Publications

"The Mandatory Arbitration Clause Debate," New York Law Journal July 18, 2016

“The concept behind a MMA is simple enough: Parties to a contract agree to settle any disputes arising out of that contract via arbitration, rather than ordinary litigation or some other avenue,” writes Goldberg Segalla partner Joseph M. Hanna in an article for the New York Law Journal. “The real world implications of MAAs, however, are far more complex.”

Joe’s piece focuses on the prevalence of “mandatory arbitration agreements” — and the issues that have cropped up alongside their rise in prominence. As Joe notes, for example, lawmakers in New York have attempted to limit how MAAs are used, with New York General Business Law §399-c prohibiting the inclusion of such agreements in written contracts for the sale of consumer goods where the consumer is party to the contract.

“This, however, is at odds with federal law,” he writes. “The Federal Arbitration Act (FAA), grounded in the commerce clause, governs arbitration at the federal level and, as a general rule, heavily favors the use of arbitration. As a result, on multiple occasions, state laws and judiciaries have clashed with their federal counterparts.”

Not to mention that MAAs — and their “seemingly incontrovertible enforceability” under Supreme Court jurisprudence — can be seen as at odds with the Seventh Amendment right to a trial by jury. “Yet jury-trial-waiver clauses have long been held to be enforceable,” Joe writes. He also notes that binding arbitration places limitations on the ability to appeal judgments.

“Attorneys, their clients, and anyone who might become bound by a MAA must be mindful of these issues before drafting or entering into such agreements,” he writes. “MAAs may have their shortcomings, but with time, cooperation, and discussion, the legislature and the judiciary have the power to change and define how they are used, and perhaps more importantly, how the arbitration process as a whole is perceived.”

Read the article here: