How Do Arbitration Clauses Impact Class Action Lawsuits?

Use these links to jump to different sections:

• What Are Class Action Lawsuits?
• Forced Arbitration Clauses Prevent Class Action Settlements
• Mass Torts for Drugs and Medical Devices
• Find an Experienced Class Action Lawyer

Remember those class action notices you’d get in the mail about an injury you didn’t know you’d suffered? Has it been a while? That may be because of the fine print of user agreements—like the ones you don’t read and then click to approve with your bank or phone service.

“The big recent development in class action litigation is arbitration clauses that may prevent you from bringing a class action claim,” says Anthony L. Giacomini of Fennemore law firm in Denver, Colorado, who has represented clients on both sides of major class actions.

What Are Class Action Lawsuits?

Class actions are lawsuits brought by a large group of plaintiffs who have suffered similar harm. They are collective actions that enable plaintiffs to join forces rather than bring lawsuits on an individual basis. Class actions have to be certified by the court, a hearing process akin to a mini-trial, with full days of testimony.

“Usually the damages are small in these types of cases, so there’s often little incentive for a singular plaintiff to take a case that’s going to take years against a well-funded defendant,” Giacomini says. “But if you can bring claims on behalf of a group of similarly situated consumers, it might be worthwhile.”

Forced Arbitration Clauses Prevent Class Action Settlements

That rigorous process has become more so following the U.S. Supreme Court’s decision in a 2011 case called AT&T Mobility LLC v. Concepcion. In that case, the Justices decided that, yes, consumers may be bound by mandatory arbitration agreements that forbid class actions.

Arbitration is a type of alternative dispute resolution (ADR) that enables parties to resolve legal disputes outside the traditional court system. “More defendants are using arbitration clauses that may prevent consumers from bringing class actions,” Giacomini says. “It varies as to the product, but I think consumers need to be aware of that.”

“It’s grossly unfair to consumers,” says Peter W. Burg of Burg, Simpson, Eldredge, Hersh & Jardine in Englewood, Colorado. “Giant entities can do all this wrongdoing, and then we’re not allowed to consolidate in a single proceeding all of these claims that have caused harm to a multitude of people.”

Other attorneys see an upside to forced arbitration proceedings.

“The courts are becoming far more critical of applications for huge fees in class actions which generate minimal return to consumers, and I think that is something that is long overdue,” says John R. “Jack” Trigg of Wheeler Trigg O’Donnell in Denver, who has defended corporations like Ford Motor Co. in major class actions. “I think there’s a place for class actions, but I think it has gotten woefully out of balance. The pendulum is starting to swing back.”

Mass Torts for Drugs and Medical Devices

While class actions are becoming less common, their cousin—the mass tort—is what you’re more likely to hear lawyers advertising on television, particularly when it comes to drugs and medical devices.

So says John Restaino, an attorney, podiatric surgeon, epidemiologist, and adjunct professor who develops expert testimony in mass torts—such as the litigation linking talcum powder to ovarian cancer. “In a mass tort, the damages are going to be individualized, and everyone is going to have their own case,” he says. “But it’s all consolidated, so one corporate witness or expert doesn’t get deposed in all 50 states over and over. He or she gets deposed once, and that can be used in everyone’s cases.”

Restaino says people should understand how long mass torts can take. “The majority of mass tort litigation resolves in three to six years,” he says. He names a few that lasted 10 years or longer.

Ironically, for the plaintiff, time is of the essence. In addition to Colorado’s two-year statute of limitations, the formula for plaintiff compensation may decrease over time. “If you miss the bus, it can become very difficult,” Burg says.

Burg also suggests consumers make informed decisions on the front end.

“I’m getting older,” he says. “I take medications. I try to be very diligent in reading about them and understanding the risks.” That can start with the fine print on the package insert, especially if—like most Americans—you take generic drugs, which the courts have insulated from liability.

“When a [generic] drug does harm, you don’t have the same rights to be compensated,” Burg says. “That’s another big issue that needs to be addressed by consumers and courts.”

Find an Experienced Class Action Lawyer

It’s worth noting that in 2022, the House passed legislation known as the Forced Arbitration Injustice Repeal Act (FAIR), which would amend the Federal Arbitration Act (FAA) to prohibit forced arbitration of legal disputes with consumers. This legislation has yet to pass Congress in the Senate.

For help with a legal dispute with a company, visit the Super Lawyers directory to find an experienced attorney in your area . For general information on this area of law, including mandatory arbitration clauses and consumer contracts, see our overview of class action and mass torts.