No. 26
IS THE CLASS ACTION FAIRNESS ACT OF 2005 A MISNOMER?
THE IMPACT ON CLASS ACTION WAIVERS IN CONSUMER ADR CLAUSES
June 2005
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Boskey ADR Competition Entry, June 2005
IS THE CLASS ACTION FAIRNESS ACT OF 2005 A MISNOMER?
THE IMPACT ON CLASS ACTION WAIVERS IN CONSUMER ADR CLAUSES
TABLE OF CONTENTS
I.
INTRODUCTION ........................................................................................................................1
II.
BACKGROUND ..........................................................................................................................2
III.
A.
Class actions and class arbitration .................................................................................2
B.
Judicial attempts to address class arbitration issues ......................................................5
C.
The Class Action Fairness Act of 2005 .........................................................................7
ANALYSIS ................................................................................................................................9
A.
Class action waivers in contracts of adhesion..............................................................10
B.
Federal jurisdiction and questions of preemption ........................................................16
C.
General Counsel - Be Careful What You Ask for .......................................................17
IV. CONCLUSION..........................................................................................................................20
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I.
INTRODUCTION
Although class actions are generally available to American consumers under state and
federal law,1 many consumer contracts include alternative dispute resolution (ADR) clauses that
specifically waive the right to pursue class remedies.2
These class action waivers— or
“collective action waivers”3— (CAWs) preclude any aggregation of claims by similarly situated
consumers, blocking access to a cost-effective means to address class-wide problems.4
In California, however, some state trial courts have been reluctant to enforce these CAWs
under the doctrines of unconscionability or unenforceability on public policy grounds.5 This
conflicts with the recent Supreme Court ruling in Green Tree v. Bazzle6 that leaves the
interpretation of CAWs to the arbitral authority.7 With the Class Action Fairness Act (CAFA) of
20058 recently signed into law, defendants have a lower burden to meet for removal to more
business-friendly federal courts.9 The Plaintiff’s bar must now reevaluate its existing litigation
strategies to overcome new hurdles in the resolution of class-wide consumer claims.
1
See Richard M. Alderman, Pre-Dispute Mandatory Arbitration In Consumer Contracts: A Call For Reform, 38
HOUS. L. REV. 1237, 1258 (2001).
2
Alternative dispute resolution clauses may require arbitration and/or mediation as the first and, sometimes, only
means of resolving disputes arising out of the contractual relationship. See, e.g., Providian and American Express
clause language, infra notes 163 and 164 and accompanying text.
3
See Myriam Gilles, Opting Out of Liability: The Forthcoming Near-Total Demise of the Modern Class Action at 5,
note 15, Benjamin N. Cardozo School of Law, Jacob Burns Institute for Advanced Legal Studies, Working Paper
No. 100, 2004, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=624002.
4
See discussion regarding cost-spreading arguments, infra Part III.A.
5
See RUAA 10 comment 3, infra note 20, and accompanying text for cases addressing unconscionability of class
arbitration provisions. See also Unfinished Story, infra note 57, at 17 (discussing the difference between the
doctrines of unconscionability and unenforceability on public policy grounds).
6
Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 123 S.Ct. 2402 (2003).
7
See Bazzle, 539 U.S. at 454.
8
109 Pub. L. 2; 119 Stat. 4 (as amended in 28 U.S.C.).
9
See discussion infra Part II.C.
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II. BACKGROUND
A.
Class actions and class arbitration
The Federal Arbitration Act10 (FAA) put binding arbitration clauses on the “same footing
as other contracts”11 in 1925. The Supreme Court has since increased its support of arbitration as
an alternative form of dispute resolution, notwithstanding its recognition of certain, occasional
inefficiencies.12 Previous interpretations of the FAA prevented federal courts from “ordering
class arbitration where the parties' arbitration agreement is silent on the matter.”13 Although the
FAA provided a means for the federal courts to promote ADR, issues relating to the
interpretation and enforcement of contract law remained primarily state issues.14 There is still
much confusion in practice regarding the circumstances where FAA’s pro-arbitration stance
preempts certain areas of state contract law.15
The Uniform Arbitration Act (UAA), introduced in 1955, is enforced in 49 states, either
as drafted or with some minor revisions.16 Like the FAA, the UAA does not specifically address
10
9 U.S.C. § 1 et seq.
See Alderman, supra note 1, at 1244 (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24.
12
See Alderman, supra note 1, at 1244-45, note 31 (stating “Arbitration agreements must be enforced, even if the
result would be inefficiency” and citing Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213 (1985)).
13
Champ v. Siegel Trading Co., 55 F.3d 269, 275 (7th Cir.1995) (interpreting FAA §4 as precluding class relief
unless explicitly stated as a possible remedy in the agreement).
14
See Judith Resnik, Procedure as Contract, 80 NOTRE DAME L. REV. 593, 599 n.12 (2005) (noting “[c]ontroversy
currently centers about whether federal pro-arbitration policies preempt state contract law, including state rulings
finding contracts to arbitrate unenforceable if they preclude class action arbitrations.”).
15
See Resnik, supra note 14, at 649 n.227 (noting “[s]tate law typically governs questions of unconscionability of
contracts, prompting a question about whether federal law, through the FAA, preempts state law doctrine.”). See
also discussion, infra Part III.B.
16
7 U.L.A. 1 (1955). Richard DeWitt & Rick DeWitt, No Pay No Play: How To Solve The Nonpaying Party
Problem In Arbitration, 60-APR DISP. RESOL. J. 27, 31 (2005). See also National Conference of Commissioners on
Uniform
State
Laws
(NCCUSL),
Uniform
Arbitration
Act
(2000)
Summary,
at
http://www.nccusl.org/Update/uniformact_summaries/uniformacts-s-aa.asp (last visited May 9, 2005). Alabama is
the holdout state. Id.
11
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the arbitration of class-wide claims.17 Twelve states recently adopted the Revised UAA (RUAA)
introduced in 200018 by the National Conference of Commissioners on Uniform State Laws
(NCCUSL). Among the updates to the 1955 version, the NCCUSL notes that the UAA “never
contemplated” consolidation of arbitration proceedings, but the RUAA “expressly allows and
governs consolidation.”19
Although the RUAA addresses case consolidations in §10, the
associated comments indicate the drafters were not contemplating class arbitrations with the new
provisions.20 Oklahoma most recently signed the RUAA into law with unique consumer-friendly
provisions providing courts guidance regarding arbitration terms in adhesion contracts, including
the availability of class remedies, to determine enforceability.21
Under Federal Rules of Civil Procedure 23,22 similarly situated plaintiffs may combine
their claims in a class action.23 The typical rationale for allowing such consolidation is based on
the implicit efficiency gains and desirably consistent results of reviewing similar facts just once
for all affected parties.24 The same rationale applies to aggregating similar claims in alternative
17
Stephen K. Huber, Confusion about Class Arbitration, 7 J. TEX. CONSUMER L. 2, 2 (2003), available at
http://www.jtexconsumerlaw.com/V7N1pdf/V7N1arbitration.pdf.
