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What if pre-dispute consumer arbitration clauses were entirely forbidden?

What if pre-dispute consumer arbitration clauses were entirely forbidden?. Thinking the unthinkable…. Hilary B. Miller Payday Loan Bar Association November 14, 2008. Issue: multiple paths to disaster. Proposed legislation to amend the FAA

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What if pre-dispute consumer arbitration clauses were entirely forbidden?

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  1. What if pre-dispute consumer arbitration clauses were entirely forbidden? Thinking the unthinkable… Hilary B. Miller Payday Loan Bar Association November 14, 2008

  2. Issue: multiple paths to disaster Proposed legislation to amend the FAA State common-law defenses based on principles of contract law (unconscionability, etc.; e.g., Szetela) Agency rulemaking (e.g., FNMA) State statutory enactments determining class-action waivers to be unconscionable Changes in S.Ct. composition Hilary B. Miller - November 14, 2008

  3. Consequences of unenforceability Class actions will proceed Risk of class arbitration Jury trial No matter what, protracted litigation over procedural matters Hilary B. Miller - November 14, 2008

  4. Objective: avoid class treatment Sidestep risk of bet-the-company litigation Minimize incentives for plaintiffs’ class bar Address problems one at a time Hilary B. Miller - November 14, 2008

  5. Avoiding disputes altogether • The best dispute resolution mechanism is the one that is complete before the customer has consulted counsel • Solve the problem at lowest-cost opportunity • Retain the customer • Minimize viral spread • Adopt a “customer satisfaction guaranty” • Ensure that customers know about it • Put teeth in it • Empower CSRs and front-line managers Hilary B. Miller - November 14, 2008

  6. Okay, but what about class actions after No-A Day? • Drafting opportunities to create enforceable pre-suit settlement opportunities: • Notice-and-opportunity-to-cure clauses • Contractual “offer of judgment” provisions • Mandatory mediation with plaintiff in person • Drafting opportunities to create post-suit benefits: • Waiver of trial by jury • In states that allow, submission to simplified dispute resolution (e.g., CPLR) • Bump-up clause/attorneys’ fees Hilary B. Miller - November 14, 2008

  7. Making it enforceable • Disclosure • Make it a bargained-for deal term • Pay the customer/offer a reduced price if customer will agree to your pre-dispute dispute-resolution program • Allow the customer a bona fide choice at the time of contracting (not post-transaction opt-out) • Contract with respect to favorable state law, if possible Hilary B. Miller - November 14, 2008

  8. It’s not too soonto modify your forms Anticipate No-A Day arrival in next year Some post-No-A-Day lawsuits will relate to previous putative misconduct Forms in use now must anticipate that they will be the basis of post-No-A-Day disputes Suggested steps are compatible with existing class-action waivers and arbitration clauses Hilary B. Miller - November 14, 2008

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