Academic journal article ABA Banking Journal

New Life for Arbitration? Assessing Supreme Court's Concepcion Decision

Academic journal article ABA Banking Journal

New Life for Arbitration? Assessing Supreme Court's Concepcion Decision

Article excerpt

The last few years have not been particularly kind to arbitration. The use of mandatory arbitration provisions in customer agreements has declined sharply in the banking sector, partly in response to litigation filed (and then settled) by the Minnesota Attorney General Lori Swanson in 2009. This action, which alleged that a major dispute-resolution firm, National Arbitration Forum, had improper ties to the debt-collection industry, resulted in a backlash against consumer arbitration. This, along with an erosion of the effectiveness of mandatory arbitration due to decidedly mixed results in litigation, resulted in a number of banks (including Bank of America, JP Morgan Chase, and Capital One) deciding to back away from arbitration in customer agreements.

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However, the Supreme Court's recent decision in AT&T Mobility v. Concepcion might just cause the industry to reexamine its view of arbitration.

In Concepcion, the Supreme Court took up an especially controversial aspect of mandatory arbitration--"class-action waivers" or agreements between a bank and a customer to arbitrate disputes strictly on an individual basis. Long the target of consumer groups and the trial bar, class-action waivers have been the subject of numerous court challenges. Some of these were successful, most notably in California where in 2005 the California Supreme Court voided an arbitration agreement in a consumer contract that contained a class-action waiver on the grounds that it was "unconscionable. …

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