UPDATED: The Aftermath: More on the Minn. AG-National Arbitration Forum Settlement; Neutrals Get 'Dear John' Letter (Web)
July 20, 2009
NEW UPDATE AT 4:40 PM EASTERN MONDAY 7/20: COMMENT BELOW FROM NAF--CEASING ADMINISTRATION, NOT DISMISSING PANELISTS
The Associated Press yesterday reported comments from Minnesota Attorney General Lori Swanson on the state’s settlement of consumer fraud charges with ADR provider National Arbitration Forum, in which NAF agreed to cease conducting consumer arbitrations.
Swanson, the AP reports in an article here, said that NAF worked “behind the scenes” with major credit card companies to get its name written into “unfair arbitration clauses” as the provider.
The AP also reports that Swanson will ask Congress to bar mandatory pre-dispute arbitration clauses in consumer contracts when she testifies at Wednesday's Washington, D.C., hearing on arbitration in front of the Domestic Policy Subcommittee of the House Oversight and Government Reform Committee.
Swanson's office has posted a press release on the settlement here.
Business Week , which has followed NAF after a cover story last year discussing the provider's marketing strategy, reports here that Swanson is sending a letter to the American Arbitration Association asking the nonprofit to exit the consumer credit card business too. (The Business Week story also includes a link to last year's feature on NAF practices.)
At the other end of the business-and-politics spectrum, Counterpunch today has posted a story trashing U.S. Supreme Court arbitration jurisprudence, citing in particular 2003's Green Tree Financial Corp.v. Bazzle, a case involving the viability of arbitration class actions, and which will be at issue before the Court this fall in Stolt-Nielsen S.A. et al. v. AnimalFeeds International Corp., No. 08-1198. (More on Stolt-Nielsen with links to the appeals court opinion here.)
The Wall Street Journal Law Blog just updated its coverage of the settlement, here.
CPR's first website article, linking to the complaint and the parties' settlement statements, can be found here.
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Meantime, NAF's David Schaibley, who is Director of Neutral Services, today has sent a Dear John letter to the company's neutrals announcing the settlement, and telling the consumer matter people that their roster days are numbered.
Some of the neutrals will maintain their contract work with the provider in the areas for which NAF will still provide arbitration services--specifically, according to the Minnesota Attorney General's settlement press release, Internet domain name disputes; New Jersey personal injury protection matters in auto insurance cases, known as PIP claims; and U.S. Department of Transprotation-administered cargo claims.
A map with the state-by-state distribution of the total number of neutrals NAF has employed in all of its service areas is still posted at this page.
Here is the text of Schaibley's letter:
I am following up to inform you of further developments related to the Attorney General action described in my email message from last week. Through settlement discussions that took place this past weekend, the FORUM has made the difficult decision to exit the consumer arbitration field. We do so voluntarily and with the full confidence that our system of dispute resolution--with you as independent arbitrators--was completely fair and unbiased. We also seek to explain that during nearly a year of voluntarily providing the Attorney General's office with thousands of documents related to her investigation, her complaint contained no allegations that either our system of dispute resolution, or your decision making, were in anyway biased. A further explanation may be found through our public statement . . . on this matter.
The FORUM is presently initiating the process by which it will wrap up its administration of consumer cases, with the result being an immediate diminution and relatively prompt cessation of the appointment of consumer cases to our panel of neutrals. We greatly appreciate your years of professional service to the FORUM and to public justice. And we look forward to pursuing remaining business lines (including personal injury/insurance, domain disputes, and moving and storage matters) and new business opportunities, which may call for a continued business relationship with many of you.
It has been a genuine pleasure to get to know so many of you on a personal and professional level.
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UPDATE: At 4:40 Eastern, Forum's Christina Doucet of NAF sent the following reply to a query concerning the removal of neutrals from its panels in light of the SchaIbley letter. She responds:
[The] Forum is ceasing its administration of consumer matters due to the ever-increasing litigation costs associated with that business. The FORUM is not dismissing any neutrals from its panel.
---Russ Bleemer, Editor, Alternatives