Swanson's arbitration suit still making waves

John O'Brien Jul. 27, 2009, 3:42pm


MINNEAPOLIS (Legal Newsline) - The world of consumer arbitration continues to change after Minnesota Attorney General Lori Swanson's lawsuit against the National Arbitration Forum.

Swanson filed suit July 14 against the NAF, which settled six days because of what it called "mounting legal and legislative challenges." In addition, it announced it was suspending its consumer arbitration operations.

Now, the American Arbitration Association has announced it is doing the same, and a major credit card issuer said it is no longer taking its disputes to arbitration.

AAA senior vice president Richard Naimark testified before the Domestic Policy Subcommittee of the House Oversight and Government Reform Committee on Wednesday.

"Consumers deserve an alternative to litigation, but they also need to be able to trust that option. Our goal will be to achieve that trust," Naimark said after the hearing.

"We have been studying this issue for some time. We made our decision to impose a moratorium on administering consumer debt arbitration independently and not at the behest of any outside entity as has been claimed."

Swanson's lawsuit alleged NAF informs consumers that it is an impartial entity, while convincing credit card companies and lenders to insert arbitrarion clauses into their contracts and then appoint the Forum to handle the negotiating.

While Congress decides the fate of two pieces of legislation that would end mandatory arbitration clauses, the NAF said it no longer has the resources to "defend against increasing challenges to arbitration on all fronts, including from state attorneys general and the class action trial bar."

The U.S. Chamber Institute for Legal Reform, which owns Legal Newsline, said Swanson's politicization of her suit undermined the legitimacy of it. Swanson also testified before the same committee Naimark did last week.

"The timing of Swanson's public announcement, the sweeping nature of her public statements and her attempt to strong-arm other arbitration providers make clear that she is using her position as an elected official of a single state to play politics with consumer arbitrations nationwide," ILR President Lisa Rickard said.

"General Swanson's public statements emphasize first her political opposition to the concept of pre-dispute consumer arbitration agreements, even as her lawsuit and subsequent settlement were aimed at the specific conflict of interest allegations on the part of a single arbitration provider."

Rickard added that Swanson is using "anti-arbitration political rhetoric" that might be aimed at helping plaintiffs attorneys who would gather clients who can not turn to arbitration in disputes.

A report on creditcards.com says JPMorgan Chase will no longer send disputes to arbitrators.

"Chase seeks to provide excellent service with integrity and respect for our customers," Chase spokesman Paul Hartwick said, according to the report. "As a result of recent events, we are taking swift and appropriate action."

From Legal Newsline: Reach John O'Brien by e-mail at john@legalnewsline.com.

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