The American Association for Justice (AAJ) has long fought to prohibit corporations from avoiding accountability by hiding forced arbitration clauses in the fine print of consumer and employee contracts. When Bloomberg broke the story that Carlyle was attempting to take away investors’ rights by including a forced arbitration clause in its proposed IPO filing, AAJ raised concerns with the SEC and brought awareness to the issue.
The media coverage that followed and the news on Friday that Carlyle dropped the forced arbitration clause shows that now more than ever, "the public cares and public scrutiny matters."
According to the Wall Street Journal:
The decision came after the American Association for Justice, a group of plaintiffs’ lawyers, issued a statement Wednesday calling on the SEC to reject Carlyle’s inclusion of the forced arbitration clause in its IPO, calling the clause a “blatant attempt to skirt accountability,” and a “predatory maneuver to circumvent well-established securities law and force investors into a rigged and biased process.”
The SEC also publicly made clear its unwillingness to allow IPOs to go forward with forced arbitration clauses. As Bloomberg pointed out, this continues the SEC's decades-long stance. Quoting SEC spokesman John Nester:
“We advised them [Carlyle] that the staff was not prepared to clear the filing with the mandatory-arbitration provision included,” Nester said in an e-mailed statement. “We are pleased they have announced that they plan to remove this provision.”