not the arbitration provisions specifically).

[2] Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 582 (2008).

[3] Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2307 (2013) (requiring the enforcement of arbitration agreements even when doing so has the practical effect of precluding redress under federal statutes).

[4] Green Tree Fin. Corporation-Alabama v. Randolph, 531 U.S. 79, 84 (2000) (noting that the risk that respondent will be saddled with prohibitive costs is too speculative to justify the invalidation of an arbitration agreement)

[5] Katherine V. W. Stone & Alexander J. S. Colvin. The Arbitration Epidemic: Mandatory arbitration deprives workers and consumers of their rights. EPI Briefing Paper #414. p. 7. December 7, 2015.

[6] Id.

[7] Id.

[8] Id.; Arbitration Fairness Act of 2015, S. 1133, 114th Cong. §402(a), (b)(1).

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