Note – Arbitration at the Tipping Point: Challenging Claim-Suppressing Arbitration Clauses
Volume 65, Issue 4, 1441-1468
If you have entered into a contract for goods or services with a corporation recently, then chances are that an arbitration clause governs any potential legal claims you may have arising from that contractual relationship. In theory, arbitration is a cheap and efficient way to assert claims and allows a claimant to avoid the backlogged court system. For consumers, however, arbitration has morphed into a dispute resolution system that is no longer a fair alternative to the courts. Two recent Supreme Court decisions have validated corporations’ use of the inequitable, claim-suppressing mechanism known as a class action arbitration waiver. The simple clause prevents claimants from forming groups to assert common claims and share costs in the arbitral proceeding. In practice, a corporation with an enforceable class action arbitration waiver will reap a windfall because an individual claimant will choose not to pursue a claim that will cost more to bring than she expects to recover. In court, the Federal Rules of Civil Procedure allow for class action lawsuits when individual claims would not be viable. Class action arbitration waivers eliminate the comparable mechanism in arbitration and provide corporations with a strong incentive to insert such clauses into contracts with consumers. This Note analyzes recent Supreme Court class arbitration precedent and considers potential challenges to these disadvantageous arbitration clauses.