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University of Miami Business Law Review

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Abstract

A Means to an End: How the Expansion of The Federal Arbitration Act of 1925 by the Supreme Court Created a Loophole for Corporations to Avoid Claims by Consumers and Workers Alike Arbitration is rarely thought of outside the legal and business world by the everyday lay person. Whether we know it or not—all of us, in some capacity, have agreed to a mandatory arbitration clause. A contract for cellular service, an employer-employee arrangement, or an agreement to open a bank account are just a few common examples that lock not only clients, but also employees, in contracts that contain mandatory arbitration clauses. In 1925, the Federal Arbitration Act was imagined to propel the efficiency of justice. However, the Supreme Court has greatly expanded the scope of the Act; which, in turn, has twisted the original intent of the Federal Arbitration Act and created a loophole for corporations to avoid class action litigation all together without even looking toward the merits of each case. Allowing this kind of abuse only deprives consumers and employees of their Seventh Amendment right to trial as mandatory arbitration clauses only seem to become more commonplace. Originally, the Federal Arbitration Act was enacted to create another avenue to dispute resolution in order to speed up cases where both parties agreed to avoid trial. Now, arbitration is a wonderland for large companies where the world of justice is flipped on its head and rules of evidence are thrown out without any regard for the law. Even though arbitration is a private dispute resolution, this should not undermine basic due process measures. Simply because large corporations want to avoid the expenses of the trial courts and damages, this does not mean justice should be put on the wayside. Individuals may be left in a worse position after arbitration— even if they come out on the winning side.

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