[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
MANDATORY BINDING ARBITRATION:
IS IT FAIR AND VOLUNTARY?
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
COMMERCIAL AND ADMINISTRATIVE LAW
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 15, 2009
__________
Serial No. 111-57
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
----------
U.S. GOVERNMENT PRINTING OFFICE
52-199 PDF WASHINGTON : 2010
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
Washington, DC 20402-0001
COMMITTEE ON THE JUDICIARY
JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California LAMAR SMITH, Texas
RICK BOUCHER, Virginia F. JAMES SENSENBRENNER, Jr.,
JERROLD NADLER, New York Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina ELTON GALLEGLY, California
ZOE LOFGREN, California BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas DANIEL E. LUNGREN, California
MAXINE WATERS, California DARRELL E. ISSA, California
WILLIAM D. DELAHUNT, Massachusetts J. RANDY FORBES, Virginia
ROBERT WEXLER, Florida STEVE KING, Iowa
STEVE COHEN, Tennessee TRENT FRANKS, Arizona
HENRY C. ``HANK'' JOHNSON, Jr., LOUIE GOHMERT, Texas
Georgia JIM JORDAN, Ohio
PEDRO PIERLUISI, Puerto Rico TED POE, Texas
MIKE QUIGLEY, Illinois JASON CHAFFETZ, Utah
LUIS V. GUTIERREZ, Illinois TOM ROONEY, Florida
BRAD SHERMAN, California GREGG HARPER, Mississippi
TAMMY BALDWIN, Wisconsin
CHARLES A. GONZALEZ, Texas
ANTHONY D. WEINER, New York
ADAM B. SCHIFF, California
LINDA T. SANCHEZ, California
DEBBIE WASSERMAN SCHULTZ, Florida
DANIEL MAFFEI, New York
Perry Apelbaum, Majority Staff Director and Chief Counsel
Sean McLaughlin, Minority Chief of Staff and General Counsel
------
Subcommittee on Commercial and Administrative Law
STEVE COHEN, Tennessee, Chairman
WILLIAM D. DELAHUNT, Massachusetts TRENT FRANKS, Arizona
MELVIN L. WATT, North Carolina JIM JORDAN, Ohio
BRAD SHERMAN, California HOWARD COBLE, North Carolina
DANIEL MAFFEI, New York DARRELL E. ISSA, California
ZOE LOFGREN, California J. RANDY FORBES, Virginia
HENRY C. ``HANK'' JOHNSON, Jr., STEVE KING, Iowa
Georgia
ROBERT C. ``BOBBY'' SCOTT, Virginia
JOHN CONYERS, Jr., Michigan
Michone Johnson, Chief Counsel
Daniel Flores, Minority Counsel
C O N T E N T S
----------
SEPTEMBER 15, 2009
Page
OPENING STATEMENTS
The Honorable Steve Cohen, a Representative in Congress from the
State of Tennessee, and Chairman, Subcommittee on Commercial
and Administrative Law......................................... 1
The Honorable Trent Franks, a Representative in Congress from the
State of Arizona, and Ranking Member, Subcommittee on
Commercial and Administrative Law.............................. 2
The Honorable John Conyers, Jr., a Representative in Congress
from the State of Michigan, Chairman, Committee on the
Judiciary, and Ranking Member, Subcommittee on Commercial and
Administrative Law............................................. 4
WITNESSES
The Honorable Linda T. Sanchez, a Representative in Congress from
the State of California
Oral Testimony................................................. 6
Prepared Statement............................................. 9
The Honorable Henry C. ``Hank'' Johnson, Jr., a Representative in
Congress from the State of Georgia, and Member, Subcommittee on
Commercial and Administrative Law
Oral Testimony................................................. 17
Prepared Statement............................................. 18
Ms. Alison E. Hirschel, National Consumer Voice for Quality Long-
Term Care, Washington, DC
Oral Testimony................................................. 19
Prepared Statement............................................. 21
Mr. Stuart T. Rossman, National Consumer Law Center, Boston, MA
Oral Testimony................................................. 24
Prepared Statement............................................. 27
Mr. Stephen J. Ware, University of Kansas, School of Law,
Lawrence, KS
Oral Testimony................................................. 74
Prepared Statement............................................. 76
Mr. Cliff Palefsky, National Employment Lawyers Association, San
Francisco, CA
Oral Testimony................................................. 86
Prepared Statement............................................. 88
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Prepared Statement of the Honorable John Conyers, Jr., a
Representative in Congress from the State of Michigan,
Chairman, Committee on the Judiciary, and Ranking Member,
Subcommittee on Commercial and Administrative Law.............. 4
APPENDIX
Material Submitted for the Hearing Record
Response to Post-Hearing Questions from Alison E. Hirschel,
National Consumer Voice for Quality Long-Term Care, Washington,
DC............................................................. 158
Response to Post-Hearing Questions from Stuart T. Rossman,
National Consumer Law Center, Boston, MA....................... 170
Response to Post-Hearing Questions from Stephen J. Ware,
University of Kansas, School of Law, Lawrence, KS.............. 181
Response to Post-Hearing Questions from Cliff Palefsky, National
Employment Lawyers Association, San Francisco, CA.............. 187
Material submitted by the Honorable Trent Franks, a
Representative in Congress From the State of Arizona, and
Ranking Member, Subcommittee on Commercial and Administrative
Law............................................................ 194
Prepared Statement of Bruce Yardwood on behalf of the American
Health Care Association (AHCA) and the National Center for
Assisted Living (NCAL)......................................... 266
Prepared Statement of Public Citizen............................. 271
Prepared Statement of AARP....................................... 282
Prepared Statement of the National Association of Home Builders.. 294
Prepared Statement of Richard W. Naimark on behalf of the
American Arbitration Association............................... 299
Prepared Statement of the American Association of Homes and
Services for the Aging (AAHSA)................................. 304
OFFICIAL HEARING RECORD
Material Submitted for the Hearing Record but not Reprinted
Enclosures to Cliff Palefsky's Response to the Post-Hearing Questions
have been retained in the official Committee hearing record
available at the Subcommittee.
Report by the Searle Civil Justice Institute Consumer Arbitration Task
Force, Consumer Arbitration Before the American Arbitration
Association, March 2009. This report is available at the
Subcommittee and can also be accessed at:
http://www.searlearbitration.org/p/full_report.pdf
Enclosures to the Prepared Statement of Public Citizen have been
retained in the official Committee hearing record available at the
Subcommittee.
Enclosure to the Prepared Statement of Bruce Yardwood on behalf of the
American Health Care Association (AHCA) and the National Center for
Assisted Living (NCAL) has been retained in the official Committee
hearing record available at the Subcommittee.
MANDATORY BINDING ARBITRATION:
IS IT FAIR AND VOLUNTARY?
----------
TUESDAY, SEPTEMBER 15, 2009
House of Representatives,
Subcommittee on Commercial
and Administrative Law,
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to notice, at 1:17 p.m., in
room 2141, Rayburn House Office Building, the Honorable Steve
Cohen (Chairman of the Subcommittee) presiding.
Present: Representatives Cohen, Conyers, Watt, Maffei,
Johnson, Scott, Franks, and Coble.
Staff present: (Majority) Norberto Salinas, Counsel; Adam
Russell, Majority Professional Staff Member; and (Minority)
Daniel Flores, Counsel.
Mr. Cohen. My apologies for being late. This hearing of the
Committee on the Judiciary Subcommittee on Commercial and
Administrative Law will now come to order. Without objection
the Chair will be authorized to declare a recess of the
hearing.
I will now recognize myself for a short statement. This
past May, this Subcommittee held a hearing focused on the
credit card industry's use of arbitration. Today's hearing is
not focused on a specific industry. Instead this Subcommittee
will examine the use of arbitration in employment contracts,
long-term care facility admission contracts and other consumer
contracts.
Also, the witnesses will update us on the recent
developments in the last 4 months which necessitate us having a
further discussion on the use of mandatory arbitration. We are
looking at many changes to the realm of arbitration. The
National Arbitration Forum has abandoned its consumer
arbitration practice, and the American Arbitration Association
has halted its practice of arbitrating debt collection cases.
Bank of America has chosen not to seek enforcement of
arbitration agreements with specific customers and American
Express is re-evaluating its arbitration policy.
The Federal Trade Commission is examining this process as
well, and President Obama's administration is urging a new
Federal agency be able to regulate the use of arbitration in
consumer transactions.
While all of these changes are a positive step, it is
unclear what impact they may have on the arbitration process.
As a Nation that has championed civil rights and consumer
protection laws, we must balance the needs for quicker and
inexpensive resolution for disputes with upholding a consumer's
right to choose.
According to my colleagues on the other side, the Supreme
Court has interpreted the FAA to permit challenges to an
arbitration agreement if that challenge is based on generally
applicable state contract law. As a result, they contend that
courts around the country routinely strike down arbitration
agreements that do not provide consumers with fair notice or
fair procedures.
While some courts have struck down arbitration agreements,
and decisions, it certainly hasn't happened routinely. Courts
have done so only for the most egregious examples, such as
where there is evidence that the arbitrators were corrupt or
where the arbitration agreements were unconscionable.
And as we all know, it is difficult to prove corruption
without expending enormous resources, which most employees and
customers don't have the resources to carry that type of suit
to conclusion. Further, most states have a very narrow view of
what constitutes unconscionability. Thus the system does not
protect consumers.
While arbitration may offer benefits, and certainly it
does, and I understand that, and I have talked to many people
about it, and they can facilitate the correction of certain
problems and in an inexpensive and timely manner, I still have
concerns about the use of mandatory binding arbitration
agreements in any context in light of the lawsuit against the
National Arbitration Forum.
Certainly sensitive to the importance of the arbitration
process and how it can be helpful in resolving issues, but
adhesion contracts cause me a problem and have since I learned
about them in law school. Nevertheless, there are instances in
which the process may not always be the best in the interest of
the consumers or employees because sometimes they are adhesion
contracts, and sometimes it doesn't allow them to get the
proper redress of injuries they may suffer.
We must be sure the arbitration process is fair and
voluntary so that all parties to a dispute can reap the
benefits of arbitration. Accordingly, I look forward to
receiving today's testimony, and I now recognize my colleague
Mr. Franks, the distinguished Ranking Member for his opening
remarks.
Mr. Franks. Well, thank you, Mr. Chairman, and Mr.
Chairman, I would like to welcome the two Members here, Mr.
Johnson and Ms. Sanchez. I had the privilege of seeing Ms.
Sanchez's addition to her family, and I have this sneaking
suspicion it may be a little Democrat. But I tell you, it was a
precious, precious little boy, and it kind of gives the rest of
us hope here.
Mr. Chairman, in all due deference to probably the opposing
viewpoints at the table here, I guess I would start out by
saying, you know, arbitration, I believe is a critical tool in
our society because it makes justice prompt and accessible for
millions of Americans, and without it too many citizens would
be left out in the cold by overburdened courts and overpriced
lawyers.
I feel strongly enough about this that I circulated a
letter yesterday to all my colleagues seeking to set the record
straight on arbitration, and because I believe that record is
so full of myths that it can be hard for us to see the issue
clearly.
Many times, for example, I hear claims that the voluntary
use of pre-dispute arbitration agreements somehow undercuts
consumers' indelible rights to jury trials, but I think that
can be hardly further from the truth.
Jury trials are remote prospects in the vast majority of
consumer lawsuits in the first place. The norm for these cases
in court is not jury trial, but dismissal on pre-trial motions
or disposition on summary judgment.
Many cases, of course, are settled, perhaps most
significantly in consumer class actions. But class actions
routinely leave consumers with pennies on the dollar for their
claims. It is the wealthy trial lawyers who bring these cases,
not the consumer plaintiffs, who reap the profits from
litigation.
Still worse, the right to trial jury is simply hollow for
those whose claims are too small for a lawyer to make. Millions
upon millions of Americans who have claims that are clearly
meritorious don't generate enough legal fees to attract a
lawyer. These citizens face tall odds when they go it alone in
court. It is the simple, flexible, inexpensive procedures of
arbitration that allow them to seek and obtain meaningful
relief.
Now, the second myth is that the courts have interpreted
the Federal Arbitration Act to trump state laws, leaving
consumers little recourse in the few cases in which arbitration
might be unfair. But the Supreme Court has interpreted the act
to permit anyone to challenge an arbitration agreement if the
challenge is based on generally applicable state contract law.
In applying this standard, courts around the country
regularly apply legal principles, such as state
unconscionability law to strike down arbitration agreements
that do not provide consumers with fair notice or fair
procedures.
