In Bloomberg Law Article, Akin Gump Lawyers Discuss Merits of Mandatory Arbitration Agreements

Bloomberg Law has published the article “INSIGHT: The Brightening Spotlight on Mandatory Arbitration Clauses,” written by Susan Leader and Jenna Mersereau Nalchajian, partner and associate, respectively, in the litigation practice at Akin Gump. The article addresses some concerns about mandatory arbitration agreements and looks at some of the lessons that can be drawn from recent attempts to eliminate them.

Leader and Nalchajian begin with a look at the push against mandatory arbitration disputes, noting that more than half of American nonunion private-sector employees are subject to them. Critics, they write, argue that such clauses “are harmful to consumers and employees because they are mandatory and require confidentiality, which prohibits parties from bringing certain claims to court and from making their accusations public.” In the wake of the #MeToo movement, there is also a debate about their propriety.

The article then discusses some of the legislation under consideration in various states to address the concerns being raised. If and when the legislation passes, however, it could face preemption issues under the Federal Arbitration Act. Eventually, the authors write, “businesses that use mandatory arbitration clauses in their contracts are likely to challenge the state legislation on FAA preemption grounds. If challenged, these issues could make their way… eventually to the U.S. Supreme Court.”

Leader and Nalchajian then offer some suggestions on whether to include a mandatory arbitration clause, advising in-house counsel to weigh both the benefits and the risks. They conclude by listing some steps a company can take, including considering how to write an arbitration provision that meets a company’s objectives with respect to dispute resolution.

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