Fair Arbitration Act of 2011 - Requires a contract containing an arbitration clause, in order to be binding on the parties, to: (1) have a heading "ARBITRATION CLAUSE" printed in bold, capital letters; (2) state explicitly whether participation in arbitration is mandatory or optional; (3) identify a source that a consumer or employee can contact for additional information regarding the arbitration program; and (4) provide notice that all parties retain the right to resolve a dispute in a small claims court for a claim of $50,000 or less.
Entitles each party under arbitration to: (1) a competent, neutral arbitrator and independent, neutral administration of the dispute; (2) representation by an attorney or other representative at such party's expense; (3) a fair arbitration hearing; (4) a face-to-face hearing; (5) the right to present evidence and cross examine witnesses; (6) a written explanation of the basis for the arbitrator's decision; and (7) the right to opt out of binding arbitration and into the small claims court (for claims of $50,000 or less).
Prescribes procedures for complaints by any party of denial of rights by the other party or the arbitrator.
[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 1186 Introduced in Senate (IS)]
112th CONGRESS
1st Session
S. 1186
To amend chapter 1 of title 9, United States Code, to establish fair
procedures for arbitration clauses in contracts.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
June 13, 2011
Mr. Sessions 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, United States Code, to establish fair
procedures for arbitration clauses in contracts.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Fair Arbitration Act of 2011''.
SEC. 2. ELECTION OF ARBITRATION.
(a) In General.--Chapter 1 of title 9, United States Code, is
amended by adding at the end the following:
``Sec. 17. Election of arbitration
``(a) Fair Disclosure.--In order to be binding on the parties, a
contract containing an arbitration clause shall--
``(1) have a printed heading in bold, capital letters
entitled `arbitration clause', which heading shall be printed
in letters not smaller than \1/2\ inch in height;
``(2) explicitly state whether participation within the
arbitration program is mandatory or optional;
``(3) identify a source that a consumer or employee can
contact for additional information regarding--
``(A) costs and fees of the arbitration program;
and
``(B) all forms and procedures necessary for
effective participation in the arbitration program; and
``(4) provide notice that all parties retain the right to
resolve a dispute in a small claims court, as provided in
subsection (b)(12).
``(b) Procedural Rights.--
``(1) In general.--If a contract provides for the use of
arbitration to resolve a dispute arising out of or relating to
the contract, each party to the contract shall be afforded the
rights described in this subsection, in addition to any rights
provided by the contract.
``(2) Competence and neutrality of arbitrator and
administrative process.--
``(A) In general.--Each party to the dispute
(referred to in this section as a `party') shall be
entitled to a competent, neutral arbitrator and an
independent, neutral administration of the dispute.
``(B) Arbitrator.--Each party shall have a vote in
the selection of the arbitrator, who--
``(i) unless otherwise agreed by the
parties, shall be a member in good standing of
the bar of the highest court of the State in
which the hearing is to be held;
``(ii) shall comply with the Code of Ethics
for Arbitrators in Commercial Disputes of the
American Bar Association and the American
Arbitration Association and any applicable code
of ethics of any bar of which the arbitrator is
a member;
``(iii) shall have no--
``(I) personal or financial
interest in the results of the
proceedings in which the arbitrator is
appointed; or
``(II) relation to the underlying
dispute or to the parties or their
counsel that may create an appearance
of bias; and
``(iv) prior to accepting appointment,
shall disclose all information that might be
relevant to neutrality (including service as an
arbitrator or mediator in any past or pending
case involving any of the parties or their
representatives) or that may prevent a prompt
hearing.
``(C) Administration.--The arbitration shall be
administered by an independent, neutral alternative
dispute resolution organization to ensure fairness and
neutrality and prevent ex parte communication between
parties and the arbitrator. The arbitrator shall have
reasonable discretion to conduct the proceeding in
consideration of the specific type of industry
involved.
``(3) Applicable law.--In resolving a dispute, the
arbitrator--
``(A) shall be governed by the same substantive law
that would apply under conflict of laws principles
applicable in a court of the State in which the party
that is not drafter of the contract resided at the time
the contract was entered into; and
``(B) shall be empowered to grant whatever relief
would be available in court under law or equity.
``(4) Representation.--Each party shall have the right to
be represented by an attorney, or other representative as
permitted by State law, at their own expense.
``(5) Hearing.--
``(A) In general.--Each party shall be entitled to
a fair arbitration hearing (referred to in this section
as a `hearing') with adequate notice and an opportunity
to be heard.
``(B) Electronic or telephonic means.--Subject to
subparagraph (C), in order to reduce cost, the
arbitrator may hold a hearing by electronic or
telephonic means or by a submission of documents.
``(C) Face-to-face meeting.--Each party shall have
the right to require a face-to-face hearing, which
hearing shall be held at a location that is reasonably
convenient for the party who did not draft the contract
unless in the interest of fairness the arbitrator
determines otherwise, in which case the arbitrator
shall use the process described in section 1391 of
title 28, to determine the venue for the hearing.
