A bill to amend chapter 1 of title 9 of United States Code with respect to arbitration.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Arbitration Fairness Act of 2007''.

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) The Federal Arbitration Act (now enacted as chapter 1 
        of title 9 of the United States Code) was intended to apply to 
        disputes between commercial entities of generally similar 
        sophistication and bargaining power.
            (2) A series of United States Supreme Court decisions have 
        changed the meaning of the Act so that it now extends to 
        disputes between parties of greatly disparate economic power, 
        such as consumer disputes and employment disputes. As a result, 
        a large and rapidly growing number of corporations are 
        requiring millions of consumers and employees to give up their 
        right to have disputes resolved by a judge or jury, and instead 
        submit their claims to binding arbitration.
            (3) Most consumers and employees have little or no 
        meaningful option whether to submit their claims to 
        arbitration. Few people realize, or understand the importance 
        of the deliberately fine print that strips them of rights; and 
        because entire industries are adopting these clauses, people 
        increasingly have no choice but to accept them. They must often 
        give up their rights as a condition of having a job, getting 
        necessary medical care, buying a car, opening a bank account, 
        getting a credit card, and the like. Often times, they are not 
        even aware that they have given up their rights.
            (4) Private arbitration companies are sometimes under great 
        pressure to devise systems that favor the corporate repeat 
        players who decide whether those companies will receive their 
        lucrative business.
            (5) Mandatory arbitration undermines the development of 
        public law for civil rights and consumer rights, because there 
        is no meaningful judicial review of arbitrators' decisions. 
        With the knowledge that their rulings will not be seriously 
        examined by a court applying current law, arbitrators enjoy 
        near complete freedom to ignore the law and even their own 
        rules.
            (6) Mandatory arbitration is a poor system for protecting 
        civil rights and consumer rights because it is not transparent. 
        While the American civil justice system features publicly 
        accountable decision makers who generally issue written 
        decisions that are widely available to the public, arbitration 
        offers none of these features.
            (7) Many corporations add to their arbitration clauses 
        unfair provisions that deliberately tilt the systems against 
        individuals, including provisions that strip individuals of 
        substantive statutory rights, ban class actions, and force 
        people to arbitrate their claims hundreds of miles from their 
        homes. While some courts have been protective of individuals, 
        too many courts have upheld even egregiously unfair mandatory 
        arbitration clauses in deference to a supposed Federal policy 
        favoring arbitration over the constitutional rights of 
        individuals.

SEC. 3. DEFINITIONS.

    Section 1 of title 9, United States Code, is amended--
            (1) by amending the heading to read as follows:
``Sec. 1. Definitions'';
            (2) by inserting before ```Maritime''' the following:
        ``As used in this chapter--'';
            (3) by striking ```Maritime transactions''' and inserting 
        the following:
            ``(1) `maritime transactions';'';
            (4) by striking ``commerce'' and inserting the following:
            ``(2) `commerce''';
            (5) by striking ``, but nothing'' and all that follows 
        through the period at the end, and inserting a semicolon; and
            (6) by adding at the end the following:
            ``(3) `employment dispute', as herein defined, means a 
        dispute between an employer and employee arising out of the 
        relationship of employer and employee as defined by the Fair 
        Labor Standards Act;
            ``(4) `consumer dispute', as herein defined, means a 
        dispute between a person other than an organization who seeks 
        or acquires real or personal property, services, money, or 
        credit for personal, family, or household purposes and the 
        seller or provider of such property, services, money, or 
        credit;
            ``(5) `franchise dispute', as herein defined, means a 
        dispute between a franchisor and franchisee arising out of or 
        relating to contract or agreement by which--
                    ``(A) a franchisee is granted the right to engage 
                in the business of offering, selling, or distributing 
                goods or services under a marketing plan or system 
                prescribed in substantial part by a franchisor;
                    ``(B) the operation of the franchisee's business 
                pursuant to such plan or system is substantially 
                associated with the franchisor's trademark, service 
                mark, trade name, logotype, advertising, or other 
                commercial symbol designating the franchisor or its 
                affiliate; and
                    ``(C) the franchisee is required to pay, directly 
                or indirectly, a franchise fee; and
            ``(6) `pre-dispute arbitration agreement', as herein 
        defined, means any agreement to arbitrate disputes that had not 
        yet arisen at the time of the making of the agreement.''.

SEC. 4. VALIDITY AND ENFORCEABILITY.

    Section 2 of title 9, United States Code, is amended--
            (1) by amending the heading to read as follows:
``Sec. 2. Validity and enforceability'',
            (2) by inserting ``(a)'' before ``A written'';
            (3) by striking ``, save'' and all that follows through 
        ``contract'', and inserting ``to the same extent as contracts 
        generally, except as otherwise provided in this title''; and
            (4) by adding at the end the following:
    ``(b) 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.
    ``(c) An issue as to whether this chapter applies to an arbitration 
agreement shall be determined by Federal law. Except as otherwise 
provided in this chapter, the validity or enforceability of an 
agreement to arbitrate shall be determined by the court, rather than 
the arbitrator, irrespective of whether the party resisting arbitration 
challenges the arbitration agreement specifically or in conjunction 
with other terms of the contract containing such agreement.
    ``(d) Nothing in this chapter shall apply to any arbitration 
provision in a collective bargaining agreement.''.

SEC. 5. EFFECTIVE DATE.

    This Act, and the amendments made by this Act, shall take effect on 
the date of the enactment of this Act and shall apply with respect to 
any dispute or claim that arises on or after such date.

Summary: Arbitration Fairness Act of 2007 - Declares 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.

Declares, further, that the validity or enforceability of an agreement to arbitrate shall be determined by a court, under federal law, rather than an arbitrator, irrespective of whether the party resisting arbitration challenges the arbitration agreement specifically or in conjunction with other terms of the contract containing such agreement.

Exempts arbitration provisions in collective bargaining agreements from this Act.