18
See NCCUSL, Drafts of Uniform and Model Acts - Official Site, at http://www.law.upenn.edu/bll/ulc/uarba/
arbitrat1213.htm. See also DeWitt & DeWitt, supra note 16, at 31; NCCUSL, supra note 16.
19
See NCCUSL, supra note 16.
20
See Huber, supra note 17, at 5 n.44 (noting the consolidation provisions are “limited” since the comment states
“Section 10 is not intended to address the issue as to the validity of arbitration clauses in the context of class-wide
disputes.” RUAA §10 comment 3).
21
See Justin Kelly, Oklahoma Adopts RUAA, With Unique Consumer Provision (June 9, 2005), at
http://www.adrworld.com/sp.asp?id=38500.
22
FED. R CIV. P. 23, available at http://www.law.cornell.edu/rules/frcp/Rule23.htm (last visited May 9, 2005).
23
The four prerequisites to filing a class action are: (1) the class is comprised of numerous parties that would make
joinder “impracticable,” (2) class members share common questions of law and fact, (3) the claims or defenses of
the class representatives typify those of the remaining class members, and (4) “representative parties will fairly and
adequately protect the interests of the class.” FED. R CIV. P. 23(a).
24
Hence the common questions of law and facts required in the class action prerequisites. FED. R CIV. P. 23(a). See
also Huber, supra note 17, at 4.
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forms of dispute resolution.25 However, many firms have adopted the use of CAWs within their
ADR clauses specifically to prevent the “economies of scale” associated with class arbitrations.26
The abuse of class action provisions within the traditional litigation environment and
resulting tort reform initiatives through most of the country have cast class actions in a negative
light for many conservatives and business interests.27
Given such hostility towards
“entrepreneurial litigation”28 by “sell-out lawyers,”29 CAWs have met little resistance by
incumbent conservative government leaders.30 However, recent cases, specifically in California,
attack the validity of such provisions, claiming that they deprive plaintiffs of a federal right to
class relief as provided under the FRCP.31 The prospects of effectively undermining the validity
of such terms on a national scale look grim, however. Consumer advocates have warned of the
impending demise of collective actions given the current pro-business climate.32
The NCCUSL specifically addressed claim consolidation, noting “[t]he existence of multiple parties, multiple
agreements and complex litigation has made the issue of consolidation of arbitration actions very important. Courts
have varied over consolidation. The 2000 Uniform Act expressly allows and governs consolidation.” See
NCCUSL, supra note 16.
26
See Reisinger, infra note 155 (noting “the potential costs of arbitration would certainly rise if the process is
opened up to include class actions.”).
27
The American Tort Reform Association creates an annual list of “judicial hellholes... that have a
disproportionately harmful impact on civil litigation.” See ATRA, Judicial Hellholes 2004, available at
http://www.atra.org/reports/hellholes/ (last visited May 9, 2005). Some of the factors contributing to designation as
a “judicial hellhole” include: “the prevalence of forum shopping, novel legal theories, and discovery abuse, as well
as the certification of class action lawsuits.” Id. Other commentators, like Charles Wolfram, “raise[] the somewhat
less nuanced objection that plaintiffs’ lawyers are, well, immoral.” See Gilles, supra note 3, at 1. Attorneys Alan
Kaplinsky and Mark Levin highlight the rampant abuse and strong-arm tactics used by some members of the
plaintiff’s bar. See Sternlight, infra note 32, at 5 (citing Alan S. Kaplinsky & Mark J. Levin, Excuse Me, But Who's
the Predator? Banks Can Use Arbitration Clauses as a Defense, Bus. L. Today, May-June 1998, at 24).
28
See generally John C. Coffee, Jr., The Regulation of Entrepreneurial Litigation: Balancing Fairness and
Efficiency in the Large Class Action, 54 U. CHI. L. REV. 877 (1987).
29
Gilles, supra note 3, at 1.
30
Some consumer advocates have sponsored websites promoting consumer interests, but such appeals have had
limited impact on the continued use of CAWs. See, e.g., Remar Sutton & Associates, Give Me Back My Rights!, at
http://www.givemebackmyrights.com/ (last visited May 9, 2005).
31
See Alderman, supra note 1, at 1259-60 (noting that, although courts have been divided on the issue, the apparent
trend supports binding consumers to the mandatory arbitration provisions, including the preclusion of class action
suits). See also FED. R CIV. P. 23, 42(a).
32
See Jean Sternlight, As Mandatory Binding Arbitration Meets The Class Action, Will The Class Action Survive?,
25
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B.
Judicial attempts to address class arbitration issues
The California Supreme Court’s 1982 decision in Keating33 is considered the “first
serious judicial examination of class arbitration.”34 In Keating, plaintiffs asked the court to
certify a class prior to proceeding with the mandatory arbitration.35 While FRCP 81(a)(3)
explicitly states the FRCP applies where the FAA provides no specific guidance on a procedural
matter,36 the court also looked to a 2nd Circuit decision from 1975 that interpreted the FAA “to
permit and even encourage the consolidation of arbitration proceedings in proper cases.”37 Thus,
the Keating court found that class arbitrations were a legitimate alternative to class actions.38.
After the adoption of the FAA, federal courts were more likely to defer to the terms of the
arbitration agreement, subject to contract interpretation under the applicable state law. The
earlier cases of Dean Witter Reynolds v. Byrd39 and Volt40 indicated just how much deference the
courts were willing to give, even at the expense of expected common law and statutory rights.41
Soon after the Keating decision in California, the U.S. Supreme Court ruled in Byrd that the
FAA’s contract enforcement objective was more significant than the “expeditious resolution of
42 WM. & MARY L. REV. 1 (2000). See also Gilles, supra note 3.
33
Keating v. Superior Court, 645 P.2d 1192 (Cal. 1982).