And the third myth is that arbitration involves high
administrative fees and unduly limits discovery. The truth
again is to the contrary. The American Arbitration Association,
for example, limits consumers' fees to only $125 for
arbitration claims seeking less than $10,000. The AAA's
consumer due process protocol, meanwhile, calls for consumers
to have access to discovery that is legally obtainable and
relevant to their case.
Recently there has been one incident that has led to
renewed calls for restrictions on mandatory binding
arbitration, and that was the National Arbitration Forum's
withdrawal from consumer arbitration. NAF's action followed a
lawsuit over the Forum's debt collection relationships. But Mr.
Chairman, this incident shows that problems are already being
solved in the one sector that has been the poster child for
enemies of arbitration.
NAF's debt collection experience provides no basis for
reaching out to prohibit mandatory binding arbitration across
the board. Too often Congress specializes in legislating
unnecessary, quote, ``solutions'' to nonexistent problems. Such
legislation typically serves only to strengthen special
interests such as the plaintiff's trial bar.
I hope that Congress does not pursue an unnecessary
solution to the mythical problems with arbitration. That
legislation would come at a huge price, the sacrifice of one of
the practical means that millions of Americans have to obtain
justice. And with that, Mr. Chairman, I respectfully yield
back.
Mr. Cohen. Thank you, and I thank you for your statement.
And I now recognize Mr. Conyers, distinguished Member of
the Subcommittee and the congressperson from the state that has
a football team, once again, for an opening statement.
Mr. Conyers. Thank you, Mr. Chairman. We welcome the
witnesses, but particularly our two Members of the Committee
who have been making very important and unique contributions on
the subject. This debate started in 1925 when we passed the
first Federal Arbitration Act, but here is what brings us here
today.
Arbitration has not always been beneficial to all parties.
Arbitration has not been fair to all parties, and arbitration
has sometimes eviscerated protection of some Federal consumer
and civil rights statutes. I commend Ms. Sanchez, a former
Subcommittee Chair herself, for her targeting and focus on one
particular area of nursing homes, and that is critical, and
that to Hank Johnson. His approach is a wider one.
Now, there are some more problems that have cropped up. The
claim, well, there is secrecy in arbitration awards so we don't
know who needs--we sometimes need to change the law and we
don't get a chance to do it because the awards are required not
to be published. So there is some wrongdoing that sometimes
escapes our attention and ultimately harms everybody.
And then originally, arbitration was conceived of as one
organization or organizations in the same industry. For
example, if General Motors and Chrysler ended up in arbitration
there would be some balance. The question, though, is what
happens when it is an employee going up against an employer?
That is a different situation.
And I am sorry to report that arbitrators have not always
been found to be neutral, and that as a matter of fact there
has been established relationships with parties on one side of
the dispute or other that have made it unlikely to get a fair
result.
And then mandatory provisions have escalated. They are in
every kind of contract and it is a ``take it or leave it''
deal. It is in there. What is the matter with you? You don't
like arbitration? What is your problem?
Credit card companies are infamous in the way they do this.
Cell phone providers, again, that dictate their consumer
product sales and service contracts have mandatory arbitration
clauses, and so millions of consumers and employees are left
with little or no way to change or modify or negotiate an
arbitration clause, so----
I am looking at some studies by Public Citizen, Christian
Science Monitor, Center for Responsible Lending, the Minnesota
attorney general's decision, and I want to start this hearing.
We have got some fine University of Michigan law school people
here, and I want to get them up, as well as our distinguished
Members of the Committee. Thank you, very much.
[The prepared statement of Mr. Conyers follows:]
Prepared Statement of the Honorable John Conyers, Jr., a Representative
in Congress from the State of Michigan, Chairman, Committee on the
Judiciary, and Member, Subcommittee on Commercial and Administrative
Law
During the Congressional debates on arbitration more than 70 years
ago, witnesses testified about the potential benefits of this form of
resolving disputes without judicial intervention.
They noted, for example, that when arbitration is properly used, it
can help parties avoid the delay and costs of protracted litigation.
And arbitration can serve to relieve the burden on courts to decide
disputes.
Their testimony led Congress to pass the Federal Arbitration Act,
which empowered courts to enforce arbitration agreements.
As we have since learned during the last 20 years, however,
arbitration is not always beneficial to all parties, and it may
eviscerate the protection of some federal consumer and civil rights
statutes.
Others claim that the secrecy of arbitration awards hinders the
development of the law, and awareness of wrongdoing by businesses,
which ultimately harms all consumers and employees.
Still others assert that arbitration providers and arbitrators are
not always neutral and, in fact, may have cozy relationships with
parties on one side of these disputes.
Nevertheless, the use of mandatory provisions in various
contractual agreements has rapidly escalated in recent years and, as a
result, has become virtually ubiquitous.
Many businesses--from credit card companies to cell phone
providers--dictate that their consumer product sale and service
contracts include mandatory arbitration clauses. Similarly, many
employers demand that their workers agree to arbitrate employment
disputes as a condition of their employment.
As a result, millions of consumers and employees across our Nation
are legally bound to mandatory arbitration clauses in contracts with
little or no ability to negotiate them.
To those who wonder why these mandatory arbitration clauses are
fundamentally unfair to consumers and employees, here are just a few
reasons.
First, those who are charged with determining arbitration disputes
may not really be neutral and independent.
For many years, former arbitrators, consumers, and employees have
contended that arbitration providers tend to favor their business
customers. Specifically, they assert that arbitrators often decide in
favor of businesses and, in the rare instances when they rule in favor
of consumers or employees, they often award damages lower than what was
requested.
Indeed, this Subcommittee has heard from several witnesses
supporting these assertions, as well as considered studies and analyses
by Public Citizen, the Christian Science Monitor, and the Center for
Responsible Lending that reached similar conclusions.
But it was not until this summer, when a lawsuit filed by the
Minnesota Attorney General helped to focus a national spotlight on
these serious allegations, that we learned how true they were.
The lawsuit alleged that the National Arbitration Forum, a major
arbitration provider claiming that it is independent, neutral, and
unaffiliated with any party to a dispute, was actually encouraging
companies to insert arbitration agreements in their consumer contracts,
and to appoint the Forum to arbitrate their disputes.
Worse, the complaint alleges, the Forum blackballed arbitrators who
ruled against its favored businesses, and had financial ties to some
businesses that were parties to disputes it arbitrated.
Obviously, arbitration under these circumstances could not be
considered fair. The Forum quickly agreed to a settlement, which
included its complete withdrawal from arbitrating consumer cases.
After this settlement, the American Arbitration Association,
another major arbitration provider, promptly announced that it would
cease arbitrating certain consumer disputes.
Despite these developments, nothing currently prevents other
arbitration providers from providing services that are not independent.
Minnesota's lawsuit certainly calls into question whether
arbitration proceedings are consistently conducted by neutral
arbitrators.
But consumers and employees should not have to rely on governmental
lawsuits to ensure that arbitration proceedings are fair.
Accordingly, I urge Congress to consider legislation that would
restore integrity to the arbitration process, or limit the
enforceability of mandatory arbitration clauses, or both.
Clearly, in the absence of governmental oversight, arbitration
providers and businesses have established relationships that benefit
them financially at the expense of consumers and employees.
Second, mandatory arbitration clauses are particularly unfair to
consumers and employees, because they often lack any bargaining power
over whether these clauses are included in contracts with their
business counterparties.
It should come to no surprise that many of these clauses, when
included in consumer and employment contracts, favor businesses.
By virtue of these clauses, consumers and employees legally lose
their constitutional right to a jury trial. In addition, some of the
procedural requirements these clauses impose can make it difficult,
even cost-prohibitive, for consumers to protect their rights under the
law.
Congress should not restrict the rights and options of consumers
and employees to resolve disputes. Rather, arbitration should be one
option among many to resolve disputes. It should not be the only
option.
Third, the courts have greatly expanded the scope of the Federal
Arbitration Act to apply to consumers and employees in respects not
originally intended by the Act's drafters.
As we have learned, the Federal Arbitration Act was conceived to
give courts the authority to enforce arbitration awards, and Congress
intended for the Act to apply only to disputes between merchants of an
equal bargaining position. The Act was not intended to apply to workers
or consumers.
Nevertheless, the Supreme Court has substantially broadened the
reach of the Act, which has, in turn, encouraged the inclusion of
mandatory arbitration clauses in nearly every type of consumer and
employment contract.
The Court's decisions have very much weakened the impact of Federal
and State consumer protection laws and employee rights laws. As a
result, many Americans have been denied their day in court.
Congress should therefore consider legislation clarifying the Act's
original intent and spirit.
Legislation that protects consumers and employees is a common-sense
solution for all Americans.
My colleagues, Representatives Linda Sanchez and Hank Johnson, each
have introduced legislation that make positive steps toward a solution.
Their proposals will allow consumers, employees, franchisees,
residents of long-term care facilities, and others to opt for
arbitration, rather than have arbitration imposed on them as a pre-
condition for service or employment. Their legislation would help
ensure a fairer arbitration process because the terms of arbitration
will not be dictated by one party to the dispute.
If Congress fails to be more assertive in protecting consumers and
employees and guaranteeing the right to a jury trial, I fear that more
Americans will be on the losing end when they have to arbitrate a
dispute.
I thank the witnesses for being here today, and look forward to
hearing their testimony.
__________
Mr. Cohen. Cheer, cheer for Michigan, da, da--thank you for
the gentleman's statement. Without objection other Members'
opening statements will be included in the record and first I
would like to--we have a panel of congresspeople.
And I do welcome Ms. Sanchez, the former Chairperson of
this particular Committee, and Mr. Johnson, the Chairperson of
another distinguished and important Subcommittee of the
Judiciary Committee. And I welcome each of them to the
Committee, and I would recognize the former Chairlady, Ms.
Sanchez, for her statement.
TESTIMONY OF THE HONORABLE LINDA T. SANCHEZ, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Sanchez. Thank you, Chairman Cohen and Chairman Conyers
and Ranking Member Franks and Members of the Committee for
allowing me the opportunity to testify today about a very
important piece of legislation, which also has a very deeply
personal meaning for me.
Last Congress, when I chaired this Subcommittee, we held
several hearings to investigate the fairness and usefulness of
arbitration agreements. We learned among other things that
arbitration is a very useful alternative to the court system,
but especially when the parties agreeing to arbitrate have
about the same level of knowledge and the same amount of
sophistication regarding it.
On the other hand, we also found that in certain
circumstances arbitration agreements can be forced on
vulnerable parties who have little knowledge about what they
are signing, and quite frankly, little choice, if any choice,
in the matter at all.
I want to be very clear that I strongly support the
principles of arbitration and the arbitration process.
Arbitration can clear court dockets, provide swift resolution
and reduce legal fees. But because it can also limit evidence
and damages and deny the possibility of a jury trial, it must
be willingly entered into by both parties, not just the party
with the superior economic power.
Checking a parent or other relative into a nursing home or
other long-term care facility is a perfect example of a time
when one party has no real power or choice in the matter. And
for these reasons I introduced H.R. 1237, the Fairness in
Nursing Home Arbitration Act, to make pre-dispute, mandatory
arbitration clauses in long-term care contracts unenforceable
and to restore to residents and their families their full legal
rights.
This legislation would allow families and residents to
maintain their peace of mind as they look for that perfect
long-term care facility.
By 2040, the demand for long-term care services will more
than double in this country and the long-term care industry is
increasingly requiring patients or their guardians to sign
binding, pre-dispute arbitration clauses as a prerequisite to
admission.
Unfortunately, the inclusion of such mandatory clauses adds
a confusing and legally binding complication to an event that
is already difficult enough and sometimes even very
heartbreaking. For desperate families who are unable to provide
adequate care at home, the need for an immediate placement for
their loved one makes the ``take it or leave it'' choice no
choice at all.
Families who are in the midst of a very painful decision to
place a parent in a nursing home rarely have the time or
wherewithal to fully and thoughtfully consider mandatory
arbitration clauses. They are in no position to adequately
determine what agreeing to such a clause will mean for their
loved one should the unthinkable happen.
Instead of some future dispute, what is real and immediate
is the prospect of needing care for a loved one now. The
emotional toll and the sense of vulnerability when moving a
loved one into the care of strangers at a nursing home is
something that I am familiar with. My father, who has been
struggling with Alzheimer's for a number of years, took a turn
for the worse in the past year, to the point where we could no
longer provide safe and adequate care at home for him.
One of the last things that I wanted to worry about when
searching for a perfect placement was whether or not he was
forgoing his legal rights. Instead, I wanted to focus solely on
the quality and the range of services that each facility had to
offer. As it turned out, my family chose a facility that met
other requirements but also had a mandatory pre-dispute
arbitration clause in its contract.
This bill that I have introduced is for the families across
the Nation who face similar decisions at a time when they are
least prepared to make them. As we learned last year, average
consumers are totally unfamiliar with the concept of
arbitration. They may not even be aware of the rights that they
are signing away when they agree to it. In short, I believe
that Congress should act to protect these vulnerable families.
I want to also clarify that not all nursing home operators
use mandatory, binding arbitration agreements upon admission.
Some do try to protect vulnerable families, for instance, by
offering arbitration on a voluntary basis. Others do admit
patients immediately but give them time to consider whether
arbitration is right for them.
This bill is fundamentally about fairness. It promotes
fairness for families experiencing the trauma of a parent in
declining health by making unenforceable mandatory, binding
arbitration agreements that families were essentially forced to
sign whether they wanted to or not.
Fairness demands that parties to a contract should have a
legitimate choice, not a forced one, about whether or not to
arbitrate their disputes. I am proud to note that several
significant groups who advocate on behalf of seniors and
consumers, including AARP, the National Senior Citizens Law
Center, the Alzheimer's Foundation of America and the National
Association of Consumer Advocates, all support H.R. 1237.
In closing, I just want to mention one thing because I have
been accused of being anti-arbitration. What this bill seeks to
do is just take away the unequal bargaining power in a pre-
dispute situation. There is nothing that would take it away in
a post-dispute, which means that parties after a dispute arises
could agree to have their dispute settled in binding
arbitration if they so choose.
But it would not force people into that scenario when they
haven't had adequate time to recognize what they are signing
when they sign a mandatory, pre-dispute, binding arbitration
clause. I think you very much for the opportunity to testify
today and I hope that you will join me in supporting this
legislation.
[The prepared statement of Ms. Sanchez follows:]
Prepared Statement of the Honorable Linda T. Sanchez, a Representative
in Congress from the State of California, and Member, Committee on the
Judiciary
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
__________
Mr. Cohen. Thank you, Congresswoman Sanchez. We welcome you
back to your old home and thank you for your coming here.
Our next witness is Representative Hank Johnson, who
represents Georgia's 4th Congressional District. He is a
regional whip, and he also serves on the House Democratic
leadership. He is on Armed Forces and Judiciary and Chairman of
the Courts and Competition Policy, a distinguished Member of
this Subcommittee and my dear friend.
You are recognized.
TESTIMONY OF THE HONORABLE HENRY C. ``HANK'' JOHNSON, JR., A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA
Mr. Johnson. Thank you, Chairman Cohen, and I have always
tried to be as great a Member as you have set the example for
me. But I want to get into this. Forced arbitration has been a
concern of mine for many years, and I firmly believe that the
Congress must act in this instance to protect consumers.
In the 100----
Mr. Cohen. Mr. Johnson, it has been suggested that you
might need to pull the mike a little closer because some of us
don't hear as well as we did 20 years ago.
Mr. Johnson. All right. Okay. In the 110th Congress I
introduced the Arbitration Fairness Act, a bill that would
prevent all forced pre-dispute arbitration clauses. That bill
passed favorably out of this Subcommittee, and I reintroduced
the legislation in this Congress, and I am proud to have the
Chairman of the full Judiciary Committee and three other fine
Members of this Subcommittee as original co-sponsors.
In fact, this bipartisan bill already has 90 co-sponsors.
H.R. 1020, the Arbitration Fairness Act, does not eliminate all
arbitration; it merely prevents forced pre-dispute arbitration
clauses. Consumers may still opt to arbitrate a dispute with a
company, but only when that consumer determines that it is the
appropriate forum at the time the conflict arises and not
before.
As Chairman of the Judiciary Committee, Judiciary
Subcommittee on Courts and Competition Policy, I believe it is
vital that consumers continue to have access to the courts and
not be foreclosed from litigation by the constraints of pre-
dispute forced arbitration clauses. Major arbitration
companies, including the National Arbitration Forum and the
American Arbitration Association, have recently stopped
arbitrating consumer claims.
However, pre-dispute arbitration clauses remain in many of
the consumer, franchisee and employment contracts. This means
that the NAF and the AAA's grand gestures do not actually
mitigate the harmful impact of forced arbitration clauses on
consumers.
Another company will eventually fill the void and begin to
arbitrate consumer claims again. There is no reason to think
that the arbitration process will be any fairer to consumers
when this occurs.
Just a few weeks ago, Bank of America voluntarily dropped
its mandatory arbitration program for credit card disputes,
deposit account disputes and disputes involving loans for
automobiles, recreational vehicles and boats.
This is very noble of Bank of America, and it is the kind
of reform we need, but we cannot count on companies to
voluntarily remove arbitration clauses when so many of the
companies benefit tremendously from them.
I recently wrote a letter to the attorney general of the
state of Georgia addressing the need for close scrutiny of
arbitration clauses in home builder contracts. The personal
harm alleged by several of my constituents shows how difficult
it is for consumers to prevail in the arbitration process.
The abusive practices that harm these victims are
indicative of a much larger problem where consumers are forced
to agree to arbitration clauses that strongly favor the company
to the detriment of the consumer.
You know, it is okay to, across the backyard fence, to lie
to your neighbor about the length and weight of the fish that
you caught or about your previous career as an actor or a model
or something like that.
I mean, you can do that. But in court, at the courthouse,
you must take an oath of office and swear to tell the truth,
and that promise or that oath is enforceable through the
criminal laws of this Nation and various states. But we have no
kind of fundamental check and balance on arbitration
proceedings with respect to having to tell the truth.
And secondly, well, I am not going to go into all the
particulars. I know that our witnesses to come will go into
various aspects of forced arbitration and why we need to take
action as a legislature to correct this imbalance which has
existed. Thank you.
[The prepared statement of Mr. Johnson follows:]
Prepared Statement of the Honorable Henry C. ``Hank'' Johnson, Jr., a
Representative in Congress from the State of Georgia, and Member,
Subcommittee on Commercial and Administrative Law
Thank you, Chairman Cohen, for the opportunity to testify today
before the Commercial and Administrative Law Subcommittee. Forced
arbitration has been a concern of mine for many years and I firmly
believe that Congress must act in this instance to protect consumers.
In the 110th Congress, I introduced the Arbitration Fairness Act, a
bill that would prevent all forced pre-dispute arbitration clauses.
That bill passed favorably out of this Subcommittee. I re-introduced my
legislation in this Congress, and am proud to have the Chairman of the
Full Judiciary and three other fine members of this Subcommittee as
original cosponsors. In fact, this bipartisan bill already has over 90
cosponsors.
The Arbitration Fairness Act does not forbid arbitration clauses.
It merely prevents forced pre-dispute arbitration clauses. Consumers
may still opt to arbitrate a dispute with a company. But only when that
consumer determines that it is the appropriate forum at the time the
conflict arises and not before.
As Chairman of the Judiciary Committee Subcommittee on Courts and
Competition Policy, I believe it is vital that consumers continue to
have access to the courts and not be foreclosed from litigation by the
constraints of a pre-dispute forced arbitration clause.
Major arbitration companies, including the National Arbitration
Forum and American Arbitration Association have recognized that the
arbitration process, in its mandatory form, is unfair to consumers.
Recently, Bank of America voluntarily dropped its mandatory arbitration
program for credit-card disputes, deposit account disputes and disputes
involved loans for automobiles, recreational vehicles and boats.
These small steps towards eliminating forced arbitration clauses
only underscores the need for Congress to enact my legislation along
with Representative Sanchez's Fairness in Nursing Home Arbitration Act.
Pre-dispute forced arbitration agreements are nearly always the product
of unequal bargaining power between the consumer and the business. The
scales of justice ought not to be so weighted.
I recently wrote a letter to the Attorney General of the State of
Georgia addressing the need for close scrutiny of arbitration clauses
in home builder contracts. The personal harm alleged by several of my
constituents pertains to just one company's abuse of the arbitration
process. However, the abusive practices that harmed these victims of
arbitration is indicative of a much larger problems where consumers are
forced to sign arbitration clauses that strongly favor the company to
the detriment of the consumer.
Arbitration agreements remain in many other consumer, employment,
and franchisee agreements. Congress must act to prohibit forced
arbitration before consumers suffer any more harm.
Again, I thank Chairman Cohen for the opportunity to testify before
the Commercial and Administrative Law Subcommittee today.
__________
Mr. Cohen. Thank you, Mr. Johnson. I appreciate the
witnesses. Is there any Member of the panel that would like to
ask a question of our colleagues? If not, we thank you for your
testimony and your work in authoring these bills, and we will
have hearings and obviously you are welcome to attend or go to
the recesses of your office and watch by the magic of
television.
So we now dismiss the first panel and welcome the second
panel.
I thank the witnesses for participating in today's hearing.
Without objection, your written statement will be placed in the
record, and we would ask that you limit your oral remarks to 5
minutes. You have got a lighting system, and the green means
you are within the first 4 minutes.
When it is yellow it means you need to be starting to think
about the fact that, in 1 minute or less, you will have a red
light, which means you are supposed to stop. If you do stop at
that point, you will be one of our best witnesses. Subcommittee
Members will be permitted to ask questions subject to the same
5-minute limit, which is rarely kept.
Our first witness is Ms. Alison Hirschel. Professor
Hirschel serves as the ``elder'' law attorney--oh, I guess that
is for older people. Yes, I didn't think it fit you--at the
Michigan Poverty Law Program, a statewide back-up center for
legal services programs, where her practice includes
litigation, legislative and administrative advocacy and
professional and community education efforts.
Prior to coming to Michigan in 1997, she spent 12 years at
Community Legal Services in Philadelphia as a staff attorney,
co-director there of the Elderly Law Project, and finally as
deputy director. Thank you for being here, Professor Hirschel,
and you may begin your 5 minutes.
TESTIMONY OF ALISON E. HIRSCHEL, NATIONAL CONSUMER VOICE FOR
QUALITY LONG-TERM CARE, WASHINGTON, DC
Ms. Hirschel. Thank you very much, Chairman Conyers,
Chairman Cohen, Ranking Member Franks----
Mr. Cohen. You need to pop your button on, I guess, to get
audio.
Ms. Hirschel. Okay. Chairman Conyers, Chairman Cohen,
Ranking Member Franks and Members of the Subcommittee, thank
you for inviting me here today to speak on behalf of NCCNHR:
The National Consumer Voice for Quality Long-term Care.
For the past 24 years, I have been a public interest lawyer
representing long-term care consumers, and I know from my
practice that residents and families often sign admissions
agreements when they are under enormous stress. Frequently,
because of a medical crisis or the loss of the caregiver, the
resident needs immediate placement and the facility to which
they are being admitted might be the only option they have.
Most consumers who sign admissions contracts don't realize
that they include an arbitration clause, and even if they
notice them, they don't know that arbitrators are often
industry lawyers with an incentive to favor the facility, or
that arbitration can be costly for consumers, or that awards
are generally significantly lower than jury awards, and that
there is virtually no appeal.
The last thing on most consumers' minds at the time of
admissions is how they will seek a remedy if something goes
wrong. Consumers enter a long-term care facility looking for
care and compassion, not arbitration or litigation. Even if the
consumer understands the provisions, most won't challenge them.
No resident or family wants to get off on the wrong foot
with a facility that will hold the resident's very life in
their hand. No one wants to be marked a troublemaker before the
resident has even entered the facility, especially about a
legal provision in the admissions contract that they hope will
never apply to them.
Unfortunately, sometimes things do go grievously wrong. In
the case of Vunies B. High, a 92-year-old Detroit area woman
who happened to be the sister of the legendary boxer Joe Louis,
she had dementia, and her family admitted her to an assisted
living facility where they thought she would be safe.
Unfortunately, on a frigid night in February of last year,
when the staff failed to properly supervise her, she wandered
out of that facility wearing only her pajamas and froze to
death. Only then did her family discover that the admissions
agreement contained a mandatory binding arbitration provision.
It stated, like many of these provisions, that in case of
any dispute, the provider has the sole and unfettered option to
resolve the dispute in binding arbitration. The provider would
choose the location for the arbitration. The provider would
choose the rules, and the provider retained its rights to any
action against Ms. High in court though she was required to
give up that right if she had an action against the facility.
Fortunately, the Federal court in that case determined that
the contract was unenforceable for a number of reasons,
including the unequal bargaining power of the parties, the lack
of discussion of the provision with Ms. High or her family, Ms.
