Supreme Court Upholds Arbitration Clauses in Consumer Adhesion Contracts, Including Clauses Prohibiting Class Arbitration
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- The Supreme Court upheld an arbitration clause in a consumer adhesion contract that barred consumers from seeking to represent a class, either in court or in arbitration, thus potentially giving companies a powerful tool to avoid many types of class actions entirely.
- The Court held that the Federal Arbitration Act, and its preference for upholding arbitration clauses, preempts states' policy judgments about how (i.e., with what safeguards) arbitration between consumers and companies should proceed.
- AT&T's arbitration clause is extremely consumer-friendly; companies wishing to take advantage of this decision should study that clause carefully.