Letter to the Honorable Barack Obama, President of the United States - Urge to Take Action Against Forced Arbitration Clauses That Strip Away Americans' Rights

Letter

Dear President Obama:

Last week, The New York Times unveiled a three-part investigative series, Beware the Fine Print, which details the pervasiveness and harmful effect of pre-dispute, mandatory arbitration clauses. The Times' reporting revealed how forced arbitration deprives Americans of one of their most fundamental constitutional rights: the right to have their claims heard in a court of law. These clauses, which are often buried in the fine print of employment and consumer contracts, severely restrict Americans' access to justice. We strongly support legislative and regulatory efforts to eliminate forced arbitration clauses, and commend your own advances on this critical issue. But we believe that more must be done. As awareness of forced arbitration grows, we urge you to identify and employ all of the Administration's existing legal authorities to ensure that Americans are able to enforce their rights and that corporations can be held accountable for wrongdoing.

The ability of hardworking Americans to seek justice in our courts, even when up against the most powerful corporate interests, is a fundamental component of our civil justice system. However, as The Times' series highlighted, the ubiquitous nature of forced arbitration provisions in consumer and employment contracts has eroded this essential element by forcing individuals into a rigged, private system designed by corporations to favor corporations. Without the traditional legal rights and protections afforded by the courts, this shadow justice system operates largely in secret and without any meaningful appeals process. Reporting by The Times also illustrated that this system is inherently biased towards corporations because arbitrators have a financial incentive to rule in favor of repeat players so they will use their services again. From nursing home contracts and employment agreements to credit card and cell phone contracts, forced arbitration clauses stack the deck against Americans facing discrimination, neglect, sexual harassment, financial rip-off schemes, corporate fraud or deceit, and even wrongful death.

The privatization of the American justice system also severely endangers our rule of law. The Constitution grants Congress the authority to enact laws and grants the judicial branch the authority to interpret those laws. Both the legislative and judicial branches' constitutional roles depend on the judiciary's ability to make public its decisions and interpretations of how the law applies to a given set of facts. Court decisions inform Congress's legislative drafting process and contribute to the future interpretation and development of the law. The secretive nature of forced arbitration, and the lack of public record or articulation of arbitration decisions, undermines Congress's ability to enact meaningful legislation and to ensure that such laws are being enforced fairly and judiciously by the courts.

The executive branch can play a critical role in addressing this problem. For example, we welcome the Department of Justice's legislative proposal, which was announced in commemoration of Veterans Day, to make arbitration clauses unenforceable against servicemembers with claims arising under the Servicemember's Civil Relief Act. This proposal would ensure that the rights of our servicemembers are protected while they are away from home, and that our nation's heroes are able to devote their full attention to duty. Many agencies and regulatory bodies also have the authority and opportunity to ensure that federal dollars are not awarded to corporations that use abusive forced arbitration clauses. Some agencies are already exercising this authority, a step we welcome and support. For example, the Centers for Medicare and Medicaid Services (CMS) has recognized the need to revise the requirements for long-term care facilities, including nursing homes, participating in Medicare and Medicaid programs to include limitations on the use of forced arbitration. Like restrictions that are placed on federal contractors, this use of federal authority is an important tool to ensure that taxpayer funds are not being used to subsidize corporate behavior that is not in the best interest of the American public. We urge other agencies that have the authority to impose conditions on the receipt of federal funds to use that power to prohibit the use of forced arbitration clauses.

The Federal government should also use its relationship with federal contractors to ensure that the United States only contracts with responsible entities that do not force their customers into mandatory arbitration. We commend you for recently issuing Executive Order 13673, "Fair Pay and Safe Workplaces," to limit federal contractors' use of forced arbitration for disputes arising from Title VII and tort claims related to sexual assault and sexual harassment. Going forward, we hope you will continue to use your authority under the Constitution, as well as the authority granted to you by the Federal Property and Administrative Services Act of 1949 and other statutes, to address the issue more broadly by requiring federal contractors to commit that they will use arbitration to resolve disputes only with the voluntary consent of all parties after such disputes arise.

The executive branch should also work to address the injustice of forced arbitration clauses through its rulemaking authority. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 empowered the Consumer Financial Protection Bureau (CFPB) to study and issue rules governing the use of forced arbitration in consumer financial services contracts. That effort is now underway, and is also a step we strongly support. Congress also granted authority to the Securities and Exchange Commission (SEC) under Section 921 of the Dodd-Frank Act to issue rules regulating the use of forced arbitration in retail securities markets, though it has not yet done so. We hope these and other Federal agencies with the authority to prohibit or impose conditions or limitations on the use of forced arbitration will take swift action to do so.

Congress has vested broad authority in the President and federal agencies to oversee the efficient implementation of key federal laws. The elimination of forced arbitration is critical to secure the public's rights and remedies under those laws. In response to mounting evidence that demonstrates the devastating impact of forced arbitration clauses, we urge you to undertake an Administration-wide review to identify the areas in which the Executive Branch can assist in addressing this issue and protect Americans' access to justice.

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