What is Class Arbitration?

Written by Small Business Tips. Posted in Bankruptcy case, Bankruptcy substantive, Judge joel pisano

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Arbitration is a form of alternative dispute resolution. In this method, the disputing parties give a non-biased third party arbitrator the power to make a decision. Unlike mediation, the arbitrator?s decision is binding as if in a court of law.

What is class arbitration?
Class arbitration occurs when a number of plaintiffs come together to file a complaint against an entity. The most common examples of this occur in product liability cases ? situations in which a drug doesn?t have the intended effects or actually harms consumers, or when a defective product causes harm.

This method of dispute resolution, though less common than class action lawsuits, enables multiple plaintiffs to receive compensation for damages without having to take the case to court. It is currently practiced in several countries, including the United States, Canada, Spain, and the United Kingdom.

Why choose class arbitration?
In many cases, individual plaintiffs don?t believe it to be financially worthwhile to bring a lawsuit against a company because of a defective product. A lawsuit could incur more expenses than it would reward the plaintiff in compensation. Of course, if one person was affected by a defective product, there are probably others out there who experienced the same damages or losses. Therefore, rather than file individually, these parties can join together to enter into a class arbitration.

How does it work?
One plaintiff brings the case to the attention of an attorney. Other plaintiffs are considered part of the cause of action, but they are not required to meet with the attorney or even become involved in the negotiations. They do, however, receive a piece of the settlement without participating or paying any money for legal fees.

Class arbitration is ideal for some legal disputes but it not appropriate in all cases. If you have any questions regarding class action lawsuits or arbitration, feel free to post in the comments section below.