Home > business law, Uncategorized > U.S. Supreme Court’s Latest Ruling – Businesses and Arbitration Clauses

U.S. Supreme Court’s Latest Ruling – Businesses and Arbitration Clauses

As the USA Today article put it:

“Score one for business over consumers at the Supreme Court this term”

“The justices ruled 6-3 Monday that California customers cannot band together against satellite TV provider DIRECTV because a federal law favoring dispute resolution by individual arbitration trumps a state law that once protected such class actions.”

Also see Yahoo.com –  U.S. top court rules for DirecTV in arbitration case

The Court’s ruling is consistent with Michigan law.

Michigan law favors upholding arbitration clauses in contracts.

Under Michigan law, arbitration clauses are to be liberally construed with any doubts to be resolved in favor of arbitration. Amtower v William C. Roney & Co., 232 Mich App 226,233 (1998).

A few years back I wrote a post about the benefits of arbitration clauses in contracts. You can check out the full article here. a few highlights:


Arbitration clauses have the benefit that they are usually most cost-effective, quick, and they are private (as opposed to court cases which are public filings).


Some of the high points to consider:

1. Where is the Other Party located?

For a client who engages in business over state lines, an arbitration clause might not be effective if you are trying to quickly collect a debt that is owed to you.  Instead, you  might want a “Jurisdiction and Venue Selection Clause

This clause would include language indicating that no matter where the dispute occurred, the contract will be interpreted under Michigan law, and the parties agree that any dispute shall only be resolved in _______ County (Typically,  Kent County, Michigan, for my clients.) Therefore, if your contract contains a jurisdiction and forum selection clause, and you are owed money by a company in Florida, you would not need to retain a Florida attorney to try and collect.

2. Is the Arbitration Agreement between the company and consumers? If so, companies need to be aware of consumer protection rights, and AAA rules regarding dispute resolutions with consumers.

The AAA has ruled that any company that wants to incorporate their services in its arbitration contract must follow their policies:

“The American Arbitration Association’s policy on consumer arbitration is guided by the state of existing law, as well as its obligation to act in an impartial manner. The Association supports the principles of the Consumer Due Process ProtocolAll cases involving a consumer where the claim is under $10,000 will be administered under the Consumer Rules and the fee schedule for those rules, without regard to the rules or fees that may be incorporated in the arbitration clause.” See, Consumer Due Process Protocol: http://ftc.gov/os/comments/debtcollectroundtable1/542930-00017.pdf

3. Arbitration can be a gamble.

Businesses should realize that if you elect to arbitrate a matter and you do not like what the arbitrator finds – your rights to appeal may be severely limited.

Questions? Comments?

e-mail: Jeshua@dwlawpc.com


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