Arbitration under Siege: Reforming Consumer and Employment Arbitration and Class Actions*

By Padis, George | Texas Law Review, February 1, 2013 | Go to article overview

Arbitration under Siege: Reforming Consumer and Employment Arbitration and Class Actions*


Padis, George, Texas Law Review


Introduction

According to her congressional testimony, when Jamie Leigh Jones arrived in Baghdad to work for Halliburton, she was housed in a barracks with four hundred male coworkers1 and was almost immediately sexually harassed.2 When she complained to managers, she was told to "go to the spa."3 The very next evening, she was "drugged, beaten, and gang-raped by several [Halliburton] employees."4 After the incident, Halliburton kept her in a container under armed guard.5 When she finally returned to the United States, Jones was initially denied her day in court because her employment contract included an arbitration clause.6 Although the jury found against Ms. Jones in her civil trial,7 her story and a recent Supreme Court decision8 have cast the public spotlight on arbitration, and arbitration is under siege.9 At the center of the controversy is a fundamental question that has divided scholars for the past decade: Should arbitration clauses in employment and consumer contracts be enforced despite the risk of unequal bargaining?10

Scholars have mostly divided into two camps on this complicated question.11 In one camp, supporters of binding arbitration argue that the problem of unfair bargaining is overstated, and that arbitration has significant benefits for employees and consumers that increase overall social welfare.12 The other camp opposes the enforcement of binding arbitration agreements, pointing to the Jones case and other arbitration horror stories that demonstrate that binding arbitration for consumers and employees can lead to disastrous and inequitable results.13 After Jones and Concepcion, this academic debate has spilled over into the political arena with potentially meaningful and lasting consequences. And (as is often the case) the entry into the political debate has done little to moderate either camp; if anything, it has crystalized and polarized the sides further.14

In addition to the divide in the scholarship, a divide has emerged between two branches of government. The Supreme Court has expanded the enforcement of arbitration clauses, under increasingly broad interpretations of the Federal Arbitration Act. As a result of decisions like AT&T Mobility LLC v. Concepcion,15 the doctrinal distinctions between labor-management and international arbitration on the one hand, and consumer and employment arbitration on the other, have been whittled away in favor of a broad federal policy favoring arbitration in troubling contexts-particularly consumer and employment contexts, where expanding arbitration presents problems. In response, proposed reforms from Congress such as the Arbitration Fairness Act would broadly abolish all arbitration in consumer and employment agreements, Title VII disputes, and franchise agreements.

This Note argues that the optimal solution is in the middle ground. Binding arbitration clauses in consumer and employment contracts should continue to be enforced because arbitration provides employees and consumers important advantages; however, consumer and employment arbitration must be seriously reformed. The reform should be sensitive to the different concerns that arise from different types of disputes, instead of the blunderbuss approaches that have emerged out of Congress and the Supreme Court.

The main thrust of this Note is to propose meaningful reform that balances the competing social interests. This Note argues three main points. First, arbitration clauses in employment and consumer contracts are not per se the problem-the real problem is unfair arbitration as a result of inadequate procedural guarantees that result from disparities not only in bargaining power (as other scholars have argued), but in access to information about disputes (commonly formulated as a "repeat-player problem")16 that causes procedural difficulties for third-party verification and review. The repeat-player problem is not in and of itself problematic,17 but it renders the procedural guarantees of unconscionability review inadequate. …

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Arbitration under Siege: Reforming Consumer and Employment Arbitration and Class Actions*
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