Class Arbitrations Under Attack—But Survive


Originally published in the Journal of the American College of Construction Lawyers Volume 7, Number 1, in Winter of 2013.

There are certain indisputable benets of commercial arbitration: knowledgeable trier of fact, quicker time to get a decision, and private proceedings. There are other attributes of arbitration that some would argue are a benet compared to litigation, and others would argue are not benecial: limited right to appeal, costs, limited discovery, no requirement to follow the law, no rules of evidence, limited ability to get all necessary parties in the same case.

Class arbitrations are a relatively new phenomenon in the United States. The Federal Arbitration Act was enacted in 1925. The Federal Arbitration Act does not specically address class arbitration. “Indeed, class arbitration was not even envisioned by Congress when it passed the FAA . . .” No state arbitration acts were found that specically addressed class arbitration. However New Mexico has a statute that addresses consolidation of arbitrations, which was used in a case discussed later to allow a consolidated arbitration, as distinguished from a class arbitration. Virtually all construction contracts involve interstate commerce, so the Federal Arbitration Act has the greatest application to construction disputes, generally preempting state arbitration acts. Rule 23 Federal Rules of Civil Procedure authorizing class actions was first enacted in 1937. It took more than 30 years after adoption of Rule 23 for the concept of class arbitration to begin showing up in reported decisions.

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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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