August 16, 2011 Articles

The Supreme Court Erects Another Roadblock to Challenging Arbitration

By Rebecca Callahan

Arbitration involves the private, consensual resolution of disputes by agreement between the parties and disputants. As a fundamental principle, arbitration is a matter of contract. Moses H. Cone Mem'l Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). In practice, this means that a party can be required to arbitrate only those disputes that the party has agreed to submit to arbitration per the arbitration agreement. AT&T Techs. v. Commc'n Workers, 475 U.S. 643, 647–648 (1986). It also means that, like other contracts, arbitration agreements may be invalidated by "generally applicable contract defenses, such as fraud, duress, or unconscionability." Doctor's Assocs., Inc. v. Casarotto, 510 U.S. 681, 687 (1996).

Frequently, a party that is willing to sign a pre-dispute arbitration clause has a different view about who should hear and decide the matter once a dispute arises and may seek to circumvent the application of the arbitration clause. One end-run tactic is to attack the contract containing the arbitration clause by asserting contract avoidance defenses, such as fraud, duress, and illegality. Such attacks are initiated via a court proceeding based upon section 2 of the Federal Arbitration Act (9 U.S.C. § 2), which provides that covered arbitration agreements shall be enforced except "upon such grounds as exist at law or in equity for the revocation of any contract." Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 452 (2003). Because arbitration is a creature of contract, the reasoning goes that if a contract containing an arbitration clause is induced by fraud, undue influence, or coercion, then the contract as a whole—including the agreement to arbitrate—should be unenforceable.

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