Master Class--Arbitration Clauses II

Abstract

Commentary and analysis of the general trend to enforce arbitration provisions in derogation of the plaintiffs’ ability to pursue classwide relief. Consequently, defendants have discovered that arbitration clauses may provide an effective means to avoid class action litigation. The article discusses issues relating to whether claims may be pursued on a classwide basis in arbitration. When a court orders enforcement of an arbitration clause, may a plaintiff instead obtain a classwide arbitration of its claims? May a defendant invoke classwide arbitration, as well? The article surveys emerging case law from the Seventh Circuit repudiating classwide arbitration, and the SEC rule excluding class actions from arbitration. The Federal Arbitration Act (FAA) is itself silent on the question of classwide arbitration. Plaintiffs have advanced the argument that Fed. R. Civ. P. 81(a)(3) allows federal courts to apply Rule 23 (governing class actions) to order that an arbitration proceed as a class action. In contrast to developments in federal courts, state courts in California and Pennsylvania have authorized classwide arbitration of claims.