Congress tackles mandatory arbitration.

Trial lawyers have known for years what the public has only recently started to recognize: Mandatory binding arbitration clauses force people to give up their right to access the nation's courts, and these clauses are quietly being included in contracts for a wide range of products and services. Consider just two examples:

* In California, AT&T sent customers a small notice in their bills stating that the company would require mandatory arbitration and that the customer agreed to arbitration merely by using AT&T services. This meant that by picking up the phone to dial, the customer was bound to arbitrate before disputes even arose.

* In Mississippi, an independent farmer lost all his chickens to a large corporation that pressured him into signing a new contract that included a mandatory arbitration clause. When the corporation broke the 15-year contract 14 years ahead of schedule (because the farmer had questioned the new contract), the farmer discovered that he could not challenge the corporation in court.

Throughout the United States, businesses slip mandatory arbitration agreements into legal contracts every day (just think of all the people who shop or conduct other business online and quickly click "yes" when asked whether they agree to accept all terms for use of the Web site). According to the American Bar Association, more than 1,000 companies in the United States insert these clauses into routine sales transactions.

Because of its pervasive use, mandatory binding arbitration has the potential to affect all areas of the law. In effect, it is the ultimate tort "reform" tool: What better way to "reform" the legal system than to take away a person's right to trial?

When Congress passed the Federal Arbitration Act in 1925, lawmakers intended it to apply not to consumers, but to large corporations that deal in international trade. These days, cases forced into arbitration include those involving employment, civil rights, and malpractice--topics that, unlike corporate contract disputes, greatly interest and affect the general public.

Federal lawmakers are trying to make inroads against mandatory arbitration clauses--as they have in previous congressional sessions over the past several years--by introducing legislation that would prevent consumers from unknowingly waiving their First Amendment right to go to court and their Seventh Amendment right to a jury trial. Examples include:

* S. 192, the Consumer Credit Fair Dispute Resolution Act

* H.R. 1296, the Motor Vehicle Franchise Contract Arbitration Fairness Act

* H.R. 2053, the American Homebuyers Protection Act

* S. Amdt. 2522, an amendment to S. 1731 (known as the "farm bill").

Similar bills would affect employment contracts and civil rights issues. H.R. 2282, the Preservation of Civil Rights Protections Act, and H.R. 1489, the Civil Rights Procedures Protection Act of 2001 (and its companion Senate bill, S. 163), would amend certain federal civil rights statutes. These include Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Rehabilitation Act of 1973, the Americans with Disabilities Act of 1990, the equal pay requirement under the Fair Labor Standards Act of 1938, and the Family and Medical Leave Act of 1993.

The proposed amendments would "prohibit the involuntary application of arbitration to claims that arise from unlawful employment discrimination based on race, color, religion, sex, national origin, age, or disability."

In this Congress, the legislation that had made the most progress was the farm bill amendment. It was successfully passed in the Senate, but the House insisted on deleting it in conference. While it does not eliminate mandatory arbitration between growers and producers, it allowed growers to leave arbitration contracts unenforced and resolve disputes through mediation or civil litigation.

The bill that has moved the furthest in the past is the motor vehicle franchise bill, introduced by Rep. Mary Bono (R-Cal.) in the 106th Congress. The bill (reintroduced in the 107th) provides that when a motor vehicle franchise contract between a car manufacturer and an auto dealer requires arbitration to resolve certain disputes arising out of the contract, arbitration may be used only if both parties consent in writing after the controversy arises.

In the 106th Congress, the bill passed the House but not the Senate. While General Motors, Ford, and Chrysler are huge corporations with political influence, the auto dealers have equal pull because they have dealerships in every congressional district.

Court challenges

Another method of fighting mandatory arbitration clauses is to challenge them in the courts. The U.S. Supreme Court has heard about a dozen key cases since the arbitration act was passed, a couple of which have been decided in recent years.

"The drafters of the act would be appalled at the way it has been interpreted," said John Vail, senior litigation counsel at the Center for Constitutional Litigation in Washington, D.C. Vail recently helped win a case in the North Carolina Supreme Court invalidating an arbitration agreement in a medical malpractice claim against Duke University. (Milon v. Duke Univ., 559 S.E.2d 789 (N.C. 2002).)

"The case law is wrong," he said, "and a majority of the [U.S. Supreme] Court has written that its jurisprudence on the issue is wrong. But the Court has made it clear that it wants Congress to fix it."

Kristin Loiacono is ATLA's associate director for media outreach and coalition development in the Media Relations department.