Mayhall Fondren Blaize

Arbitration clause can wipe out the right to business litigation

The focus of news about litigation has been on the aggressive inclusion of arbitration provisions in many large contracts in recent years. Under the law in Louisiana law and all jurisdictions, arbitration clauses are generally enforceable. Therefore, where expensive and time-hungry business litigation could be by-passed by arbitration, many business entities have incorporated such clauses into their commercial contracts.

The use of alternative dispute resolution can pertain to situations where the entity is a big retailer or credit card issuer. These conglomerates due much better in arbitration than by going to court. Most credit card contracts and retail credit cards nowadays not only provide arbitration as the sole remedy for disputes, but they also provide that no class actions will be tolerated.

Although restrictions on normal litigation have held up in the past, this year companies are taking it a step further: the contracts with consumers also prohibit the bringing of class actions. That is a critical obstacle to the vindication of consumer rights, and many lawyers and interest groups are fighting that provision. Recently, the federal Consumer Protection Agency criticized mandatory arbitration provisions.

Changes in the validity of arbitration provisions should be anticipated for the near future. Similarly, the provisions will be challenged in the courts as being suppressive of consumer rights. With the federal agency onboard on such issues, there may be greater protections for consumer ahead.

There are shortcoming of arbitration as compared to business litigation in Louisiana and elsewhere. Arbitration does not provide access to the full array of civil procedure rules and is run on a somewhat limited model compared to a full litigation case. The usual rule is that the arbitrator's decision is not appealable. Obviously, an arbitrator is not the same as a multi-membered jury. Other criticisms are that arbitration may not be set up to provide the wide and detailed scope of discovery that the parties want.

Source:, "You can always have a trial", Matthew Addison, June 27, 2016

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