“Infinite” Arbitration Clauses

Business Conflict Blog by Peter Phillips

Prof. David Horton of the University of California, Davis, School of Law has posted a provocative article scheduled to be published by the University of Pennsylvania Law Review. Titled “Infinite Arbitration Clauses,” it collects and comments upon purported arbitration “agreements” pursuant to which one party seeks to obligate another party to arbitrate, rather than litigate, a wide scope of facets of their past, current or future relationship — irrespective of whether those claims arise from a “container contract” in which the arbitration agreement appears.

Adding to the concern is the growing enforceability of “delegation clauses,” by which courts increasingly recognize parties’ intention that arbitrators, not courts, determine whether a dispute is subject to arbitration. Several courts have determined that the mere selection of AAA Commercial Rules is sufficient to divest courts of the power to determine whether a dispute is arbitrable. (Rule 7 of the AAA Commercial Rules provides in part that “[t]he arbitrator shall have the power to rule on his or her jurisdiction, including any objections to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.”)

Prof. Horton cites some arbitration “agreements” that purport to wrest from judicial control all claims of any sort that one party might bring against another:

“All disputes, claims or controversies whether based on any prior, current or future agreement,… event or occurrence, whether individual, joint or class in nature, including contract and tort disputes and any other matter at law or equity… shall be resolved by arbitration.”

“Any dispute between us shall be submitted to arbitration.”

“I agree that any claim dispute or controversy between myself and the Company shall be submitted to and determined exclusively by arbitration.”

“[The obligation to arbitrate] survives the termination of your services with us [and] is indefinite.”

Section 2 of the Federal Arbitration Act restricts the enforceability of arbitration agreements under federal law to “provision[s] in .. a contract… to settle by arbitration a controversy arising out of such contract or transaction….” Prof. Horton raises the question, however, whether such a restriction is jurisdictional in federal courts, or whether it even exists under state arbitration law.

Promising to arbitrate personal injuries arising from a motor vehicle accident that has not yet occurred? Promising to arbitrate future claims of negligence? Barring class claims of injury resulting from unsafe products?The whole thing reminds me of one of my favorite “arbitration agreements:

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F. Peter Phillips

F. Peter Phillips is a commercial arbitrator and mediator with substantial experience providing consultation on the management of business disputes to companies around the globe. A cum laude graduate of Dartmouth College and a magna cum laude graduate of New York Law School, Mr. Phillips served for nearly ten years… MORE >