Skip to Content

Arbitration Clauses: The Golden Ticket for Corporations


Grab a copy of a contract you have recently gotten from a business or corporation, and give it a quick look. Do you notice anything wrong? Probably hard to say, since most corporate contracts are written with legalese so dense, it is intentionally geared to deter the average person from reading the whole thing. Out of this mess of words, a huge problem has arisen for consumers, employees, business owners, and just about everyone in between.

Corporations have been using the term we “may elect to resolve any claim by individual arbitration” in their contracts, typically stuffed away somewhere near the back. From American Express and travel websites to AT&T and even Taco Bell, corporations from coast to coast are utilizing these nine words in just about every contract they create. While it may seem innocuous, this actually means that it is impossible for people to create a class action against the company.

Why is this a problem, you understandably ask? Imagine trying to paddle against a tsunami in nothing but a canoe. That is exactly what it is like for individuals who need to file a lawsuit against a corporation that is backed by vast, seemingly endless resources. Without the ability to create a class action, the scales are inherently unbalanced.

To put it into perspective, take an example of someone suspecting that they have been overcharged by their cellular provider by $500. They can try to sue for that money, but if they lose, they have to pay for the corporation’s court costs and attorney fees – prices that are sure to range well into the thousands. Rather than risk sinking themselves into bankruptcy over a “comparatively” small amount of money, they opt not to take the matter to court. The belief is that this opens the window for huge corporations to regularly swindle countless people out of a few hundred dollars or less without any fear of legal backlash.

Is There a Fix on the Way?

According to The New York Times, in a study they conducted (which may be viewed in full here), 134 of 162 cases in 2014 brought against corporations backed the validity of these controversial arbitration clauses. That percentage is staggering. 82% of the time, courts are ruling in favor of huge corporate bodies and not the average American. With such a statistic in place, it does not appear like a change is going to come from the courts – not soon anyway.

On the other side of the story, many corporations insist that individual arbitration created by these clauses is both fair and easier for everyone involved, including their clients. There is also a commonly held belief in the corporate world that class actions are simply too powerful. Once formed, no company can protect themselves from the damages sure to ensue from a successful class action.

What do you think? Do corporations need these clauses to protect themselves? Or are people being exploited due to their lack of funds and free time?

If you have more questions about class actions – or if you think you might need to file one in after suffering a preventable personal injury caused by a dangerous product – you can contact our Columbus injury lawyers at Rourke and Blumenthal LLC today. We are always ready and willing to help those in need by putting our 75+ years of combined experience to good use. Call 614.321.3212 today.

Share To: