Judicial Attitudes Toward Arbitration and the Resurgence of Unconscionability
40 Pages Posted: 11 Feb 2005
The Federal Arbitration Act requires enforcement of arbitration agreements, unless generally applicable grounds for revocation of the agreement, including unconscionability, exist. For the most part, claims of unconscionability have been only rarely successful. In the recent past, however, many courts have held arbitration agreements unconscionable. This paper suggests that courts are using an arbitration-specific version of the unconscionability doctrine to circumvent the requirements of the Federal Arbitration Act and permit judicial resolution of claims. Evidence suggests that judges are using unconscionability more frequently and more expansively than in the past. Judges currently find arbitration agreements unconscionable at twice the rate of nonarbitration agreements. Twenty years ago, prior to the Supreme Court's most expansive readings of the Federal Arbitration Act, judges found arbitration and nonarbitration agreements unconscionable at approximately the same rate. Judges are also holding unconscionable specific features of arbitration agreements, such as forum selection clauses, confidentiality requirements, and punitive damages limitations, which are routinely enforced in nonarbitration agreements. To avoid preemption under the Federal Arbitration Act, judges must avoid selective use of the unconscionability doctrine and hold features of arbitration agreements unconscionable only where they would reach the same result in a nonarbitration agreement. In finding an arbitration agreement unconscionable, judges must also demonstrate how the agreement exemplifies general features and characteristics of unconscionable contracts, such as unequal bargaining power, oppression, and unfairness.
Keywords: Arbitration, unconscionability
JEL Classification: K10
Suggested Citation: Suggested Citation