Maine citizens and businesses could lose one of the most effective ways to resolve disputes between them, if Congress passes the so-called FAIR Act now being debated in Washington.
Misleadingly titled the “Forced Arbitration Injustice Repeal” Act, this law would effectively force consumers and employees into expensive and wasteful class action lawsuits by eliminating arbitration as a viable alternative. Plaintiff attorneys would be the big winners, which is why they are fighting so hard to enact the FAIR Act.
Their campaign is driven by easily disproven myths, including that arbitration is unfair to individuals, delivers worse results than lawsuits, and keeps valuable information away from the public.
In fact, arbitrators are impartial decision-makers that both sides have an equal say in selecting. The American Arbitration Association limits filing fees in consumer cases to $200 – less than it costs to file a lawsuit in federal court – and damages and attorney fees are available in arbitration just as they are in court. Also, courts provide valuable oversight over the entire process, with the power to invalidate unfair terms such as excessive fees or inconvenient arbitration venues.
Arbitration also provides better results. A March 2022 study by NDP Analytics sponsored by the U.S. Chamber Institute for Legal Reform found that consumers won 42% of cases that ended in an arbitration decision, compared with 29% in court, while the median award was $20,356 versus $6,669 in court. Employees did even better, prevailing in 38% of the cases that ended in a decision and winning a median $142,000, more than double the median court award.
Those comparisons probably understate the advantages of arbitration, since most lawyers refuse to take the smaller cases that tend to go to arbitration, and they claim 30-40% of whatever they win in larger cases. The real purpose of the FAIR Act is to eliminate arbitration as competition for class actions, where the results for consumers and employees are even worse.
A 2019 study by the Federal Trade Commission found that fewer than 5% of class members get any benefit at all from the typical lawyer-driven class action. Another study by the Consumer Financial Protection Bureau found that the average payment in class action settlements was a paltry $32.35 per class member, while attorney fees averaged $1 million per case, gobbling up more than 40% of the money available for consumers.
The FAIR Act’s supporters say they want to even the playing field between consumers and business. The reality is businesses will hardly be willing to offer arbitration if they still face costly and wasteful class action lawsuits. The costs of defending against a class action are so high that most companies are forced to settle. In those settlements, the typical consumer gets pennies on the dollar while the lawyers make millions.
The arbitration system has worked well for almost a century, providing benefits to consumers and employees at low cost through an impartial process. The FAIR Act would uproot that system and replace it with one we know doesn’t work, for the benefit of a tiny constituency of well-paid attorneys. Maine’s voters deserve better.
What can you do? Contact Maine’s Senators TODAY!
Senator Collins: (202) 224-2523 | Senator King: (202) 224-5344
Maine’s Senators may be asked to vote soon on the misleadingly named FAIR Act – as in “Forced Arbitration Injustice Repeal.” Instead of ending “forced” arbitration, the FAIR Act will likely deprive Maine consumers, employees, and businesses of the most effective method for resolving their disputes with each other and force them into class action lawsuits instead.
Arbitration has provided an efficient alternative to court for nearly a century. Filing fees are typically $200, less than it costs to file a lawsuit in federal court, and the arbitrator is a neutral decision-maker selected with the input of both sides. Courts provide valuable oversight, by striking down unconscionable terms such as excessive fees or inconvenient arbitration locales.
Consumers and employees also tend to do better when they arbitrate their disputes out of court. A March 2022 study by NDP Analytics sponsored by the U.S. Chamber Institute for Legal Reform found that consumers won 42% of cases that ended in an arbitration decision, compared with 29% in court, while the median award was $20,356 versus $6,669 in court. Employees did even better, prevailing in 38% of the cases that ended in a decision and winning a median $142,000, more than double the median court award.
So why is Congress even debating the FAIR Act? One reason: Class action lawsuits. Arbitration is typically considered on an individual basis, and that cuts plaintiff attorneys out of the rich fees they can get by bringing class actions. They don’t like the competition, and they’ve asked their allies in Washington to do something about it. Let Sen. Susan Collins and Sen. Angus King know you don’t want arbitration taken away from you just to make trial lawyers richer.
Let Senator Collins and Senator King know that the FAIR Act is bad for Maine. Senator Collins: (202) 224-2523 | Senator King: (202) 224-5344