Arbitration - ADR News

Charles Schwab Corp plans to wait until the end of a disciplinary proceeding before enforcing a change in its customer agreement requiring investors to give up class action rights, a spokeswoman said on Thursday.

Class action plaintiffs lawyers are still struggling for another bite at Apple after their antitrust claims against Apple and AT&T Mobility foundered on an AT&T arbitration agreement with iPhone customers last year. In a 26-page brief filed on Monday, the lawyers argued that their follow-on suit against only Apple should be allowed to move forward, since Apple is just as liable as AT&T for creating an alleged monopoly in the aftermarket for iPhone voice and data services.

For other arguments against class actions, the Haggler spoke to a representative at the United States Chamber of Commerce’s Institute for Legal Reform, which is a big fan of the Concepcion decision. Matt Webb, a senior vice president of the organization, says the class-action system is flawed because it is designed by and for lawyers. Arbitration, he added, can work.

The Dodd-Frank Act gives the Consumer Financial Protection Bureau explicit authority to study use of arbitration clauses related to financial products and services.

Finally, a spotlight will be shone on a widespread business practice that forces unhappy customers to settle disputes through binding arbitration — rather than by telling their story in court.

The Consumer Protection Finance Bureau is studying arbitration clauses, those provisions inserted into a growing number of contracts that force consumers to settle their disputes in arbitration instead of trial court. But the agency is so far ignoring what one lawyer calls “the elephant in the room”: Class actions, which were hemmed in by a U.S. Supreme Court decision one year ago that a number of law firms — many of them prominent supporters of the Obama administration — would like to overturn.

The government's new consumer watchdog is launching an inquiry into the use of arbitration clauses in financial contracts, which keep disputes over credit cards and other products out of the court system.

Businesses that lose a motion to compel arbitration may be surprised to find that, in some federal courts, they will be required to proceed with litigation in court even while appealing their right to arbitrate the matter.

Last month, the Securities and Exchange Commission rejected attempts by the Carlyle Group, and proposals by stockholders of Pfizer and Gannett, to mandate arbitration rather than litigation in disputes between investors and management. The SEC gave no explanation for its action on Carlyle (related to an upcoming public offering), and it said opaquely the Pfizer and Gannett proposals might violate the securities laws.

If you think you will have your day in court when aggrieved by civil injustice, think again. More likely, you will be headed for a meeting run by a professional arbitrator. Ironically, the Supreme Court is to blame. It is leading a quiet transformation by moving the country from using public court trials to secret arbitration hearings.