Class action
The U.S. Supreme Court held in AT&T Mobility v. Concepcion that arbitration agreements can validly contain clauses banning class action claims. While this concerned a consumer contract, it appears that this decision is also applicable to other sorts of contracts as well.
The court, in fact, upheld a ban on a proposed class action antitrust lawsuit in American Express Co. v. Italian Colors Restaurant.
The Concepcion decision has not been uniformly applied, however. In one circumstance the court allowed for a class action to be brought under Florida law concerning consumers being charged for a roadside assistance plan they supposedly never ordered – despite an agreement with the defendant business stating that the matter should instead be arbitrated.
However, the 11th Circuit court which heard this matter did not address whether certain arbitration agreements can be invalidated upon public policy grounds.
There have been other courts that ruled against the enforceability of arbitration agreements that were deemed unconscionable. One case found an agreement unconscionable waiving the right to a class action because the agreement allegedly violated state law.
As case law in this matter remains unclear, businesses and employers will need to continue to be cautious in its approach when drafting arbitration agreements or clauses. The law is not settled on whether mandating that disputes are arbitrated rather than tried in court truly is enforceable.
Business litigation and contract disputes are seldom easy to resolve. While lawyers may wish to suggest that one type of solution will remedy every circumstance, the ultimate result is often dependent upon a number of complex factors. Business contracts do need to be drafted with care and then reviewed by a business lawyer to make certain that there are no red flags raised by the agreement.