Franchisee Urges Capitol Hill to Make Mandatory Arbitration Illegal
WASHINGTON, D.C. - Former franchise owner Deborah Williams and consumer advocates lobbied Capitol Hill on Wednesday, April 29 to ask that Congress pass the Arbitration Fairness Act, a pending bill that bans mandatory arbitration clauses in franchise and other contracts. It was part of an event designated "Arbitration Fairness Day."
The former owner of a Coffee Beanery shop and members from consumer groups such as Fair Arbitration Now and Public Citizen attended meetings at the Hill to say that the 84-year-old arbitration system has become corrupted by big business interests to the detriment of consumers and small businesspersons. Attorneys argue that arbitration has a "repeat player" phenomenon, which is a short-hand way of saying that big business repeat players have certain advantages. Big business decides who will provide the arbitration and where it will be provided. Some argue that arbitrators tend to woo big businesses in order to keep their arbitration business. Big businesses also gain insights of what argument resonates with the arbitrator and what won't based on their long-term experiences with their selected arbitrator.
The bipartisan Arbitration Fairness Act (H.R. 1020) had already been introduced by Rep. Hank Johnson (D-Ga.) in the House of Representatives and was introduced (S.931) in the Senate by Sen. Russ Feingold (D-Wis.) on April 29. The measure is meant to ensure that the decision to arbitrate is made voluntarily. The bill aims to make pre-dispute agreements requiring arbitration for any employment, consumer, franchise, or civil rights disputes unenforceable to allow a choice between arbitration and the civil court system.
The proposed legislation would not outlaw the current practice of requiring dispute resolution in the franchisor's home city.
Franchisees and consumer advocates complain that there is little opportunity to negotiate the terms of an arbitration clause in contracts. They find themselves having to choose either to accept a mandatory arbitration clause or to forgo securing employment or needed goods and services. Critics of arbitration say that arbitration courts create a dual legal system in which arbitration rulings are rarely held accountable to U.S. law. One such an example is in a recent Supreme Court ruling (see 14 Penn Plaza v. Pyett) that declared that arbitration provisions can actually waive an employee’s right to enforce employment discrimination laws.
In a letter to lawmakers, consumer advocacy group Public Citizen wrote that the new bill’s "sole aim is to end the unscrupulous business practice of forcing consumers and employees into biased arbitrations by binding them long before any disputes arise.”
The Coalition of Franchisee Associations, a trade lobbyist for franchise owners, has designated the Arbitration Fairness Act as one of its top bills to support, according to a recent article by monthly trade journal Franchise Times.
Bob Purvin, chair of the American Association of Franchisees and Dealers empathizes with the plight of franchise owners who must arbitrate, even though they would prefer to go through the court system. But the AAFD doesn’t lobby. However, Purvin says that his organization came out early in verbal support of the Arbitration Fairness Act. “We encourage our member groups in getting behind it,” he says.
But the sole franchisee in attendance at the introduction of the bill, Deborah Williams, looked unsupported by fellow franchisees on Wednesday.
She tells Blue MauMau how tough this path has been: “This has been the fight of my life. I hope the passing of this bill will help level the playing field. Williams adds, "This bill may be the very protection needed should franchisees ever fall prey to a predatory franchisor."
It now looks like the AAFD may be looking at changing direction when it comes to staying away from lobbying efforts. “The AAFD has been deficient in funding active lobbying efforts, and it is something I would like to see changed,” declares Purvin.
Consumer advocates say there is widespread support across party lines for the Arbitration Fairness Act. They cite a recent poll from Lake Research Partners that shows that some six in ten voters support the act and that 59 percent of likely voters oppose the use of mandatory binding arbitration clauses like those found in franchise contracts and credit card agreements. Lake Research Partners’ President, Celinda Lake, concludes of the poll, “The public supports the Arbitration Fairness Act because equal justice under the law is a core American value.”
But Lisa A. Rickard, president of the U.S. Chamber Institute for Legal Reform says the consumer groups and skewed pollsters have their facts wrong. "In a bipartisan survey released in 2008,” she cites, “71 percent of likely voters opposed efforts by Congress to remove arbitration agreements from consumer contracts, and 82 percent preferred arbitration to litigation as a means to settle a serious dispute with a company.”
Rickard emphasizes that the Arbitration Fairness Act could nullify millions of existing contracts, causing widespread uncertainty of their recourse should a dispute arise among consumers, employees and franchised business owners.
The American Bar Association is neutral on the Arbitration Fairness Act of 2009. Kimberly Knight, section director of the American Bar Association’s leadership council of the section on dispute resolution, says, "The American Bar Association Section of Dispute Resolution has distinctly taken no position on the Arbitration Fairness Act."
But the International Franchise Association, a trade lobbyist representing largely franchisors, is stepping up its efforts to oppose the bill.
With such diversity of forces lining up around this bill, Williams pleads, “I hope that franchisees stop drinking the [franchisor] Kool Aid, take a look around them and support this [act] as a way to help protect themselves.”
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Related Reading:
- Forced Arbitration: You Lose, Now Pay For Our Lunch
- Organizations that support the Arbitration Fairness Act of 2009 (pdf, 4 pgs)
- One Couple's Descent into Coffee Beanery Franchise Hell
- Coffee Beanery Attempts to Stay Mandate Pending Supreme Court Petition
- Coffee Beanery Franchisees Testify for Arbitration Fairness Act
- AAA Rejects Coffee Beanery Franchisees Request for Arbitration Expenses
- Coffee Beanery Franchisees Win on Appeal; Arbitration Decision Vacated
- Coffee Beanery Story To Be Presented to Congress
- Coffee Beanery Franchisees Fight On Despite Losses
- Sixth Circuit Denies Coffee Beanery Petition for Rehearing
- Franchise topic:
