Is Justice is Second Fiddle to Arbitration?

Maybe arbitration involving consumers is beginning to run its course. A recent post by Wayne Parsons describes Bank of America’s decision to stop forcing arbitration on consumers. Wayne cited David Robertson’s belief that Bank of America’s decision was a result of the recent decisions by the National Arbitration Forum and the American Arbitration Association to stop hanlidng consumer arbitrations as well as by increased congressional scrutiny. These changes in attitude are most likely a direct result of the Minnesota’s Attorney General’s law suit and subsequent settlement with the National Arbitration Forum to not be involved in consumer arbitration. Under the settlement, the National Arbitration Forum is prohibited from accepting, participating or administering any new arbitrations involving consumer debt, including credit cards, consumer loans, telecommunications, utilities, health care and consumer leases.

There is another issue in the arbitration arena that should concern everyone. In most arbitrations involving interstate commerce (which includes almost anything these days) the Federal Arbitration Act (FAA) controls. The Act lists four grounds to vacate an award issued by the arbitrator(s). For years courts also recognized non-statutory grounds for vacating an arbitration award, such as where the award exhibits a “manifest disregard of the law.”

Last Spring In Hall Street Associates, L.L.C. v. Mattel, Inc., the United States Supreme Court held that the statutory grounds are the exclusive means for vacating an arbitration award under the FAA. Does that mean we can have rules of law for the court system but arbitrators who do not violate the statutory grounds like showing bias, corruption, and fraud can just ignore the law? We should all be concerned if that is the case. Lower courts are beginning to interpret and apply the Hall Street decision and are coming to different conclusions as to whether manifest disregard of the law remains a proper basis to overturn an arbitration award.

I have a hard time after 35 years of practicing law believing that our courts cannot overturn an arbitration award that manifestly disregards the law. This is especially true in a consumer setting where most consumers never realize that had even signed arbitration agreements or know what arbitration means. It is time organize to get Congress to amend the FAA and include manifest disregard of the law and say to the American public everybody has to follow the law! Justice should not play second fiddle to arbitration.