Even as the Supreme Court has aggressively wielded the Federal Arbitration Act to preempt state-law contract rules that prevent arbitration, state courts have still been able to use traditional contract doctrines to invalidate arbitration agreements that are unfairly "one-sided" — for instance, where an agreement provides that a business gets to bring its claims in court but the consumer must bring her claims in arbitration.
In a decision that could have far-reaching implications, the Tenth Circuit rejected that reasoning yesterday in THI of New Mexico v. Patton, holding impermissible (and therefore preempted) under the FAA the New Mexico state courts' position that a business-goes-to-court-but-consumer-goes-to-arbitration agreement is unfairly one-sided. Because the FAA requires courts to treat arbitration as equal to litigation, reasoned the Tenth Circuit, courts cannot assume that consumers are being treated unfairly by being forced to arbitrate their claims even though the business who drafted the arbitration agreement chose to retain its own access to courts. That view, according the Tenth Cicuit, is premised on the notion that arbitration is inferior — a view that contravenes the FAA. (One wonders: if arbitration is so great, why would a business force only its prospective opponents to go there, while reserving its own right to go to court?)
If this reasoning is picked up in other courts, consumer advocates will have lost a critical tool in challenging arbitration agreements.
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What do we have courts for if we are not allowed to use them?