Determining the Proper Standard for Invalidating Arbitration Agreements Based on High Prohibitive Costs: A Discussion on the Varying Applications of the Case-by-Case Rule
Transactions: The Tennessee Journal of Business Law, Vol. 14 #1, Fall 2012, Forthcoming
30 Pages Posted: 20 Jun 2012
Date Written: 2012
Compulsory arbitration agreements placing a high risk of prohibitive costs on plaintiffs can make it difficult for plaintiffs to bring their disputes and effectively vindicate their statutory claims. The Supreme Court has indicated that high costs can make an arbitration agreement unenforceable, but the Court has not yet articulated a clear standard on when agreements should be invalidated on that basis. While most courts agree that a case-by-case inquiry is appropriate, the courts are split on whether to apply the case-by-case inquiry to the individual plaintiff’s situation, or to a broader class of prospective plaintiffs. This article argues that the proper case-by-case inquiry is the broader approach, which evaluates the agreement’s impact on a group of prospective plaintiffs because it provides the most protection of the deterrent function of anti-discrimination statutes for the broad group of parties the statutes are designed to protect.
Keywords: arbitration, cost
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