October 28, 2017

Trends in arbitration

Trends in arbitration

On October 24, 2017, the United States Senate, by a 51-50 vote, approved H.J.Res. 111 providing for congressional disapproval under Chapter 8 of Title 5, United States Code, of the rule submitted by Bureau of Consumer Financial Protection relating to "Arbitration Agreements." 

The Joint Resolution, in effect, nullified a rule adopted by the Consumer Financial Protection Bureau prohibiting banks from mandating that consumers resolve disputes with the bank through arbitration.

The Bureau's rule regulated the use of arbitration agreements in contracts for specific consumer financial products and services and prohibited "the use of a predispute arbitration agreement to prevent a consumer from filing or participating in certain class action suits." The rule also requires consumer financial product and service providers to furnish the CFPB with particular information regarding arbitrations."

In contrast, on October 26, 2017, a California appellate court handed down its decision in Baxter v. Genworth North America Corp., [California Courts of Appeals, First Appellate District, Docket Number A144244, ], sustaining a lower court's ruling that held that a employment agreement constituted  “procedural unconscionability.”

Genworth had acquired another company, AssetMark, and Maya Baxter, as a condition of continue employment by Genworth, was required to agree to resolving any dispute with Genworth through its "Resolve Employee Issue Resolution  Program," a four-step procedure culminating in arbitration of the matter[s].

Significantly, the court ruled that severing the offending provisions it found in Genworth's "Resolve Employee Issue Resolution  Program" was not an option because "the arbitration agreement is permeated by unconscionability."