High's obvious confusion, and the fact that the agreement was
presented to Ms. High and her family after she had already
moved into the facility, and was, in fact, never signed.
The High family was lucky the arbitration agreement was
invalidated. Courts routinely enforce onerous arbitration
clauses signed under the most coercive conditions. When
arbitration agreements are enforced, harrowing abuse or neglect
may never be brought to light, and that is an important
incentive for facilities to provide quality care, and it is
lost when those things don't come to light.
As Yale law professor, Judith Resnik, notes in a
forthcoming book, secretiveness in outcomes is often a
signature of arbitration. She notes that ``arbitration is often
a set of procedures without transcripts, public observers or
reported outcomes.''
At the same time we are seeing a dramatic rise in the
number of mandatory arbitration clauses, government surveys and
studies continue to provide disturbing evidence of serious
neglect and avoidable injuries and deaths in nursing homes.
This is particularly shocking in an industry that receives $75
billion in taxpayer money each year through Medicare and
Medicaid.
Proponents of forced pre-dispute arbitration agreements
lament that funds that should be spent on resident care are
allegedly diverted to pay for litigation and liability
insurance.
But I want to be clear about two points: First, what really
costs taxpayers unfathomable sums of money is poor care itself.
Poor care leads to unnecessary and frequent hospitalization for
conditions that never should have arisen and to surgery,
specialists' visits, medications and durable medical equipment
to address ills that never should have been suffered.
Second, even if providers are spared the expense of
litigation and increased premiums should those occur, there is
no guarantee that those savings will be used to improve
resident care or do anything that benefits residents. Nothing
prevents providers from simply using those funds to increase
their investors' returns.
As testimony in several congressional hearings has
disclosed, nursing home corporations are setting up complex
operating and financing structures that hide ownership, bleed
funding out of facilities, limit accountability and reduce
nursing staff and quality of care.
We should be limiting corporate abuse of public funds, not
residents seeking justice. And finally, let me just note that I
am not anti-arbitration. I am only opposed to pre-dispute,
binding, forced arbitration.
Arbitration wasn't intended as an end-run around justice or
a way to keep wrongdoing out of the public eye. And in cases in
which consumers already suffered grievous harm, Congress should
not permit long-term care facilities to add the bitter burden
of denial of the fundamental right of access to the court.
Thank you.
[The prepared statement of Ms. Hirschel follows:]
Prepared Statement of Alison E. Hirschel
Chairman Conyers, Chairman Cohen, Ranking Member Franks and members of
the Subcommittee:
Thank you for inviting me to speak on behalf of NCCNHR: The
National Consumer Voice for Quality Long Term Care.\1\ For more than 30
years, NCCNHR has provided a national voice for long-term care
residents, their families, ombudsmen, and consumer advocates, such as
the Michigan Campaign for Quality Care which I represent. Thirty years
ago, I started my career as an intern at the House Select Committee on
Aging. And for the past 24 years, I have been a public interest lawyer
representing long term care consumers on issues ranging from their
initial admissions to facilities to their sometimes tragic experiences
of abuse or neglect in those facilities.
---------------------------------------------------------------------------
\1\ NCCNHR (formerly the National Citizens' Coalition for Nursing
Home Reform) is a nonprofit membership organization founded in 1975 by
Elma L. Holder to protect the rights, safety and dignity of America's
long-term care residents
---------------------------------------------------------------------------
Residents and families often sign admission agreements at times of
enormous stress in their lives and when they feel they have very
limited options. Seeking admission to a facility is rarely a slow and
deliberative process in which consumers carefully evaluate the quality
and services at numerous facilities and ponder every page of the often
voluminous admissions package to compare it to admission agreements of
other nearby facilities. Frequently, the admission occurs after a
medical crisis or the loss of a caregiver when the resident needs an
immediate placement. Indeed, sixty percent of nursing home admissions
are directly from a hospital. The facility to which the applicant is
being admitted will often be the only facility that has a bed, will
accept the resident, or is close to the resident's family and friends.
Most consumers who sign these contracts are unaware that they
include an arbitration clause, and they may not understand the
provisions even if they notice them. They don't know that the
arbitrators are often health care industry lawyers who have an
incentive to find for the facility and limit awards so that they will
be hired by the provider for future disputes. They don't understand
that arbitration can be very costly for the consumer, that arbitration
awards are generally significantly lower than jury awards, and that
there is no real ability to appeal. Moreover, the last thing on most
consumers' minds at the time of admission is how they will seek a
remedy if something goes wrong. They enter a long term care facility
looking for care and compassion, not litigation or arbitration.
Even if the long term care facility explains the binding
arbitration clause, most consumers will not challenge it. First,
nothing about the long term care admissions process is like a
negotiation between two equal parties. Consumers may not have any other
options and they generally sign whatever paperwork is presented to
them. Second, no resident or family wants to get off on the wrong foot
with a facility that will hold the fragile resident's life in its
hands. No one wants to be marked a troublemaker before the resident has
even entered the facility, especially about a legal provision
applicants do not expect to ever affect them.
Unfortunately, sometimes things do go grievously wrong as they did
for Vunies B. High, a 92 year old Detroit area resident with dementia.
She was the sister of the legendary boxer Joe Louis, a graduate of
Howard University, an accomplished woman who served as a long time
English teacher and counselor in Detroit public schools. Ms. High's
family placed her in an assisted living facility because they thought
she would be safe there. On a frigid night in February of last year,
staff of the facility failed to notice when Ms. High wandered out of
that facility wearing only her pajamas. She froze to death. Her family
then discovered that the admissions agreement contained a mandatory,
binding arbitration provision. It, like many mandatory arbitration
clauses, stated that in the case of any dispute:
The provider had the sole and unfettered option to
choose to resolve the dispute in binding arbitration;
The provider would choose the location for the
arbitration;
The provider would choose the rules (the rules of the
American Arbitration Association or of the American Health
Lawyers Association Alternative Dispute Resolution Service
Rules of Procedure for Arbitration);
And the provider retained its right to institute any
action against Ms. High in any court of competent jurisdiction,
though Ms. High was required to forego that option as well as
her right to a jury trial in any matter that was litigated in
court.
In addition, the agreement contained a limitation of only $100,000
in damages, in addition to medical costs incurred, a provision Ms.
High's family also did not recall. When Ms. High's family sought
redress for her tragic and preventable death, the facility, relying on
the arbitration agreement, moved to dismiss the case. Fortunately, the
federal court determined that the contract was unenforceable for a
number of reasons including:
The unequal bargaining power of the parties;
The lack of discussion of the provision with Ms. High
or her family;
Ms. High's obvious limitations and confusion;
The unilateral nature of the arbitration provision;
The fact that the agreement was presented to Ms. High
and her family after she had already moved into the facility;
and
The context of presenting the agreement in an elder
care facility.
The High family was lucky the arbitration agreement was
invalidated. Courts routinely enforce onerous arbitration provisions
signed under the most coercive conditions. When arbitration agreements
are enforced, harrowing abuse or neglect may never be brought to light
and an important incentive for facilities to provide quality care is
therefore lost.
As Yale Law Professor Judith Resnik notes in a forthcoming book,
``[S]ecrecy about both processes and outcomes is often a signature of
[arbitration]. . . .'' \2\ She cites a federal court decision that
observes that confidentiality is part of the character of arbitration
itself to prevent it from having precedent and gaining the trappings of
adjudication.\3\ And that secrecy often includes banning disclosures by
participants, barring attendance by third party observers, and
excluding or limiting the media.\4\ As Professor Resnik concludes,
``The [Alternative Dispute Resolution] packet . . . is often a set of
procedures without transcripts, public observers, or reported
outcomes.'' \5\
---------------------------------------------------------------------------
\2\ See Chapter 14 in Judith Resnik and Dennis Curtis, REPRESENTING
JUSTICE: THE RISE AND FALL OF ADJUDICATION AS SEEN FROM RENAISSANCE
ICONOGRAPHY TO TWENTY-FIRST CENTURY COURTHOUSES (Yale University Press,
forthcoming 2010).
\3\ Id. citing Iberia Credit Bureau, Inc. v. Cingular Wireless, 379
F. 3d 159, 175 (2005).
\4\ Id.
\5\ Id
---------------------------------------------------------------------------
At the same time we are seeing a dramatic rise in the number of
mandatory arbitration clauses, government studies continue to provide
disturbing evidence of serious neglect and avoidable injuries and
deaths in nursing homes. According to a Government Accountability
Office (GAO) report in 2007, twenty percent of nursing homes have been
cited for putting their residents at risk of serious injury or death--a
shockingly high figure in an industry that receives more than $75
billion taxpayer dollars through Medicare and Medicaid each year. And
the GAO says that state surveys understate the actual jeopardy and harm
residents are experiencing.
It is true that we have an elaborate nursing home enforcement
system. But that enforcement system is, like many nursing homes
themselves, seriously understaffed and enormously challenged by its
vital responsibilities. In my home state, a shortage of surveyors has
meant that complaints take weeks, months, and sometimes as long as a
year to investigate. In that period, records are lost or altered,
witnesses and evidence disappear, and surveyors are no longer able to
substantiate even extremely serious and legitimate complaints. And when
the neglect or abuse cannot be substantiated, no penalty can be
imposed.
Moreover, while surveyors miss a lot at nursing homes, licensed
assisted living facilities--which do not have the benefit of federal
regulation--are inspected even less often and less rigorously, and
regulators in my state have few remedies if problems are discovered.
And there is no enforcement in unlicensed facilities like the one in
which Ms. High resided. Thus, an overburdened enforcement system in
nursing homes, a limited system in licensed assisted living, and a
nonexistent enforcement system in unlicensed homes cannot be an
adequate substitute for litigation in egregious cases.
Proponents of forced pre-dispute arbitration agreements lament that
funds that should be spent on resident care are allegedly diverted to
pay for litigation and liability insurance. But I want to be clear
about two points: First, what really costs taxpayers unfathomable sums
of money is poor care itself. Poor care leads to unnecessary and
frequent hospitalization for conditions that never should have arisen,
and to surgery, specialists' visits, medications, and durable medical
equipment to address ills that never should have been suffered. When a
Wisconsin nursing home ignored for more than five days Glen Macaux's
doctor's orders to inspect and assess his surgical site, the resulting
infection caused septic shock, excruciating pain, severe depression,
and total disability--as well as hospital bills of almost $200,000.
Second, even if providers were spared the expense of litigation and
increased insurance premiums--by tipping the playing field very much in
their own favor--there is no guarantee that savings will be invested in
adequate staffing, training, supplies, or in creating safe and
appealing environments. Nothing prevents providers from using those
funds to increase investors' returns instead of improving residents'
care and lives. The Government Accountability Office showed that when
Congress increased Medicare funding for skilled nursing facilities
specifically to improve nurse staffing levels, the amount of nursing
care residents received was virtually unchanged. And the Centers for
Medicare and Medicaid Services recently reduced Medicare funding to
nursing homes because it concluded that some of the therapy Medicare
paid for was given by aides, not licensed physical therapists, and that
it was often given to residents concurrently in groups while the
government was billed for individual treatments. Moreover, as testimony
in several Congressional hearings has disclosed, nursing home
corporations are setting up complex operating and financing structures
that hide ownership, bleed funding out of the facilities for corporate
profits, limit accountability, and reduce nursing staff and quality of
care. We should be concerned about corporate abuse of public funds, not
with residents seeking justice in the courts when they become victims
of neglect and abuse that is often caused by corporate greed.
Finally, let me note that we are not anti-arbitration. We are only
opposed to pre-dispute, binding, forced arbitration. Arbitration was
not intended as an end run around justice or a way to keep wrongdoing
out of the public eye. In cases in which consumers have already
suffered grievous harm, Congress should not permit long term care
facilities to add the bitter burden of denial of the fundamental right
of access to the courts.
Thank you.
__________
Mr. Cohen. Thank you, Professor Hirschel, and you did good
on your red light.
Our second witness is Mr. Stuart Rossman. He is another
University of Michigan attendee, I believe, while in
undergraduate school. He is a National Consumer Law Center
staff attorney directing litigation efforts there. He has 13
years in private practice and we welcome him here.
He has founded and chaired the attorney general's Abandoned
House Task Force, a project ready to assist municipalities and
community groups in seeking solutions to abandoned properties.
Thank you, sir, we welcome your testimony.
