As transactional lawyers and commercial litigators know, contractual arbitration provisions frequently include language that permits the parties to seek injunctive relief from courts under certain circumstances. However, the scope of such "injunction exclusions" varies widely, and courts have interpreted these exclusions in different—sometimes surprising—ways. This article will examine the state of the law in a number of jurisdictions, explore litigation pitfalls, and provide practice pointers related to the interplay between arbitration and injunctions.

State of the Law

Generally courts favor enforcing arbitration provisions and are reluctant to recognize exclusions to arbitration agreements unless they are clearly and expressly stated in the relevant contract. This approach is driven in part by the Federal Arbitration Act, which reflects a "national policy favoring arbitration." Southland v. Keating, 465 U.S. 1, 10 (1984). Accordingly, courts typically look for either an express exclusion of a particular claim or "forceful evidence of a purpose to exclude" an action from arbitration in favor of litigation. AT&T Tech v. Comms. Workers of Am., 475 U.S. 643, 650 (1986). Courts must balance the policy in favor of arbitration against ordinary state-law principles of contract construction, which require arbitration agreements be limited to disputes the parties have expressly agreed to arbitrate. Comedy Club v. Improv W. Assocs., 553 F.3d 1277, 1284-85 (9th Cir. 2009).

Narrow View

Clauses excluding injunctive relief from commercial arbitration agreements are commonplace; in accordance with the general principle favoring arbitration, courts have construed such provisions narrowly. The SDNY has taken a particularly restrictive approach, generally interpreting injunctive exclusions to permit injunctions prior to arbitration only to the extent they are sought "in aid of arbitration"—that is, to compel arbitration or preserve assets pending resolution of arbitration. Baldwin Tech. Co. v. Printers' Serv., 2016 BL 22555, at *3, n. 4 (S.D.N.Y. Jan. 27, 2016). For example, in Baldwin Tech. Co., the court rejected the argument that plaintiffs were entitled to a permanent injunction based on the language: "[n]otwithstanding anything to the contrary herein, each party shall have the right to seek injunctive relief in court at any time and under any circumstances." Id. at *2. Instead, the court construed the arbitration agreement "as broadly as possible" based on the "strong federal policy favoring arbitration." Id. at *3, n. 4 (citing Oldroyd v. Elmira Sav. Bank, FSB, 134 F.3d 72, 76 (2d Cir. 1998)).