34
Huber, supra note 17, at 3. Although the case eventually proceeded to the U.S. Supreme Court as Southland v.
Keating to resolve some questions regarding FAA preemption, the issue of class arbitration was only directly
addressed at the state level. Southland Corp. v. Keating, 465 U.S. 1, 104 S. Ct. 852 (1984). Id.
35
See Huber, supra note 17, at 3.
36
See Huber, supra note 17, at 3 n.19 (citing FED. R CIV. P. 81(a)(3)).
37
See Huber, supra note 17, at 3 (quoting Compania Espanola de Petroleos, S.A. v. Nereus Shippers, 527 F.2d 966
(2d Cir. 1975), cert. denied, 426 U.S. 936 (1976)).
38
See Huber, supra note 17, at 3. The court also anticipated “without doubt” that more court resources would be
required to monitor class arbitration proceedings than conventional arbitration. Id. at 4 n.27 (quoting Keating, 645
P.2d at 1209).
39
Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 105 S. Ct. 1238 (1985).
40
Volt Info. Sciences, Inc. v. Bd. Of Trs. of the Leland Stanford Junior Univ., 489 U.S. 468 (1989).
41
See Alderman, supra note 1, at 1262.
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claims.”42 The contract terms in Byrd resulted in an inefficient resolution process, but the court
found that strictly abiding by those terms trumped any interests in optimizing procedures. 43
Later, in Volt, the U.S. Supreme Court once again emphasized the importance of abiding by
contract terms and allowed the parties to arbitrate under state arbitration rules, as a matter of
contract law.44 At this point, the federal courts “adopted the extreme position” of prohibiting
class or consolidated arbitrations unless explicitly authorized in the agreement, but even under
today’s RUAA, consolidation may be unavailable if explicitly prohibited by the agreement. 45
The U.S. Supreme Court granted certiorari for Bazzle46 at a time when some observers
believed “the very legitimacy of class arbitration was in doubt.”47 Bazzle resulted from the
consolidation of two cases against Green Tree Financial Services where class arbitration
proceedings resulted in total awards of over $20 million in damages, which the South Carolina
Supreme Court upheld.48 Green Tree unsuccessfully claimed that the singular terms of the
contract implicitly barred class arbitration,49 but the state courts deemed such semantic
arguments unpersuasive and the contract essentially silent or, “at best,” ambiguous, requiring
construction against the drafting party.50
This allowed class arbitration “if it would serve
42
See Huber, supra note 17, at 4 n.33 (quoting Byrd, 470 U.S. at 219).
See Huber, supra note 17, at 4.
44
See Huber, supra note 17, at 4.
45
See Huber, supra note 17, at 4. Whether this remains valid with Oklahoma’s recently adopted RUAA provisions
remains to be seen. See Kelly, supra note 21.
46
Bazzle, 539 U.S. 444.
47
See Huber, supra note 17, at 4.
48
See Huber, supra note 17, at 5. Bazzle v. Green Tree Financial Corp., 351 S.C. 244, 569 S.E.2d 349, 352-53, 354
(S.C. 2002) (specifying the award of $10,935,000, plus $3,645,500 in attorney's fees and $18,242 in costs for the
Bazzle class and $9,200,000, plus $3,066,666 in attorney's fees and $18,252 in costs for the Lackey class).
49
Bazzle, 539 U.S. 444, 444. See Bazzle, 569 S.E.2d at 352 n.3 (noting “[t]he arbitration clause does not mention
class actions in arbitration or otherwise, but Green Tree argues the singular language… relating to ’this contract ...
[being] resolved … by an arbitrator selected … with the consent of you’ precludes class-wide arbitration.”).
50
Bazzle, 569 S.E.2d at 359.
43
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efficiency and equity, and… not result in prejudice.”51
Although the U.S. Supreme Court did not reach a majority opinion in Bazzle, nor entirely
uphold the lower court’s ruling, the justices all agreed with the concept of class arbitration.52
The Court essentially declared that it is the purview of the appointed arbitrator(s), not the court,
to determine whether a contract effectively waives a consumer’s right to class remedies. 53 The
court’s role is limited to determining whether the arbitration agreement exists and covers the
issues in dispute.54 Since the trial court erred by performing some of the arbitrator’s duties, the
court remanded Bazzle to allow the arbitrator to perform those duties instead.55
C.
The Class Action Fairness Act of 2005
President Bush signed the Class Action Fairness Act (CAFA) into law on February 18,
2005.56 While the CAFA sets new standards for class action settlements, the most significant
changes affect original federal jurisdiction and defendants’ removal of cases from state courts.57
The CAFA modifies original federal jurisdiction requirements by eliminating the need for
“complete diversity” under 28 U.S.C. § 1332 and allowing federal jurisdiction where “some class
members and some defendants are from different states.”58 It also allows claim aggregation to
51
Bazzle, 569 S.E.2d at 360.
See Huber, supra note 17, at 6.
53
Bazzle, 539 U.S. at 454 (remanding the case back to the arbitrator for contract interpretation).
54
See Huber, supra note 17, at 6.
55
See Huber, supra note 17, at 6 n.74 (quoting Bazzle, 123 S. Ct. at 2408).
56
109 Pub. L. 2; 119 Stat. 4 (as amended in 28 U.S.C.). The Act does not apply retroactively to cases filed prior to
its enactment. Id., §9. But see Scott L. Nelson, The Class Action Fairness Act: The Dog has Barked, 15 No. 1
CLASS ACTIONS AND DERIVATIVE SUITS 1, 2 (2005), available at http://www.abanet.org/litigation/premiumlt/classact/v15n1.pdf (indicating “reports are already in that some defendants have removed previously filed cases
under the Act, asserting that an action is ‘commenced’ only when it is first filed in or removed to federal court.”).
57
Scott L. Nelson, ABA Section of Litigation, The Class Action Fairness Act of 2005: An Analysis 1-2, at
http://www.abanet.org/litigation/premium-lt/classact/s5_analysis.pdf. See also Scott L. Nelson, Bazzle, Class
Actions, and Arbitration: An Unfinished Story, 15 No. 1 CLASS ACTIONS AND DERIVATIVE SUITS 8 (2005), available
at http://www.abanet.org/litigation/premium-lt/classact/v15n1.pdf [hereinafter Unfinished Story].