TESTIMONY OF STUART T. ROSSMAN, NATIONAL CONSUMER LAW CENTER,
BOSTON, MA
Mr. Rossman. Mr. Chairman, Members of the Committee, thank
you very much for inviting me here. As was noted, I am Director
of Litigation for the National Consumer Law Center, which is a
40-year-old national organization representing the interests of
low income and elderly consumers in the areas of access to
credit, affordable home ownership and utility rights.
We are dedicated to enforcing the substantive rights of
consumers and we are proud supporters of the Arbitration
Fairness Act that has been filed.
In my practice, arbitration clauses are ubiquitous. They
show up in credit cards. They show up in bank accounts. They
show up in telephone and cell phone contracts. They appear in
personal, home and car loans, utility agreements and in student
financing.
They are particularly prevalent in predatory products where
we are dealing with the most vulnerable consumers, items such
as payday loans, rent-to-own contracts and subprime mortgages
and credit cards all contain the forced arbitration clauses.
Forced arbitration clauses prevent access to the
constitutionally protected judicial system. It prevents people
from having access to the rules of evidence, the rules of civil
procedure, appellate review and their right to jury.
You are well aware of the problems which have been
discussed and will be discussed this afternoon, but ostensibly
we are dealing with issues where the arbitration provisions
show up as contract of adhesion with no choice between
alternative products.
They are required prior to the dispute no one can even
imagine what the problems could be down the road. There is a
lack of transparency and secrecy. There is a lack of
accountability with a right of review.
There is a bias toward the merchant as the repeat user, the
repeat player bias that we have heard about. There is
susceptibility for conflict of interest and then there is the
expense to the consumer.
As has been noted, there have been two major developments
this past month in this area. First is as a result of a suit
brought by the Minnesota Attorney General's Office, the
National Arbitration Forum has dropped doing all consumer
arbitration cases. They are no longer accepting new arbitration
cases or processing them.
The claims that were brought by the Minnesota Attorney
General's office dealt with conflicts of interest, but there
were also issues involving the level and the quality of the
service that was being provided and whether it was biased.
Then, in response to a letter from the Minnesota Attorney
General's Office or otherwise, the American Arbitration
Association announced that it was suspending its debt
collection arbitrations pending further consideration of
appropriate safeguards.
And then the Bank of America and JPMorgan Chase both
announced that they would be dropping arbitration clauses in
all of their credit card agreements. Bank of America went
further to indicate that it was dropping it in its deposit
agreements and its automobile loans.
That is a welcome development as a first step, but is not
enough, and Federal legislation still is needed. With the debt
collection, the problem is not the actor, the bad apple so to
speak, but the system itself.
The opportunity for abuse and for profiteering are inherent
in the relationship. It is an intrinsic flaw where the
arbitration company draws its income from satisfying the debt
collector or risk losing that account. Private justice where
the funds are being paid for by private parties is inherently
going to end up being biased.
The fact that NAF is no longer in the business does not
mean that there are not plenty of pretenders to the throne
waiting in the wings to take over this very lucrative business.
The American Arbitration Association did in fact drop debt
collection arbitration, but it did not drop the enforcement of
forced arbitration clauses against plaintiffs, when they
brought their own cases.
Furthermore, we have no idea what safeguard would be put in
place, when they would be put in place and, most important, who
will enforce them. Without enforcement, they are just pieces of
paper.
And finally, Bank of America and JPMorgan Chase should be
congratulated for dropping the credit card requirements, but
that still means that eight out of the ten largest credit cards
companies in the United States still have mandatory arbitration
clauses and the banks can always reverse their policies. As has
been seen recently on a number of occasions, banks announce
policies and can easily reverse them a year or two later down
the road.
Congress created consumer rights and enforcement under the
Fair Debt Collection Practices Act and Fair Credit Reporting
Act, Truth in Lending and other statutes, but I am particularly
interested, as a civil rights lawyer, in the access to fair
credit. And I would be very concerned if under the Equal Credit
Opportunity Act or the Equal Credit Opportunity Act my clients
were no longer able to assert their rights under those
statutes.
For 10 years I filed suit against the automobile finance
industry for claims of discrimination. We were able to get
systemic change in those industries as a result of those
lawsuits. I would not have wanted to tell my clients, Betty
Cason or Edwin Borlay that they did not have their day in court
to assert their ECOA claims because of an arbitration clause,
when they couldn't possibly have known about the discrimination
at the time that they entered into their loan agreements.
At NCLC we say that economic justice is a civil right and I
would ask this Committee and Congress to sustain those civil
rights by passing the Arbitration Fairness Act and all other
consumer litigation intended to protect consumers from forced
arbitration clauses. Thank you very much.
[The prepared statement of Mr. Rossman follows:]
Prepared Statement of Stuart T. Rossman
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
__________
Mr. Cohen. Thank you, sir, we appreciate your testimony.
Our third witness has a positive and a negative to me, his
great first name Stephen, Mr. Stephen Ware. He is a professor
at the University of Kansas School of Law, which brings back
pangs from 1\1/2\ years ago.
He teaches at the school there, doesn't take SATs for his
basketball players, taught six different law schools including
Samford's Cumberland School of Law, which started in Tennessee
and was a faculty member there for 2 years.
He is the author of two books, several other publications
and a frequent speaker at academic conferences, continuing
legal education programs and a ``Rock Shock Jayhawk.'' You are
welcome.
TESTIMONY OF STEPHEN J. WARE, UNIVERSITY OF KANSAS, SCHOOL OF
LAW, LAWRENCE, KS
Mr. Ware. Thank you very much, Chairman Cohen, Ranking
Member Franks, Members of the Subcommittee.
Although I am a professor of law at the University of
Kansas, I speak to you today not on behalf of my university or
anyone else, but on my own as an individual scholar who
specializes in arbitration law.
Thank you for inviting me to testify. As someone who has
spent the last 16 years focused on arbitration, it is a real
honor for me to get the chance to talk to the elected officials
who ultimately control the future of arbitration in this
country.
And my suggestion and request to you is to please proceed
with caution because arbitration does a lot of good, including
a lot of good for ordinary citizens. For example, I am a
consumer, and I like to see arbitration clauses in the
contracts of the companies I do business with.
That tells me that the company is saving money on legal
fees because arbitration tends to be a quicker and cheaper
process and competition over time will force the company to
pass on some of those savings to me. And if I ever have a claim
against one of those companies, I would like to save my own
time and money by having access to the quicker and cheaper
process.
So if arbitration and litigation tend to reach similar
outcomes, and by outcomes I mean who wins and how much money
they win, but arbitration reaches those outcomes quicker and
cheaper than litigation, then arbitration is good for
everybody.
It is good for the business and it is good for the consumer
or employee or whoever has a dispute with the business. And
that is basically the conclusion I have reached in my career of
studying arbitration.
Sure the trial lawyers who feel threatened by arbitration
can tell stories of particular consumers and employees who did
not fare well in a particular arbitration, but people can also
tell stories of particular consumers and employees that did not
fare well in litigation.
So we shouldn't be comparing arbitration to some ideal
imaginary dispute resolution process. We should be comparing
the reality of arbitration with the reality of litigation, as
those are the two options available to parties today. And when
the comparison moves beyond stories, beyond anecdotes, to
serious empirical studies arbitration looks very good for
consumers and employees overall.
So what is at issue here in the bills before Congress?
Basically you are being asked what should be the law on
arbitration clauses in consumer contracts, employment contracts
and similar contracts, and there are at least three possible
answers to that question.
One answer is none of these arbitration clauses should be
enforced and that is the answer of the Arbitration Fairness
Act. If you enact that bill or something similar, you will say
none of these arbitrations clauses shall be enforced. At the
other extreme would be laws saying all of these arbitration
clauses should be enforced. Nobody is advocating that and that
is not what current law does.
What current law does under the Federal Arbitration Act is
enforce some of these arbitration clauses. The Federal
Arbitration Act instructs courts to enforce the fair ones,
don't enforce the unfair ones, and courts frequently decline to
enforce arbitration clauses.
Courts have spent generations developing legal doctrine
that are sensitive to the case-by-case variations in the facts
of a case. Arbitration agreements can be written in a wide
variety of ways, and the consent parties give to arbitration
agreements can incur under a wide variety of circumstances.
I suggest that courts, being sensitive to those factual
differences, courts resolving cases individually, is a better
approach than legislation which necessarily paints with a broad
brush. I thank you for your attention and look forward to any
questions.
[The prepared statement of Mr. Ware follows:]
Prepared Statement of Stephen J. Ware
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
__________
Mr. Cohen. Thank you, sir. Appreciate your testimony,
Professor Ware.
Mr. Ware. I stayed within the 5 minutes, too.
Mr. Cohen. Right, you did, you beat the 5-minute clock.
Beulah didn't have to hit the buzzer.
Our final witness is Mr. Cliff Palefsky. He is a civil
rights and employment lawyer and a partner in the San Francisco
law firm of McGuinn, Hillsman and Palefsky, co-founder of the
National Employment Lawyer's Association and co-chair of their
Mandatory Arbitration Task Force.
He has been involved in many arbitration decisions. He has
been involved in state and Federal legislative efforts dealing
with mandatory arbitration of civil rights claims. Mr.
Palefsky, welcome.
TESTIMONY OF CLIFF PALEFSKY, NATIONAL EMPLOYMENT LAWYERS
ASSOCIATION, SAN FRANCISCO, CA
Mr. Palefsky. Thank you very much, Mr. Chairman. I think I
should start with presenting my bias here.
I am an employment lawyer. We are the folks that Congress
has asked to help enforce your civil rights laws and your
whistleblower laws and your wage and hour laws. I believe that
I have an ethical obligation to my clients to get their cases
resolved as quickly as possible without even filing a complaint
if I can, because that is what people in the employment context
need.
That is my bias. You will have a hard time finding anyone
in this country who is a bigger proponent of ADR than me, a
bigger user of ADR than me. We have led the Nation in
encouraging the use of mediation for employment disputes.
Let me tell you what I have learned over the past 20 years.
Civilizations are evaluated by the quality of their civil
justice systems. We are still lecturing, today, other countries
about the rule of law, while in contemporary America, American
workers and consumers are being sent to secret tribunals with
no right of appeal.
It is extraordinary that we sit here and debate the right
of terrorists to access a Federal court, when the victims of
sexual harassment and whistleblowers are denied that
opportunity and are told that they must not only go to secret
tribunals with no right of appeal, but they must pay for that
privilege.
The notion that arbitration and our public constitutional
court system are equivalent is the modern day version of
separate but equal. It would be malpractice for any practicing
attorney to equate the two systems and to not understand the
differences.
In every single material defining respect, they are the
exact opposites. Public versus private, free versus pay, full
discovery versus no discovery or limited discovery, a judge who
is required to follow the law versus not follow the law, the
right to appeal versus the right not to appeal and a judge
whose economic future is dependent on satisfying the repeat
user.
Arbitration is a dispute resolution system. It is not a
justice system. It cannot be confused as a justice system. In
the employment context, it is important to realize that none of
these notions that Professor Ware talks about in terms of
voluntariness apply.
Our laws, the Norris-LaGuardia Act, the National Labor
Relations Act, say it is the public policy of this country to
recognize that individual workers do not have the ability to
freely negotiate terms of labor.
Ever since the 13th amendment, we have recognized that the
free market has failed to protect employees. The notion that if
you don't like this arbitration clause, quit, give up your job,
give up your health insurance is a proper way to regulate the
workplace, has been discredited.
What is at stake here is the integrity of the laws that you
have passed. You have passed the civil rights laws and we
cannot enforce them. They are being undermined. You have passed
whistleblower laws and we cannot enforce them. If you blow the
whistle and no one hears, you are not a whistleblower, you are
a sitting duck. You are a sucker.
If you want to know what America would look like if all sex
harassment claims were sent to arbitration, look at the
securities industry in the 1970's and 1980's, when movies like
``Bonfire of the Vanities'' and ``Working Girl'' were held up
as models of how accurate they are.
If you want to know what America would look like if all
whistleblower claims went to arbitration, look at the
securities industry where they have compelled arbitration of
whistleblower claims up to the present date.
If you want to know what America would look like if
subprime lending claims go to arbitration, look at what
happened here until last year or 2 years ago, when Freddie Mac
and Fannie Mae said they would not longer buy loans with
mandatory arbitration clauses.
What is going on, in fact, is do-it-yourself tort reform.
Congressman Franks, I would love to address what you believe
are myths. In fact all state regulation of the arbitration
relationship essentially has been preempted. Your own state of
Arizona has specifically excluded employment contracts from
your arbitration statute. That has been preempted.
