Last year, a reasonable debate was possible over which U.S. Supreme Court decision that term was more likely to end the class action: Wal-Mart Stores Inc. v. Dukes, 131 S. Ct. 2541 (2011), or AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). The former curbed class certification, while the latter upheld standard-form consumer contracts that mandated arbitration, even when state law found such contracts of adhesion to be unconscionable. Reasonable as that debate was, the answer has now become clear: AT&T Mobility may have initiated a revolution that could end most shareholder litigation involving public corporations.

This new challenge comes from two different directions. First, The Carlyle Group L.P., a prominent private-equity firm, filed a registration statement with the U.S. Securities and Exchange Com­mis­sion on Jan. 10 for an initial public offering (IPO) and disclosed a broad provision in its limited-partnership agreement requiring its limited partners to arbitrate all claims against it or any of its insiders before a panel of three arbitrators in Wilmington, Del. Drafted to cover the waterfront, this provision would have eliminated both the state derivative action and the federal securities class action. In February, Carlyle abandoned this attempt in the face of SEC opposition. Second, shareholder activists at both Pfizer Inc. and Gannett Co. Inc. have submitted proxy proposals to the SEC seeking bylaw amendments that would introduce similar arbitration provisions at these companies. Although both companies are resisting (possibly because they do not want to be test cases), a horde of managements might still follow the first company to succeed in including such a provision.

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