Last week, the New York Times ran a series of three front-page articles blasting the recent trend of various industries to put arbitration clauses, some with class-action waivers, in consumer contracts. Anyone looking for a balanced view of arbitration should look elsewhere. A flurry of critics—from bloggers, to law professors, to Forbes magazine, to the U.S. Chamber of Commerce—quickly and properly hammered the Times for its remarkably slanted approach.
The Times began its series with a romanticized view of class actions, in which those lawsuits function as “the only tool citizens have to fight illegal or deceitful business practices.” We are told that the villains whose “goal was to kill class actions” was a cabal of powerful lawyers representing banks and credit card companies. Those attorneys supposedly “figured out how to twin arbitration clauses with class-action bans.” When John Roberts became Chief Justice of the United States, he purportedly brought with him an anti-arbitration bias that he had developed during private practice.
The Times claims that, based on its investigation of “thousands of court records,” it determined that judges compel arbitration, and reject class proceedings, nearly 80% of the time. “Of 1,179 class actions that companies sought to push into arbitration, judges rule in their favor four out of every five cases[,]” the articles report. According to the Times, “[i]n 2014 alone, judges upheld class-action bans in 134 out of 162 cases.”
Of 1,179 class actions that companies sought to push into arbitration, judges rule in their favor four out of every five cases. In 2014 alone, judges upheld class-action bans in 134 out of 162 cases. –New York Times, October 31, 2015
The credibility of this reporting is strained by, among other things, its outsized reliance on sources that disfavor arbitration or on people who lost their cases at arbitral hearings. As the CFPB Monitor pointed out, a considerable body of research has shown arbitration to be a valuable and worthwhile process for consumers. Also, the Times’s heroic view of class actions is offset by an equally compelling narrative, in which greedy plaintiffs’ lawyers file scores of frivolous lawsuits and, when successful, they end up securing large fees for themselves and getting for their clients nothing more than petty coupons.
At bottom, the Times’s articles and its follow-on editorial show how arbitration agreements with class waivers are now mainstream. Businesses that do not use them likely place themselves at a competitive disadvantage. For small-dollar disputes, the biggest downside to arbitration is often the risk that the arbitrator will order class relief. That risk can be minimized by properly worded clauses. So if your company has not yet included arbitration provisions in its standard contracts, it is high time to consider adding them.