One of the most dangerous legal traps that can ensnare a real estate business—or any employer, for that matter—is a company-wide lawsuit alleging violations of minimum-wage or overtime laws. A new decision by the United States Supreme Court appears to offer employers long-overdue relief from those dangers.
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For now, individual arbitration is still a viable option for avoiding at least some class actions. But what do you do when the transaction for the would-be class representative is so old that you no longer have a copy of the arbitration agreement? A recent decision from a federal appellate court gives businesses guidance about proving the existence of now-discarded arbitration contracts.
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The Supreme Court continues to have a lot to say about class-action jurisprudence. On December 14, 2015, the Supreme Court offered another missive on class-arbitration waivers and affirmed its support of the Federal Arbitration Act (FAA). Though the decision concerned waivers appearing in a consumer contract for satellite services, DirecTV, Inc. v. Imburgia offers insight to anyone seeking to enforce a consumer contract containing a class-arbitration waiver.
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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.
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For people looking to sue businesses in class actions, California has long been the preferred venue of choice. It is believed, rightly or wrongly, that courts and laws in the Golden State strongly favor consumers. A recent decision from the California Supreme Court, involving class-action waivers, throws that conventional wisdom into doubt, suggesting a less plaintiff-friendly outlook for the state.

On their face, the holdings in the case, Sanchez v. Valencia Holding Company,seem unremarkable. In 2010, Gil Sanchez bought a used Mercedes-Benz from Valencia. The sales agreement contained a provision requiring arbitration of disputes, and the contract also stipulated that Sanchez waived his right to seek class-action relief. In tandem, those clauses—if enforced—would completely insulate the dealership from potential class liability.


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In 2011, the U.S. Supreme Court held in AT&T Mobility v. Concepcion that a mandatory arbitration clause included in a cell phone contract effectively eliminated a consumer’s opportunity to seek redress through a class-action lawsuit. On July 15, 2015, Consumer Financial Protection Bureau (“CFPB”) Director Richard Cordray testified before the Senate Banking Committee and indicated that the CFPB—the same entity that has enforcement authority for certain laws that affect the real-estate industry, including TILA, RESPA, and HOEPA—will convene a small business review panel in part to decide what action to take regarding arbitration clauses in financial services agreements.

This testimony comes on the heels of a March 2015 study that found that consumers do not understand the arbitration clauses that are found in their financial services agreements—such as credit cards, checking accounts, payday loans, prepaid loans, private student loans, and mobile wireless contracts.  In consumer contracts, arbitration clauses often limit a consumer’s ability to participate in or bring a class-action lawsuit. The CFPB has determined that mandatory arbitration is not in consumers’ best interests and now appears poised to enact rules affecting a company’s ability to include an arbitration clause in a consumer financial contract.


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