Originally from Law and Practice of Arbitration - 4th Edition

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1. The Anti-Arbitration Critique

The Court's policy on arbitration avoided serious objections until the development of employment and consumer arbitration in the late 1980s and early 1990s. The emergence of disparate-party arbitration generated some dissension among lower courts. Their opposition centered upon the legality and enforceability of adhesive contracts. The Court itself shunned the matter. In several landmark opinions, it provided an oblique response by holding fast to the position that the statutory duty of courts was to enforce arbitration contracts.1 In effect, the Court was saying that would-be contractual unfairness did not alter the "prime directive" of the governing statute.2

AT&T Mobility v. Concepcion3 put an end to the decisional drought on the question of adhesive arbitration. There, the Court finally addressed the validity of adhesive contracts by asserting that consumer transactions had long been practiced through the mechanism of unilateral contracts―in effect, these agreements are the standard form contracts of the consumer transaction world. It was, therefore, both impolitic and impractical for the Court to challenge or modify established usages in the area. The Seventh Circuit had provided an earlier rationale for upholding adhesive bargains for arbitration.4 It declared that adhesive contracts were legitimate as long as they gave each side significant benefits that were desirable and in furtherance of their individual interests. In effect, the Seventh Circuit advanced a new vision of contract formation, which minimized the requirement of bilaterality and freely given consent, and focused upon the economic and individual "benefits of the bargain."5

When a merchant or employer imposed the obligation to arbitrate upon a customer or employee as a condition of doing business or employment, the unilateral character of the imposition, in addition to its origin in the power of the economically superior party, did not necessarily nullify the "agreement." These circumstances merely demonstrated a substantial imbalance in the negotiation of the agreement, so-called procedural unconscionability.6 The critical question was whether the terms and conditions of the "bargain" actually oppressed the weaker party. 7 Would an "objective and rational" consumer or employee, empowered with choice, reject or accept the transaction and its contingencies? In a more populous world in which regulatory conflicts can readily flare and markets are ever more competitive, the traditional contract, like the concept of judicial litigation as the mainstay of adjudication, needed to be adapted and reformulated. A trend nonetheless developed in the U.S. Congress8 and some state legislatures9 to enact legislation that opposed arbitration's increasing range of application and its influence upon the protection of legal rights. To the power brokers in society-at least to a vocal minority among them-the privatization of the adjudication of public law rights was an unacceptable development in the law of arbitration. The statutory regulation of commercial conduct in the form of antitrust and securities laws and the guarantees of citizenship in terms of civil rights, equal protection, and due process needed to be addressed in public proceedings by duly designated public servants who rendered published determinations reasoned according to the provisions and practices of well-settled law.