II 

110TH CONGRESS 

1ST SESSION S. 1135 

To amend chapter 1 of title 9, United States Code, to establish fair 

procedures for arbitration clauses in contracts. 

IN THE SENATE OF THE UNITED STATES 

APRIL 17, 2007 

Mr. SESSIONS introduced the following bill; which was read twice and referred 

to the Committee on the Judiciary 

A BILL 

To amend chapter 1 of title 9, United States Code, to 

establish fair procedures for arbitration clauses in contracts. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Fair Arbitration Act 

5 of 2007’’. 

6 SEC. 2. ELECTION OF ARBITRATION. 

7 (a) IN GENERAL.—Chapter 1 of title 9, United 

8 States Code, is amended by adding at the end the fol9 lowing: 


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1 ‘‘§ 17. Election of arbitration 

2 ‘‘(a) FAIR DISCLOSURE.—In order to be binding on 

3 the parties, a contract containing an arbitration clause 

4 shall— 

5 ‘‘(1) have a printed heading in bold, capital let6 ters entitled ‘ARBITRATION CLAUSE’, which heading shall be printed in letters not smaller than 1 7 ⁄2

8 inch in height; 

9 ‘‘(2) explicitly state whether participation with10 in the arbitration program is mandatory or optional; 

11 ‘‘(3) identify a source that a consumer or em12 ployee can contact for additional information regard13 ing— 

14 ‘‘(A) costs and fees of the arbitration pro15 gram; and 

16 ‘‘(B) all forms and procedures necessary 

17 for effective participation in the arbitration pro18 gram; and 

19 ‘‘(4) provide notice that all parties retain the 

20 right to resolve a dispute in a small claims court, as 

21 provided in subsection (b)(12). 

22 ‘‘(b) PROCEDURAL RIGHTS.— 

23 ‘‘(1) IN GENERAL.—If a contract provides for 

24 the use of arbitration to resolve a dispute arising out 

25 of or relating to the contract, each party to the con26 tract shall be afforded the rights described in this 


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1 subsection, in addition to any rights provided by the 

2 contract. 

3 ‘‘(2) COMPETENCE AND NEUTRALITY OF ARBI4 TRATOR AND ADMINISTRATIVE PROCESS.— 

5 ‘‘(A) IN GENERAL.—Each party to the dis6 pute (referred to in this section as a ‘party’) 

7 shall be entitled to a competent, neutral arbi8 trator and an independent, neutral administra9 tion of the dispute. 

10 ‘‘(B) ARBITRATOR.—Each party shall have 

11 a vote in the selection of the arbitrator, who— 

12 ‘‘(i) unless otherwise agreed by the 

13 parties, shall be a member in good stand14 ing of the bar of the highest court of the 

15 State in which the hearing is to be held; 

16 ‘‘(ii) shall comply with the Code of 

17 Ethics for Arbitrators in Commercial Dis18 putes of the American Bar Association and 

19 the American Arbitration Association and 

20 any applicable code of ethics of any bar of 

21 which the arbitrator is a member; 

22 ‘‘(iii) shall have no— 

23 ‘‘(I) personal or financial interest 

24 in the results of the proceedings in 

25 which the arbitrator is appointed; or 


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1 ‘‘(II) relation to the underlying 

2 dispute or to the parties or their 

3 counsel that may create an appear4 ance of bias; and 

5 ‘‘(iv) prior to accepting appointment, 

6 shall disclose all information that might be 

7 relevant to neutrality (including service as 

8 an arbitrator or mediator in any past or 

9 pending case involving any of the parties 

10 or their representatives) or that may pre11 vent a prompt hearing. 

12 ‘‘(C) ADMINISTRATION.—The arbitration 

13 shall be administered by an independent, neu14 tral alternative dispute resolution organization 

15 to ensure fairness and neutrality and prevent ex 

16 parte communication between parties and the 

17 arbitrator. The arbitrator shall have reasonable 

18 discretion to conduct the proceeding in consid19 eration of the specific type of industry involved. 

20 ‘‘(3) APPLICABLE LAW.—In resolving a dispute, 

21 the arbitrator— 

22 ‘‘(A) shall be governed by the same sub23 stantive law that would apply under conflict of 

24 laws principles applicable in a court of the 

25 State in which the party that is not drafter of 


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1 the contract resided at the time the contract 

2 was entered into; and 

3 ‘‘(B) shall be empowered to grant whatever 

4 relief would be available in court under law or 

5 equity. 

