Forced Arbitration Injustice Repeal Act
Floor Speech
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Mr. ARMSTRONG. Madam Chair, I want to quote Justice Breyer in a Supreme Court opinion:
The typical consumer who has only a small damage claim, who seeks, say, the value of only a defective refrigerator or television set would be left without any remedy but a court remedy, the costs and delays of which could eat up the value of an eventual small recovery.
Madam Chair, I yield 3 minutes to the gentleman from California (Mr. McClintock), my friend.
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Mr. ARMSTRONG. Madam Chair, I yield myself such time as I may consume.
Madam Chair, I agree with my friend from Florida; sexual assault cases should never be a part of forced arbitration, ever, under any circumstances.
The problem is, when we are doing that and moving into this, we are also taking this huge swath of cases that don't qualify at the high end, don't have enough money for class action lawsuits, but yet are too big for small claims court.
The reality of those situations in any court system across the country, is they are overworked, they are behind, and they are delayed. But, most importantly, probably, if you are dealing with a contractual lawsuit that doesn't have the ability to get treble or punitive damages, and it is a small enough claim like a refrigerator or a television, there is really no access because the cost of the lawyer will make it prohibitive to go to court.
And the argument that this only allows choice doesn't really work because the same reason you write a contract at the beginning of a business relationship as opposed to when that relationship is dissolving, is because you want to put terms in place before problems arise. And the reason is when you go to arbitration in these types of cases, one side will be so disadvantaged by arbitration they would never agree to it.
But probably the most egregious part of this bill is the fact that we are retroactively applying it to hundreds of thousands, if not millions, of existing contracts. So things that were agreed to, either employee-vendor or vendee relationships, now will be null and void and we will be rewriting the rules of the game sometimes decades after it has occurred.
So it is important to recognize that--and I would just end with this--probably the most toxic area of law we have everywhere in the country, is family law--and only in a place where you can be in absolute love can you learn to hate somebody that bad--courts are moving towards arbitration prior to dispute resolution in order to deal with it. If anybody has ever dealt with that or practiced in that area of law, there are reasons why this occurs, and it is so you can try to arrange it.
I agree there are abuses. I agree with Ranking Member Collins that there are plenty of things we could look at to do, but we cannot throw the whole system out because you are going to have a broad swath of cases that no longer have any legal access.
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Mr. ARMSTRONG. Madam Chair, I have one real quick response, particularly on family law.
The gentleman is correct; those are almost always post dispute. But in a very significant amount of those cases, they are court ordered arbitration, so I don't know how voluntary we would call it.
Madam Chair, I continue to reserve the balance of my time.
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Mr. ARMSTRONG. Madam Chair, I continue to reserve the balance of my time.
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Mr. ARMSTRONG. Madam Chair, I yield myself such time as I may consume.
Madam Chair, they are not unconstitutional. The Supreme Court has explained that arbitration is usually cheaper and faster than litigation. It can have simpler procedural and evidentiary rules, normally minimizes hostility, and is less disruptive to ongoing and future business dealings amongst the parties.
I think that is part of the issue here. I said this the other day in committee, and I am probably going to say it more than anybody wants to hear it, but hard cases make bad law. There are obviously issues. There are issues of court systems being abused and there are issues of arbitration being abused. But we have to remember that the vast majority of these cases fall into those normal contract disputes, employment disputes, business versus business disputes, or small dollar level consumer disputes.
While you have a constitutional right to a jury trial in any State or Federal court, depending on your action, you do not have a constitutional right to be able to pay for that in a civil proceeding. The cost of these types of cases just will naturally prohibit them from being resolved in any way at all.
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Mr. ARMSTRONG.
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Mr. ARMSTRONG. Madam Chair, I think we can't talk about this bill and talk about arbitration without also talking about class actions.
Mayer Brown did a study on class-action suits. Rather than simply relying on anecdotes, the study undertook an empirical analysis of neutrally selected sample sets of putative consumer and employee class- action lawsuits filed in Federal court in 2009.
In the entire dataset, not one of the class actions ended in a final judgment on the merits for the plaintiff. None of the class actions went to trial, either before a judge or a jury.
The vast majority of cases produced no benefits to most members of the putative class, even though in a number of those cases, the lawyers who sought to represent the class often enriched themselves in the process, and the lawyers representing the defense as well.
Approximately 14 percent of all class-action cases remain pending 4 years after they were filed, without resolution or even a determination of whether the case could go forward on a class-wide basis. In these cases, class members have not yet received any benefits and likely will never receive any, based on the disposition of the other cases we have studied.
Over one-third, 35 percent, of the class actions that have been resolved were dismissed voluntarily by the plaintiff. Many of these cases settled on an individual basis, meaning a payout to the individual named plaintiff and the lawyers who brought the suit, even though the class members receive nothing.
Just under one-third, 31 percent, of class actions that have been resolved were dismissed by a court on the merits. Again, that means that the class received nothing.
One-third, 33 percent, of resolved cases were settled on a class basis.
The settlement rate is half the average for Federal court litigation, meaning that a class member is far less likely to have even a chance of obtaining relief than the average party suing individually.
For those cases that do settle, there is often little or no benefit for class members.
I have been personally involved in this in a Barbri lawsuit for any member of the bar across the country. I have no idea how much my fellow lawyers made, but I know I got a check for $37 in the mail. Few class members ever even see those paltry benefits, particularly in consumer class actions.
Unfortunately, because information regarding the distribution of class-action settlements is rarely available, the public almost never learns what percentage of a settlement is actually paid to class members. But of the six cases in the dataset for which the settlement dispute was made public, five delivered funds to only minuscule percentages of the class, 0.000006, 0.33 percent, 1.5 percent, 9.6 percent, and 12 percent.