The notion that courts all over the country are enforcing
unconscionability arguments is simply not true. We have had
that success in California, but all over the country courts are
not striking down clauses. They are finding the most egregious
clauses to be just fine because it clears their dockets.
What is going on is a scandal in the house of justice and
the Judiciary Committee must recognize--don't worry about
statistics. You would never suggest to any other country that
justice is provided in secret conference rooms by judges who
have to please the repeat user. For-profit justice has never
worked. It will never work. Thank you very much.
[The prepared statement of Mr. Palefsky follows:]
Prepared Statement of Cliff Palefsky
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
ATTACHMENT A
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
ATTACHMENT B
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
ATTACHMENT C
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
__________
Mr. Cohen. Thank you, sir. We will now have 5-minutes of
questions. Same rules on the clock, and I will begin. Mr. Ware,
you stated that you like to go to stores that have arbitration
agreements. Do you read those arbitration agreements before you
go into a store?
Mr. Ware. Well, when I receive a credit card or a cell
phone contract, I often look to see the arbitration clause, and
I am pleased to see when there is one in there.
Mr. Cohen. That is kind of like the ``Good Housekeeping
Seal of Approval'' to you?
Mr. Ware. Well, no, it is a plus for the reason I gave
earlier. I----
Mr. Cohen. And the reason was because they will save money,
and they pass the savings on to you?
Mr. Ware. Yes, it is the more efficient way of resolving
disputes, and I am confident that over time anything that saves
businesses money will be helpful to consumers.
Mr. Cohen. So do you also suggest consumers, and you should
go to stores that maybe don't recycle because they save money,
and they can pass the savings on to you or maybe employ people
at very low wages or get their products from Asia where they
have children and women working in sweatshops?
Mr. Ware. Well, obviously, Chairman Cohen, we all want
retailers and other businesses to follow all the laws you
referred to there and those laws should be enforced. If the
conduct----
Mr. Cohen. But you don't--no. You don't have to recycle,
and you can buy goods from Asia where they pay people $1 an
hour, and they don't have kind of rights, but you would get a
cheaper product.
Mr. Ware. And each individual consumer ought to be able to
decide if he or she doesn't want to support a business that
engages in those sorts of activities, and I think arbitration
is importantly distinct from those examples in that arbitration
has not shown to be harmful to consumers and employees.
Mr. Palefsky says don't look at statistics. Don't worry
about statistics because when you move past anecdotes and get
to statistics, arbitration looks pretty darn good for consumers
and employees.
Mr. Cohen. Well, if you like it, which obviously you do and
you like that, you could always do it voluntarily. Why should
it be compulsory?
Mr. Ware. Oh, well, that is a hugely important point,
Chairman Cohen, the distinction between pre-dispute arbitration
agreements and post-dispute arbitration agreements.
And the fact of the matter is after a dispute arises the
business can consult its lawyer and ask itself which forum
would be more favorable to it for that particular dispute,
arbitration and litigation, and the business can't be expected
to act against its self-interest at that point and agree post-
dispute to arbitration, when that would be the more favorable
process for the consumer. Similarly a consumer can consult a
lawyer and will choose the process that is more favorable to it
post-dispute.
So we don't see many post-dispute arbitration agreements.
It is very rare. And this is through no fault of arbitration,
but just the fact that litigation is the default. That is what
happens when the parties don't both agree to arbitrate, and it
is very rare that they are going to both see arbitration after
the fact as more favorable to them.
Whichever party sees advantages to litigation, whether it
be a jury or greater discovery, the more expensive motion
practice, et cetera, that party can be expected to choose
litigation.
Mr. Cohen. Thank you, sir. Mr. Rossman and Palefsky seemed
equally passionate, and I will recognize Mr. Palefsky first,
since your name was mentioned. Do you have any thoughts on that
testimony?
Mr. Palefsky. Well, absolutely. First of all, I did not
mean to suggest that statistics don't bear us out. Statistics
do bear us out. In California, we were able to pass a statute
that required arbitration providers to post the results of
consumer employment arbitration, and those results were
profound.
Employees win a fraction of the time compared to what they
win in court. The mean damage award of all cases is only 9 or
10 percent. The statistics actually support dramatically what
we have been saying, that the laws that you have passed are
being undermined, and that arbitration is not an equal forum.
The statistic that you must focus on is the huge cost of
arbitration. It can cost $40,000, $50,000, $80,000 to bring a
sex harassment case to arbitration. Really, this is a form of
double taxation. Americans are already paying for a public
justice system. There is no precedent in American jurisprudence
to force someone to pay a judge to have a law enforced.
So the notion that arbitration is cheaper for most
plaintiffs is simply not true. The filing fees alone at the
American Arbitration Association can be $13,000, just to file
before the arbitrators start charging $400 or $500 per hour.
Mr. Cohen. Let me ask you this, sir, you and if Ms.--if
anybody else wants to jump in, you are allowed to, the class
actions are prohibited. What kind of an injustice happens when
people can't bring class actions for small claims?
Mr. Palefsky. If people can't bring class actions for small
claims you are basically allowing people to cheat, to steal
people's rights and steal people's money, if there is no way to
vindicate the smaller claims.
It simply is not economical to bring a claim for $100
either in arbitration or in court, so the only way your
consumer protection laws and the only way justice will ever be
reached in certain small claims is through the class action
procedure. That is why Federal law has specifically designated
class action procedures in various consumer statutes.
And in the wage and hour context, in the Fair Labor
Standards Act, you specifically created a collective action
process recognizing that individual workers can't afford to
bring claims for their small wages that are owed for their
overtime; that they fear retaliation.
So without the ability to bring class actions for smaller
claims you are basically giving a ``Get Out of Jail Free
Card,'' and it is an invitation to cheat and to steal.
Mr. Cohen. Mr. Ware, is there a way to take your love for
arbitration cases but also have group love and have class
actions?
Mr. Ware. Yes, Mr. Chairman, absolutely. You can have class
actions in arbitration. And so the question of whether
consumers should be allowed to sign away their right to class
action is really a separate question from whether that class
action is going to proceed in litigation or arbitration.
And it is important, it seems to me, to recognize that from
the consumers' standpoint class actions are something of a
mixed bag. In other words, if I win a class action, what do I
win, maybe a $5 coupon to buy more services from a company that
I am already having a dispute with and don't want to deal with
them anymore.
Whereas, if I give up that right to class action in favor
of arbitration, then when I have a real dispute, a dispute I
care about as opposed to one a plaintiff's lawyer brought on my
behalf, I may have the better access to justice in the quicker,
cheaper process.
So to me it is a very mixed question whether consumers
should want to give up that right to class action. If, however,
you conclude that they should not be able to, then you have got
a separate issue from arbitration as a whole. Arbitration
Fairness Act reaches far more broadly than class action.
Mr. Cohen. But don't you think there are times when the
class action tends to change the policies and the practices of
the merchant and that is a benefit to everybody, even in you
just got the $5 coupon you don't want to use, that they don't
continue to use those same unscrupulous practices that got them
a judgment rendered against them?
Mr. Ware. Yes, Mr. Cohen, I agree with you that that would
go into the cost benefit analysis of whether it is a worthwhile
right. And again, if you disagree with my assessment of those
pros and cons, you can tackle class action separately in a much
more narrow bill than the ones that have been considered in
Congress.
Mr. Rossman. I just--if you don't mind Mr. Chairman----
Mr. Cohen. Sure, Mr. Rossman.
Mr. Rossman. Listening to the concerns, particularly the
fact is that Congress has already taken care of the issue of $5
coupons and the Class Action Fairness Act was passed 4 years
ago and that class actions are, in fact, the sole way that many
consumer laws can be enforced.
In the Equal Credit Opportunity Act cases that I was just
mentioning to you, the remedy that we sought was to get
systemic change in the way that automobile loans were being
handled across the country, which were leading to
discrimination against African Americans and Hispanics.
We were seeking future injunctive relief to change those
policies. You cannot get that relief in arbitration. It was
only by being able to try cases, in Tennessee as a matter of
fact, that we were able to get those changes made across the
industry. That authority was required from the United States
Federal District Court judge.
I am also somewhat confused by the professor talking about
making informed judgments. It would seem to me being able to
make a choice, whether you are the merchant or the consumer,
after dispute arises, and you can make the cost benefit
analysis knowing what is at stake, certainly makes more sense
than making that cost benefit analysis in a vacuum where you
don't even know what the dispute is. You can't even conceive of
it.
As I said to you beforehand, I doubt very much that Mrs.
Cason, when she went in to buy her Nissan car was thinking
about preserving her civil rights, preventing discrimination at
that point in time and how she was going to be enforcing it 5
years down the road.
I think that it proves the case. You should have the
opportunity to consult with counsel, knowing what your full
rights are and knowing what the dispute is when you make that
decision, not buying a pig in poke.
Mr. Cohen. Thank you. And Ms. Hirschel, you gave the
example of the nursing home situation. My father had to go into
a nursing home, and it was a very difficult time. He had
Alzheimer's, and we were lucky to get a nursing home to take
him, and most people are fortunate. Sixty percent of admits
come from hospitals, and that is kind of the rules. It is
tough.
Is there a way to have a process whereby the people have a
little bit more opportunity, you know, to render independent
judgment rather than, you know, ``Oh, my God, my loved one
needs this care, I am lucky to have a bed, and let us move
on?''
Ms. Hirschel. If you are asking if there is some sort of
compromise that is available, my answer to that would
unfortunately be no, because the longer a resident is in a
nursing home the more vulnerable those people feel. The more
they understand that every aspect of their life, from the meals
that they need to going to the bathroom, is dependent on the
staff in that facility.
So if you say, well, after 30 days they should be more
comfortable, at that point we can talk about arbitration. It is
still a situation in which the person is very vulnerable and
unwilling to create a problem by resisting an arbitration
agreement.
In addition, you know many nursing home residents don't
even now have access to a telephone. Many nursing homes don't
have any involved family. Nursing home residents don't have any
involved family. They are hardly in a position to consult a
lawyer 30 days or 60 days after they enter a nursing home for
advice about what the implications of the arbitration agreement
with a mandatory arbitration would be.
And they are simply not in a position--the majority of
nursing home residents have some form of cognitive impairment.
They are simply not in a position to understand what the
implications of that clause would be.
Mr. Cohen. Thank you.
And with that I recognize the Ranking Member, Mr. Franks,
for questioning.
Mr. Franks. Thank you Mr. Chairman. Mr. Ware, I guess
sometimes it is good to restate the obvious, and that is
binding arbitration in the context that we have discussed is
something that people sign up for ahead of time.
This is not something that is imposed upon them later and
sometimes, you know, it occurs to me it gives them at least an
initial option to say whether I would rather subject myself to
binding arbitration or a court system that I may have some of
the same questions as to the ultimate justice that may come out
of that.
And you have made some, I think, very compelling statements
related to the similar outcome, but I was struck by Mr.
Palefsky's comments that seem to diverge significantly from
yours. I thought the one about the terrorist was kind of
interesting.
I am not sure we could get terrorists to sign a binding
arbitration agreement. It might go against some of their own
philosophical persuasions, and I am not sure if they did that
they would hold themselves accountable to it in the long run.
But can you give me some idea as to why it seems that Mr.
Palefsky's remarks are so divergent from your own?
Mr. Ware. Thank you, Mr. Franks. Mr. Palefsky, when he
backed away from his statement about ``don't worry about
statistics,'' he then picked the one empirical study that
supports his side of the case in contrast to several that cut
the other way.
The one empirical study he is referring to was the Colvin
article he attached to his testimony, and the Colvin article
even cites all the other studies and says, oh, these are
surprising results and they contradict what we have seen in the
other studies.
More importantly, the Colvin study, at least what Palefsky
attached to his testimony is a--it is not even a published
article, and the way of course scholarship works, empirical
studies are published, and then other scholars have a chance to
look at them and critique them and debate develops. So it is
clearly a reach by Mr. Palefsky to pull the one study that
contradicts the norm and then act as if it is the only study.
Mr. Franks. The one area I found myself somewhat fascinated
was that sometimes I am afraid in the last couple of years this
Committee has in some cases granted more constitutional and
legal deference to terrorists than they have American citizens,
but that is another subject entirely.
What conclusion do you draw from the recent legal action
against the National Arbitration Forum for its debt collection
processes and practices?
Mr. Ware. Well, as the Minnesota attorney general's
investigation revealed, which scholars in the field had known
already, is that debt collection, whether it be through
arbitration or litigation, debt collection raises a set of
issues unique to debt collection.
