Prof. David Horton asks and answers "Does the Federal Arbitration Act apply to wills and trusts" on SCOTUSblog

Associate Professor of Law, David Horton, wrote a post for SCOTUSblog entitled, "Does the Federal Arbitration Act apply to wills and trusts?" The post was part of an Arbitration Symposium organized by the Supreme Court blog.

Here's an excerpt:

"Over the last two decades, arbitration has transformed the way that consumer and employment disputes are resolved. Recently, arbitration clauses have become increasingly common in a different context: wills and trusts. The roots of this movement are easy to understand. Even with the economic downturn, Americans bequeath hundreds of billions of dollars each year. This massive intergenerational wealth transfer - the largest in history - is expected to make probate litigation more common. Incapacity and undue influence claims are notorious not just for depleting estates, but for exposing a testator or settlor's intimate life in open court. Arbitration's purported benefits - its low cost, speed, and privacy - make it attractive to estate planners and their clients."

Read the full post here.

Will arbitration kill the consumer class action?

By Associate Professor David Horton

For "contract procedure" enthusiasts, few stories in 2011 will rival the U.S. Supreme Court's decision in AT&T v. Concepcion. The Court will decide whether the Federal Arbitration Act (FAA) preempts state courts from striking down class arbitration waivers under the unconscionability doctrine. It's no exaggeration to say that the fate of the consumer class action hangs in the balance.

The seeds of Concepcion go back to the late 1990s and early 2000s, when companies began to see mandatory arbitration clauses as a panacea for class action liability. During that period, most courts held that the FAA flatly precluded plaintiffs from aggregating claims. As a result, mandatory arbitration clauses not only funneled consumers outside of the court system, but forced them to pursue their lawsuits on an individual basis. But in 2003, a highly fractured plurality of the Court suggested in Green Tree v. Bazzle that the FAA didn't bar class arbitration. Thus, to continue to use arbitration as a bulwark against the class action, companies were forced to insert express class action waivers into their agreements.

In Discover Bank v. Superior Court, a landmark 2005 decision, the California Supreme Court held that these class arbitration waivers could be unconscionable when applied to numerous low-value claims. The state high court explained that, in those circumstances, class arbitration waivers amounted to "get out of jail free cards" for corporate liability. For instance, if a business defrauds a million consumers out of $10, no individual consumer will spend the time and money necessary to sue. That lawsuit will either be brought as a class action or not at all.