Those results are consistent with other available information about settlement distribution in consumer class actions.
Although some cases provide for automatic distribution of benefits to class members, automatic distribution is almost never used in consumer class actions. Only 1 of the 40 settled cases fell into that category.
The bottom line is, the hard evidence shows that class actions do not provide class members with anything close to the benefits claimed by their proponents, although they can and do enrich attorneys.
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Mr. ARMSTRONG. Madam Chair, I yield myself such time as I may consume.
Madam Chair, like the First Amendment, Fourth Amendment, and when you are from a small State, you are a big fan of the 10th Amendment as well. I like the Second Amendment, but I like the other ones, too.
We are talking about credit cards, and we are talking about those issues, and I think we are talking about consumer contracts. The Consumer Financial Protection Bureau did a study in 2015, and it came up with a couple of things. Particularly, you cannot talk about getting rid of forced arbitration without talking about class actions again.
For example, the CFPB study found that the substantial majority of class actions are resolved with no benefits to the class members. The weighted-average claims were only 4 percent, i.e., the vast majority of class members do not file claims for payment from class action settlement funds. The average settlement payment to class members was just $32.35, while the average attorney's fees averaged $1 million per case. The average fee paid to class action plaintiffs' lawyers as a percentage of the announced settlement was 41 percent, with a median of 46 percent.
Class-action lawsuits produce class-wide settlements and took an average of nearly 2 years to resolve. Obviously, there are cases that go longer; there are cases that go shorter. But when you are dealing in a consumer protection area for a small amount of money, 2 years is an exceptionally long time to be dealing with that kind of litigation.
Arbitration is simpler. It is quicker. It is often easier and more convenient for the parties. In many cases, it creates less hostility and gets finished quicker.
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Mr. ARMSTRONG. Mr. Chairman,
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Mr. ARMSTRONG. Mr. Chairman, I continue to reserve the balance of my time.
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Mr. ARMSTRONG. Mr. Chairman, I continue to reserve the balance of my time.
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Mr. ARMSTRONG. Mr. Chairman, I yield myself the remainder of my time.
In closing, I just want to ask one simple question: Under this bill, who wins and who loses?
Do consumers win? No. Studies show arbitration provides consumers faster and cheaper results that are just as good as court outcomes deliver; and we know that they will have way more access to a result in small cases that are bigger than small claims and too small--those in which hiring a private lawyer at an hourly rate makes sense but are too small so class action doesn't apply.
Do employees win? No. Research shows employees are three times more likely to win in arbitration than in court, and prevailing employees typically win twice as much money in arbitration in a shorter period of time.
Do class action plaintiffs win? Not if you listen to the Consumer Financial Protection Bureau. The CFPB'S 2015 study of arbitration and class actions found the substantial majority of class actions were resolved with no benefits flowing to the absent class members. The weighted average rate in class actions was only 4 percent, meaning the vast majority of class members do not file claims for payment under class action settlement funds. The average settlement payment, again, was only $32.35.
Does anybody win under this bill? Surprise, surprise, somebody does. It is the plaintiffs' in class action trial bar. Once again, all you have to do is look at the CFPB's study. It found that class action attorneys' fees average $1 million per case, and the average fee paid to a class action plaintiffs' lawyer as a percentage of the announced settlement was 41 percent, with a median of 46 percent.
So the answer to the question about this bill is simple: Consumers don't win. Employees don't win. Even class action plaintiffs don't win. But the plaintiffs' class action trial lawyers sure do win, and they make out like bandits.
Mr. Chairman, I urge my colleagues to vote ``no'' on this unjust bill, and I yield back the balance of my time.
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Mr. ARMSTRONG. Mr. Chairman, I rise in opposition to the amendment.
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Mr. ARMSTRONG. Mr. Chair, I appreciate the sentiment, but the amendment is unnecessary. The bill's terms clearly already do nothing to prevent post-dispute arbitration agreements from being negotiated or enforced, in theory.
Honestly, the amendment really does nothing. It is a fig leaf designed to hide the mischief that is actually being done by the bill. It pretends to preserve the possibility of negotiating agreements to arbitrate once disputes arise, but if this bill succeeds in wiping out pre-dispute arbitration agreements, parties will almost never ever arbitrate. And the simple reason is, if one person really wants to be in arbitration, the other person will be really disadvantaged by arbitration.
In order to have a post-dispute arbitration, you need both parties to agree. And the simple fact is, that once a dispute arises, there is always going to be a benefit for one of the parties to go to court. And most of the time, it is not going to be the consumer or the employee that sees these advantages. It will be a company or an employee with the resources to overwhelm a consumer or an employee in court with discovery, procedure, and expensive lawyer fees.
And far too often, just the prospect of that will be enough to dissuade a consumer or employee from even filing a lawsuit to begin with, which means that the parties with the deepest pockets will just be able to get off scot-free.
The reality is, in most disputes, no matter what venue you are in-- you can be in Federal court, you can be in State court, you can be in arbitration--there is going to be unequal bargaining power. Pre-dispute arbitration gives people with less financial means in your basic employment dispute, contractual dispute, or consumer dispute, a venue that is affordable, gets done in a reasonable amount of time, and allows them to move through.
Now, if you are a company and you are not forced into that in pre- dispute, why in the world would you ever agree to go back there?
Mr. Chair, I urge opposition to this amendment, and I yield back the balance of my time.
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Mr. ARMSTRONG. Mr. Speaker, I demand a recorded vote.
A recorded vote was ordered.
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