6 ‘‘(4) REPRESENTATION.—Each party shall have 

7 the right to be represented by an attorney, or other 

8 representative as permitted by State law, at their 

9 own expense. 

10 ‘‘(5) HEARING.— 

11 ‘‘(A) IN GENERAL.—Each party shall be 

12 entitled to a fair arbitration hearing (referred 

13 to in this section as a ‘hearing’) with adequate 

14 notice and an opportunity to be heard. 

15 ‘‘(B) ELECTRONIC OR TELEPHONIC

16 MEANS.—Subject to subparagraph (C), in order 

17 to reduce cost, the arbitrator may hold a hear18 ing by electronic or telephonic means or by a 

19 submission of documents. 

20 ‘‘(C) FACE-TO-FACE MEETING.—Each 

21 party shall have the right to require a face-to22 face hearing, which hearing shall be held at a 

23 location that is reasonably convenient for the 

24 party who did not draft the contract unless in 

25 the interest of fairness the arbitrator deterVerDate Aug 31 2005 03:36 Apr 19, 2007 Jkt 059200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1135.IS S1135

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1 mines otherwise, in which case the arbitrator 

2 shall use the process described in section 1391 

3 of title 28, to determine the venue for the hear4 ing. 

5 ‘‘(6) EVIDENCE.—With respect to any hear6 ing— 

7 ‘‘(A) each party shall have the right to 

8 present evidence at the hearing and, for this 

9 purpose, each party shall grant access to all in10 formation reasonably relevant to the dispute to 

11 the other parties, subject to any applicable 

12 privilege or other limitation on discovery under 

13 applicable State law; 

14 ‘‘(B) consistent with the expedited nature 

15 of arbitration, relevant and necessary pre16 hearing depositions shall be available to each 

17 party at the direction of the arbitrator; and 

18 ‘‘(C) the arbitrator shall— 

19 ‘‘(i) make reasonable efforts to main20 tain the privacy of the hearing to the ex21 tent permitted by applicable State law; and 

22 ‘‘(ii) consider appropriate claims of 

23 privilege and confidentiality in addressing 

24 evidentiary issues. 


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1 ‘‘(7) CROSS EXAMINATION.—Each party shall 

2 have the right to cross examine witnesses presented 

3 by the other parties at a hearing. 

4 ‘‘(8) RECORD OF PROCEEDING.—Any party 

5 seeking a stenographic record of a hearing shall 

6 make arrangements directly with a stenographer and 

7 shall notify the other parties of these arrangements 

8 not less than 3 days before the date of the hearing. 

9 The requesting party shall pay the costs of obtaining 

10 the record. If the transcript is agreed by the parties, 

11 or determined by the arbitrator to be the official 

12 record of the proceeding, it shall be provided to the 

13 arbitrator and made available to the other parties 

14 for inspection, at a date, time, and place determined 

15 by the arbitrator. 

16 ‘‘(9) TIMELY RESOLUTION.— 

17 ‘‘(A) IN GENERAL.—Upon submission of a 

18 complaint by the claimant, the respondent shall 

19 have not more than 30 days to file an answer. 

20 ‘‘(B) EVIDENCE.—After the answer is filed 

21 by the respondent, the arbitrator shall direct 

22 each party to file documents and to provide evi23 dence in a timely manner so that the hearing 

24 may be held not later than 90 days after the 

25 date of the filing of the answer. 


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1 ‘‘(C) EXTENSIONS.—In extraordinary cir2 cumstances (including multiparty, multidistrict, 

3 or complex litigation) the arbitrator may grant 

4 a limited extension of the time limits under this 

5 paragraph, or the parties may agree to such an 

6 extension. 

7 ‘‘(D) DECISION.—The arbitrator shall no8 tify each party of its decision not later than 30 

9 days after the hearing. 

10 ‘‘(10) WRITTEN DECISION.—The arbitrator 

11 shall provide each party with a written explanation 

12 of the factual and legal basis for the decision. This 

13 written decision shall describe the application of an 

14 identified contract term, statute, or legal precedent. 

15 The decision of the arbitrator shall be subject to re16 view only as provided in subsection (c)(2) of this sec17 tion and sections 10, 11, and 16 of this title. 

