Class Action Litigation -- Helping your business avoid or minimize the risk of exposure

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A couple of novel tools are becoming increasingly available under Washington state and federal law, enabling businesses to reduce exposure to class and/or collective action litigation. Specifically, courts are more likely to enforce arbitration agreements, including provisions that waive one’s ability to pursue class and/ or collective actions. Therefore, a claimant would be limited to pursuing his or her claims in an arbitration format on an individual basis. Additionally, the U.S. Supreme Court recently held open the possibility that an offer of judgment to an individual claimant may moot a Fair Labor Standards Act (FLSA) collective action, requiring dismissal of such a case.

Enforceability of Arbitration Agreements -

Where a claimant attempts to circumvent an arbitration agreement and litigate a claim in court, courts consider whether a valid arbitration agreement exists and, if it does, whether the agreement encompasses the dispute at issue. As long as the answers to these two questions are affirmative, the court should send the claim to arbitration. In considering whether an arbitration agreement is valid, courts generally evaluate whether the agreement is procedurally or substantively unconscionable. Procedural unconscionability relates to the manner in which the agreement was entered into. Courts typically consider whether the claimant had a reasonable opportunity to understand the terms of the contract and whether the important terms regarding arbitration were hidden in a maze of fine print. Even if there is unequal bargaining power between the claimant and the defendant, Washington state courts are reluctant to find procedural unconscionability sufficient to justify invalidation of an otherwise enforceable arbitration agreement. Generally, it is important for businesses to provide the recipients of their proposed arbitration agreement with ample opportunity to read and understand the agreement and to ask questions about the same. In addition, using a stand-alone document for the arbitration agreement may be preferable to including arbitration terms within a larger, more complicated agreement.

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Topics:  Arbitration Agreements, Class Action, Collective Actions, Enforcement, FLSA, SCOTUS

Published In: Alternative Dispute Resolution (ADR) Updates, Civil Procedure Updates, General Business Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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