Author: David Lavi, Esq.

Date: May 17, 2023

What are a few of challenging issues behind arbitration agreements?

The laws governing arbitration agreements vary by jurisdiction, so it’s important to consult with a legal professional who specializes in arbitration and class action matters for specific advice.

1. Federal Arbitration Act (FAA): In the United States, the FAA is a federal law that generally favors the enforcement of arbitration agreements. However, certain provisions of the FAA allow for challenges to arbitration agreements. For example, under Section 2 of the FAA, an arbitration agreement may be invalidated if it is unconscionable or against public policy.
2. State Consumer Protection Laws: Some jurisdictions have consumer protection laws that may offer additional grounds for challenging arbitration agreements in the context of class actions. These laws are designed to safeguard consumers’ rights and may provide specific provisions related to arbitration agreements.
3. Class Action Fairness Act (CAFA): In the United States, the CAFA is a federal law that governs class action lawsuits. It allows certain class actions to be heard in federal court rather than state court. While the CAFA does not directly address arbitration agreements, it may impact the availability of class action litigation as a whole.
4. State Arbitration Acts: Many jurisdictions have their own arbitration acts or laws that supplement or modify the provisions of the FAA. These state-specific laws may provide additional grounds for challenging arbitration agreements, such as unconscionability or lack of procedural fairness.
5. Case Law: Court decisions, including those by higher courts, can establish precedents and interpretations of laws that may impact the enforceability of arbitration agreements in class actions. Legal professionals often look to relevant case law to understand the current state of the law on this issue.

In California, courts have addressed various issues related to arbitration agreements and class actions. One notable example is the Iskanian v. CLS Transportation Los Angeles, LLC case decided by the California Supreme Court in 2014. In this case, the court held that class action waivers in employment arbitration agreements are generally enforceable under federal law, but they cannot waive an employee’s right to bring representative claims under the state’s Private Attorneys General Act (PAGA). The court reasoned that PAGA claims are fundamentally a public right and cannot be waived through arbitration agreements.

It’s important to note that the enforceability of arbitration agreements and the availability of class actions can be complex and may depend on various factors, including the specific language of the arbitration agreement, the jurisdiction, and the nature of the claims involved. Therefore, it is advisable to consult with a qualified attorney who can provide guidance tailored to your specific situation.