58
Nelson, supra note 57 (noting that federal claims continued to be eligible under 28 U.S.C. § 1331). The
52
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meet amount-in-controversy requirements and grants federal jurisdiction when the amount
exceeds $5 million.59 Although the diversity requirements have been relaxed, the CAFA did
include some exceptions to limit the number of state class actions that remain in state courts.60
The second requirement under § 1332 involves the amount-in-controversy threshold. The
U.S. Supreme Court recently ruled in Zahn v. International Paper Co.61 that all class members
must have claims exceeding $75,000.62 This requirement is especially difficult to meet in
consumer class actions and prevents many cases from proceeding to federal court. 63 With the
CAFA now in effect, however, § 1332(d)(2)64 now only requires a single plaintiff class member
to have diverse citizenship from any single defendant, and an aggregate amount-in-controversy
exceeding $5 million,drastically increasing the number of eligible consumer cases.65
Defendants may remove class actions to federal court by simply meeting the more lenient
diversity and amount-in-controversy requirements required for original jurisdiction.66
Previously, removal was impermissible if any defendant claimed citizenship in the forum state,
“complete diversity” requirement, enforced since Strawbridge v. Curtiss, 7 U.S. 267 (1806), calls for “all named
class representatives and all defendants... to be citizens of different states.” Id. If a named representative shared his
or her home state with a defendant, complete diversity failed and the case would have to remain in state court. Id.
In states like Texas, which recently passed legislation to limit attorney’s fees in state class actions, this opportunity
to file in federal court may actually encourage some plaintiff’s attorneys to proceed. See Carter, infra note 71
(quoting Marc R. Stanley, a Dallas lawyer, “We've been trying to get our [class actions] into federal court, and this
[minimal diversity jurisdiction] makes it easier to do.”)
59
See Nelson, supra note 57.
60
Namely, actions where more than 2/3rds of all class members are citizens of the forum state and either a “primary
defendant” or other defendant that can provide “significant relief” also resides there. See Nelson, supra note 57, at 5
(citing 28 U.S.C. § 1332(d)(4)). Furthermore, a federal court may decline jurisdiction where the “primary
defendants and between one third and two thirds of the class members are citizens of the forum state.” See Nelson,
supra note 57, at 6 (citing 28 U.S.C. § 1332(d)(3)). The CAFA also introduces a new balancing test for courts,
including consideration of the “interests of justice” and “the totality of the circumstances. Id.
61
414 U.S. 291 (1973).
62
See Nelson, supra note 57, at 3 n.1 (noting the Supreme Court recently heard a case questioning the validity of
Zahn given the supplemental jurisdiction statute 28 U.S.C. § 1367).
63
See Nelson, supra note 57, at 3.
64
28 U.S.C. as amended or added by the CAFA of 2005.
65
See Nelson, supra note 57, at 4.
66
See Nelson, supra note 57, at 4.
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but the CAFA amendments make the defendant’s state of citizenship irrelevant.67 Furthermore,
any defendant may remove an eligible case without the consent of any other defendants. 68 The
removal requirements now also allow 30 days after the first pleading or other filing when the
defendant can determine federal jurisdiction eligibility under the new § 1332(d).69
III. ANALYSIS
Until key pending cases are resolved,70 the most likely impact of the CAFA is that
defendants will seek removal from state courts whenever possible.71 Not only will this help
minimize the risk that CAWs will be found unenforceable, but it will also leave the decision how
to interpret such provisions in the hands of the arbitrators rather than the courts.72 If the
arbitrators have already indicated they will honor class action waiver provisions within contracts
of adhesion,73 application of Bazzle simply reaffirms the arbitrators’ authority to resolve the
matter – one case at a time.
Some commentators consider Bazzle “insubstantial,” leaving many issues associated with
class arbitration unresolved.74 Furthermore, the CAFA “creates skirmish points... [t]hat play[]
into the hands of the defense interests.”75
Since contract law is typically left up to state
67
28 U.S.C. 1453(b).
28 U.S.C. 1453(b).
69
28 U.S.C. 1446(b). Previously, defendants only had a one year period from the time of action commencement to
petition for removal. See Nelson, supra note 57, at 5 (citing 28 U.S.C. 1453(b)). Now, defendants have a 30 day
window with which to act upon any new filings indicating eligibility for removal, regardless of the initial filing date
of the suit. See Nelson, supra note 57, at 6.
70
See Resnik, supra note 14 (citing two cases pending appeal with the California Supreme Court: Discover Bank v.
Superior Court, 129 Cal. Rptr. 2d 393 (App. 2003) and Mandel v. Household Bank, 129 Cal. Rptr. 2d 380 (App.
2003)).
71
See Terry Carter, Class Action Climax, 4 No. 7 A.B.A. J. E-REPORT 1 (Feb. 18, 2005).
72
See Bazzle, supra note 6.
73
Some arbitrators have modified rules in anticipation of litigation on this very point. See AAA Supplementary
Rules for Class Arbitrations (Oct. 8, 2003), available at http://www.adr.org/sp.asp?id=21936.
74
See Huber, supra note 17.
75
See Carter, supra note 71.
68
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interpretation and enforcement,76 issues regarding the “standards for judicial review of class
arbitration awards, or of pre-award settlements” remain uncertain.77 Given such risks, class
arbitration may be “the worst of both worlds”78—complex, high stakes litigation with no
provisions for appellate review.79
A.
Class action waivers in contracts of adhesion
The use of CAWs in arbitration clauses is a relatively recent trend developed in the
1990’s.80
Adverse class action awards81 and aggressive marketing campaigns by arbitral
bodies82 further promoted the use of CAWs in many contractual agreements. Since the FAA
requires enforcement of arbitration agreements (unless the contract itself is revocable), this
leaves only the alternatives of claiming fraud, duress, or incapacity to void the agreement or 83
courts declaring CAWs unenforceable due to public policy reasons.84
Consumer advocate Richard Alderman points to four shortcomings with pre-dispute
mandatory arbitration clauses in consumer contracts: (1) lack of options, (2) occasionally slow
and ineffective arbitration proceedings leaving consumers worse off than with traditional legal
76
See Huber, supra note 17, at 7.
See Huber, supra note 17, at 10.
78
Pepper Hamilton, LLP, Litigation and Class Action Report -- July 2003 at 4 (Stephen G. Harvey ed.), available at
http://www.pepperlaw.com/pepper/pdfs/LitReport0703.pdf.
