Yesterday, the U.S. Supreme Court in a 5-4 decision endorsed the enforceability of class arbitration waivers, which businesses may enter into before any dispute arises to protect themselves from consumer and employment class actions. AT&T Mobility v. Concepcion, No. 09-893 (April 27, 2011). While the plaintiffs’ bar undoubtedly is already dreaming up ways to evade Concepcion, the impact of this decision should be major.
Class arbitration waivers are designed for consumers, employees, or others to commit to pursue any future claims only through binding arbitration (as opposed to in court) and only on an individual basis (as opposed to as part of a class). In other words, by signing a consumer contract or other agreement containing a class arbitration waiver, an individual is agreeing not to pursue a class action either in court or in arbitration. Prior to yesterday, the enforceability of such waivers was frequently challenged, with the plaintiffs’ bar arguing that some claims can only effectively be pursued on a class basis. In light of the Supreme Court’s holding in Concepcion, businesses should consider implementing an arbitration program or refining their existing programs in order to protect themselves from future class claims. Legal guidance should be obtained in the design, communication, and implementation of such programs so as to maximize their chances of enforceability.
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