Arbitration clauses and class action waivers have become nearly ubiquitous in consumer contracts. This comes as no surprise since the U.S. Supreme Court has issued a string of opinions over the last several terms upholding the use of these provisions. With the law on the validity of consumer contract waiver provisions seemingly all but settled (or is it?), this article will provide an overview of the advantages of using these waivers, a summary of the relevant law, including recent Supreme Court decisions, and some thoughts on the continued viability of blanket arbitration clauses and class action waivers.
Advantages
As any class action practitioner or class action defendant can attest, class action litigation can quickly become prohibitively expensive. When a class is certified, even defendants with strong merits arguments feel pressure to settle rather than risk the possibility of an adverse liability determination. Discovery is typically burdensome and expensive. Furthermore, consumer class actions are typically driven by plaintiffs’ lawyers, who are the true beneficiaries of successful class action litigation. Indeed, a successful class representative will likely not recover more in litigation than he or she would through arbitration.
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