USA – NEW YORK Law and Practice Contributed by: Sam Lieberman, Claiborne Hane and Ben Hutman, Sadis & Goldberg LLP
ing A merican Express Co. v Italian Colors Restaurant , 570 U.S. 228, 233 (2013)). Having determined that the securities laws and Supreme Court precedent do not bar mandatory arbitration provisions in a company’s governing documents, the SEC announced that it would now focus its decision on whether to accelerate the effec- tiveness of a registration solely on the accuracy of a company’s disclosures – not on the substance of what is disclosed. This development reflects a broader trend towards deregulation and a shift in the SEC’s approach to corporate governance. SEC Commis- sioner Atkins indicated that such policy changes are part of an initiative to make initial public offerings more attractive by reducing compliance burdens. The SEC’s stance suggests a preference for allowing companies greater flexibility in determining their dispute resolu- tion mechanisms, including mandatory arbitration, without facing regulatory scrutiny or sanctions. The SEC’s change in policy could cause many com- panies to adopt mandatory arbitration agreements (including class action waivers), because they no longer fear the risk that the SEC will hold up the effec- tiveness of their registration statements. If this causes many companies to adopt such provisions, it could cause a major reduction in class actions in the United States. Thus, this could prove to be one of the most significant class action developments in many years.
On the other hand, it is important to note that there remain state law and other obstacles to corporations forcing stockholders into mandatory arbitration and/ or class action waivers. For example, Delaware, the state in which most US corporations are incorporated, requires that every company’s certificate of incorpora- tion and/or by-laws must allow stockholders to bring claims “in at least 1 court in this State” (8 Del. C. Sec- tion 115 (c) (2025)). This provision effectively bars a corporation incorporated in Delaware from enforcing mandatory arbitration provisions against stockholder or derivative claims. Similarly, mandatory arbitration agreements generally cannot be enforced retroac- tively or without proper documentation. Accordingly, this is a new development that all class action legal practitioners should monitor in the coming years.
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