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Validity of mandatory arbitration clauses underscored by SCOTUS

On Behalf of | May 29, 2018 | Business Litigation |

Forced arbitration contracts are on a roll, both in Connecticut and nationally.

A recent New York Times article notes that American companies are increasingly inserting arbitration-only clauses in their contracts executed with consumers. Those provisions require customers to proceed via a private process to resolve legal disputes rather than through formal litigation. Business owners generally favor arbitration for the comparatively expedited outcomes and cost savings that it often brings.

Such benefits have resulted in company principals’ increased use of arbitration clauses in employment agreements as well, an extension of those provisions that was recently challenged in several legal cases.

Those matters were consolidated on appeal and recently ruled upon by the U.S. Supreme Court.

The outcome: a clear victory for American companies and, say critics, an equally apparent defeat for scores of millions of employees.

The court’s majority was razor-thin, with the 5-4 ruling reflecting two ideologically divergent lines in the tribunal. Writing for the majority, Justice Neil Gorsuch stated that arbitration-only provisions have long received a clear stamp of approval from the U.S. Congress and applicable federal legislation. Eroding congressional intent by taking away a dispute-resolution tool providing for speed, efficiency and lowered costs. he noted, would have arbitration “looking like the litigation it was meant to displace.”

The court’s minority viewpoint expressed starkly different sentiments, with Justice Ruth Bader Ginsburg calling the ruling “egregiously wrong.” Ginsburg stressed that, because arbitration disallows aggrieved worker plaintiffs from banding together in class action claims, many important grievances will be unheard owing to individual claimants’ vulnerability and lack of resources.

Gorsuch noted the complaint, but called it a “false alarm.” He stated that the ruling merely endorsed well-established law and settled legal precedent, and that Congress has the power to alter policy if it chooses to do so.