As announced by this press release, the U.S. Subcommittee on Domestic Policy will hold a hearing related to arbitration on July 22, 2009. The hearing is entitled “Arbitration or ‘Arbitrary’: The Misuse of Arbitration to Collect Consumer Debts.” Experts invited to testify include: Michael Kelly, Chief Operating Officer, National Arbitration Forum Richard W. Naimark, Senior Vice-President, International Centre for Dispute Resolution, a division of the American Arbitration Association F. Paul Bland, Staff Attorney, Public Justice Professor Christopher R. Drahozal, John M. Rounds Professor of Law, University of Kansas The Honorable Lori Swanson, Attorney General, State of Minnesota. Stay tuned to Disputing for updates on this controversial topic! Technorati Tags: arbitration, ADR, law, consumer arbitration

[Update: Lee Keller King currently works at this firm.] The July 2009 Edition of Texas Bar Journal titled “The Electronic Lawyer,” features the following letter to the editor written by Texas attorney Lee Keller King. Mr. King writes in response to a Texas Bar Journal article published in May 2009 (blogged here). We welcome your commentary about this post! I am one of those critics who believe that the trend in mandatory arbitration has gone too far (“The Future of Arbitration,” May, p. 352). Regarding the comment that “an advocate for less arbitration … is likely to omit that the consumer fails to even appear in the majority” of credit card arbitrations is correct, as far as it goes, but does not give the reason for the high rate of defaults. Most credit card arbitration agreements that I have reviewed (and fought on behalf of my clients) have included onerous choice of venue provisions. Is it any wonder that a consumer in Texas, who took out his credit card in Texas and used it in Texas, will be hard pressed to appear for arbitration in New Jersey? Or in New York? I think not, and I doubt if any such consumer would —in the real world — knowingly consent to such a venue provision. However, in the world of consumer arbitration, she is presumed to have consented because she is presumed to have read all the fine print in the consumer credit application she signed to get the credit card. I am not saying that arbitration does not have its place, but is it fair to impose binding arbitration on consumers who are not educated regarding the court system, much less the arbitration system? I would say that it is not, and many agree with me. I would, however, support a form of arbitration that our sister state of Arizona has found useful. In Arizona, all civil cases (except family law cases) with an amount in controversy under a certain amount ($65,000, I believe) are sent to an arbitration conducted by an attorney picked at random from the attorneys practicing in that county. If a party is dissatisfied with the result of the arbitration, that party may appeal for a trial de novo in the Superior (district) Court. Should the party that appeals the arbitration not be successful in obtaining a 23 percent more favorable result at trial, then it is liable to the nonappealing party for attorney’s fees of the defendant against the appeal, reasonable expert witnesses necessitated by the appeal, and for costs. This is something I think would also work in Texas and would allow for fair resolution of many disputes, while nonetheless reducing the case load on the courts. Lee Keller King Technorati tags: arbitration, ADR, law, Arbitration Fairness Act of 2009

Via the ADR Prof Blog, we learned that the Minnesota Attorney General, Lori Swanson, has filed a lawsuit against the National Arbitration Forum (“NAF”). The Complaint (Minnesota vs. National Arbitration Forum) alleges consumer fraud, deceptive trade practices, and false advertisement. On July 14, the AG’s office issued a press release about the lawsuit (Attorney General Swanson Sues National Arbitration Company for Deceptive Practices) and the NAF responded with a media announcement on its website (National Arbitration Forum Media Statement Regarding Lawsuit). Related Posts: Minnesota AG Files Suit Against Leading Arbitration Firm, Wall Street Journal, July 15, 2009. Minnesota lawsuit claims credit card arbitration firm has ties to industry, USA Today, July 15, 2009. Minnesota AG Sues Arbitration Company, Alleging Ties to Collection Industry, The National Law Journal, July 15, 2009. As some of our readers may know, in the past, Karl Bayer has arbitrated cases administered by the NAF.

Professor Alan Scott Rau has forwarded us the following comments relating to our post of yesterday, in which we summarized the recent Texas Supreme Court case of In re Morgan Stanley & Co., Inc., __ S.W.3d __ (Texas 2009) (No. 07-0665). The Texas Supreme Court gets it absolutely right [and totally without regard to the fact that they quote me.] How could it be otherwise? Compare Justice Hecht’s dissent: “A raving lunatic in a strait-jacket “agrees” to a contract, including an arbitration clause. Her guardian later seeks to avoid it, but the question of the contract’s validity must be submitted to the arbitrators for a final and binding decision. But where do the arbitrators get such authoritative decisionmaking power? Why, where they always get their power—from the agreement of the parties! Now, just what agreement of the parties is that? Well, there is something written and signed—it “exists,” doesn’t it? “It happened,” didn’t it? That the signatory was out of her head is just an inconvenient detail.” Such an approach could only make sense if one is living in some world of words and labels totally divorced from reality. “The law” rarely permits such silly results—and it never, ever, absolutely requires them. All of this is reasonably obvious. What I find more interesting here is Justice Hecht’s argument that the result should be different because the Texas courts need to align themselves with the Fifth Circuit. This is really rather striking when you think about it: As a matter of constitutional law the Texas courts have an equal claim with the lower federal courts to interpret the dictates of federal law; I can’t believe that it’s better to acquiesce in foolish Fifth Circuit opinions than to try to get the Fifth Circuit to reconsider. Now it may well be, as Justice Brister points out, that even if the plaintiff’s incapacity is ultimately confirmed by a court, she [or her guardian] may still be bound to arbitrate; where “estoppel” kicks in, arbitration is no longer consensual and becomes irrelevant anyway. But this is a different point, and the case hadn’t been argued on that basis—which just reflects the fact that the lawyering was inadequate and that we’re in a messy state on appeal. Alan Scott Rau Burg Family Professor of Law University of Texas at Austin School of Law http://ssrn.com/author=55273 Technorati Tags: arbitration, ADR, law, Texas Supreme Court, In re Morgan Stanley