It’s no secret that the Trump administration wants to “deconstruct” the administrative state, in part by refusing to enforce federal laws designed to protect workers and the environment. This is happening at the same time that corporations are pushing more and more ordinary Americans into forced arbitration, limiting their ability to file lawsuits to vindicate their rights. With the federal government unwilling to enforce the law and private parties unable to do so, ordinary Americans are caught in a pincer between these two trends.
But there’s another option: states. State governments that have the political will have several tools they can use to enforce federal laws when the Trump administration doesn’t.
The enforcement crisis is rooted in the spread of arbitration beyond business-to-business cases. Historically, arbitration was used to resolve commercial disputes between businesses that negotiated on more-or-less equal footing. But over the past few decades, corporations have begun inserting forced arbitration clauses into contracts that individuals do not — and often cannot — freely negotiate. These arbitration clauses, which are now ubiquitous in consumer and employment contracts, force people into confidential individual arbitrations that may not provide the same due process as the courts.
And the damage doesn’t stop there. Forced arbitration interferes with state and federal regulation and can allow bad actors to bury evidence of wrongdoing. Because arbitration is designed for secrecy, measuring these problems is tricky. But the #MeToo movement has shined a light on sexual harassment cases — many of which were shielded from scrutiny using arbitration — and a growing list of examples suggests that people’s rights are systematically unprotected.
Arbitration supporters respond that this shouldn’t bother us because federal agencies stand ready to enforce the law when there are violations. But that assumes agencies will enforce the law vigorously, and the reality under Trump is nearly the opposite. Consider Mick Mulvaney’s tenure as acting director of the Consumer Financial Protection Bureau. After Mulvaney promised to focus the agency on its core priorities, the CFPB essentially stopped policing predatory payday lenders.
Forced arbitration and agency sabotage mean that crucial federal laws — particularly those that protect consumers, employees and debtors — are going unenforced. While states generally cannot force the federal government to enforce federal law, they can resist nonenforcement if they think creatively.
To start, states can file many of the lawsuits the Trump administration is not bringing. For example, the 2010 Dodd-Frank financial reform law authorizes states to enforce the law’s prohibition on unfair, deceptive or abusive practices; its rules on mortgage lending; various regulations issued by the CFPB; and related statutes, such as the Truth in Lending Act. The Fair Housing Act authorizes states to bring actions against predatory lenders that target minority communities for dangerous loans. Antitrust, consumer protection, and environmental statutes authorize state attorneys general to serve as plaintiffs. States’ authority to enforce federal law is not unlimited. For example, Dodd-Frank does not allow a state regulator to bring certain actions against national banks. But state lawsuits could pick up much of the slack from somnolent federal agencies.
IF STATES CAN bring these suits, what’s stopping them? You might think the answer is that states would also be forced into arbitration, but not so: Because state governments are not a party to the contracts, there is no contractual basis to force them to arbitrate.
It turns out the barriers are more practical than legal. State attorneys general traditionally have had smaller budgets and have paid employees less than their federal counterpart. As California recognized, state AGs need more resources and better protections for independent decision-making to do the work of federal agencies. Meanwhile, law schools like the ones at which we teach need to ensure their graduates see working in state AG offices as a career path that allows them to serve the public interest while acquiring much-needed skills. And voters need to hold their elected AGs accountable for their record on enforcing laws that are otherwise going unenforced.
Of course, states are often reluctant to increase spending and raise taxes to pay for it. But there are options here as well. For example, if a state wants to increase enforcement without increasing public funding for state agencies, it can follow California’s lead and authorize private citizens to file lawsuits on behalf of the state through a “private attorney general” statute. These statutes build on an ancient procedure known as “qui tam” that allows private citizens to sue in the name of the king. The plaintiff gets a share of the recovery, creating a powerful incentive for people who know of wrongdoing to file suit. Because plaintiffs — or more accurately, their attorneys — pay the costs of litigation, the statutes increase enforcement resources without new taxes. And these suits — like those brought by a state AG — can potentially skirt forced arbitration clauses.
Yet despite their potential, only California has adopted a private attorney general statute, and it applies only to labor claims. Most likely, this reflects the fact that states traditionally counted on federal agencies and private lawsuits to provide an adequate level of enforcement — a position that is becoming less tenable by the day. There is also a more cynical interpretation: The same corporations that require arbitration also donate to state legislative races, so the lack of state legislation might be the product of corporate influence. Again, progress requires voters caring about enforcement and holding their elected officials to account.
The one-two punch of bureaucratic sabotage and forced arbitration has weakened the enforcement of critical federal laws. With the federal government unwilling to enforce the law and private parties unable to do so, it is time for states to step up.
Zachary D. Clopton is a law professor at Cornell Law School. David L. Noll is a law professor at Rutgers Law School.