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Sunday, September 22, 2019

Republican AGs who railed against CFPB anti-arbitration rule, now on board with banning arbitration #MeToo

By Ann Maher | Feb 23, 2018

WASHINGTON - A group of Republican attorneys general who railed against an effort to outlaw arbitration clauses so that consumers could bring class actions against financial services companies now appear to be on board with legislation that would eliminate arbitration from workplace sexual harassment claims.

A coalition of 56 attorneys generals - about half of whom are Republicans - voiced support for a bill that would end arbitration agreements that mandate sexual harassment allegations be resolved through private arbitration rather than through the judicial process, in a letter to Congress Feb. 12. The AGs say the current process of handling claims in arbitration rather than in courts protects "serial violators" and gives inadequate relief to victims.

However, last August, a few months before the Senate narrowly defeated the Consumer Financial Protection Bureau's (CFPB) anti-arbitration rule, 16 Republican attorneys general urged Senate Leader McConnell to reject the CFPB anti-arbitration rule.


Patrick Morrisey of West Virginia, Alan Wilson of South Carolina, Steve Marshall of Alabama, Bill Schuette of Michigan, Leslie Rutledge of Arkansas, Josh Hawley of Missouri, Christopher Carr of Georgia, Tim Fox of Montana, Curtis Hill, Jr. of Indiana, Derek Schmidt of Kansas, Adam Laxalt of Nevada, Mike Hunter of Oklahoma, Jeff Landry of Lousiana, Ken Paxton of Texas, Sean Reyes of Utah and Brad Schimel of Wisconsin wrote that, among other things, the rule was flawed "because it completely ignores the public's interest in liberty of contract, is likely to result in a de facto ban on an efficient and simple dispute resolution for consumers and fails to recognize that arbitration helps to prevent or reduce backlogs in state and federal court dockets."

A year earlier, most of those same AGs - Morrissey, Laxalt, Rutledge, Schuette, Wilson, Paxton and Scott Pruitt of Oklahoma - wrote a letter to the CFPB saying the anti-arbitration rule should be withdrawn.

"The long-standing view of Congress and the Supreme Court is that arbitration benefits consumers," they wrote on Aug. 22, 2016.

The hard fought arbitration battle that pitted trial lawyers against the banking industry barely made it through the Senate last October with no Republican votes to spare.

But after the CFPB rule was overturned, Democrats and at least one Republican senator sought to eliminate arbitration agreements with respect to workplace sexual harassment amidst the #MeToo movement.

In December, U.S. Senators Lindsey Graham (R-South Carolina) and Kirsten Gillibrand (D-New York) introduced "Ending Forced Arbitration of Sexual Harassment Act of 2017," which would void agreements workers enter into with employers stipulating that sexual harassment claims will be dealt with in arbitration rather than in the courts. They cited sexual harassment claims of former TV news personality Gretchen Carlson who left the Fox News network in 2016 "after enduring years of sexual harassment," and who said, after settling her claims for $20 million, that "forced arbitration is a harasser’s best friend."

Graham was one of two Republican senators who voted against overturning the CFPB's anti-arbitration rule, along with Louisiana's John Kennedy..

The coalition of AGs says that "while there may be benefits to arbitration provisions in other contexts, they do not extend to sexual harassment claims. Victims of such serious misconduct should not be constrained to pursue relief from decision makers who are not trained as judges, are not qualified to act as courts of law, and are not positioned to ensure that such victims are accorded both procedural and substantive due process."

About a month after the CFPB's anti-arbitration rule was overturned, Carlson's issues were brought up at a legal reform hearing in the Senate Judiciary.

Senior executive counsel for the NFIB Small Business Legal Center Elizabeth Milito was asked about arbitration clauses in a combative exchange with then Sen. Al Franken, a month before he announced he was stepping down because of accusations he inappropriately touched women.

He asked Milito whether she thought arbitration clauses prevent victims from speaking out.

Milito responded that she could not speak to forced employment contracts because she did not now how widespread they are among the small businesses represented by NFIB.

After a testy exchange, Milito said that an employee has the right to take issues to an attorney.

As for the recent position taken by the coalition of attorneys general, MIlito said the NFIB has not taken a stand.

But she reiterated an NFIB position that arbitration agreements exist to allow employers and employees to settle disputes outside of court with a neutral and fair third-party arbiter.

"This enables all parties involved to have their issues resolved faster, confidentially, and at less of a cost," she said.

She also pointed to an NFIB amicus brief in Murphy Oil v. NLRB, pending before the U.S. Supreme Court. She said that in the brief, the NFIB argues that the National Labor Relations Board’s decision to consider voluntary arbitration agreements as a limitation of employees’ labor rights is a direct violation of a small business owner’s right under existing federal law to settle employment disputes outside of court.

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Organizations in this Story

Missouri Attorney General Josh Hawley The Office of Michigan Attorney General Bill Schuette The Office of South Carolina Attorney General Alan Wilson Virginia Attorney General's Office