Originally from Alternatives to the High Cost of Litigation

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For decades, representatives of business interests fought to place disputes, especially business-to-consumer (“B-to-C”) disputes, into arbitration rather than court. A second front in this battle developed in which these same interests collided over whether the arbitration clauses in the B-to-C contract could also contain a ban on class actions or, in the words of some cases and clauses, a ban on “collective actions.”

Those bans prevented consumers from joining with other consumers to bring claims in arbitration that they would be able to bring in court were they not constrained to arbitration. The result was, essentially, a route. Again and again, courts upheld arbitration clauses over state law and other objections, and upheld the collective action bans within those clauses.

As a result, there was a genuine financial disincentive for both client and lawyer in pursuing grievances against businesses. The one-two punch of the arbitration agreement/class action ban meant that consumer recovery would be limited to small individual losses, and lawyer recovery would be unable to benefit from class-wide attorneys’ fees.