II 

110TH CONGRESS 

1ST SESSION S. 1782 

To amend chapter 1 of title 9 of United States Code with respect to 

arbitration. 

IN THE SENATE OF THE UNITED STATES 

JULY 12, 2007 

Mr. FEINGOLD (for himself and Mr. DURBIN) 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 of United States Code with 

respect to arbitration. 

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 ‘‘Arbitration Fairness 

5 Act of 2007’’. 

6 SEC. 2. FINDINGS. 

7 The Congress finds the following: 

8 (1) The Federal Arbitration Act (now enacted 

9 as chapter 1 of title 9 of the United States Code) 

10 was intended to apply to disputes between commerVerDate Aug 31 2005 20:27 Jul 14, 2007 Jkt 059200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1782.IS S1782

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1 cial entities of generally similar sophistication and 

2 bargaining power. 

3 (2) A series of United States Supreme Court 

4 decisions have changed the meaning of the Act so 

5 that it now extends to disputes between parties of 

6 greatly disparate economic power, such as consumer 

7 disputes and employment disputes. As a result, a 

8 large and rapidly growing number of corporations 

9 are requiring millions of consumers and employees 

10 to give up their right to have disputes resolved by 

11 a judge or jury, and instead submit their claims to 

12 binding arbitration. 

13 (3) Most consumers and employees have little 

14 or no meaningful option whether to submit their 

15 claims to arbitration. Few people realize, or under16 stand the importance of the deliberately fine print 

17 that strips them of rights; and because entire indus18 tries are adopting these clauses, people increasingly 

19 have no choice but to accept them. They must often 

20 give up their rights as a condition of having a job, 

21 getting necessary medical care, buying a car, open22 ing a bank account, getting a credit card, and the 

23 like. Often times, they are not even aware that they 

24 have given up their rights. 


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1 (4) Private arbitration companies are some2 times under great pressure to devise systems that 

3 favor the corporate repeat players who decide wheth4 er those companies will receive their lucrative busi5 ness. 

6 (5) Mandatory arbitration undermines the de7 velopment of public law for civil rights and consumer 

8 rights, because there is no meaningful judicial review 

9 of arbitrators’ decisions. With the knowledge that 

10 their rulings will not be seriously examined by a 

11 court applying current law, arbitrators enjoy near 

12 complete freedom to ignore the law and even their 

13 own rules. 

14 (6) Mandatory arbitration is a poor system for 

15 protecting civil rights and consumer rights because 

16 it is not transparent. While the American civil jus17 tice system features publicly accountable decision 

18 makers who generally issue written decisions that 

19 are widely available to the public, arbitration offers 

20 none of these features. 

21 (7) Many corporations add to their arbitration 

22 clauses unfair provisions that deliberately tilt the 

23 systems against individuals, including provisions 

24 that strip individuals of substantive statutory rights, 

25 ban class actions, and force people to arbitrate their 


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1 claims hundreds of miles from their homes. While 

2 some courts have been protective of individuals, too 

3 many courts have upheld even egregiously unfair 

4 mandatory arbitration clauses in deference to a sup5 posed Federal policy favoring arbitration over the 

6 constitutional rights of individuals. 

7 SEC. 3. DEFINITIONS. 

8 Section 1 of title 9, United States Code, is amend9 ed— 

10 (1) by amending the heading to read as follows: 

11 ‘‘§ 1. Definitions’’; 

12 (2) by inserting before ‘‘ ‘Maritime’ ’’ the fol13 lowing: 

14 ‘‘As used in this chapter—’’; 

15 (3) by striking ‘‘ ‘Maritime transactions’ ’’ and 

16 inserting the following: 

17 ‘‘(1) ‘maritime transactions’;’’; 

18 (4) by striking ‘‘commerce’’ and inserting the 

19 following: 

20 ‘‘(2) ‘commerce’ ’’; 

21 (5) by striking ‘‘, but nothing’’ and all that fol22 lows through the period at the end, and inserting a 

23 semicolon; and 

24 (6) by adding at the end the following: 


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1 ‘‘(3) ‘employment dispute’, as herein defined, 

2 means a dispute between an employer and employee 

3 arising out of the relationship of employer and em4 ployee as defined by the Fair Labor Standards Act; 

5 ‘‘(4) ‘consumer dispute’, as herein defined, 

6 means a dispute between a person other than an or7 ganization who seeks or acquires real or personal 

8 property, services, money, or credit for personal, 

9 family, or household purposes and the seller or pro10 vider of such property, services, money, or credit; 

11 ‘‘(5) ‘franchise dispute’, as herein defined, 

12 means a dispute between a franchisor and franchisee 

13 arising out of or relating to contract or agreement 

14 by which— 

15 ‘‘(A) a franchisee is granted the right to 

16 engage in the business of offering, selling, or 

17 distributing goods or services under a mar18 keting plan or system prescribed in substantial 

19 part by a franchisor; 

20 ‘‘(B) the operation of the franchisee’s busi21 ness pursuant to such plan or system is sub22 stantially associated with the franchisor’s trade23 mark, service mark, trade name, logotype, ad24 vertising, or other commercial symbol desig25 nating the franchisor or its affiliate; and 


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1 ‘‘(C) the franchisee is required to pay, di2 rectly or indirectly, a franchise fee; and 

3 ‘‘(6) ‘pre-dispute arbitration agreement’, as 

4 herein defined, means any agreement to arbitrate 

5 disputes that had not yet arisen at the time of the 

6 making of the agreement.’’. 

7 SEC. 4. VALIDITY AND ENFORCEABILITY. 

8 Section 2 of title 9, United States Code, is amend9 ed— 

10 (1) by amending the heading to read as follows: 

11 ‘‘§ 2. Validity and enforceability’’, 

12 (2) by inserting ‘‘(a)’’ before ‘‘A written’’; 

13 (3) by striking ‘‘, save’’ and all that follows 

14 through ‘‘contract’’, and inserting ‘‘to the same ex15 tent as contracts generally, except as otherwise pro16 vided in this title’’; and 

17 (4) by adding at the end the following: 

18 ‘‘(b) No predispute arbitration agreement shall be 

19 valid or enforceable if it requires arbitration of— 

20 ‘‘(1) an employment, consumer, or franchise 

21 dispute; or 

22 ‘‘(2) a dispute arising under any statute in23 tended to protect civil rights or to regulate contracts 

24 or transactions between parties of unequal bar25 gaining power. 


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1 ‘‘(c) An issue as to whether this chapter applies to 

2 an arbitration agreement shall be determined by Federal 

3 law. Except as otherwise provided in this chapter, the va4 lidity or enforceability of an agreement to arbitrate shall 

5 be determined by the court, rather than the arbitrator, 

6 irrespective of whether the party resisting arbitration chal7 lenges the arbitration agreement specifically or in conjunc8 tion with other terms of the contract containing such 

9 agreement. 

10 ‘‘(d) Nothing in this chapter shall apply to any arbi11 tration provision in a collective bargaining agreement.’’. 

12 SEC. 5. EFFECTIVE DATE. 

13 This Act, and the amendments made by this Act, 

14 shall take effect on the date of the enactment of this Act 

15 and shall apply with respect to any dispute or claim that 

16 arises on or after such date. 

Æ 


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