The attempt by Maryland lawmakers to invalidate class action waivers in arbitration agreements was defeated on April 11, 2011, when House Bill 729 failed, 25-21, on its third reading in the State Senate.

The Bill had overwhelmingly passed the Maryland House of Delegates, raising great concern that it might become law and lead to the appearance of similar bills in other state legislatures. The Bill would have banned all class action waivers, regardless of the nature of the contract, the type or dollar amount of the claim(s), and/or the consumer’s ability to find representation.

This is a significant victory for consumers and employees. Empirical data confirms that arbitration is faster and more cost-effective than the courts for resolving disputes. The data also establishes that consumers and employees do at least as well in arbitration as they do in court. See, for example, the studies conducted by the Searle Civil Justice Institute of Northwestern University School of Law during 2009, published at C. Drahozal and S. Zyontz, “An Empirical Study of AAA Consumer Arbitrations,” 25 Ohio St. J. on Disp. Resol. 843 (2010), and C. Drahozal and S. Zyontz, “Creditor Claims in Arbitration and in Court,” 7 Hastings Bus. L. J. 77 (2011). As the U.S. Supreme Court itself has emphasized, by avoiding the delay and expense of litigation, arbitration is “helpful to individuals … complaining about a product, who need a less expensive alternative to litigation.” Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 280 (1995). (Click here to read an earlier legal alert on the Bill.)

Ballard Spahr’s Consumer Financial Services Group is nationally recognized for its skill in litigation defense and avoidance, including pioneering work in pre-dispute arbitration programs. For further information, please contact Alan S. Kaplinsky, Group Chair, at 215.864.8544 or kaplinsky@ballardspahr.com, or Mark J. Levin at 215.864.8235 or levinmj@ballardspahr.com.


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