Claim-Suppressing Arbitration: The New Rules

Abstract:     
Binding, pre-dispute arbitration imposed on the weaker party in an adhesion contract so-called "mandatory arbitration" should be recognized for what it truly is: claim-suppressing arbitration. Arguments that such arbitration processes promote access to dispute resolution have been refuted and should not continue to be made without credible empirical support. Drafters of such arbitration clauses are motivated to reduce their liability exposure and, in particular, to eliminate class claims against themselves. Claim-suppressing arbitration, furthermore, violates two fundamental principles of due process: It allows one party to the dispute to make the disputing rules; and it gives the adjudicative role to a decision maker with a financial stake in the outcome of key jurisdictional decisions "that is to say, arbitrators have authority to decide their own power to decide the merits, a question in which they have a financial stake. The Supreme Court has facilitated this doctrine through a series of poorly-reasoned and incoherent decisions, in which the Court's liberal wing has been particularly inept at seeing the stakes for consumer and employee plaintiffs. Exploiting Justice Breyer's incoherent line of majority opinions attempting to identify "gateway" issues, the conservative Court majority has recently insulated all questions of enforceability of arbitration clauses from judicial review and is on the verge of allowing corporate defendants to immunize themselves from class actions through use of arbitration clauses.

Number of Pages in PDF File: 30

Keywords: Claim-suppressing, arbitration, mandatory arbitration, class action, alternative dispute resolution, Justice Breyer, arbitrability, validity, enforceability, gateway issues, arbitrator, neutral, public policy exception, consent, adhesion contract, American Arbitration Association, due process, Feder

JEL Classification: K41

working papers series