Class Action Waivers in California: Discover Bank and Employment Arbitration

It is a matter of significant controversy and a subject of much litigation whether the U.S. Supreme Court's Federal Arbitration Act (FAA) jurisprudence enforcing pre-dispute arbitration agreements, regardless of whether the underlying dispute derives from contract, statute or public policy, extends to situations where individuals seek to bring class claims on behalf of large groups either in court or before the arbitral tribunal. Mostly, the decisions have supported this extension, provided the arbitration agreement authorizes the decision-maker to apply statutory as well as contract law and to award statutory remedies for proven violations. Because plaintiffs' lawyers have responded to these developments by bringing class claims in arbitration, despite silence in the underlying agreement whether the arbitrator possesses “class certification” authority, a number of companies have inserted express class action waivers in their arbitration programs. A recent decision of the California Supreme Court places in question the legal effectiveness of this response, at least in that state and for “consumer”-type claims.