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Fixing Arbitration Just Took a Huge Step Forward

December 13, 2016
Colson Hicks Eidson

Do you remember what forced arbitration is? It’s when a company sneaks a clause into a contract that actually strips you of your right to take it to court. If you sign such a contract, then you would be forced to go to arbitration if you are wronged by the company you signed on with. This kind of clause has been slipped into cellphone contracts, employment contracts and even nursing home contracts. However, a federal lawsuit could change how forced arbitration works, and it all starts with investments.

Is Fixing Arbitration Possible?

You see, Texas is suing the U.S. Department of Labor (DoL) over new fiduciary rules. These rules would force financial advisors to make recommendations in the interest of their clients, and it would force individual insurance agents to become registered investment advisors. But the rules would also prohibit financial advisors from using forced arbitration clauses to keep investors from suing them. Some argue that this will violate the Federal Arbitration Act, but the American Association for Justice thinks otherwise.

The AAJ recently submitted an amicus briefing to the judge in charge of this federal case. According to the President of the AAJ—Colson Hicks Eidson partner Julie Braman Kane—this brief points out that the Federal Arbitration Act doesn’t give financial advisors the right to use forced arbitration in all circumstances. This means that federal agencies like the DoL should have the right to regulate arbitration to protect people’s statutory rights.

This amicus briefing was one of only two that were not dismissed when the judge denied several others filed with the court. This could be great news for Americans! It means that if the DoL’s rules are approved, then federal agencies will have the power to regulate when arbitration can and can’t be used.

This could keep corporations from turning arbitration into their own personal puppet court, and it could help protect your constitutional freedoms. Do you think the Department of Labor’s fiduciary rules should be upheld? Do you think this will be the first step in controlling corporate greed? Tell us what you think on Facebook and Twitter, and don’t forget to keep following our blog for even more updates on the AAJ’s quest to protect your rights.