Can Corporations Use Arbitration Clauses to Avoid Class Actions?

Here is an interesting development in the law involving companies using arbitration contract provisions to avoid small claims that could only be affordable to litigate in a class action.

This article begins by explaining that arbitration clauses often amount to waiving the right to sue, under circumstances where class actions are the only affordable option, and yet the U.S. Supreme Court has affirmed them under such circumstances.

The article then discusses an unresolved issue: Are shareholders bound by an arbitration clause in bylaws that prevents them from litigating against the corporation for securities fraud or breach of duty claims? That is, can an arbitration clause be inserted into bylaws to prevent the shareholders from suing the corporation?

Wake up, shareholders! Your rights may be in danger: Frankel