Introduction
There is a widespread practice today, in sales, credit, employment,
health care and other agreements, to require individuals to waive important
legal rights and remedies. Mandatory arbitration clauses often contain
such waivers, as do other provisions in standard form contracts. See NCLC’s
Consumer and Media Alert:
Mandatory Arbitration Clauses Devastating Consumer Rights.
Citizens and state legislators are quite concerned about these practices,
but there is an incorrect perception that states can do little about this
because of the preemptive effect of the Federal Arbitration Act and other
federal law.
This NCLC model law avoids such preemption and significantly limits
abuses in this area. The model demonstrates that states have broad authority
to regulate such abuses, despite the preemptive effect of the Federal
Arbitration Act (FAA).
The model may be particularly timely, because a number of states are
considering enacting a Revised Uniform Arbitration Act (RUAA). The RUAA
provides none of the safeguards offered by the NCLC model. For example,
the RUAA actually prohibits consolidation of claims if the agreement prohibits
consolidation, while the NCLC model takes the opposite approach, and limits
pre-dispute waivers of the ability to proceed on a class-wide basis.
The NCLC model is designed as five separate laws, and each can stand
independently or be combined into a broader law. These five laws are set
out below, with a brief commentary following each model.
Those wishing to explore these issues in more depth with NCLC should
contact Steve Tripoli (stripoli@nclc.org)
or Jon Sheldon (jsheldon@nclc.org)
at NCLC’s Boston office, 617-542-8010. In addition, a detailed analysis
as to the interrelationship of the Federal Arbitration Act and state law
is found at NCLC’s Consumer
Arbitration Agreements (2d ed. 2002). |
and NCLC