Judge Laments that Law of Arbitration Ignores Common Sense

Judge Laments that Law of Arbitration Ignores Common Sense

By Paul Bland

Executive Director

So, in a routine aspect of modern American legal practice, a federal judge just killed off a lawsuit on the grounds that U.S. Supreme Court decisions require that the court enforce a forced arbitration clause against the plaintiffs. As usual, the court was unable to consider whether the plaintiffs’ antitrust claims were actually valid before throwing out the case, and court was not permitted to consider the fact that the forced arbitration clause would wipe away the plaintiffs’ claims. But what is unusual about this case is that the judge actually TOLD THE TRUTH about what was happening.

U.S. Judge Jack Zouhary, appointed to the bench by President George W. Bush, calmly reflected that “binding precedent does not permit this Court to deny the Motion because this Court believes arbitration in this context is inefficient and wasteful, . . . or would undermine effective enforcement of federal antitrust laws through the mechanism of a class action.” 

A normal person who is not already extremely familiar with the U.S. Supreme Court’s decisions in this area would probably do a double take at this, thinking “You mean a court has to enforce an arbitration clause even where it’s inefficient and would undermine the antitrust laws?” This hypothetical innocent might ask: “Surely that’s not right.” 

It may not be right in the sense of fair or moral (Judge Zouhary even cites Dickens), but it’s sure right as a matter of law under the decisions of the five-member majority of the Supreme Court.

In this case, the defendant jerked the plaintiffs around for some time by litigating in court for months and trying to see if it could win the case there, and then only moving to arbitration when that became a better strategy. The plaintiffs thus argued that the defendant had waived its right to demand arbitration by litigating in court for too long before asking for arbitration. 

Judge Zouhary felt compelled to deny this argument also, noting that the applicable law imposed a “demanding” standard and concluding that the plaintiffs hadn’t proven it merely by showing that the defendant had wasted the plaintiffs’ and the court’s time. 

But hey, isn’t this all fair, since everyone voluntarily agreed to arbitration? Not so much, in the real world, as Judge Zouhary remarked upon “this Court’s strong belief that neither Mohawk nor its customers who signed the credit agreement believed they were signing away any ability to litigate in federal court the existence of an unlawful antitrust conspiracy.” 

If that’s true, why throw out the case?  “Unfortunately, the law trumps a practical approach resolving these claims,” he writes.  Well, that wasn’t very satisfying.

So what’s the upshot of how the Supreme Court’s decisions on forced arbitration are working out for people who have legal claims in America? 

Let’s let Judge Zouhary say the obvious:  “here again, . . . common sense plays no role.”

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