Despite parties mutually agreeing when a deal is made that they will arbitrate any disputes arising between them, often one party seeks to avoid arbitration when a dispute does arise. But on May 15, 2017, the United States Supreme Court reaffirmed a state court’s obligation to enforce arbitration rights in its Kindred Nursing Centers, L.P. v. Clark ruling. The opinion took note of, and rejected, some of the tactics used to invalidate vested, federally protected arbitration rights.
State Erosion of Arbitration Agreements
Parties that agreed to arbitration seek to avoid it when they believe litigation provides them with leverage over their opponent (i.e., cost, publicity, chances of a favorable jury decision, etc.). For years state courts have been developing state law arguments to avoid enforcing a party’s arbitration rights under the guise that such defenses are “generally applicable” to all types of contracts. Some state courts have used the right to a jury trial as the express foundation to invalidate arbitration provisions, or invalidate their inception, to justify allowing parties to litigate in court. Other examples are:
- Arkansas, Alltel Corp. v. Rosenow, 2014 Ark. 375, 2014 WL 4656609 (Ark. 2014) (finding the “doctrine of mutuality” applies to all contracts and, therefore, the arbitration clause at issue was invalid for lack of mutuality).
- Missouri, Baker v. Bristol Care, Inc., 450 S.W.3d 770 (Mo. 2014) (finding an arbitrator did not have authority to decide a party’s defenses to arbitration because they were based in contract formation rather than enforceability).
- New Jersey, Atalese v. U.S. Legal Servs. Group, 99 A.3d 306 (N.J. 2014) (finding an arbitration clause invalid because, by scoping arbitration as a waiver...
