California is changing its tune. Although previously known for decisions that flouted federal arbitration law, its decision yesterday in Sanchez shows the current California Supreme Court will abide by SCOTUS’s interpretation of the FAA. After a trial court and intermediate appellate court had ruled that the arbitration clause in a consumer contract was unconscionable, the
Validity of Arbitration Agreement
State Courts Disagree About Incorporating Arbitration Agreements By Reference (Post #200!)
One way to challenge the very existence of an agreement to arbitrate is to say that the parties’ contract said nothing about arbitration and did not validly incorporate any other document calling for arbitration. Oklahoma and Alabama have recently come out at opposite ends of the spectrum in terms of what kind of notice must…
Should You Cut The Delegation Clause From Your Arbitration Agreement?
A recent report showed that less than half of arbitration agreements in the consumer financial arena include delegation clauses in their arbitration agreements. Two recent decisions from state high courts suggest that is a wise decision because courts do not like to enforce delegation clauses. (Reminder: a delegation clause gives the arbitrator explicit authority to…
Arbitration Fireworks: Three Federal Circuits Refuse To Compel Arbitration
Three federal appellate courts recently affirmed lower courts’ refusal to compel arbitration. These cases show that the federal policy favoring arbitration is not absolute – the parties must have agreed to arbitrate the claims at issue and the defendant cannot have waived its right to arbitrate by engaging in significant discovery and motion practice.
In…
Hawaii Finds Arbitration Agreement With "Severe Limitations on Discovery" is Unconscionable
Hawaii issued a bold arbitration decision this month. It applied its state contract law to conclude that the parties did not form a clear arbitration agreement, but even if they did, it was unconscionable because it prohibited both discovery and punitive damages. Narayan v. The Ritz-Carlton Dev. Co., Inc., __ P.3d __, 2015 WL…
Missouri Declares It Unconscionable For NFL Commissioner to Arbitrate Employment Dispute
The Supreme Court of Missouri has issued two significant arbitration decisions in recent weeks, showing its willingness to sever any aspects of an arbitration agreement that it finds unconscionable (while enforcing the overall obligation to arbitrate).
First, in a contentious decision, the Supreme Court of Missouri found that a former employee of the St. Louis…
Eighth Circuit Shows How Difficult It Is To Prove Arbitration Agreement Unconscionable Due To Cost
Almost two years ago in American Express Co. v. Italian Colors, SCOTUS significantly narrowed, but did not overrule, the “effective vindication” doctrine, which allows plaintiffs to invalidate an arbitration agreement if it precludes them from effectively vindicating their federal statutory rights. A decision today from the Eighth Circuit shows just how difficult it is…
SCOTUS Will Hear Arbitration Case in October Term
Just as I was beginning to worry that arbitration had fallen out of favor at the nation’s highest court… today the Supreme Court announced that it will hear the case of DIRECTV, Inc. v. Imburgia during its October Term, an appeal from a California Court of Appeals. In DIRECTV, a case pitting Kirkland &…
SCOTUS Allows California to Interpret Federal Arbitration Act As Excluding Private Attorney General Claims
Today, the U.S. Supreme Court denied the petition for certiorari in the Iskanian case from the California Supreme Court. In doing so, SCOTUS allowed one of the most interesting Federal Arbitration Act interpretations in recent years to stand. As you may recall, the decision held that the Federal Arbitration Act did not apply to labor…
Sirius XM Faces Class Action Because Arbitration Agreement Provided Late Is Invalid
A few months ago, the Ninth Circuit found that the arbitration agreement in Barnes & Noble’s website was not enforceable. This week, the Ninth Circuit found that the arbitration agreement Sirius XM Radio relied upon was not enforceable because the user did not know he had any agreement with Sirius XM, let alone an arbitration…