Class Action Waivers in Arbitration Agreements: Lessons From Case Law and New CFPB Regulatory Action

Description

Enforcement of class action waivers in arbitration agreements has been hotly contested since the Supreme Court’s blockbuster AT&T Mobility LLC v. Concepcion ruling, which the Court again addressed in American Express Co. v. Italian Colors Restaurant and DIRECTV v. Imburgia. Since Concepcion, the plaintiffs’ bar has developed a number of strategies for resisting the enforceability of arbitration agreements.

The CFPB issued a final rule on July 10, 2017, banning companies from using arbitration clauses to bar consumers from filing class action lawsuits (effective for new agreements in early 2018). This removes a critical tool of defendants to limit class action litigation over consumer financial products and practices and expands the rights of class action plaintiffs.

The NLRB has consistently challenged the Court’s ruling that the NLRA’s protection of employee rights to engage in “concerted activities” supersedes the Supreme Court’s Concepcion interpretation of the Federal Arbitration Act (FAA). The Supreme Court will take up this issue in the Fall Term 2017.

It remains to be seen whether Congress will overturn the CFPB rule under the Congressional Review Act or whether the courts will rule that the rule violates the FAA. Class action counsel must understand the implications of these significant recent developments when drafting and enforcing arbitration agreements.

Listen as our authoritative panel explains the current legal environment for the enforceability of arbitration agreements that prohibit class or representative litigation. The panel will discuss the CFPB’s new rule banning companies from using arbitration clauses to bar consumers from filing class action lawsuits, the anti-arbitration position taken by the NLRB, and the Supreme Court’s decision to review this position.