Schwartz Testifies Before Congress on Binding Arbitration Agreements

Victor Schwartz, Partner and Co-Chair of Shook’s Public Policy Group, was invited to testify before a full committee hearing of the U.S. Senate Judiciary Committee on April 2, 2019. The topic was “Arbitration in America," and the hearing was live-streamed on the Committee’s website. 
 
Committee members heard testimony on the necessity of legislation to bar or limit the use of binding pre-dispute arbitration agreements (also referred to as “forced arbitration”). Schwartz testified that a multiplicity of laws already ensure that binding pre-dispute agreements are fair and that the alternative of civil litigation is often impractical for consumers or employees unless potential damages are extremely high and the outcome of litigation is virtually certain. 
 
“A principal benefit of pre-dispute arbitration agreements, and arbitration generally, is that it provides consumers, employees, and other claimants with an efficient means to obtain redress for a large number of claims in which litigation is impractical,” Schwartz told committee members. “Pursuing a lawsuit can be a costly and time-consuming endeavor for anyone, and may simply be an unrealistic option where an alleged injury is of an individualized nature and too modest in potential value to attract the assistance of a lawyer.”
 
“Arbitration, in comparison, allows claimants to bypass the costs of the litigation system. Claimants, in general, can have their disputes adjudicated more quickly and more cheaply than in the courts. For example, under the American Arbitration Association’s employment procedures, employees cannot be asked to pay more than $300 in total arbitration costs; employers must shoulder all the remaining fees.  In many instances, claimants pay nothing at all in arbitration. In the litigation system, the court fees alone to initiate a case may be $400 or more, and that is before the payment of any fees to a lawyer who agreed to take the case.”
 
“The more costly litigation path is also plagued with problems that can significantly delay any adjudication and potential redress of a claim,” Schwartz continued. “Many state courthouses – which is where most civil claims are filed – are, quite simply, overburdened. Entire court systems may be grappling with significant budget cuts that stretch already scarce judicial resources and result in reduced services and lengthy delays. As the Committee is likely aware, many federal district courts have likewise experienced high caseloads and lengthy delays. Arbitration, on the other hand, can potentially shave months or even years off the resolution time of a claim.”
 
Law360 provided coverage of the hearing, noting that Sen. Lindsey Graham (R-S.C.) asked Schwartz whether there should be a national standard for arbitration clauses. "The combination of benefits gained from arbitration with respect to lower costs, greater efficiency and increased availability of redress are reinforced by the fact that the arbitral process provides claimants with a fair, reliable, and effective means of dispute resolution," Schwartz told Graham. See Law360, "Sen. Graham Floats Idea of National Arbitration Standards," April 2, 2019.

Although the views Schwartz expressed are solely his own, he testified on behalf of the U.S. Chamber Institute for Legal Reform.