Chapter 6 - § 6.4 • ARBITRATION OF STATUTORY CLAIMS — GENERALLY

• Jurisdiction: Colorado

§ 6.4 • ARBITRATION OF STATUTORY CLAIMS — GENERALLY

The statutes and common law exclude certain disputes from being arbitrated. A few examples are discussed below. See also §§ 4.3.9 and 7.5.

Some parties have asserted that an arbitration clause requiring statutorily created rights to be arbitrated is invalid, because, inter alia, administrative fees and arbitrators' fees must be paid but are not costs in litigation. The litigant asserts that these costs effectively deprive the party of his or her statutorily granted rights. In addition, since arbitration does not utilize a jury, some parties have asserted they are being deprived of a right to trial by jury. These concerns primarily have been in the labor and consumer areas, discussed above, and limitations on the arbitration costs to be borne by consumers and employees have developed.

FAA

Particularly when the statute creating a cause of action provides for the "right to sue," the issue arises as to whether such same or similar language prohibits enforcement of the arbitration agreement with respect to claims under the statute. For example, in CompuCredit Corp. v. Greenwood,²⁴ the statute provided, "You have a right to sue a credit repair organization that violates the Credit Repair Organization Act [CROA]." The U.S. Supreme Court held that that language did not preclude enforcement of an arbitration clause between the parties. The Court has stated that the FAA's mandate to enforce arbitration agreements, "[l]ike any statutory directive, . . . may be overridden by a contrary congressional command."²⁵

The courts have generally held that arbitration agreements encompassing statutory claims are enforceable under the FAA. Judge Roberts (now Chief Justice Roberts), sitting on the D.C. Circuit, defined the rules of arbitrating statutory claims in Booker v. Robert Half International, Inc.:²⁶

Statutory claims may be subject to agreements to arbitrate, so long as the agreement does not require the claimant to forgo substantive rights afforded under the statute.

. . .
[C]laims under anti-discrimination statutes may be subject to arbitration, so long as the claimant "effectively may vindicate [his or her] statutory cause of action in the arbitral forum."²⁷

Generally, there is a presumption that an arbitral forum is adequate to resolve statutory claims. However, that presumption "'falls apart . . . if the terms of [the] agreement actually prevent an individual from effectively vindicating his or her statutory rights.'"²⁸

Colorado federal district court judge Brooke Jackson defined the arbitrability of claims under the Fair Labor Standards Act.²⁹

• The Supreme Court recognizes that arbitration generally is a sufficient medium for resolving federal statutory claims, even those arising under a statute designed to further important social policies.³⁰
• However, the prospective litigant must be able to effectively vindicate its statutory claims — it must be an effective and accessible alternative forum.³¹
• The arbitration provision may not operate as a prospective waiver of a party's right to pursue statutory remedies.³²

Judge Jackson found that two provisions of arbitration clause were unenforceable.

• The fee-splitting provisions of the AAA incorporated commercial rules. The condition that the plaintiff bear the costs of providing experts, witnesses, and preparation and presentation of proofs would effectively preclude the plaintiff in her circumstances from pursuing her claim.³³
• The requirement that the plaintiff bear her non-attorney fees and costs even should she prevail is a prospective waiver of the statutory attorney fees remedy and undermines the statutory enforcement scheme, which may significantly chill the bringing of these claims. Arbitration agreements denying a civil rights plaintiff the right to attorney fees are presumptively void as a matter of public policy.

The court found the unenforceable provisions could not be severed (see § 5.5), and therefore declared the arbitration agreement unenforceable.³⁴

A 2008 U.S. Supreme Court decision said:

"By agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral . . . forum." Mitsubishi Motors Corp., 473 U.S., at 628, 105 S. Ct. 3346, 87 L. Ed. 2d 444. So here, Ferrer relinquishes no substantive rights . . . California law may accord him. But

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