Ethical Problems in Class Arbitration

This article examines two significant conflicts of interest that arise in class-action arbitration. The first arises at the beginning of class-action arbitration, where an attorney’s selection and payment of fees to an arbitrator is followed almost immediately by the arbitrator’s selection of an attorney as lead counsel. If the arbitrator picks as lead counsel the attorney who picked the arbitrator, there is a strong appearance of a quid pro quo. The second arises at the end of class-action arbitration, where the arbitrator, who likely has been receiving payment for his or her services since the onset of the class arbitration proceeding, must make an award or approve a settlement between the parties and ensure that class counsel has adequately represented the class as a whole. The arbitrator’s prior receipt of payment from class counsel creates a strong incentive for the arbitrator to be more concerned with the interests of class counsel than with the interests of absent class members. This article argues that Congress should amend the FAA to, among other things, require limited judicial supervision of the process of selecting class arbitrators and the process of issuing a class award or approving a class settlement.