Note: No Longer Available: Critiquing the Contradictory Ways Courts Treat Exclusive Arbitration Forum Clauses when the Forum Can No Longer Arbitrate
By Nicole Wanlass. Full text here.
A number of contracts contain clauses mandating that any disputes arising under the contract must be resolved through arbitration by a particular forum. However, disputes over these contracts can end up in court when the exclusive arbitration forum cannot, or will not, arbitrate them. Under 9 U.S.C. § 5, a court can appoint a new arbitrator when there is a “lapse” in the naming of an arbitrator in the parties’ contract. The question in these cases, then, is whether the fact that the exclusive arbitration forum is no longer available for arbitration constitutes such a “lapse.” This Note reviews the problems and contradictions that plague caselaw on this issue. Courts have applied different tests when determining whether to appoint a new arbitrator for the dispute or continue the litigation, and these tests arguably overlook the “lapse” requirement of 9 U.S.C. § 5. Courts have also reached disparate conclusions when given the same basic language creating an exclusive arbitration forum clause and have probably overstressed the Supreme Court’s pro-arbitration policy in their holdings.
This Note argues that the solution to these issues is two-fold. First, attorneys must draft exclusive arbitration forum clauses more carefully, in order to keep these clauses free from ambiguous language that generally causes these disputes. Second, courts need to reach more predictable and equitable rulings on exclusive arbitration forum disputes. Specifically, courts should use a more straightforward application of 9 U.S.C. § 5, more frequently examine external evidence and the context of that external evidence, and consult consumer protection policies when resolving these disputes. Following this two-part solution will work to make this area of law clearer and more equitable, and thereby help ensure predictable results for parties facing disputes over exclusive arbitration forum clauses.