2012 Scholarship Series: ADR for the Masses

Foreword: ADR for the Masses

Jennifer W. Reynolds

90 OR. L. REV. 691

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Tsunami: AT&T Mobility LLC v. Concepcion Impedes Access to Justice

Jean R. Sternlight

90 OR. L. REV. 703

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It is highly ironic but no less distressing that a case with a name meaning “conception” should come to signify death for the legal claims of many potential plaintiffs. The U.S. Supreme Court’s five-to-four decision in AT&T Mobility LLC v. Concepcion is proving to be a tsunami that is wiping out existing and potential consumer and employment class actions. This Article will explore the decision; how the decision is being interpreted by lower courts; the decision’s impact on parties to such litigation; and how, if not legislatively limited, this case will substantially harm consumers, employees, and perhaps others. By permitting companies to use arbitration clauses to exempt themselves from class actions, Concepcion will provide companies with free rein to commit fraud, torts, discrimination, and other harmful acts without fear of being sued. In may contexts, if plaintiffs cannot join together in a class action, lack of knowledge, lack of resources, or fear of retaliation will prevent them from bringing any claims at all. As one plaintiffs’ lawyer specializing in consumer claims stated, “The ruling opens the door for companies to pickpocket $10 at a time from millions of consumers.”



Fully Federalizing the Federal Arbitration Act

Michael J. Yelnosky

90 OR. L. REV. 729

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There is a widely shared belief that the Supreme Court’s Federal Arbitration Act (FAA) doctrine is far too solicitous of arbitration and not sufficiently solicitous of state lawmaking power. That may be so, but the Court has interpreted one provision of the FAA, the savings clause, to permit the application of state law to invalidate otherwise enforceable arbitration agreements. This Article examines the savings clause and its impact on provisions in arbitration agreements that interfere with the ability of claimants to effectively enforce substantive federal- or state-law rights. The Court’s interpretation of the savings clause as preserving a role for state law is dicta. A better reading is that the savings clause authorizes federal courts to create federal common law to govern the enforcement of covered arbitration agreements. That alternative interpretation is consistent with the Court’s treatment of the rest of the statute; it is consistent with an analogous regulatory scheme— federal common law regulation of the enforcement of collective bargaining agreements—and it reflects a division of lawmaking authority that would have been familiar to the Congress that passed the FAA in 1925. Moreover, while there are no doubt legitimate state interests in regulating arbitration agreements and guaranteeing parties a judicial forum for the assertion of certain rights, that alone does not require application of state law to FAA-covered arbitration agreements. Like it or not, Congress has the authority to regulate the enforcement of arbitration agreements in interstate commerce, and a necessary consequence is the displacement of some overlapping state law. A fully federalized savings clause would result in the development of a uniform body of arbitration law, and that body of law could prove to be at least as effective, and perhaps even more effective, in addressing the major arbitration issue of our time: the imposition on relatively weak parties, like consumers and employees, of agreements that effectively deprive those parties of the right to assert their federal- or state-law rights. This nascent body of federal common law helps shed light on the Supreme Court’s recent decision in AT&T v. Concepcion and helps chart a post-Concepcion approach to the issue of “lopsided” arbitration agreements.



Litigation Supply Should Not Exceed Shareholder ADR Demand: How Proper Use of the Demand Requirement in Derivative Suits Can Decrease Corporate Litigation

Joseph C. Barsalona

90 Or. L. Rev. 773

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Imagine that you are a shareholder of a Fortune 500 company. One morning you wake up, open today’s edition of The New York Times, and see an article on the front page about your company. You read the headline, and your jaw drops: the CEO has a five-million-dollar salary despite the fact that he spends more time on vacation in Cabo, Mexico, than he does in the boardroom. Assuming that you love this company and are not willing to sell your shares, what recourse exists? For you, your fellow shareholders, and even the company itself, the answer depends on the state in which your company is incorporated. To confront corporate misfeasance, a shareholder may bring either a class action lawsuit or a derivative lawsuit. In the last twenty years, class action litigation has increased substantially while derivative litigation has remained stagnant. The reason behind this trend is simple: while class action lawsuits allow parties to sue a corporation directly, parties filing derivative suits must go through the process of requesting that the company essentially sue itself by making demand upon the company. Because of this languid process, savvy plaintiffs’ attorneys have long evaded corporate codes by skipping over the demand procedure while state case law permitted them to do so. As a result, companies fight hundreds of class action lawsuits every year in court without ever having the opportunity to resolve disputes with shareholders internally. There is a way to fix this problem.