As part of ongoing faculty development efforts, Professor Stephen Friedman presented a talk entitled Protecting Consumers from Arbitration Clauses in Cyberspace on Thursday February 14th. Professor Friedman argued that the Federal Arbitration Act of 1925 should not govern online transactions as it does other interstate commerce transactions, but rather that state laws should govern online transactions.
Professor Friedman opened with a look at how the Federal Arbitration Act of 1925 and the Electronic Signatures in Global and National Commerce Act (ESIGN) of 2000 are currently viewed as the precedents that govern online consumer agreements. He also examined some of the court cases used to expand the Federal Arbitration Act’s scope. This expansion of scope pulled more and more cases under federal jurisdiction, and if electronic signatures or contracts are found to meet the Federal Arbitration Act’s written requirement, all online consumer transactions occurring across state lines would also fall under federal jurisdiction. Professor Friedman eloquently argued that state governments having the authority to decide upon their own regulations would ultimately better serve consumers.
Indicating that he would urge Congress to clearly carve the Federal Arbitration Act out of ESIGN’s coverage, Professor Friedman noted, “Online consumer contracts are to 2008 as oral contracts are to 1925.” Pressed to offer a solution rather than a condemnation of the current methodology, he responded, “I’m not here to provide solutions, but to argue that states should have the right to make the decisions,” before adding that he felt that by allowing different states to experiment with different statutes, a proper solution could be found.