The National Arbitration Forum has agreed to stop administering all consumer and employment arbitrations, Minnesota Attorney General Lori Swanson announced yesterday. The settlement is to take effect Friday, July 24, 2009.
The agreement settles a suit filed by Ms. Swanson on July 14, 2009, alleging that the NAF holds itself out to the public as a neutral party when, in fact, it has extensive ties to the collection industry. These allegations were denied by the NAF. The company will continue to administer arbitrations of Internet domain name disputes and other types of arbitrations that it is administering as of July 24, 2009.
Companies using arbitration should examine their arbitration provisions to see what administrators are designated. The NAF should be eliminated and replaced with the American Arbitration Association (AAA) and JAMS, the two other arbitration administrators with the ability to administer consumer and employee arbitrations on a nationwide basis. This should be done immediately for all new agreements and, to the extent permitted, all existing agreements. Under Section 5 of the Federal Arbitration Act, the court must appoint an arbitrator to replace the NAF if there is no other administrator named in the arbitration agreement. The Minnesota Attorney General has also sent a letter to the AAA demanding that it cease administering consumer arbitrations.
Ballard Spahr's Consumer Financial Services Group is nationally recognized for its guidance in structuring and documentation of new consumer financial services products, its significant experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs). For more information, please contact Alan S. Kaplinsky, 215.864.8544 or kaplinsky@ballardspahr.com; Mark J. Levin, 215. 864.8235 or levinm@ballardspahr.com.
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