Arbitration v. Civil Jury Trial

Arbitration agreements commonly inserted in consumer contracts do not disturb the Seventh Amendment right to a jury trial in suits at common law.

Judson Phillips, founder of Tea Party Nation, stumbles in arguing otherwise. (http://www.washingtontimes.com/news/2017/aug/29/7th-amendment-cfpb-arbitration/)

Mr. Phillips misleadingly asserts: “The Seventh Amendment of the U.S. Constitution guarantees Americans the right to a civil jury trial.”

In pertinent part, the Amendment provides that “In suits at common law…the right to trial by jury shall be preserved.” The United States Supreme Court has explained that a suit at common law is a suit that would have entitled a litigant to a jury trial under English common law in 1791 when the Seventh Amendment was ratified. That means maritime suits, suits against the government, or suits seeking equitable as opposed to legal relief such as injunctions may be tried without juries.

In addition, the Supreme Court has declared that the Seventh Amendment has no application to suits in state courts, which dwarf federal civil suits. In Hardware Dealers’ Mutual Fire Ins. Co. of Wisconsin v. Glidden Co. (1931), the Court declared in upholding a state arbitration statute: “The Fourteenth Amendment neither implies that all trials must be by jury, nor guarantees any particular form or method of state procedure.” The Federal Arbitration Act of 1925, moreover, specifically directs federal courts to enforce arbitration agreements in lieu of civil litigation. The United States Supreme Court has insisted on fastidious compliance with the FAA’s strong policy favoring arbitration, for example, Kindred Nursing Center, L.P. v. Clark (2017).

In sum, contrary to Mr. Phillips, the Seventh Amendment guarantee applies to only a tiny fraction of all civil cases. And even in those cases, the right can be displaced by arbitration enforceable under the FAA if the parties agree.

Mr. Phillips deplores the proliferation of arbitration agreements in consumer contracts that he maintains are inequitable and prejudicial. Undeterred by facts and law, he fumes that they violate the Constitution. He swoons over the Consumer Finance Protection Board’s (CFPB) prospective rule that would outlaw prohibitions on class actions in consumer finance contracts. But in doing so, Mr. Phillips shortchanges the Constitution that he professedly venerates.

Reasonable arguments can be marshalled in favor or against arbitration agreements. That is why the Constitution entrusts responsibility over arbitration to legislative bodies. Justice Oliver Wendell Holmes reminded in Missouri, Texas, and Kansas, Ry. v. May (1904):

“Great constitutional provisions must be administered with caution. Some play must be allowed for joints in the machine, and it must be remembered that legislatures are ultimate guardians of the liberties and welfare of the people in quite as great a degree as the courts.”

The United States Congress, by enacting the FAA, has established a national policy favoring arbitration over litigation. Nothing prevents Congress from re-examining, abolishing, or amending that policy in light of unforeseen circumstances or the lessons of experience. Members will be accountable to their constituents for their votes.

Mr. Phillips recognizes that his anti-arbitration arguments have no sway in Congress. But instead of searching for better arguments or redoubling his efforts to convince Congress—the constitutionally prescribe route for redressing grievances—Mr. Phillips latches onto the CFPB, an agency that has been declared unconstitutional by the United States Court of Appeals for the District of Columbia Circuit. The CFPB not only exercises legislative power delegated by Congress without standards or the fear of political retaliation at the ballot box, the agency also cannot be controlled by Congress through the power of the purse. It is funded by the Federal Reserve.

Mr. Phillips forgets that the Constitution is predominantly about process, not results; and, its cherished separation of powers is a structural bill of rights to protect the people from tyranny. Even assuming Mr. Phillips’ ends are laudable, they would not justify his unconstitutional means.

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