Arbitration clauses that prohibit class action lawsuits guard companies from class action litigation. The Supreme Court has disparaged the use of class arbitration and has upheld class action waivers. As a result, if a contract contains an arbitration clause that bars class actions, the only recourse under the contract is to pursue individual arbitration. If a claim yields only a small amount of damages, the claimant would essentially be left with no recourse: the claimant would not be able to join a class action, and the cost of individual arbitration would outweigh the potential reward. Thus, arbitration clauses that forbid class action lawsuits can completely insulate companies from liability, so long as a single claim is not worth the cost of arbitrating.
This post was originally published on the Cardozo Journal of Conflict Resolution website on February 27, 2022. The original post can be accessed via the Archived Link button above.
Thanopoulos, Yanni, "The New Arbitration Class Action: Filing Thousands of Individual Arbitration Claims" (2022). CJCR Blog. 26.