18 ‘‘(11) EXPENSES.—The arbitrator or inde19 pendent arbitration administration organization, as 

20 applicable, shall have the authority to— 

21 ‘‘(A) provide for reimbursement of arbitra22 tion fees to the claimant, in whole or in part, 

23 as part of the remedy in accordance with appli24 cable law or in the interests of justice; and 


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1 ‘‘(B) waive, defer, or reduce any fee or 

2 charge due from the claimant in the event of 

3 extreme hardship. 

4 ‘‘(12) SMALL CLAIMS OPT OUT.— 

5 ‘‘(A) IN GENERAL.—Each party shall have 

6 the right to opt out of binding arbitration and 

7 to proceed in any small claims court with juris8 diction over the claim. For purposes of this 

9 paragraph, no court with jurisdiction to hear 

10 claims in excess of $50,000 shall be considered 

11 a small claims court. 

12 ‘‘(B) EXCEPTION.—If a complaint in small 

13 claims court is amended to exceed the lesser of 

14 the jurisdictional amount of that court or a 

15 claim for $50,000 in total damages, the small 

16 claims court exemption of this paragraph shall 

17 not apply and the parties shall proceed by arbi18 tration. 

19 ‘‘(c) DENIAL OF RIGHTS.— 

20 ‘‘(1) DENIAL OF RIGHTS BY PARTY MIS21 CONDUCT.— 

22 ‘‘(A) IN GENERAL.—At any time during an 

23 arbitration proceeding, any party may file a 

24 motion with the arbitrator asserting that anVerDate Aug 31 2005 03:36 Apr 19, 2007 Jkt 059200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1135.IS S1135

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1 other party has deprived the movant of a right 

2 granted by this section and seeking relief. 

3 ‘‘(B) AWARD BY ARBITRATOR.—If the ar4 bitrator determines that the movant has been 

5 deprived of a right granted by this section by 

6 another party, the arbitrator shall award the 

7 movant a monetary amount, which shall not ex8 ceed the reasonable expenses incurred by the 

9 movant in filing the motion, including attor10 neys’ fees, unless the arbitrator finds that— 

11 ‘‘(i) the motion was filed without the 

12 movant first making a good faith effort to 

13 obtain discovery or the realization of an14 other right granted by this section; 

15 ‘‘(ii) the opposing party’s nondisclo16 sure, failure to respond, response, or objec17 tion was substantially justified; or 

18 ‘‘(iii) the circumstances otherwise 

19 make an award of expenses unjust. 

20 ‘‘(2) DENIAL OF RIGHTS BY ARBITRATOR.— 

21 ‘‘(A) IN GENERAL.—A losing party in an 

22 arbitration proceeding may file a petition in the 

23 United States district court in the State in 

24 which the party that did not draft the contract 

25 resided at the time the contract was entered 


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1 into to assert that the arbitrator violated a 

2 right granted to the party by this section and 

3 to seek relief. 

4 ‘‘(B) REVIEW.—A United States district 

5 court may grant a petition filed under subpara6 graph (A) if the court finds clear and con7 vincing evidence that an action or omission of 

8 the arbitrator resulted in a deprivation of a 

9 right of the petitioner under this section that 

10 was not harmless. If such a finding is made, 

11 the court shall order a rehearing before a new 

12 arbitrator selected in the same manner as the 

13 original arbitrator as the exclusive judicial rem14 edy provided by this section. 

15 ‘‘(d) LIMITATION ON CLAIMS.—Except as otherwise 

16 expressly provided in this section, nothing in this section 

17 may be construed to be the basis for any claim in law 

18 or equity. 

19 ‘‘(e) DEFINITIONS.—In this section— 

20 ‘‘(1) the term ‘contract’ means a contract evi21 dencing a transaction involving commerce; and 

22 ‘‘(2) the term ‘State’ includes the District of 

23 Columbia, the Commonwealth of Puerto Rico, 

24 Guam, the Commonwealth of the Northern Mariana 

25 Islands, and the Virgin Islands.’’. 


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1 (b) TECHNICAL AND CONFORMING AMENDMENT.— 

2 The table of sections at the beginning of chapter 1 of title 

3 9, United States Code, is amended by adding at the end 

4 the following: 

‘‘17. Election of arbitration.’’. 

5 (c) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to any contract (as that term is 

7 defined in section 17 of title 9, United States Code, as 

8 added by this Act) entered into after the date that is 6 

9 months after the date of enactment of this Act. 

Æ 


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