Arbitration

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The AT&T Arbitration Clause as a Replacement for Class Action

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Michael Springer:

Recently, the Supreme Court heard oral arguments in the suit between AT&T and Vincent and Liza Concepcion on whether the Federal Arbitration Act preempts California contract law. This case raises a policy issue that will not necessarily be answered by the Supreme Court: the efficacy of the class action lawsuit. While the class action definitely serves a significant purpose, there are other methods of solving the problem it seeks to address. In fact, the very arbitration clause the Supreme Court of California struck down as unconscionable can both serve the same function as a class action suit and do so in a manner that is arguably better for the consumer.

Class action suits serve two main functions. The class action allows plaintiffs to pursue a legal claim that they otherwise would not, and the class action provides incentives for companies to behave in socially desirable ways. The first of these functions, while ostensibly served, hardly carries weight in the world today.

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Injury or Deterrence: The End of Class-Action Litigation and Its Benefit to Consumers

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Jason Sherman

On November 8, The Wall Street Journal asked, “Is D-Day Approaching For Class-Actions Lawsuits?” The next day, the Supreme Court heard oral arguments for AT&T Mobility v. Concepcion. The lower courts held AT&T Mobility’s (“ATTM”) adhesion contract’s arbitration clause unconscionable because it prevented class actions through either litigation or arbitration. However, the Federal Arbitration Act, as argued by ATTM, may preempt the finding by the lower courts, ultimately allowing corporations to use “no class action” clauses to shield themselves from class action litigation or arbitration. The media has mostly predicted that the case will be resolved in favor of ATTM, and as Professor Brian Fitzpatrick said, “it could end class-action litigation in American as we know it.” Many believe this lack of access to class action will “have harmful public policy consequences” that “would cut off the only meaningful method to redress widespread discrimination, fraud, or other violations of the law.”

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FINRA Proposed Rule Change Would Give Customers Option of All-Public Arbitration Panels

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Barbara Black

Brokerage firms customarily include in their customers’ agreements a predispute arbitration agreement requiring that investors arbitrate their disputes before an arbitration panel of the Financial Industry Regulatory Authority (FINRA). Current rules governing customers’ claims over $100,000 require each three-person panel to include one non-public, or industry, arbitrator in addition to one public arbitrator and one chair-qualified public arbitrator. Investor advocates long have argued that the mandatory inclusion of an arbitrator with ties to the securities industry was unfair to investors and gave the securities industry one decision-maker who would be sympathetic to its position.

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