Arbitration clauses can be an effective way to control the risks and costs of litigation. This is especially true for companies that provide a large customer base. Such companies may face the spectre of collective action triggered by a single angry customer. The costs and risks associated with collective actions may encourage companies to settle reasonable claims through other means rather than endangering their businesses. Fortunately, the U.S. Supreme Court has strongly supported the use of arbitration clauses, including those that waive class action. In 2011, the court found that the Federal Arbitration Act (“FAA”) prejudged a California law that would have struck down a compromise clause that includes the waiver of the class action. AT-T Mobility LLC/ Concepcion, 131 pp. Ct. 1740 (2011). The arbitration clause in Concepcion was a rather typical clause of the boiler platform that was used in consumer mobile phone contracts.
However, the FAA`s victory over state laws that oppose such clauses in consumer contracts did not end the fight. Concepcion was decided with a narrow 5-4 margin, and many consumer advocates are moving quickly to try to make holes in the magnitude and effect of the decision. The decision of Charming Shoppes presented a more complex situation and a less satisfactory analysis. There, the grievor filed a complaint for breach of contract and sought some benefit and sought a default judgment when the defendant did not respond to the summons and appeal. Weeks later, counsel for the defendant contacted the applicant`s lawyer and, finally, the suit was granted to allow the parties to negotiate an agreement. These negotiations failed after several months, and the accused then filed a “cross-movement” to force, among other things, arbitration. The Tribunal granted the applicant`s application and dismissed the defendant`s motion, finding that the defendant had waived all arbitration rights by failing to respond to the appeal, delaying the progress of the appeal, and participating in conciliation conferences and negotiations. The Tribunal found that the contract in question contained “a provision that disputes arising from the contract will be settled,” 2019 N.Y. Misc. LEXIS 389 to 1-2, and this applicant had argued that the defendant had “renounced” any right to arbitration because of his breach, albeit in the absence of support authority. However, the court found this authority later in Charming Shoppes` decision. There, the court held that “the defendant effectively waived his right to apply the compromise clause if he did not respond to the citation and complaint, in circumstances where there was no reasonable excuse for such a default.