Arbitration Clauses in User Agreements | Class Action Strategies

When you download a new app or sign up for a streaming service, you may find arbitration clauses buried in the fine print of some of the contracts. These provisions require consumers to resolve disputes through private proceedings rather than through the court systems.

Our consumer protection attorneys believe some of these clauses strip consumers of their constitutional right to a jury trial and make it harder to hold corporations accountable. Contact our lawyers to discuss any individual case.

What Is an Arbitration Clause?

An arbitration clause is a contractual provision that requires parties to settle disputes through binding arbitration instead of litigation in court. This is a private dispute resolution process where an arbitrator makes a decision that is typically final and difficult to appeal. These clauses are common in consumer contracts involving:

• Credit cards and bank accounts
• Online marketplaces and retailers
• Employment contracts
• Subscription services
• Cell phone and internet providers

Because consumers rarely read lengthy user agreements, most are unaware of what they’ve agreed to until a dispute arises.

Legal Arguments Against Arbitration Clauses

Attorneys argue that these clauses are fundamentally unfair to consumers. Most consumers do not read or understand the terms of service they accept, and companies know this, of course.

Courts have wrestled with the question of whether “clickwrap” or “browsewrap” agreements constitute genuine consent. Critics argue that forcing arbitration without informed agreement violates contract law principles of fairness and voluntariness.

Consumer advocates often challenge these clauses as procedurally and substantively unconscionable. Procedural unconscionability arises when contracts are presented on a take-it-or-leave-it basis with no opportunity to negotiate. Substantive unconscionability exists when the terms heavily favor one party, such as requiring consumers to pay steep fees or waiving the right to class actions.

Erosion of Class Action Rights

Perhaps the most troubling feature of arbitration clauses is the waiver of class action participation. Class actions are a vital legal tool for consumers filing hidden fees claims or data privacy violation lawsuits. Without this mechanism, most consumers cannot realistically pursue claims, effectively granting corporations immunity for widespread harms.

Arbitrators are often repeat players hired by corporations. Plaintiffs say this creates a bias in favor of businesses, as arbitrators may want to maintain relationships with companies that bring them consistent work. Additionally, arbitration lacks the transparency of public trials, shielding corporate wrongdoing from public scrutiny.

How Lawyers Challenge Arbitration

Despite the legal obstacles arbitration clauses create, lawyers have developed strategies to challenge them and preserve consumer rights. Attorneys may point to unclear language or oppressive terms. Courts in some states have been receptive to these arguments, refusing to enforce unfair arbitration agreements.

Recently, consumer advocates have turned arbitration clauses against corporations themselves. If companies require individual arbitration, attorneys file thousands of individual demands at once. This mass arbitration strategy forces companies to pay millions in filing fees, pressuring them to settle on favorable terms.

The Forced Arbitration Injustice Repeal (FAIR) Act, introduced in Congress, seeks to ban forced arbitration in consumer and employment contracts. While not yet law, such efforts raise awareness of the dangers of mandatory arbitration.

Why Hire The Lyon Firm

At The Lyon Firm, we believe consumers deserve a fair chance to hold corporations accountable. Arbitration clauses are often designed to silence individuals, but our firm has a proven record of challenging unfair provisions and pursuing justice.

If you believe you’ve been harmed by a company’s unfair practices or hidden arbitration clause, contact The Lyon Firm for a free consultation.