You think you can sue. The contract says you agreed to arbitrate instead — individually, not as part of a class. That clause is almost certainly enforceable, and the Supreme Court has said so more than once.
The case that settled this, and stayed settled
In AT&T Mobility v. Concepcion (2011), the Supreme Court ruled 5-4 that the Federal Arbitration Act preempts state laws attempting to invalidate class-action waivers in consumer arbitration agreements. The practical effect: a company can require customers to resolve disputes through individual arbitration only, blocking class-action lawsuits, and most state laws trying to override this don't survive a federal court challenge. The Court reaffirmed this position again in DIRECTV, Inc. v. Imburgia (2015), rejecting a California court's attempt to sidestep Concepcion through contract interpretation.
Where these clauses typically hide
Arbitration and class-action waiver clauses appear routinely in phone service contracts, credit card agreements, employment agreements, software terms of service, and app terms of use — often buried well into a long document, in the same dense block of text as governing law and liability provisions. They rarely announce themselves as significant; most consumers encounter them only when a dispute actually arises and it's too late to negotiate them away.
What accepting an arbitration clause actually means
- You generally give up the right to sue in court for disputes covered by the clause
- You generally give up the right to join or benefit from a class-action lawsuit against the company
- Your dispute is instead decided by a private arbitrator rather than a judge or jury
- Arbitration decisions are typically final, with very limited grounds for appeal
The small claims carve-out many people don't realize exists
Many arbitration clauses include an explicit exception allowing either party to bring an individual claim in small claims court instead of arbitration, provided the claim qualifies under that court's monetary limit. This exists partly because companies rarely object to individual small claims cases — they're low-cost and don't carry the class-wide exposure arbitration clauses are designed to prevent. If you have a smaller claim, check your specific contract for this carve-out before assuming arbitration is your only path.
How to actually identify these clauses before you sign
- Search the document for the words "arbitration," "class action," "class waiver," or "dispute resolution" rather than reading start to finish.
- Check specifically whether a small claims court carve-out is included — this preserves a real option even if arbitration otherwise applies.
- Check whether the clause allows you to opt out within a specific window after signing — some companies include this, often quietly.
- If the clause matters enough to you, factor it into your decision to sign at all — post-signing objections rarely succeed given Concepcion's precedent.
What this means practically
- Arbitration clauses with class-action waivers are enforceable in the vast majority of US consumer contracts, following Concepcion and its reaffirmation in Imburgia.
- These clauses are rarely visually distinguished from the rest of the contract — you have to specifically look for them.
- A small claims court carve-out, if present, can preserve your ability to bring an individual claim even under an otherwise binding arbitration clause.
- Check for an opt-out window at signing — this is your best chance to avoid the clause, since challenging it later is difficult.
Sources
- Wikipedia — AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011): en.wikipedia.org
- JD Supra — Arbitration Wars: Supreme Court Continues to Affirm the Supremacy of the FAA, including DIRECTV v. Imburgia: jdsupra.com
Related Kibbo Tools
- Contract Red Flags Checklist — spot arbitration and class-action waiver clauses before you sign.