Mandatory arbitration

Mandatory arbitration is a contract term that prevents a conflict from receiving judicial attention. In a mandatory arbitration, as mandated in the contract, liability for damages must be determined as a result of an arbitration process before a civil lawsuit can be filed in the court system. In arbitration, neutral arbitrators (often knowledgeable practicing attorneys) are selected and then evidence is presented. The arbitrators then determine the amount of the arbitration award, if any. If the arbitration award is made after the presentation of evidence by each party to the arbitrator, that is the end of the matter (and often the arbitration award is thereafter made a court judgment for further enforcement purposes). Only if one of the litigants refuses to accept the arbitration award, a lawsuit may then be filed to have a "trial de novo" (new trial) in a court of law, with liability to be determined by a judge or jury. Arbitration awards are very rarely overturned by the courts and trial de novo's are extremely rare. Only if one of the parties in the arbitration can prove to the court that there was actual fraud involved in the arbitration process or manifest disregard of the law will the courts permit new trials.
Most recently, in the United States, Senators Russ Feingold of Wisconsin and Congressman Hank Johnson of Georgia, together with numerous co-sponsors in both Houses, introduced the Arbitration Fairness Act (S. 1782, H.R. 3010) in the U.S. Congress. The bill would prohibit mandatory pre-dispute binding arbitration in consumer, employment, and franchise disputes. Parties to a dispute would still be able to choose arbitration over court if they wanted to, but individuals would be given a choice in the matter and would not be denied their constitutional right to access the courts and have a jury trial. The bill would overturn the strong presumption in favor of arbitrability that has been erected by decisions of the United States Supreme Court under the rubric of the Federal Arbitration Act, at least as applied to consumer, employment, and franchise disputes. The bill is supported by the groups such as Public Citizen, Center for Responsible Lending, Consumer Federation of America, Homeowners Against Deficient Dwellings, Home Owners for Better Building, National Association of Consumer Advocates, National Consumer Law Center, National Consumer Coalition for Nursing Home Reform, National Employment Lawyers Association, and American Association for Justice. Opposition to the bill is led by the U.S. Chamber of Commerce's Institute for Legal Reform.
Among other things, the proposed Act states that: "No predispute arbitration agreement shall be valid or enforceable if it requires arbitration of— (1) an employment, consumer, or franchise dispute; or (2) a dispute arising under any statute intended to protect civil rights or to regulate contracts or transactions between parties of unequal bargaining power."

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