``(6) Evidence.--With respect to any hearing--
``(A) each party shall have the right to present
evidence at the hearing and, for this purpose, each
party shall grant access to all information reasonably
relevant to the dispute to the other parties, subject
to any applicable privilege or other limitation on
discovery under applicable State law;
``(B) consistent with the expedited nature of
arbitration, relevant and necessary prehearing
depositions shall be available to each party at the
direction of the arbitrator; and
``(C) the arbitrator shall--
``(i) make reasonable efforts to maintain
the privacy of the hearing to the extent
permitted by applicable State law; and
``(ii) consider appropriate claims of
privilege and confidentiality in addressing
evidentiary issues.
``(7) Cross examination.--Each party shall have the right
to cross examine witnesses presented by the other parties at a
hearing.
``(8) Record of proceeding.--Any party seeking a
stenographic record of a hearing shall make arrangements
directly with a stenographer and shall notify the other parties
of these arrangements not less than 3 days before the date of
the hearing. The requesting party shall pay the costs of
obtaining the record. If the transcript is agreed by the
parties, or determined by the arbitrator to be the official
record of the proceeding, it shall be provided to the
arbitrator and made available to the other parties for
inspection, at a date, time, and place determined by the
arbitrator.
``(9) Timely resolution.--
``(A) In general.--Upon submission of a complaint
by the claimant, the respondent shall have not more
than 30 days to file an answer.
``(B) Evidence.--After the answer is filed by the
respondent, the arbitrator shall direct each party to
file documents and to provide evidence in a timely
manner so that the hearing may be held not later than
90 days after the date of the filing of the answer.
``(C) Extensions.--In extraordinary circumstances
(including multiparty, multidistrict, or complex
litigation) the arbitrator may grant a limited
extension of the time limits under this paragraph, or
the parties may agree to such an extension.
``(D) Decision.--The arbitrator shall notify each
party of its decision not later than 30 days after the
hearing.
``(10) Written decision.--The arbitrator shall provide each
party with a written explanation of the factual and legal basis
for the decision. This written decision shall describe the
application of an identified contract term, statute, or legal
precedent. The decision of the arbitrator shall be subject to
review only as provided in subsection (c)(2) of this section
and sections 10, 11, and 16 of this title.
``(11) Expenses.--The arbitrator or independent arbitration
administration organization, as applicable, shall have the
authority to--
``(A) provide for reimbursement of arbitration fees
to the claimant, in whole or in part, as part of the
remedy in accordance with applicable law or in the
interests of justice; and
``(B) waive, defer, or reduce any fee or charge due
from the claimant in the event of extreme hardship.
``(12) Small claims opt out.--
``(A) In general.--Each party shall have the right
to opt out of binding arbitration and to proceed in any
small claims court with jurisdiction over the claim.
For purposes of this paragraph, no court with
jurisdiction to hear claims in excess of $50,000 shall
be considered a small claims court.
``(B) Exception.--If a complaint in small claims
court is amended to exceed the lesser of the
jurisdictional amount of that court or a claim for
$50,000 in total damages, the small claims court
exemption of this paragraph shall not apply and the
parties shall proceed by arbitration.
``(c) Denial of Rights.--
``(1) Denial of rights by party misconduct.--
``(A) In general.--At any time during an
arbitration proceeding, any party may file a motion
with the arbitrator asserting that another party has
deprived the movant of a right granted by this section
and seeking relief.
``(B) Award by arbitrator.--If the arbitrator
determines that the movant has been deprived of a right
granted by this section by another party, the
arbitrator shall award the movant a monetary amount,
which shall not exceed the reasonable expenses incurred
by the movant in filing the motion, including
attorneys' fees, unless the arbitrator finds that--
``(i) the motion was filed without the
movant first making a good faith effort to
obtain discovery or the realization of another
right granted by this section;
``(ii) the opposing party's nondisclosure,
failure to respond, response, or objection was
substantially justified; or
``(iii) the circumstances otherwise make an
award of expenses unjust.
``(2) Denial of rights by arbitrator.--
``(A) In general.--A losing party in an arbitration
proceeding may file a petition in the United States
district court in the State in which the party that did
not draft the contract resided at the time the contract
was entered into to assert that the arbitrator violated
a right granted to the party by this section and to
seek relief.
``(B) Review.--A United States district court may
grant a petition filed under subparagraph (A) if the
court finds clear and convincing evidence that an
action or omission of the arbitrator resulted in a
deprivation of a right of the petitioner under this
section that was not harmless. If such a finding is
made, the court shall order a rehearing before a new
arbitrator selected in the same manner as the original
arbitrator as the exclusive judicial remedy provided by
this section.
``(d) Limitation on Claims.--Except as otherwise expressly provided
in this section, nothing in this section may be construed to be the
basis for any claim in law or equity.
``(e) Definitions.--In this section--
``(1) the term `contract' means a contract evidencing a
transaction involving commerce; and
``(2) the term `State' includes the District of Columbia,
the Commonwealth of Puerto Rico, Guam, the Commonwealth of the
Northern Mariana Islands, and the Virgin Islands.''.
(b) Technical and Conforming Amendment.--The table of sections at
the beginning of chapter 1 of title 9, United States Code, is amended
by adding at the end the following:
``17. Election of arbitration.''.
(c) Effective Date.--The amendments made by this section shall
apply to any contract (as that term is defined in section 17 of title
9, United States Code, as added by this Act) entered into after the
date that is 6 months after the date of enactment of this Act.
<all>
Introduced in Senate
Read twice and referred to the Committee on the Judiciary.
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