Arbitrations are supposed to provide an impartial decision that is quick, efficient and economically feasible. You probably have agreed to arbitration in a variety of contexts that you are unaware of…service agreements, credit cards agreements, phone contracts and Internet service provider arrangements probably all include arbitration requirements. Read the fine print.
While arbitration may initially seem like a good way to settle disputes, reported issued by consumer groups, such as Public Citizen, paint a different picture. They suggest that the arbitration process is often heavily slated toward business.
One of the big problems with arbitration is it doesn’t allow class actions…so individuals often are unable to pool their resources.
This week the Third Circuit Federal Court of Appeals held that an arbitration clause may be struck down under state law as unconscionable if they prohit the use of the class action vehicle in cases where a large number of consumers have claims that would individually yield only small sums.
Houma v. American Express Company underscores the power of state courts to reject arbitration and anti-class action provisions that are unconscionable. A law professor, who’s writings were cited by the Third Circuit, hs indicated that this is an important ruling becuase it makes clear that the Federal Arbitration Act does not preepmt unconscionability challenges to class action prohibitions and because it finds that choice of law clauses are sometimes trumped by strong state public policy.
Richard J. Arsenault, 2011