79
See Huber, supra note 17, at 4 (noting that “thwarting judicial review is a conscious goal of the AAA and other
arbitration organizations.”). See Id. n.23 (noting that the AAA may not prohibit reasoned awards, but it
“discourages them;” citing Stephen A. Hochman, Judicial Review to Correct Arbitral Error – An Option to
Consider, 13 OHIO ST. J. DISP. RES. 103, 105 (1997)).
80
See Gilles, supra note 3, at 30-31.
81
See Gilles, supra note 3, at 30-31, n.96 (citing the $590 million judgment against defendant in Broussard v.
Meineke Discount Muffler Shops, Inc., 958 F.Supp. 1087 (W.D.N.C., 1997), rev’d, 155 F.3d 331 (4th Cir. (N.C.)
Aug 19, 1998) as the impetus for trade journal suggestions to include class waivers in mandatory arbitration
agreements for franchisors.).
82
See Gilles, supra note 3, at 31, n.100 (citing NAF promotional materials and subsequent consumer suits
promoting NAF services towards corporate attorneys as the “only” way to avoid class action litigation.).
83
See Alderman, supra note 1, at 1245-46, note 33 (citing Green Tree v. Randolph, 531 U.S. 79, 89 (2000)).
84
Unconscionability being the primary public policy reason for choosing not to enforce an otherwise valid
contractual term. See Thomas J. Cunningham, Class Actions in Arbitration, 92 ILL. B.J. 532, 534 (2004).
77
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remedies, (3) businesses that are “repeat players” often benefiting from the “informal rules” and
“lack of guidelines,” and (4) consumers losing the opportunity to benefit from legal precedents
or reform obtainable via litigation.85
To consider a pre-dispute arbitration clause valid, the consumer must give consent to be
bound by such terms through voluntary participation and negotiation by both parties, not under
fraud, duress, or mistake.86 As Alderman notes, however, contracts of adhesion leave little room
for negotiations and are essentially offered on a take-it-or-leave-it basis.87 Most cases disputing
the validity of a typical consumer arbitration clause find little relief, since a policy generally
favoring freedom of contract prevails.88 Under the majority view, lack of “meaningful choice” is
insufficient to invalidate such terms.89 Alderman’s proposal is wholesale abandonment of ADR
clauses in consumer contracts,90 which, after Gateway, only a handful of courts might consider.91
Proponents of arbitration cite to significant cost-savings for all parties involved in
arbitration versus traditional litigation.92 Although there may be situations where arbitration is
less costly than litigation, there are also some circumstances that favor small claims court over
85
See Alderman, supra note 1, at 1240-42.
See Alderman, supra note 1, at 1246.
87
See Alderman, supra note 1, at 1247.
88
See Alderman, supra note 1, at 1248-49.
89
See Alderman, supra note 1, at 1249. In Hill v. Gateway 2000, 105 F.3d 1147 (7th Cir. 1997), the Seventh Circuit
ruled that efficiency reasons were more significant than meaningful consent when determining whether consumers
should remain bound by unilateral terms provided by retailers. See Gilles, supra note 3, at 50-52. The Hill decision
leaves little room to argue whether consumers reasonably expect CAWs to be a part of the terms of agreement at the
time of sale. See Gilles, supra note 3, at 50-52. If such terms are unacceptable, reasons the court, the consumer can
simply forgo the transaction – just take-it-or-leave-it. Id.
90
See Alderman, supra note 1, at 1242 n.18 (stating “the only viable means of reform is to do what many other
countries have done --preclude pre-dispute mandatory arbitration in consumer transactions”). See also Gilles, supra
note 3, at 8.
91
See Alderman, supra note 1, at 1248 n.45. California courts have split on the issue of whether CAWs in contracts
of adhesion are unconscionable and, therefore, unenforceable. See Cunningham, supra note 84, at 534.
92
See Alderman, supra note 1, at 1249-50.
86
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arbitration.93
After Green Tree v. Randolph,94 however, the plaintiff “bears the burden of
showing of showing the likelihood of incurring such costs."95
When the stakes are high, but distributed among many potential claimants, class actions
provide an efficient means of resolving common disputes over legitimate, but individually small
injuries.96 Precluding such collective action jeopardizes the efficient resolution of bona fide
“negative value” cases in either arbitration or court proceedings.97 The threat of excessive costs
for individual plaintiffs has different expected value calculations compared to the defendants’
position in consumer claims.98 Since defendants face more significant losses due to the sheer
volume of similar claims that may be filed, more resources are justifiably allocated towards
defense compared to the individual plaintiff who stands to lose much less by simply walking
away.99 To overcome this power imbalance, consumers should be able to consolidate claims so
they may benefit from the inherent economies of scale.100
Alderman notes that access to the court system has proven effective in vindicating
consumer rights where they might otherwise fail through legislative means.101 The California
courts
have
been
“hospitable”
to
attacks
against
CAWs
under
the
doctrine
of
93
See Alderman, supra note 1, at 1249-50. Many state small claims courts cost around $100. See Alderman, supra
note 1, at 1250. Some arbitrators, however, may charge as much as $1,000 per day, leaving consumers with minor
claims no real cost-effective relief on an individual basis. See Alderman, supra note 1, at 1250-51. See also
“negative value” claims, infra note 97 and accompanying text.
94
Green Tree Financial Corp. v. Randolph, 531 U.S. 79 (2000).
95
See Alderman, supra note 1, at 1252 n.64 (quoting from Green Tree, 531 U.S. at 92).
96
See COOTER & ULEN, infra note 98, at 402-03.
97
See Unfinished Story, supra note 57, at 9. A “negative value” case typically costs more in litigation than the
original damages incurred. Id. See also COOTER & ULEN, infra note 98, at 402-03.
98
See ROBERT COOTER & THOMAS ULEN, LAW AND ECONOMICS 392-99 (4th ed. 2004) (explaining how to compute
the value of a legal claim).
99
See COOTER & ULEN, supra note 98. See also Alderman, supra note 1, at 1253-58.
100
See Alderman, supra note 1, at 1258-62.
101
See Alderman, supra note 1, at 1262. Restricting access to the justice system puts consumers at a further
disadvantage to fight in what should be neutral and accessible fora. Id. at 1262-63.
