Ron Aronovsky (Southwestern) has just published “Starting Over: Letting States Regulate Adhesion Arbitration Agreements” in the Syracuse Law Review. The abstract:
The explosive growth of adhesion arbitration—mandatory arbitration clauses in adhesion contracts—throughout today’s economy compromises access to justice for millions of Americans. This widespread use of adhesion arbitration stems from a series of U.S. Supreme Court decisions interpreting the Federal Arbitration Act (FAA) as establishing an expansive pro arbitration policy. These decisions have upheld arbitration clauses in adhesion contracts written by large businesses forcing employees, consumers, and others with unequal bargaining power to waive their rights to a public jury trial, a class action, or a judge deciding whether the clause is even valid. They also hold that the FAA preempts state law that would regulate the impact of adhesion arbitration. Adhesion arbitration clauses are controversial. Some view these clauses as beneficial to the economy and efficient for disputants. Others find them problematic and have offered a range of possible reforms. This article agrees that reforms are needed and contends that the Court’s FAA decisions must be overturned legislatively as to adhesion arbitration. It proposes a solution that is less extreme than outlawing pre-dispute arbitration agreements, broader than discrete procedural reforms, and potentially more attractive to stakeholders. This article proposes that Congress amend the FAA to exclude adhesion arbitration agreements from the scope of the statute. This proposal would immediately untether adhesion arbitration from the Court’s FAA jurisprudence. It would also create a regulatory vacuum that the states would fill. Freed from FAA preemption, states could prohibit adhesion arbitration or serve as regulatory laboratories for procedural reforms designed to realize the efficiencies and meaningful access to justice that an arbitration process grounded in fairness can offer.
It’s an exciting and dynamic article – very much recommended.
