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California Decision Upholding Class Action Arbitrations Under the FAA Threatens to Undermine Benefits of Arbitration

1 January 1998
Mayer Brown Article
Arbitration is widely hailed a means of reducing the time and expense of resolving disputes. But health care providers, credit card issuers, and other businesses often favor arbitration for an additional reason — it reduces the risk of a huge damages award. Litigation presents the danger of runaway juries, exorbitant punitive damages, and, perhaps the scariest feature, class actions that may require company-breaking payouts to thousands or even millions of plaintiffs. A recent California appellate court decision now has jeopardized the ability to avoid class actions through arbitration.
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