It has a lot to do with the defendant, the debtor being
hard to serve with process and to give notice of the dispute,
and then a lot of debtors in that situation don't show up to
court and for arbitration to defend the case so a default
judgment arises.
Those issues peculiar to debt collection, in fact, have
caused the FTC to have a series of events around the country
studying both arbitration and litigation of debt collection
issues because they recognize how unique those issues are.
And in the arbitration context, obviously the recent
developments with the National Arbitration Forum and the
American Arbitration Association have largely put those issues
aside so that that has been taken care of, the concerns about
that have been taken care of and those issues are simply
inapplicable when we are talking about other consumer and
employment arbitration.
Mr. Franks. On one of the written statements that you have,
this is pointed out here, in your statement you make the
argument that ``contractually agreed to mandatory binding
arbitration is actually more voluntary than litigation.'' Could
you explain that detail? Do you think that, as you have said,
that arbitration remains generally as fair as litigation?
Mr. Ware. Well that is just a simple point that arbitration
doesn't happen unless there is a contract theme that is going
to happen, and sometimes the contract--even pre-dispute
consumer, even the sort of things that would be covered by the
Arbitration Fairness Act--everyone would agree is voluntary.
For example, I have formed a contract with a home builder
where the home builder, the builder and I, both agree to put an
arbitration clause in the contract. I don't think anybody would
dispute the voluntariness of that pre-dispute consumer
transaction, yet the AFA made that unenforceable.
So those aren't the kind of transactions I think Members
are concerned about. I think the form contract, which is often
not read or understood by consumers, and those problems are
problems or issues that go far beyond arbitration.
Lots of form contracts have lots of clauses that courts
sometimes find unconscionable. So my point, again, is let us
handle this as we do now on a case-by-case basis in the courts,
where courts are sensitive to the particular clauses and the
particular facts of the case.
Mr. Franks. Mr. Chairman, I have one more question, but I
am out of time, so I yield back.
Mr. Cohen. If you would like to take it, I will go ahead
and yield to you.
Mr. Franks. Okay, thank you. Just briefly, opponents of
arbitration claim that if we eliminate pre-dispute arbitration
agreements consumers will still be able to agree to arbitrate
their disputes after the disputes arise. Now, I understand you
have already addressed that to a degree, but help--just restate
it in a way that the Committee can understand as to why that is
fairly unlikely?
Mr. Ware. It is highly unlikely. It doesn't happen now and
there is no reason why it is going to happen a lot in the
future, simply because at that point, once there is a dispute
both sides can look at the dispute and say what is in my self-
interest for this dispute?
So even if arbitration has lower process costs, it is
quicker and cheaper than litigation, there will often be
usually one party who says I don't want those quicker and
cheaper lower process costs. I would rather have the forum that
is better for me for whatever tactical reasons in that case,
and you can't expect lawyers and their clients to think any
other way. We have an adversary system where each side is
supposed to look after their own interests.
Mr. Franks. Thank you.
And thank you, Mr. Chairman.
Mr. Cohen. You are welcome.
Mr. Johnson, do you seek recognition?
Mr. Johnson. Yes, I do, Mr. Chairman. Thank you very much.
Is it--well, you have been studying the arbitration process for
14 years you said?
Mr. Ware. Sixteen now, Mr. Johnson.
Mr. Johnson. Sixteen, and have you gotten some idea out of
that study as to the success rate for the merchants or the
commercial interest that has the consumer locked into it? Do
you know what the rates are in terms of how many times the
consumers win and how many times they lose, the percentage?
Mr. Ware. Yes, Mr. Johnson. Those are the empirical studies
we were discussing earlier, and Mr. Palefsky and I were
referring to the employment arbitration studies. In the
consumer arbitration side there has been a little less study
but----
Mr. Johnson. And that is what I want to know is of the
small amount of study that has been done are you aware of the
results of those studies?
Mr. Ware. Yes sir, I think the most reliable one is the
recent study by my faculty colleague at the University of
Kansas, Chris Drahozal. His study which he testified about here
recently, shows very comparable results in consumer actions in
arbitration and litigation, again, supporting the general
conclusion that arbitration and litigation do about as well for
consumers in terms of outcomes as each other.
Mr. Johnson. All right. Thank you.
And Mr. Palefsky, do you have any response to the kind
professor from Kansas?
Mr. Palefsky. I think that he is wrong. I know that many
studies in the past try to find out how can you find out what
happened in arbitration because no one was making those results
available. They were secret, but now that we have the
California statistics--once those statistics were posted online
by the providers, that is where we learned that the National
Arbitration Forum credit card cases were going 99 percent where
the banks win.
That is where we learned that employees were winning
between 12 and 20 percent. So I think that some of the older
studies didn't have the kind of accurate information and out of
fairness to Professor Colvin, he did publish a paper.
It is cited in his paper--what we have attached here is an
updated version, and Mr. Colvin, Professor Colvin's statistics
are directly from the providers. So we know that the system is
not working. And if it was in fact a better system for
consumers you know the companies would not be tripping over
themselves to force it on them.
Mr. Johnson. All right. Thank you sir.
And Mr. Ware, is it true that you don't have to take an
oath of office, excuse me, an oath before testifying, an oath
to testify truthfully in an arbitration proceeding?
Mr. Ware. Well, different arbitration----
Mr. Johnson. Yes or no, if I could, because I am going to
run out of time shortly. Is that true or is that false?
Mr. Ware. It varies.
Mr. Johnson. I mean well, what public officer with the
authority to administer an oath on behalf of the government
would be available for an arbitration proceeding?
Mr. Ware. None, but perjury is a ground for courts vacating
an arbitration award.
Mr. Johnson. Well, but perjury does require an oath that
you take to tell the truth, the whole truth and nothing but the
truth, under penalty of perjury, and that is the legal route to
address issues of lying.
Mr. Ware. Yes, Mr. Johnson, but Federal Arbitration Act
Section 10 allows courts to vacate arbitration awards when
there is corruption in the arbitration process such as someone
lying.
Mr. Johnson. And then, you know, is it true the arbitration
costs are almost unbearable for the consumer?
Mr. Ware. No. In the vast majority of cases the arbitration
costs are very low. The fees to file a claim in arbitration,
for example the AAA Consumer Due Process Protocol, very low
fees comparable to the fees paid in court.
Mr. Johnson. But oftentimes the proceeding is held in a
city different from the one that the consumer lives in and
where the dispute arose. Is that correct?
Mr. Ware. No, I think that is quite rare that an
arbitration clause requires the consumer to travel far.
Mr. Johnson. Well, that was carefully worded now. I mean it
really puts--average arbitration clause doesn't put any
restrictions on where the arbitration proceeding would take
place. It is so broad that it leaves that up to the commercial
interest to decide what is in their best interest.
But oftentimes I understand that, you know, these
arbitration proceedings actually take place--like if I live in
Atlanta, and I signed up for a cell phone agreement in Atlanta,
and something happened in where--and if you are like my momma
you don't like anybody taking a nickel or a penny away from
you, and they don't deserve it.
She will pursue matters like that to the end of the earth,
but you would have to sometimes go to the end of the earth to
deal with the location of the arbitration hearing.
Mr. Ware. And courts have held unconscionable the few
arbitration clauses that have required the consumer to travel a
long way, while now many consumer arbitration agreements are
written to say that the arbitration will be in the county or
judicial district where the consumer resides.
Mr. Johnson. Thank you. I will yield back.
Mr. Cohen. Thank you.
And now I recognize the gentleman in his Carolina blue, Mr.
Coble.
Mr. Coble. Thank you sir. Professor Ware, the Chairman and
Mr. Franks and Mr. Johnson commenced their examination with
you. I don't want you to feel slighted so I will make you my
lead-off hitter as well.
I was going to ask about the Minnesota case, but I think
you pretty well addressed that. Let me ask you this, Professor,
to your knowledge, has the American Arbitration Association
ever stated that pre-dispute contractual agreements to
arbitrate are generally unfair to consumers?
Mr. Ware. No, definitely not. That is an important
distinction that the AAA has only, and maybe even temporarily,
refrained from taking new debt collection arbitration cases.
But they have not said that the problems that the concerns
about debt collection reached beyond that to other consumer and
employment arbitration.
Mr. Coble. Thank you, sir.
Mr. Palefsky, are there any aspects of binding arbitration
that you feel are effective and should be permitted or
retained?
Mr. Palefsky. Oh, I think binding arbitration can be a
great way to resolve many disputes, sir. Contract disputes
between parties of equal bargaining power. In my practice,
executives fighting over severance, I think voluntary
arbitration can be a very effective method.
I do believe that mediation is a much better way. And if I
might correct Mr. Ware, the American Arbitration Association
refuses to accept pre-dispute clauses in the health care field
and the American Arbitration Association issued a press release
in 1997 saying that employment arbitration should be voluntary.
Mr. Coble. Well, let me--I am on a race with a red light so
let me interrupt you. Let me put another question to you, Mr.
Palefsky. Do you believe, Mr. Palefsky, there are instances--
or, strike that. Are there any instances where consumers can
voluntarily consent to binding arbitration?
Mr. Palefsky. Of course. I think knowing and voluntary
consent is all that is required to make it a valid arbitration
agreement. I don't have any problem with the current--all
right, here is the problem. The only check and balance that was
ever contemplated to keep arbitration fair was voluntariness,
that the parties themselves ensured fairness.
This notion that a consumer has to run to court and
litigate unconscionability, which would cost you $20,000, and
if you win, it goes on appeal for 2 years, it is going to cost
a consumer $50,000 in 2 years to challenge an unfair
arbitration clause in court.
Mr. Coble. Well----
Mr. Palefsky. That serves nobody's interest. Make it
voluntary, and the marketplace will ensure fairness.
Mr. Coble. Ms. Hirschel, if nursing homes cannot utilize
binding arbitration, how would this affect that industry?
Ms. Hirschel. Well, I know that there is often an expressed
concern about the cost that nursing homes would suffer, but
there are two things that I would like to say about that. One
is that if you are looking at liability insurance premiums, the
Center on Medicare Advocacy did a study in 2003 that showed
that liability insurance premiums were not tied to insurance
pay-out.
The second thing is if you are looking at litigation costs,
there was a study in Florida that showed that only a very small
number of nursing homes were repeatedly sued, and that those
were the facilities that were entirely predictable because they
were the facilities that were cited over and over for egregious
violations.
So I think that both the liability insurance costs and the
litigation costs are costs that are not necessarily going to go
up or are clearly tied to ending mandatory pre-dispute binding
arbitration.
Mr. Coble. Mr. Rossman, I don't want you to feel----
Mr. Rossman. Thank you.
Mr. Coble [continuing]. Ignored. Is it your view that
binding arbitration is an ineffective venue for consumers?
Mr. Rossman. Well, once again, that is a sweeping response.
I think that pre-dispute is ineffective because there is no way
that a consumer can make a considered and informed judgment
when they are just entering into a transaction as to any
conceivable dispute that would arise under that contract.
If after they have entered into the contract a dispute
arises and they are given an opportunity to choose between
going through arbitration or through litigation, I think that
it is a perfectly acceptable choice at that point in time, but
at that point they know what they are buying.
Mr. Coble. Let me go to my lead-off man and let him sum up.
Mr. Ware. Well, my response to that last point is again,
when I and my home builder put an arbitration clause in our
contract pre-dispute, we were making a deal that we both
thought was going to save us money, and this bill we are
discussing would take money out of our pockets and put it in
the hands of trial lawyers.
Mr. Rossman. Congressman, if I could just a second, you are
using the home builder there. Are there other home builders you
could conceivably go to? What do you do when all but one mobile
telephone company in the United States requires mandatory pre-
dispute arbitration? What do you do if now eight out of ten
credit card companies require that you have mandatory pre-
dispute arbitration clause and prior to August it was 10 out of
10.
Mr. Ware. If the consumer really prioritizes avoiding
arbitration, the consumer can pick the cell phone or credit
card company that doesn't require it, and for the bulk of the
consumers who don't pay attention to that and get an
arbitration clause, they are getting what courts are saying in
a case-by-case basis is a fair process, or if it is not fair, a
court will hold it unconscionable in that case.
Mr. Coble. Mr. Rossman, I was going to brag to my Chairman
from Tennessee at beating the red light, but you cost me that
favor, so I yield back.
Mr. Rossman. I apologize, and I beg your forgiveness.
Mr. Cohen. Thank you, Mr. Coble.
Mr. Scott from Virginia is recognized.
