The Arbitration Agreement - Chapter 1 - AAA Yearbook on Arbitration and the Law - 30th Edition
Originally from the AAA Yearbook on Arbitration and the Law - 30th Edition
1.01 Contract Formation
Thomas v. Right Choice Staffing Grp., LLC, 218 F. Supp. 3d 564 (E.D. Mich. 2016)
Silence about costs and fees of arbitration does not provide a basis for rendering the arbitration agreement unenforceable. Post-arbitration judicial review allows for modification of an award to conform to public policy if it would possibly deter similarly situated individuals from seeking to vindicate their federal statutory rights.
Plaintiffs sought to have an arbitration agreement declared unenforceable because the AAA, to which the parties submitted their arbitral claims, classified their arbitration subject to commercial rather than employment rules. The arbitration costs would therefore be split between the two parties.
The court had to determine whether the costs of the arbitral forum would effectively prevent the plaintiff from vindicating his or her statutory rights, thereby rendering an arbitration agreement unenforceable. With no clear guidance for an agreement without a cost-splitting provision and the potential prohibitive costs arising from the arbitrator, the court relied on a Sixth Circuit opinion that provided factors to evaluate to determine if the costs of arbitration would render an agreement to arbitrate unenforceable because it would prevent similarly situated persons from vindicating their statutory rights. Such factors consisted of the plaintiff’s socioeconomic status, the average or typical arbitration costs in comparison to the costs of litigation, and the potential chilling effect on similarly situated potential litigants. In light of these factors, the court concluded that the costs would effectively deter similarly situated potential litigants seeking to vindicate their federal statutory rights in the arbitral forum. Nevertheless, the court did not find the arbitration agreement unenforceable because the arbitrator had not made his final decision regarding costs and the agreement did not specify the cost-splitting mechanisms. Therefore, it was merely speculative whether cost the plaintiffs would incur would be prohibitively expensive.