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So Fairness in Arbitration Means 'No Arbitration'

The House Judiciary's subcommittee on commercial and administrative law will hold a hearing Tuesday on H.R. 6126, the "Fairness in Nursing Home Arbitration Act of 2008." (Hearing notice here.)

The CRS summary for the bill, introduced May 22, states: "Provides that a pre-dispute arbitration agreement between a long-term care facility and a resident (or anyone acting on the resident's behalf) shall not be valid or specifically enforceable." It's the companion bill to the Martinez-Kohl anti-arbitration measure, S. 2838.

The big picture is that the plaintiff's bar has embarked on a multifront campaign against arbitration; a May 1 letter to Congress from major business associations cited 13 separate bills where arbitration is under attack. From the letter:

If successful, these legislative efforts would retroactively declare unenforceable potentially millions of provisions for the orderly and economical resolution of disputes. Opponents of pre-dispute arbitration have neglected to realize that, if enacted, these provisions will actually limit the realistic opportunity for an average consumer, employee, and investor to obtain a remedy if a dispute arises. Evidence shows that arbitration can be very useful in the context of low-value claims. Studies show that plaintiffs' lawyers are reluctant to take cases involving relatively small claims because they seek larger potential attorneys' fees than would likely result from these cases. According to one survey, plaintiffs' employment lawyers said they would not take a case unless it was worth at least $60,000, on average. Therefore, without the option of arbitration, consumers would be faced with two choices--to try to navigate the legal system on their own, or to abandon their claim. The only real beneficiaries of these anti-arbitration provisions and bills would be class action lawyers who would benefit from both the rare blockbuster claim and the possibility of bringing more class action lawsuits--lawsuits that provide little benefit to class members while ensuring large payouts to class action attorneys.

The trial lawyers have made nursing homes the most prominent target in this broad assault, finding it a fruitful area for emotional pleas.

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.