Courts Validate Arbitration Agreements, But Ways to Avoid Forced Arbitration Still Exist

In 1925, Congress enacted the Federal Arbitration Act, 9 U.S.C. Sections 1-16 (2012), and in the space of 16 sparsely worded sections covering a few pages forever changed the contractual dispute resolution process in the United States. Congress intended the FAA to counteract judicial hostility to the private dispute resolution regime by validating the enforceability of agreements requiring private arbitration of certain disputes that parties otherwise would have litigated in courts, see American Express v. Italian Colors Restaurant, 570 U.S. 228, 232 (2013); AT&T Mobility v. Concepcion, 563 U.S. 333, 339 (2011); Hall St. Associates v. Mattel, 552 U.S. 576, 581 (2008) and Allied-Bruce Terminix v. Dobson, 513 U.S. 265, 270 (1995).

This intent remained mostly true for the remainder of the century and FAA jurisprudence largely only affected commercial disputes between business entities. Everything changed in 1999 when the U.S. Chamber of Commerce, other business organizations, and their legal advisers realized they could limit employees’, consumers’ and individuals’ rights to sue in court by inserting arbitration clauses in their standard mass form contracts. This strategy’s impact metastasized over the following twenty years via the widespread inclusion of arbitration clauses in employment agreements and handbooks, consumer goods package inserts, and the ubiquitous terms and conditions in a web-based world that we click to apply for a credit card, join a gym, rent a car or make internet purchases. Because most businesses’ employment or purchase agreements now include arbitration clauses, finding a comparable non-arbitration alternative is a near impossibility. As a result, tens of millions of Americans are parties to arbitration agreements and—whether they realize it or not—have agreed to resolve all disputes through private, confidential arbitration; waived their right to seek judicial remedies, including the right to a jury trial, and—depending upon the language of the clause—surrendered their right to bring or participate in a class or collective action. More troubling is that arbitration may not be the most fair mechanism to resolve their disputes, see Styczynski v. MarketSource, No. 18-2662, 2018 U.S. Dist. LEXIS 203871, at *29 (E.D. Pa. Nov. 30, 2018) (noting recent empirical studies, academic publications, and news articles discussing the inequities and difficulties employees and consumers encounter in forced arbitration proceedings).