Posted: 11 Apr 1997
Date Written: November 1996
This article examines the increasing use of contracts of adhesion in which companies require consumers, employees, franchisees and other "little guys" to submit disputes with the company to binding arbitration. The article argues that the Supreme Court's current preference for such agreements is not statutorily well-founded. Specifically, it contends that the Federal Arbitration Act was not intended to make such agreements binding on unknowing consumers or employees.Turning next to policy analysis, the article asserts that the Supreme Court has erred in expressing a preference for binding arbitration in cases where such arbitration was not knowingly and voluntarily accepted by both parties. In particular, it argues that binding arbitration is not necessarily better and cheaper for all parties than litigation. Rather, a company can use a binding arbitration clause to secure significant strategic advantages over less knowledgeable parties. The article further argues that by using preemption principles to preclude states from protecting their own citizens from unfair binding arbitration Congress and the Supreme Court have trammeled important federalism interests.
Suggested Citation: Suggested Citation
Sternlight, Jean R., Panacea or Corporate Tool? Debunking the Supreme Court's Preference for Binding Arbitration (November 1996). Available at SSRN: https://ssrn.com/abstract=10392