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unconscionability.102
Although the U.S. Supreme Court ruled that unconscionability is a
legitimate basis for invalidating arbitration agreements under the FAA, 103 few courts have been
willing to find the facts necessary to strike such provisions.104 Some California courts take
liberty in applying established unconscionability doctrine by focusing on the realistic impact of
the clauses, as opposed to their equal application to both parties.105
The Fifth Circuit, however, has recently ruled in the typical majority fashion for such
cases.106 In Iberia Credit Bureau, Inc. v. Cingular Wireless, LLC,107 plaintiffs once again
attacked CAWs in their cellular phone agreements on unconscionability grounds.108 In Iberia,
three Louisiana cell phone provider agreements were in dispute, where one required the
customers to arbitrate, but did not limit the provider’s available courses of action, which the
court found unconscionable.109 Another agreement (Cingular’s) bound both the customer and
provider to arbitration, therefore avoiding the “one-sidedness”110 that would justify the court’s
finding of unconscionability.111 The Iberia Court noted that its findings were not unique to
Louisiana as they had also recently found similar terms permissible under Texas law.112
This does not mean California is a safe haven for those seeking to void CAWs on the
102
See Gilles, supra note 3, at 5. The court may choose to strike unconscionable terms from the contract, leaving
other valid terms intact, should such modification necessary for public policy reasons. See, e.g., Gilles, supra note
3, at 43-44 (citing Szetela v. Discover Bank, 97 Cal. App. 4th 1094 (Cal. App. 2002) for finding the CAW
unconscionable, but still enforcing the remainder of the mandatory arbitration provision).
103
See Gilles, supra note 3, at 33-34, n.107 (citing Doctor’s Associates v. Casarotto, 517 U.S. 681, 687 (1996)).
104
See Gilles, supra note 3, at 34-35, n.112-14 and accompanying text.
105
See Gilles, supra note 3, at 35-36 (discussing the fairness versus equity rationale of the California courts and the
superficial and unrealistic “equal” application of terms).
106
See Gilles, supra note 3, at 38.
107
379 F.3d 159 (5th Cir. 2004).
108
See Gilles, supra note 3, at 37.
109
See Iberia, 379 F.3d at 168-71 (discussing rationale behind finding Centennial’s terms unconscionable).
110
Iberia, 379 F.3d at 169 (stating “[t]he one-sidedness of the duty to arbitrate raises a serious question as to the
clause's validity.”).
111
See Iberia, 379 F.3d at 174-75 (discussing rationale behind finding Cingular’s CAW terms enforceable).
112
See Iberia, 379 F.3d at 174 (citing Carter v. Countrywide Credit Industries, Inc., 362 F.3d 294 (5th Cir. 2004)).
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basis of unconscionability. The California Supreme Court is due to hear arguments in the case of
Discover v. Superior Court113 to resolve the current break in its lower courts on the extent of
FAA preemption with respect to application of the unconscionability doctrine.114 In a surprise
ruling on May 18, 2005, the First Appellate District of California, generally considered a
consumer-friendly forum, found that CAWs are enforceable.115 Although the court recognized
class-wide remedies may be pursued, it also opined that “[j]udicial recognition of a class-wide
remedy in arbitration cannot be equated with a nonwaivable statutory right."116
For much of the rest of the country, up until Bazzle, many of the federal appeals and
district courts had abided by the seventh circuit’s Champ decision, requiring explicit consent to
class arbitration claims within the contract terms.117 In some cases, plaintiffs have argued that
the CAWs denied them class relief otherwise provided for under the controlling statute. 118 Such
attempts have been unsuccessful, as courts have found plaintiffs are not denied the opportunity to
petition for relief under the applicable statute simply because they have waived their rights to
collective action.119
Gilles suggests one way to overcome this initial resistance to
113
Discover Bank v. Superior Court (2003), 105 Cal.App.4th 326, review granted, depublished at 2003, Daily
Journal DAR 3936.
114
See Gilles, supra note 3, at 38. See also discussion, infra Part III.B.
115
See Rita Parrish et al v. Cingular Wireless, LLC et al. (No. 105518); California Appeals Court Finds No Right to
Class Arbitration (May 24, 2005), at http://www.adrworld.com/sp.asp?id=38433.
116
See Parrish v. Cingular Wireless, LLC, --- Cal.Rptr.3d ----, 05 Cal. Daily Op. Serv. 4166, 2005 Daily Journal
D.A.R. 5728, 2005 WL 1163636 (2005).
117
See Cunningham, supra note 84, at 532-33 (noting “[t]he Champ decision has been followed in the third, fourth,
sixth, eighth, and eleventh circuits, as well as by a host of district courts, making it the prevailing view among
federal courts today.”). In practice, this rarely occurred. See Gilles, supra note 3, at 49 n.152 (citing Linda J.
Demaine & Deborah R. Hensler, “Volunteering” to Arbitrate Through Predispute Arbitration Clauses: The Average
Consumer’s Experience, 67 LAW & CONT. PROBS 55, 65-66 (2004) study finding “100% explicitly prohibited class
actions in a judicial forum and 30% explicitly prohibited class-wide arbitration.”).
118
See Gilles, supra note 3, at 38, e.g., the Truth in Lending Act (“TILA”).
119
See Gilles, supra note 3, at 39 (citing Johnson v. West Suburban Bank, 225 F.3d 366 (3d Cir. 2000), cert. denied,
531 U.S. 1145 (2001)).
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incompatibility arguments is for the statute to include its own “anti-waiver provision.”120
Alderman believes the courts are ignoring the fact that “while the individual's rights may be
preserved, the beneficial and deterrent effects of the class action have been precluded.”121
The courts have indicated some consideration of the limitations of proceeding with
arbitral remedies that may preclude effective vindication of the plaintiff’s statutory rights.122
Johnson may only serve as a default interpretation that CAWs and statutory claims may be
compatible, but if the arbitral proceedings impede effective resolution of such claims, the CAWs
may be suspect.123 This rule, more fully developed under Green Tree v. Randolph,124 limits the
financial burdens placed on plaintiffs in order to arbitrate their claims.125
In New York, CAWs are under attack by this line of reasoning in Italian Colors et al. v.
American Express.126 In that case, plaintiffs liken the CAWs’ “anti-cost spreading feature” to
“mandatory cost-splitting provisions,” currently considered invalid when they would interfere
with the exercise of a federal statutory right.127 Plaintiffs’ damages of approximately $5,400
each are dwarfed by the expected litigation costs.128 Strict application of the CAW deters
similar, likely meritorious claims where, by pooling resources together, plaintiffs have a better
opportunity to seek the relief available to them.129 While the arguments sound promising, this
120
See Gilles, supra note 3, at 40.
See Alderman, supra note 1, at 1261.
