Asymmetry and Invalid Arbitration Clauses

In the wake of the recent blizzard of U.S. Supreme Court decisions unequivocally solicitous of arbitration clauses, courts have generally been loath to invalidate arbitration agreements between private parties. Indeed, in most cases, guided by the principle of “rigorous enforcement,” courts faced with mandatory arbitration provisions generally do little more than act as rubber stamps, sending case after case directly to arbitration. To most courts, the mere existence of a mandatory arbitration clause in a contract evinces an intent by the parties (who were often presumed to be sophisticated parties with bargaining power) to arbitrate; the terms in the franchise agreement are held to be conclusive as the final, fully integrated expression of the parties' intent. Although the Federal Arbitration Act (“FAA”) itself provides exceptions to the policy of enforcement, few courts historically have seriously considered invalidating an agreement to arbitrate. Against this strong sentiment, a franchisee seeking to litigate his or her case in court in the face of a mandatory arbitration clause has historically had little hope.

The few courts that have ventured out of the mainstream and invalidated an arbitration clause have done so based on one of two general theories. First, some courts have ruled that a franchisee was not bound by an arbitration clause since the arbitration clause did not itself, or through its language, apply to the underlying dispute. For instance, one court vacated an order compelling arbitration when the written agreement containing the arbitration requirement had expired before the underlying dispute arose. Second, some courts have held that an arbitration clause is void based on unconscionability, one of the traditional bases of challenging the formation of a contract.