The Politics of Arbitration Law and Centrist Proposals for Reform

Abstract

Arbitration law in the United States is far more controversial when applied to individuals than to businesses. While enforcement of arbitration agreements between businesses sometimes raises legal issues that divide courts, those issues tend to interest only scholars, lawyers, and other specialists in the field of arbitration. In contrast, enforcement of arbitration agreements between a business and an individual (such as a consumer or employee) raises legal issues that interest many members of Congress and various interest groups, all of whom have taken positions on significant proposals for law reform. The Consumer Financial Protection Bureau has extensively researched and reported on consumer arbitration agreements and is expected to issue a rule regulating, or even prohibiting, such agreements.

This Article both explains how issues surrounding consumer and other adhesive arbitration agreements became divisive along predictable political lines and introduces a framework to understand and compare various positions on them. This new framework arrays on a continuum five positions on the level of consent the law should require before enforcing an arbitration agreement against an individual. Progressives generally would require higher levels of consent than arbitration law currently requires, while conservatives generally defend current arbitration law’s low standards of consent.

This Article proposes a centrist position. It joins progressives in rejecting overbroad enforcement of adhesive arbitration agreements due to conservative supported anomalies in arbitration law’s treatment of contract-law defenses, legally- erroneous decisions, and class actions. Once these anomalies are fixed, though, this Article joins conservatives in defending general enforcement of adhesive arbitration agreements under contract law’s standards of consent because adhesive arbitration agreements should — contrary to progressive opinions — be as generally enforceable as other adhesion contracts. This Article briefly concludes by proposing language for a rule the Consumer Financial Protection Bureau could adopt to enact the reforms advocated in this Article.

Keywords: adhesion contracts, arbitration, employment, consumer, default rules, exculpatory clauses