122
See Gilles, supra note 3, at 40 (quoting Green Tree Fin. Corp. of Ala. v. Randolph, 531 U.S. 79, 90 (2000),
“federal statutory claims... may only be arbitrated ‘so long as the prospective litigant effectively may vindicate his or
her statutory cause of action in the arbitral forum.’”).
123
See Gilles, supra note 3, at 40-41.
124
Green Tree Fin. Corp. of Ala. v. Randolph, 531 U.S. 79 (2000).
125
See Gilles, supra note 3, at 41.
126
No. 03 CV 03719, 2003 WL 22682482 (N.D. Cal., 2003) (order transferring venue to S.D.N.Y.), 03 CV 9592
(S.D.N.Y.). The Second Circuit should rule on Italian Colors later this year. See Gilles, supra note 3, at 42.
127
See Gilles, supra note 3, at 5-6.
128
See Gilles, supra note 3, at 42.
129
See Gilles, supra note 3, at 42.
121
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strategy may only be successful within a limited number of “negative value” cases.130
B.
Federal jurisdiction and questions of preemption
The pending Discover131 case seeks to resolve some questions surrounding the extent of
federal preemption in state contract law interpretation.132 A previous decision in Szetela v.
Discover133 ruled the CAW provisions in Discover’s consumer contracts unenforceable.134
However, California’s Second District Court of Appeals found that Szetela was “wrongly
decided” for failing to consider the FAA’s impact on substantive law affecting the agreement’s
interpretation.135 Declining to follow Szetela, the Second District was also unpersuaded by
similar arguments from the Fourth District in Mandel v. Household Bank.136 The Mandel court
failed to enforce the CAW provisions of an arbitration agreement subject to Nevada law, again
on grounds of unconscionability.137 The defendant in Mandel argued that the FAA requires
enforcement of such agreements as written, preempting state law interpretation to the contrary.138
The Second District court chose to interpret a policy favoring arbitration to mean favoring the
entire arbitration agreement, including its CAW provisions.139 Accordingly, the court found that
§2 of the FAA preempts California law that might find CAWs unconscionable and any anti-
130
See Gilles, supra note 3, at 6.
Discover Bank v. Superior Court (2003), 105 Cal.App.4th 326, review granted, Daily Journal DAR 3936.
132
See Cunningham, supra note 84, at 534.
133
97 Cal. App. 4th 1094, 118 Cal. Rptr. 2d 862 (4th D 2002).
134
See Cunningham, supra note 84, at 534.
135
See Cunningham, supra note 84, at 534 (quoting Discover Bank v. Superior Court, 105 Cal. App. 4th 326 n.12).
136
105 Cal.App.4th 75 (4th D 2003).
137
Discover, 105 Cal. App. 4th 326 n.12 (discussing Mandel).
138
Discover, 105 Cal. App. 4th 326 n.12 (citing Mandel, 105 Cal.App.4th at 83). The Fourth District court
ironically acknowledged that federal preemption may be valid if state law disfavored arbitration, but since Nevada
law actually favors arbitration, the need to preempt state law interpretation does not exist. Id.
139
Discover, 105 Cal. App. 4th 326 (stating “once an arbitration agreement is found to have been validly formed,
California law, like federal law, favors its enforcement. In this case… we need not discuss the contract formation
issue and have assumed the existence of a valid arbitration agreement.”).
131
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waiver provisions enacted at the state level attempting to invalidate them.140
Meanwhile, at the federal level, the Ninth Circuit dealt with a similar quandary in Ting v.
AT&T.141 There, the court determined that the FAA did not preempt state substantive contract
law.142 In that case, the court could find CAWs unconscionable while upholding the remainder
of the arbitration agreement.143 It similarly held in Ingle v. Circuit City Stores, Inc.144 that the
FAA did not "supplant state law governing the unconscionability of adhesive contracts."145
The risk for defendants in California is that courts at both the state and federal level have
ruled against enforcing CAWs, notwithstanding the federal pro-arbitration stance embodied in
the FAA. If the FAA’s enforcement provision must still yield to state law determinations of
unconscionability, the CAFA will hardly protect defendants from an onslaught of new collective
actions, either in court or in arbitration. The greater risk to defendants is high-stakes class
arbitration in a forum that gives deference to both unfavorable state contract law interpretation
and arbitral class awards that are not subject to further judicial review.146 Although the recent
Parrish decision shows some promise of contract enforcement trumping efficiency concerns,
potential defendants must await California’s Discover decision for more significant guidance.
C.
General Counsel - Be Careful What You Ask for
Advisors now warn potential defendants to “be careful what you ask for”147 when
140
Discover, 105 Cal. App. 4th 326.
See Cunningham, supra note 84, at 534 (citing Ting v. AT&T, 319 F3d 1126 (9th Cir 2003)).
142
See Cunningham, supra note 84, at 534.
143
See Cunningham, supra note 84, at 534.
144
328 F3d 1165 (9th Cir 2003).
145
See Cunningham, supra note 84, at 534 (quoting Ingle, 328 F3d at 1174 n.10).
146
Discover, 105 Cal. App. 4th 326 (determining that “classwide arbitration in California vastly increases the scope
of potential liability and damages that a defendant will face without the ability to seek judicial review of the merits of
the arbitrator's decision.” (emphasis added)).
147
Law Seminars International, A Comprehensive Advanced Conference on Innovative Strategies for Litigating
141
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drafting and enforcing class arbitration provisions. Arbitrators, such as Judicial Arbitration and
Mediation Services (JAMS)148 and the American Arbitration Association (AAA),149 now provide
supplementary rules for class arbitration proceedings.150
The National Arbitration Forum
(NAF)151 offers a Class Claim Resolution (CCR) program to address the needs of class
actions.152 However, defendants still lack many of the procedural safeguards of the FRCP.153
Interestingly, in November 2004, JAMS announced it would not enforce consumer
contract CAWs.154 This move angered some general counsel, who threatened to discontinue
using JAMS for disregarding explicit contract terms to the contrary.155 By March 2005, with
mounting criticism and reports of major accounts leaving,156 JAMS announced an about-face
regarding their decision not to enforce such terms.157 JAMS attributed its reversal to conflicting
court decisions in different jurisdictions that prevented them from maintaining their
Class Action Suits, available at http://www.lawseminars.com/section_details/05CLASSWA.htm.
148
See generally Judicial Arbitration and Mediation Services, at http://www.jamsadr.com.
149
See generally American Arbitration Association, at http://www.adr.org.
