Class Action Litigation Report® is a one-stop resource for tracking the most important class-action and multi-party litigation across the nation, and across all subjects with particular focus on...
By Perry Cooper
Oct. 18 — A well-drafted arbitration provision can save companies from expensive and time-consuming class litigation, two defense attorneys say.
The U.S. Supreme Court has created a robust body of arbitration law over the past five years. Companies and their attorneys should draft service and employment contracts with these decisions in mind, Mayer Brown LLP partners Kevin S. Ranlett and Archis A. Parasharami, both based in Washington, said.
Ranlett and Parasharami ought to know. Their firm helped client AT&T Mobility draft an arbitration provision that was ultimately upheld by the U.S. Supreme Court in one of those landmark cases, AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011).
AT&T’s arbitration provision is a good model of what works, they said. But Ranlett stressed that arbitration clauses aren’t one-size-fits-all. Companies need to customize their contracts to suit their individual circumstances.
Here are three tips for implementing an arbitration program.
The contract should expressly say class actions aren’t permitted, Ranlett said. It also should ban arbitration on a classwide basis, which he called “bad for everyone.”
Make it clear in the agreement whether the court or an arbitrator will make decisions about arbitrability, he said.
Several courts are currently grappling with the question of who decides whether class arbitration is available because the contracts didn’t say so explicitly ( 17 CLASS 1063, 10/14/16 ).
Lay out what kinds of claims should be decided by the arbitrator, Ranlett said.
The more you can spell out clearly at the time of drafting, the more it will save you from headaches down the road.
The arbitration clause should be prominent and obvious so that the consumer or employee signing it will be sure to notice it, Ranlett said.
It should also give consumers the option of forgoing arbitration to handle their claims in small claims court, as AT&T’s contract provides, he said.
Filing fees are lower in small claims court than in regular court proceedings, and filers don’t need attorney representation. But they can’t proceed as a class.
It’s important not to put all of the costs of arbitration on the consumer, Parasharami said.
At the very least, companies should follow the American Arbitration Association’s rules for costs. Those rules cap the consumer’s filing fee at $200 and require the business to compensate the arbitrator.
Parasharami suggests companies consider being even more generous than the AAA requires.AT&T’s arbitration clause provides that the company pays all arbitration costs as long as the claim isn’t frivolous.
In 2011, when the Supreme Court upheld AT&T’s arbitration provision in Concepcion, the provision required AT&T to pay a consumer a minimum of $5,000 and double attorneys’ fees if an arbitrator awarded the consumer more than AT&T’s final settlement offer. That floor is now $10,000.
Finally, attorneys should avoid including provisions that would be held invalid under unconscionability principles of contract law.
That includes ensuring the arbitration forum is convenient for the consumer or employee and that both sides’ arguments are treated equally, Ranlett said.
The company should also follow AT&T’s lead and not limit the consumer or employee’s remedies.
That means giving the arbitrator the option of awarding any form of individual relief that would be available to the consumer in court, including punitive damages, attorneys’ fees and injunctive relief.
The attorneys spoke at an Oct. 11 webinar put on by Strafford Publications Inc.
To contact the reporter on this story: Perry Cooper in Washington at email@example.com
To contact the editor responsible for this story: Steven Patrick at firstname.lastname@example.org
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)