Challenging Arbitration Agreements for Unconscionability: An Uphill Battle for Employees and Others

By Levine, Gerald M. | Dispute Resolution Journal, November-January 2010 | Go to article overview

Challenging Arbitration Agreements for Unconscionability: An Uphill Battle for Employees and Others


Levine, Gerald M., Dispute Resolution Journal


In stating that contracts to settle "by arbitration" controversies involving commerce "shall be valid, irrevocable, and enforceable," the Federal Arbitration Act (FAA) clearly expresses a preference for arbitration over litigation. The FAA leaves the door ajar for the possibility that arbitration agreements are subject to nullification if "grounds ... exist at law or in equity for the revocation of any contract."1 Consistent with this provision, courts have recognized a number of grounds for invalidating arbitration agreements, one of which is unconscionability arising from excessive economic power of one party.

The settled law is that "private agreements to arbitrate are enforced according to their terms" without regard to the subject matter of the dispute and subject only to the threshold issue as to whether the clause is unconscionable.2 The FAA's endor sement of arbitration was incorporated into the original Uniform Arbitration Act, and continued in the revised UAA (RUAA) approved in 2000 by the National Conference of Com missioners on Uniform State Laws (NCCUSL), which has been adopted in some 14 jur isdictions and is pending in a few others.3 What is true at the federal level is generally (although not universally) true at the state level. As a result, parties who desire to be released from the obligation to arbitrate face an uphill battle when they seek to have a court declare an arbitration agreement invalid and unenforceable. What is termed unconscionable by the complaining party may be no more than a subjective sense of oppressiveness. Too frequently, parties seeking relief from arbitration agreements offer argument rather than evidence. They fail to understand that no amount of legal argument can persuade a court without factual evidence.

The uphill nature of the complaining party's battle is evidenced in three recent decisions discussed in this article: one by New York's highest court, another by the 2nd Circuit, and the third by a district court in the same circuit. Col lectively, they illustrate the strength of the policy in favor of enforcing arbitration agreements and the difficulty of invalidating such agreements for unconscionability in New York State and the 2nd Circuit, courts at the center of commerce in the United States. It has been done but it is a Sisy phean task.4

The purpose of the FAA was to reverse judicial hostility to private arbitration agreements and "to place arbitration agreements on the same footing as other contracts."5 This meant simply that such agreements should be enforced as written. As explained by the Supreme Court in Southland v. Keating, "We see nothing in the [Federal Arbitration] Act indicating that the broad principle of enforceability is subject to any additional limitations under state law than the generally applicable contract defenses of fraud, duress, or unconscionability. 6 In Volt Information Sciences v. Leland Stanford Jr. University, the Supreme Court observed that the parties may limit by contract the issues that they will arbitrate, or opt for a broad arbitration clause that encompasses all disputes. They also may agree to arbitrate "gateway" arbitrability questions.7 In Rent-A-Center v. Jackson, one of the Court's most recent decisions, the Court emphasized that arbitration is a matter of consent, not coercion, "so parties are generally free to structure their arbitration agreements as they see fit."8

In many challenges to the enforceability of an arbitration agreement, the complaining party alleges that the repugnant contract is one of adhesion, a contract prepared by the party with greater bargaining power that is essentially non-negotiable. However, adhesion contracts generally are enforceable. The business community argues that without them, little business would be conducted.

Another often-challenged provision calls for the parties to share arbitration fees and costs, which include the arbitrator's compensation, but not attorney or witness fees. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Challenging Arbitration Agreements for Unconscionability: An Uphill Battle for Employees and Others
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.