Chairman of the Board – Arbitration Resolution Services
[This analysis by the author was originally published in the Securities Arbitration Commentator. Reposted with permission of and thanks to SAC!]
I’m baaack! Below is an update of my previous guest analysis. The ten bills – all anti-arbitration and all introduced by Democrats in the new Congress – are organized a bit differently, and this new analysis comes with a handy chart.
Some bills are reintroductions, but a few are new. Some amend the FAA, some specific statutes, and some both. To one extent or another, the bills aim to protect consumers – including investors – employees, civil rights claimants, servicemembers, and/or whistleblowers, from perceived unfair processes. Some bills ban predispute arbitration agreements, while some create procedural safeguards. Finally, some are prospective but a few are retroactive.
|Bill Name||Intro Date||Sen||House||Area(s)||Statute(s) Amended||Actions||Retro?|
|Arbitration Fairness Act||3/7/2017||S.537||H.R. 1374||consumer; employment; antitrust; civil rights; consumer||FAA||Bans PDAAs||Yes|
|Arbitration Transparency Act||2/2/2017||No||H.R. 832||consumer financial; securities||FAA||Hearings public||Yes|
|Mandatory Arbitration Transparency Act||3/15/2017||S. 647||No||employment, consumer (including investments), and civil rights disputes.||FAA; 15 USC 45a (trade practices)||Voids and makes unenforceable arbitration agreements with confidentiality clauses. Empowers FTC to enforce. Provides private cause of action.||No|
|CLASS Act||3/7/2017||S. 553||No||students||FAA; Higher Ed Act of 1965||Bans PDAAs; CAWs in student loan agreements||No|
|Investor Choice Act||1/19/2017||H.R. 585||securities||Sec Exch Act of 1934; Investment Advisers Act of 1940.||Bans PDAAs; CAWs||No|
|Justice for Servicemembers and Veterans Act||3/15/2017||S. 646||No||servicemembers||Uniformed Services Employment and Reemployment Rights Act of 1994||Bans PDAAs; allows only post-dispute agreements||No|
|Justice for Victims of Fraud Act||2/7/2017||S. 552||H.R. 1414||customers of unauthorized banking and credit card accounts||TILA; Electronic Fund Transfer Act||Bans PDAAs||Silent|
|Protecting America’s Workers Act||2/7/2017||No||H.R. 914||whistleblowers||OSHA||Bans PDAAs|
|Restoring Statutory Rights Act||3/7/2017||S. 550||H.R. 1396||individuals and class reps and small businesses||FAA||Undo state preemption cases; arbitrability issues for court||Yes|
|Safety Over Arbitration Act||3/7/2017||S. 542||No||individuals; hazard to public health or safety||FAA||Bans PDAAs; allows only post-dispute agreements. Requires unsealed explained award.||No|
Of Most Interest to Securities Arbitration Parties
While the proposed legislation would impact securities arbitrations to some extent, I analyze below the bills that should be are of particular interest to securities arbitration parties and practitioners.
Arbitration Fairness Act (H.R. 1374): Our old friend, has been introduced going back years.
This version of the AFA is identical to the last version, and would amend the FAA to ban mandatory arbitration of employment, consumer (including securities), antitrust, or civil rights disputes. It would be retroactive, applying to claims made after the effective date. Reintroduced March 7. House text here.
Investor Choice Act (H.R. 585): Would amend the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940 to ban the use of mandatory PDAAs by broker-dealers and investment advisers, let customers select the arbitration forum, and would guarantee class action participation. It would not be retroactive. Reintroduced on January 19th. House text here.
Arbitration Transparency Act (H.R. 832): Would amend the FAA to require that arbitration proceedings in certain disputes involving consumer financial products and services be open to the public. It would be retroactive, applying to hearings taking place on or after the effective date. This is a new bill introduced February 2nd. House text here.
Mandatory Arbitration Transparency Act (S. 647): Is different than the House version. Would amend the FAA to make unenforceable arbitration agreements with confidentiality clauses for employment, consumer (including investments), and civil rights disputes. Exception if confidentiality interest significantly outweighs disclosure, and for collective bargaining agreements. Empowers Federal Trade Commission to enforce as an unfair or deceptive trade practice. Allows a private cause of action for violations. This is a new bill introduced March 15th. Text here.
Justice for Victims of Fraud Act (S. 552 and H.R. 1414): Would amend the Truth in Lending Act and the Electronic Fund Transfer Act to bar arbitration of disputes similar to the fictitious Wells Fargo banking and credit card accounts. Reintroduced March 7. Silent on effective date. Courts decide arbitrability. House text here.
Protecting America’s Workers Act (H.R. 914): Amends OSHA to protect whistleblowers: “Procedural Rights — The rights and remedies provided for in this subsection may not be waived by any agreement, policy, form, or condition of employment, including by any pre-dispute arbitration agreement or collective bargaining agreement.” This is a new bill introduced February 7th. House text here.
My Quick Analysis
I continue to think there’s virtually no chance any of the bills aimed at broadly amending the FAA will be passed by this Congress or signed by President Trump. As I wrote previously, the lone bill I think has a chance is the Justice for Servicemembers and Veterans Act, not only because it is narrowly focused (again, it would amend the Uniformed Services Employment and Reemployment Rights Act of 1994, not the FAA), but also because the last bill actually garnered Republican support – unlike any of the other bills introduced in the last Congress. I think a bill perceived as protecting servicemembers will have bipartisan appeal and President Trump clearly supports the military. Thus, this bill might have a chance at becoming law. I say, “perceived as” immediately above, because I don’t agree with the premise that arbitration is an inferior form of justice. After all, SCOTUS requires that claimants in arbitration be able to effectively vindicate their statutory rights.
By the way, why can’t there be a single omnibus bill instead of ten? And why do some bills share a name but not content in both houses of Congress? Just asking….