Recent U.S. Supreme Court cases have broadly expanded the scope of the Federal Arbitration Act to allow corporations to insert forced arbitration clauses in one-sided, non-negotiable contracts and override both Congressional action and state laws intended to protect consumers. In 2011, the Supreme Court held in AT&T v. Concepcion that corporations may use forced arbitration clauses to deny consumers their right to join together in class actions to hold corporations accountable. The Supreme Court further expanded corporations’ ability to evade the enforcement of critical federal laws with its decision in American Express v. Italian Colors Restaurant (June 2013). In this case, small businesses sought a class action to pursue their claims that American Express had violated federal antitrust laws. The Court held that the class action ban and forced arbitration clause in the contracts were enforceable—even in cases where the cost of individual arbitration would, as a practical matter, prevent the vindication of rights under federal law.
Since these Supreme Court decisions, corporations have frequently invoked these arguments that consumers’ claims should not be pursued collectively but, rather, individually. Unfortunately, courts now follow these arguments. This has had an enormous impact on consumers cases—where the value of claims can be small individually, but large in the aggregate, and class actions are often the only way of revealing widespread corporate fraud. A study by the Center for Justice and Democracy illustrates 39 actual cases where forced arbitration clauses and class-action bans have been enforced – and cases dismissed – just in the last two years. When these claims disappear, it allows corporate wrongdoers to completely escape any legal accountability and continue their fraudulent and abusive behavior.