Image of a legal team conferring with the judge in a courtroom whose class-action lawsuit against a major corporation was deemed frivolous and sent to forced arbitration.

Forced Arbitration: A Just Defense Against Frivolous Lawsuits?

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Today's post explores the large corporations banning class-action suits in their terms of service.

In our last post, we discussed the rise of frivolous class-action lawsuits in California (and everywhere else). We also questioned the ethics surrounding marketing firms that exist for the sole purpose of using social media to attract plaintiffs for potential money-grabbing cases. Today’s post explores the large corporations banning class-action suits in their terms of service.

Thinking of Class-Action Suing? Think Again

As more class-action lawsuits against major corporations arise, many of these companies are including a clause in their terms of service banning consumers from initiating and joining class-action suits. These companies are citing the Federal Arbitration Act (FAA) of 1925 that allows companies to employ policy terms that only permit consumers to engage in arbitrations as a means of dispute resolution. Customers forfeit their right to take a company to trial by accepting the terms of service.

A Real-World Example

A noteworthy example of this is a 2011 case involving AT&T. Consumers realized AT&T had been charging $30.22 for phones they had advertised as being free with the purchase of a wireless plan. A husband and wife, Vincent and Liza Concepcion noticed this charge and moved to sue the cell carrier. Long story short, 5-4 Supreme Court ruling dismissed their case. Their decision affirmed that the FAA preempts state laws that prohibit contracts from disallowing class-wide arbitration.

Why It Matters

Advertising companies specializing in social media marketing for class-action plaintiffs most likely aren’t warning potential clients that their time and effort (and in some cases, attorney costs) may be wasted due to the high likelihood of a class-action suit being deemed frivolous or subject to the FAA and dismissed in court. In forced arbitration, losing parties cannot appeal the decision.

A Question of Ethics, as Always

Do you think major corporations need protection from potentially costly, frivolous class-action lawsuits? Do you think consumers should face forced arbitration if a company engages in deceptive behavior? That is up to you to decide, especially if you reside in California.

If you need help with court representation for personal injury, DUI, misdemeanor, or sexual harassment, Hales & Associates, A Professional Law Corporation is here to help. Call us today at (951) 489-3320 to schedule a free consultation.

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