Violation Of Arbitration Agreement


The other arbitration currently before the Supreme Court concerns the ability of a state court to interpret arbitration clauses. It was generally accepted that contract law was a matter of national law and that it was for national courts and not federal courts to interpret contracts. In an arbitration proceeding for consumers who waive a class action called DIRECTTV, Inc. v. Imburgia, an arbitration clause stated that, notwithstanding the arbitration clause, «however, if your state`s right to waive class arbitration was not applicable, [the entire section requiring arbitration] would not be applicable.» 30 The case took place in California at a time when class actions were found to be unenforceable in consumer contracts as they exist in that contract. As a result, the State Court refused to impose a waiver of the class action. The Supreme Court has agreed to a review to determine whether the state`s interpretation of the treaty conflicts with the FAA and should therefore be overturned. It is difficult to know the practical implications of the broad delegation of dispute resolution by the courts to arbitration, given that arbitration is private and arbitral awards are generally not made public. However, surveys indicate that consumers and employees are less likely to win their cases when they are tried in arbitration and, if they win, the amounts of damages are much lower than what would be the case for a court. In addition, there is important evidence that people who have suffered from corporate misconduct are prevented from asserting their rights as a whole, as arbitration proceedings may be too costly and the results may be too risky for consumers or individual workers.

In particular, the ban on class actions makes it unlikely that many allegations of corporate misconduct – especially those involving modest sums of money for large groups of individuals – will ever be heard. As Justice Breyer said, «Only a madman or a fanatic complains about $30.» 68 Arbitration is even more common in consumer transactions than in employment. The most comprehensive and recent study on the prevalence of arbitrage in consumer transactions was conducted by the Consumer Financial Protection Bureau (CFPB).

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