For a variety of businesses, both large and small, arbitration is considered an attractive way to resolve disputes. Arbitration often is cheaper and faster than full-blown litigation, which can entail significant expense and lengthy appeals. Those advantages have led many companies to include arbitration clauses in their standard commercial and consumer contracts. But the positive features of arbitration can quickly disappear if you are forced into classwide arbitration or to consolidate multiple individual arbitrations. These pitfalls can be avoided when considering arbitration provisions or drafting arbitration agreements by paying careful attention to the developing case law on classwide and consolidated arbitration. And that same developing case law is key if you need to oppose efforts to expand the scope of an ongoing arbitration.
Agreement Terms Are Crucial
As the U.S. Supreme Court repeatedly has explained, the Federal Arbitration Act embodies the “overarching principle that arbitration is a matter of contract,” and courts should “rigorously enforce” arbitration agreements according to their terms, as in American Express v. Italian Colors Restaurant, 133 S.Ct. 2304, 2309 (2013), and Dean Witter Reynolds v. Byrd, 470 U.S. 213, 221 (1985). Therefore, it is critical to remember that an agreement to arbitrate not only gets you into arbitration but also controls its shape and scope. An arbitration clause can specify what issues you will arbitrate, the rules under which you will arbitrate, who will resolve specific disputes, and, perhaps most importantly, with whom you will arbitrate.
