There has existed for some time a tension between two provisions commonly found in consumer contracts of adhesion; i.e., the requirement that all claims be resolved by arbitration and the prohibition against any claims being pursued in a class action.
Large corporations see that combination as providing them with the greatest possible protection; the arbitration serves as a refuge from runaway jury verdicts, and the preclusion of class actions eliminates the risk of prodigious adverse awards when thousands of small claims are combined and pursued in one arbitration. But the double whammy imposed on consumers does more than provide comfort to manufacturers, financial institutions, brokerage firms and the like; in many cases, it effectively eliminates any right of recovery whatsoever.
