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Mandatory arbitration and class action lawsuits

On Behalf of | Aug 30, 2021 | Uncategorized

When consumers in Alabama and around the country make online purchases, they are almost always required to agree to a list of terms and conditions before their transactions are processed. When they check a box to agree to these terms and conditions, they often give up their right to file a lawsuit against the seller if the product is defective and causes them harm. This is because many sellers include a clause that requires all disputes to be settled through binding arbitration.

Binding arbitration

Arbitration clauses have become far more common in recent years because the proceedings take place behind closed doors and arbitrators tend to be less sympathetic than juries. They also allow companies to include language that prevents consumers from joining together and filing class actions. Clauses that require consumers to agree to arbitration began to appear in the 1980s, and they have now become the rule. According to a 2019 study, 81 of America’s 100 largest corporations require their customers to agree to arbitration.

Class actions

Arbitration provisions that prevent class-action lawsuits are especially worrying for consumer advocates because they could prevent the public from finding out about dangerous product defects, but the courts do not appear to share these concerns. When lawmakers in California prohibited companies from including language in arbitration clauses that restricted class actions, the U.S. Supreme Court ruled that the law violated the 1925 Federal Arbitration Act.

Legal representation

While arbitrators have more discretion than judges and are not required to follow legal precedent, they are expected to make decisions that are fair and equitable. Experienced attorneys would likely advise consumers to avoid mandatory arbitration whenever they can, and they could encourage them to be particularly cautious of provisions that would prevent them from joining a class action.