Arbitration Clauses Before Supreme Court

Mandatory arbitration clauses are contained in almost every consumer transaction agreement, and financial and employment contracts. We have previously written about the fact that these mandatory arbitration clauses benefit only big business. As a result of the unfair nature of these clauses, there has been a movement within the United States to prohibit their inclusion in many consumer, financial, and employment contracts.
The increasingly conservative United States Supreme Court has recently been upholding a wide range of mandatory arbitration clauses. Just recently, the Supreme Court agreed to decide during the next term whether a class-action ban in a cell phone arbitration agreement is unconscionable. This is one of the most controversial issues in arbitration.
The Supreme Court has agreed to hear a steady stream of arbitration cases during the past decade or so. The decisions have generally been pro-arbitration., even though lower courts appear to be increasingly skeptical of claims that arbitrations offer greater efficiency and lessen costs of court litigation.
The most important case pending before the Supreme Court is AT&T v. Concepcion, which is the cell phone class-action ban case.
Also pending before the Supreme Court is the case of Rent A Center v. Jackson. In that case, Jackson, the plaintiff sued his employer for race discrimination and retaliation. The trial court granted the employer’s motion to dismiss and to compel arbitration according to a clause in Jackson’s employment contract.
Jackson appealed, arguing that the arbitration agreement was unconscionable and that the issue of unconscionability must be decided by a court, not an arbitrator. The United States Court of Appeals for the Ninth Circuit agreed that the threshold issue of unconscionability is for a court to decide.
While these cases are pending , Congress has begun to address the arbitration problem. Currently pending is a bill, the Arbitration Fairness Act of 2009, which would ban pre-dispute arbitration agreements in employment, consumer and franchise contracts. This legislation has been introduced by Rep. Hank Johnson of Georgia and Sen. Russell Feingold of Wisconsin. The legislation has garnered substantial support, but other issues such as health care reform and financial reform have placed it on a back burner.
This is very important legislation as the Supreme Court seems intent on upholding these patently unfair and unconscionable clauses.