150
See JAMS Class Action Rules (Feb. 2005), available at http://www.jamsadr.com/rules/class_action.asp. See also
AAA Supplementary Rules for Class Arbitrations (Oct. 8, 2003), available at http://www.adr.org/sp.asp?id=21936.
151
See generally National Arbitration Forum, at http://www.arb-forum.com/ (last visited May 10, 2005).
152
See NAF, Class Claim Resolution Program, at http://www.arb-forum.com/resources/pdf/Class-Claims-Res0203.pdf (last visited May 10, 2005).
153
See Law Seminars, supra note 147.
154
Warren W. Harris & Erin Glenn Busby, Most Recent Changes to FRCP 23 – Class Actions And What May Be In
Store For The Future, available at http://www.bracepatt.com/files/tbl_s16Publications%5CFileUpload77%
5C1266%5CHarris-ClassActions.pdf.
155
See Sue Reisinger, New Jams Policy Has Angered GCs, Allowing Class Action Claims Barred In Contracts
Feeds Fear Others May Also, 27 NAT’L L. J. NO. 20, 8 (Jan. 24, 2005).
156
See Nancy J. Moore, JAMS Reverses Policy on Preclusion Clauses, Citing Court Decisions, Neutrality Concerns,
6 No.6 CLASS ACTION LIT. REP. 216 (Mar. 25, 2005), available at http://subscript.bna.com/SAMPLES/
cal.nsf/0/5f647cd14865fcd185256fce006e0fb0?OpenDocument (reporting some observers understood the reversal
was due to “several corporations [pulling] all of their arbitration work--not just their consumer arbitrations--from
JAMS as a result of the policy.”). See also Providian Notice of Changes, infra note 163, at 1 (Providian changed the
use of “Administrator” to specifically exclude JAMS or “any other administrator that maintains a policy that refuses
to enforce any part of the Arbitration Provision.”)
157
See Press Release, JAMS Reaffirms Commitment to Neutrality Through Withdrawal of Class Action Arbitration
Waiver Policy (Mar. 10, 2005), available at http://www.jamsadr.com/press/show_release.asp?id=198.
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“responsibility and commitment to absolute neutrality.”158
Where the agreement is silent, AAA uses a default interpretation permitting class
claims.159 The AAA Rules provide for (1) arbitration clause interpretation for permitting class
claims, (2) class certification, and (3) the merits of the case.160 However, AAA has also chosen
to interpret its rules so they do not preclude separate demands filed by multiple potential
claimants for the same allegations and the same class, essentially “arbitrator shopping.”161 NAF
interprets Bazzle to require the arbitrator strictly enforce the terms of the agreement, believing it
more important for both parties to expect all terms to remain valid. 162
Because of the inconsistencies among major arbitral bodies, some general counsels have
opted to amend their arbitration agreements to explicitly bar class remedies.163 A typical CAW
now specifies that the consumer may not (1) pursue class relief in court, (2) pursue class relief in
arbitration, nor (3) consolidate claims with other consumers against the same defendant. 164 For
existing relationships, the Bazzle decision coupled with business-friendly arbitral bodies virtually
subjects all customers and employees with existing arbitration agreements to CAWs without
158
See JAMS Press Release, supra note 157.
Christopher P. Galanek & Jennifer B. Dempsey, Business Litigation & Arbitration Client Alert (July 29, 2004),
available at http://www.pogolaw.com/news-alerts-attachment.html/articles/763/Business%20Litigation%20&%20
Arbitration%20Alert0604.pdf.
160
See Galanek & Dempsey, supra note 159.
161
See Galanek & Dempsey, supra note 159, at 2 (noting claimants may file with multiple arbitrators until one
certifies the class).
162
See Reisinger, supra note 155 (noting the distinction between NAF’s and JAMS’ interpretation of Bazzle). The
NAF “enforce[s] the parties’ agreements as written, which is what the [FAA] requires,” according to its Managing
Director, Edward Anderson. Id. NAF’s Anderson “believes that JAMS’ new policy threatens the credibility of all
arbitrators because companies will now wonder which clause in a signed contract could be voided next.” Id.
163
See, e.g., Providian National Bank, Important Notice of Changes to the Arbitration Provision of Your Providian
Visa/Mastercard Account Agreement (Mar. 2005) (on file with author).
164
See Providian Notice of Changes, supra note 163, at 4-5. See also Gilles, supra note 3, at 32 n.104 (citing
American Express’ Merchant Card Acceptance Agreement).
159
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taking much, if any, action.165
Gilles suggests the courts may still circumvent CAWs by essentially threatening to void
the entire arbitration agreement should the arbitrator disallow class arbitration remedies. 166 This
would take the financial pressure off groups like JAMS, since the decision to enforce would still
be with the court.167 Rather than rely on such “activist judges,” however, consumers should seek
legislative intervention to correct the imbalance inherent in unilaterally imposed CAWs.168
IV. CONCLUSION
Consumers should continue to be wary of contract ADR clauses that waive their rights to
class remedies, either in arbitral or judicial proceedings.
Familiarity with ADR processes
available to consumers may ease the burden of resolving future disputes, should they arise.
More importantly, consumers should closely monitor upcoming cases testing the validity of
CAWs. Near-term, they may encounter more hostile federal courts and arbitral bodies unable or
unwilling to provide relief through consolidation. Legislative action may be required to restore
the inequities CAWs pose to consumers.
Sellers should also familiarize themselves with the recent class arbitration rules
promulgated by some of the larger arbitral authorities. If their ADR clauses do not refer to an
arbitrator with provisions for class arbitration, or class rights are ineffectively waived or silent on
the issue, they take the risk of being subject to surprisingly less favorable proceedings.
165
See Gilles, supra note 3, at 61. Some states with business-friendly change-in-terms provisions make it possible
to unilaterally amend arbitration agreements to insure CAWs are in effect. Id.
166
See Gilles, supra note 3, at 46 (suggesting “Judges… may direct the parties to proceed to arbitration with the
proviso that, if the arbitrator refuses to accord class treatment, then the parties may come back to court and the
arbitration provision will be stricken as a whole.”).
167
See Gilles, supra note 3, at 46.
168
Given current circumstances, it may be several years before relief is available to millions of consumers with
legitimate claims against defendants benefiting from this “class action shield.” See Sternlight, supra note 32 (citing
Edward Wood Dunham, The Arbitration Clause as Class Action Shield, 16 FRANCHISE L.J. 141, 142 (1997)).
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