Class Action Arbitrations - the Challenge for the Business Community

Abstract

Class actions in American civil courts had become routine, but a recent U.S. Supreme Court decision opened the way for claimants to pursue class or consolidated claims in arbitral forums within the United States. In general, arbitrators decide whether a contract containing an arbitration clause permits class arbitrations and whether applicable law allows such class claims. Few states attempt to preclude class arbitration entirely, and almost all arbitrators have construed arbitration clauses that are silent on the subject as implicitly allowing class arbitrations. When companies seek to bar class claims against them by including such prohibitions in standard arbitration clauses, a growing minority of states will refuse to enforce such prohibitions, finding them ‘unconscionable.’ The result is either that a claimant may pursue class claims in arbitration or that the entire arbitration clause fails and the claimant may pursue a class action in court. There are, however, some approaches that businesses may take to reduce the risks of confronting class claims in arbitration.