Rethinking Anti-Aggregation Doctrine

Abstract:     
This Article proposes a new approach to “anti-aggregation agreements” — contractual provisions that purport to prohibit parties from participating in class actions and other aggregate proceedings. Anti-aggregation agreements are permitted by Supreme Court doctrine under the Federal Arbitration Act but eliminate financial incentives for attorneys to seek out and prosecute wrongdoing. Where private litigation performs an important deterrent function, anti-aggregation agreements raise the prospect that protected companies will be permitted to violate the law with impunity.

Taking the Supreme Court’s arbitration doctrine as a given, the Article argues that an anti-aggregation agreement’s enforceability should be tied to its effect on actual regulatory compliance. Consistent with the Court’s preference for privately-designed dispute-resolution procedure, this test allows an anti-aggregation agreement to be enforced by default. But if a party shows that the agreement permits significant, unremedied wrongdoing, the agreement is not enforced.

In contrast to the leading approach in the doctrine and scholarship, this test allows enforcement of anti-aggregation agreements that eliminate claiming against a protected company. At the same time, the test invalidates agreements that result in substantial wrongdoing, regardless of their effect on claiming. In doing so, the test ties the decision not to enforce an anti-aggregation agreement to a fact of normative and legal significance. Where it is shown that enforcement of an agreement permits significant unremedied wrongdoing, there can be little doubt that eliminating incentives for private attorneys to enforce the law creates an impermissible gap in the regulatory enforcement framework.

Number of Pages in PDF File: 48

Keywords: Class action waiver, anti-aggregation agreement, Concepcion, American Express

JEL Classification: K41

Accepted Paper Series