Mr. Scott. Thank you. Mr. Rossman, could you explain the
legal concept of adhesion contracts and explain why all of
these just aren't thrown out based on that legal principle?
Mr. Rossman. Well, the adhesion contract is a contract
where there is a clause that is a mandatory or a required
portion and it is a ``take it or leave it.'' Either you take
the contract with the arbitration clause or you don't take the
contract.
If in fact we are dealing in a marketplace where the
alternative is really not between taking the contract with the
arbitration clause or not taking the contract, but rather the
situation of having access to the service or not having access
to the service, that is no choice at all.
The reality of it is that, you know, until recently, unless
you were a member of the AFL-CIO or a member of AARP, you could
not get a credit card in the United States without a mandatory
arbitration clause.
If you want to get a cell phone right now in the United
States, you have to accept it with a mandatory arbitration
clause, unless you are with the one carrier with limited
coverage in the United States that doesn't require it.
I would argue that in our modern society that access to
credit cards, access to mobile phones, have become virtual
necessities, and that it is no choice whatsoever. It is a
``take it or leave it'' under those circumstances.
And although there are, in fact, laws that find that
clauses can be unconscionable, the reality is that there are
different levels of unconscionability depending on what state
you are in. If you are in California or in Massachusetts, you
may find that there is a much higher level of unconscionability
or less of a tolerance for unconscionability.
But it is not the same across the United States, and there
are many places where that will, in fact, be allowed, and, in
fact, there have been cases that have allowed it throughout the
United States. That kind of checkered enforcement is
inexcusable. Where I live shouldn't determine whether or not I
have a choice between credit cards or phone service.
Mr. Scott. Are there other anti-trust implications, Mr.
Rossman?
Mr. Palefsky. Absolutely. Pre-dispute clauses that
designate a single provider are, in every definition, contracts
in restraint of trade. They eliminate competition in the
providing of ADR services. They lock you into perhaps the most
expensive--I can get an arbitrator to arbitrate without any
filing fee at all. Or I can go the American Arbitration
Association and pay a $13,000 filing fee and arbitrators who
charge $500 an hour.
It is absolutely inappropriate to allow one party to
contract in advance, not only with the consumer to mandate the
use of a single provider, but they work out deals with the
providers themselves to get special arrangements in the
administration of their case loads.
It is not uncommon for these major arbitration providers to
have case managers assigned to a particular company no matter
where the arbitration arises. One person in that organization
is charged with keeping the customer satisfied.
It is an invitation to abuse. And if consumers had the
ability to choose the arbitration provider, it would do wonders
to improving the fairness of the system and reducing the cost.
There is no reason in the world--ADR used to be a noble
endeavor undertaken by people who really were concerned with
solving problems.
In the labor arbitration field, they would charge $100 an
hour to resolve a dispute. Those very same arbitrators, when
they are doing my sex harassment cases, are charging $500 an
hour because they can. And that is exactly the result of these
pre-dispute restraints of trade.
Mr. Scott. Could you explain what the EEOC thinks of
mandatory arbitration?
Mr. Palefsky. The EEOC unanimously, the Republican and
Democrat commissioners, passed a policy statement which is
probably the best thing ever written on mandatory arbitration.
They say that it has structural biases against the claimants.
They say it interferes with their ability to enforce the
law, to do the job that you have asked them to do. They point
to the high costs. They point to the limited discovery. They
point to the private hearings, and the EEOC has stated
unequivocally--again, it is a shame that this has turned into a
partisan issue.
Justice need not be a Democrat or Republican issue. The
EEOC unanimously has a policy statement which is attached to my
testimony which I urge you all to read because you cannot say
you support civil rights and support mandatory arbitration of
civil rights claims.
The reason we passed the civil rights laws was to provide
access to a Federal court and a judge who was obligated to
apply the law. Arbitrators do not need to know or follow the
law. That is not acceptable for laws of Congress. That is not
acceptable for civil rights laws.
We are talking about the Lilly Ledbetter Fair Pay Act where
we had to fix Supreme Court decisions. We can't enforce that.
Arbitrators don't need to know the law or enforce it or respect
the acts of Congress. That is not acceptable. We cannot be a
Nation of laws if there is no place to go to enforce the laws.
What does it mean to live in a constitutional democracy if
Congress can pass a law and the people you are trying to
protect don't have the right to have the law enforced? The
Supreme Court has built a fiction that arbitration is just
another forum with no impact on substantive rights. That is
simply false as a matter of fact, because you lose the right to
have the law enforced.
Here is the law, on appeal, that ``an arbitration award has
to be confirmed even if there are errors of law or fact on the
face of the award that result in a substantial injustice.''
Think about that for a second, that our courts are obligated to
put their imprimatur on a judgment that is false on its face in
the enforcement of this Nation's civil rights laws. Is that
what you had in mind?
Mr. Scott. Thank you.
Mr. Cohen. Thank you, Mr. Scott. Would you like to go on
any further?
Mr. Scott. Well, yes, can you say a word about the
structural biases in the arbitration that the EEOC pointed out?
Mr. Palefsky. Right. The structural biases deal with one,
the privacy makes it difficult for witnesses to gather access
of similar treatment, pattern and practice. Who else was
discriminated against? Who else was harassed?
The cost: most people can't afford their day-to-day life.
You can't afford $20,000 or $30,000 to bring the case. You
cannot--discrimination cases are different than a lot of other
cases. There are a lot of small consumer cases where you don't
need a lot of discovery, but in discrimination cases, I am
trying to prove someone's state of mind. I cannot do that
without depositions.
In the employment case, all of the witnesses, all of the
documents are under the control of the employer. Ethical rules
preclude me from getting that information informally. I simply
cannot sustain my burden of proof without adequate discovery.
In many arbitration forums, they don't even permit
depositions. In the securities industry, in FINRA arbitrations,
I represent whistleblowers, and I am not allowed to take a
single deposition.
That is like saying, tie your hands behind your back and
come out fighting and argue your case to arbitrators selected
by the securities industry who know that if they find against
this firm, they will never sit again.
There is a reason that we appoint judges for life. There is
a reason that we have financial disclosures for our judges. You
cannot design a system where the decision maker has a financial
interest in pleasing the repeat user. As a concept it does not
work and it cannot work.
And it is incredible that anyone in this room on this
Committee would suggest that for-profit justice where the
decision maker has an economic interest in the outcome of the
case is equivalent to our constitutional system of justice.
I wanted to point out to you that in the Declaration of
Independence, Thomas Jefferson listed the grievances against
the king that justified this revolution, and we know that he
said ``for depriving us of the benefit of trial by jury.'' But
he was also concerned about the repeat user.
In the Declaration of Independence he said, ``He has made
judges dependent on his will alone for the tenure of their
offices and the amount in payment of their salaries.'' Those
words are truer today. At the turn of the last century,
arbitration was so disfavored because of the very abuses that
we see occurring today, that courts were not even permitted to
enforce pre-dispute clauses.
Everything that we are seeing happening today happened 100
years ago. The FAA was passed in 1925 to permit Federal courts
to once again be able to enforce arbitration clauses between
merchants. It was never intended to apply in the adhesion
context. It was specifically never intended to apply to
employment claims.
And that is how it was interpreted in the courts for 70
years, and it was certainly never intended to apply to
statutory claims for the laws that you pass to encourage people
to blow the whistle. If you don't want people to blow the
whistle, take the laws off the books.
If you don't like the civil rights laws, take them off the
books. But do not pretend you want to enforce those laws and
say that we can't bring those to a free court to a judge who is
obligated to follow the law.
Mr. Scott. Thank you, Mr. Chairman.
Mr. Cohen. Thank you, I appreciate it. We have finished our
first round. We are not going to have a second round. I think
we have a pretty good idea about where Mr. Ware and Mr.
Palefsky stand. I am going just allow the other two witnesses
to have, like, 2 minutes if you would like to have anything
further to say.
Ms. Hirschel?
Ms. Hirschel. Thank you very much. All I want to say is
that this really is a gross injustice, especially in the
nursing home context, and it is an injustice that only Congress
can solve, and I ask you to do that. Thank you.
Mr. Cohen. Thank you.
And Mr. Rossman?
Mr. Rossman. Just once again, thanking the Committee for
allowing us to testify today. The issue here is whether or not
consumers are going to be able to enforce the rights that this
Congress has given each and every one of them, to allow them a
right to seek a full and fair hearing where they have the right
to be able to have an impartial arbitrator determine their
claims is one that I think that is one that is both
constitutional as well as a hallmark of our system of justice.
By going forward and having a system, as Mr. Palefsky says,
where one party is literally paying for the cost of the
arbitrator, One thing I do want to clarify, and I will end on
this note, I think it has been passed around what the cost of
arbitration is, and I think somewhere in the testimony I saw
someone said that the filing fee was $125. I believe--
Professor, you may correct me on that--I believe that is for a
documents-only filing.
And the reality of it is that, whether it be a labor case
or a consumer case, you are not going to be able to file these
on the papers. We have to do discovery and we have to go
through hearings on this and when the arbitrator has to decide
a case is being paid by the hour, I suspect that he has very,
or she, has very little incentive for doing it as expeditiously
as would be the case with a Federal district court judge who is
on the mandate from the chief judge of the district to clear
the docket as quickly as possible.
So you have a system that is inherently not only more
expensive when you actually assert your rights, but it is in
the interest of the arbitrators to drag it out and move it
along as much as possible to get as much fees as they possibly
can under the circumstances.
Mr. Cohen. Thank you, sir.
And Mr. Palefsky, I want to ask one last question. You
distinguish employment law and statutory violations as areas
where you don't think the laws of arbitration should apply in a
unique way. Any there any other type of cases that would fit
into the category that you think should be maybe carved out?
Mr. Palefsky. I think that every American citizen has the
constitutional right to access to the right of petition, to the
right of due process and to the right to trial by jury, and
that right should not be waived unless it is waived knowingly
and voluntarily.
The answer to your question is yes. I don't think adhesion
contracts are an appropriate way to waive constitutional
rights. I think an adhesion contract is a privilege that we
extend to business to allow them to conduct routine commercial
transactions where the rights that are being exchanged come
from the parties.
It is not an appropriate way to waive constitutional
rights, and it is certainly not an appropriate way to waive the
protections of statutes that Congress passes after the free
market has failed to protect those consumers, nursing home
victims, workers, investors on Wall Street.
Mr. Franks. Mr. Chairman, could we ask Mr. Ware--the other
three got final thoughts. Would you be willing to let him have
a final thought?
Mr. Cohen. Sure.
Mr. Ware. Just----
Mr. Cohen. Gentlemen, you are not in Kansas anymore.
Mr. Ware. Thank you, Mr. Chairman, just to say very quickly
that we should not be comparing arbitration to this mythical
vision of litigation where everything is wonderful. We need to
compare it to the reality of litigation and the practical
effect on consumers and employees's access to justice.
Mr. Cohen. Thank you, Mr. Ware.
I thank all the witnesses for their testimony today and the
Members who attended. Without objection, Members will have 5
legislative days to submit any additional written questions
which are forwarded to the witnesses. I ask you to respond,
unlike certain people that have come to us from the state of
New Jersey, in a timely manner, they will be made part of the
record.
Without objection, the record will remain open for 5
legislative days from the submission of any other additional
material. Again, I thank everyone for their time and patience.
The hearing of the Subcommittee on Commercial and
Administrative Law is adjourned.
[Whereupon, at 2:53 p.m., the Subcommittee was adjourned.]
A P P E N D I X
----------
Material Submitted for the Hearing Record
Response to Post-Hearing Questions from Alison E. Hirschel,
National Consumer Voice for Quality Long-Term Care, Washington, DC
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Response to Post-Hearing Questions from Stuart T. Rossman,
National Consumer Law Center, Boston, MA
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Response to Post-Hearing Questions from Stephen J. Ware,
University of Kansas, School of Law, Lawrence, KS
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Response to Post-Hearing Questions from Cliff Palefsky,
National Employment Lawyers Association, San Francisco, CA
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Material submitted by the Honorable Trent Franks, a Representative in
Congress From the State of Arizona, and Ranking Member, Subcommittee on
Commercial and Administrative Law
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Prepared Statement of Bruce Yardwood on behalf of the American Health
Care Association (AHCA) and the National Center for Assisted Living
(NCAL)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Prepared Statement of Public Citizen
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Prepared Statement of AARP
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Prepared Statement of the National Association of Home Builders
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Prepared Statement of Richard W. Naimark on behalf of the
American Arbitration Association
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Prepared Statement of the American Association of Homes and
Services for the Aging (AAHSA)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]