Ethics of Legal Astuteness: Barring Class Actions Through Arbitration Clauses

Abstract

Recent Supreme Court cases empower firms to effectively bar class action lawsuits through mandatory arbitration clauses included in consumer adhesion and employment contracts. This article reviews these legal changes and argues for economic self-restraint among both corporate executives and corporate lawyers who advise them. Arbitration has many virtues as it promises to reduce transaction costs and to streamline economic exchange. Yet, the ethics of implementing a legal strategy often requires self-restraint when one is in a position of power, and always requires respect for due process when issues of human health, safety, and dignity are in play.

Keywords: arbitration, legal astuteness, class action, ethics

JEL Classification: K10, K40