Alternative Dispute Resolution

Recognizing and Understanding Consent Issues in Arbitration


by Jeffrey J. Mayer and Theodore W. Seitz

United States courts boil arbitration law down to a simple two part syllogism: 1) courts will enforce voluntary agreements for a nonjudicial actor to finally decide disputes; and 2) this voluntary dispute resolution agreement results in procedures that are different from, but not inferior to, judicial proceedings. See, e.g., Mitsubishi Motors Corp v Soler Chrysler-Plymouth, Inc, 473 US 614 (1985); Moses Cone Hospital v Mercury Construction, 460 US 1 (1983). Federal courts have enthusiastically embraced this docket-clearing principle with a genuine fervor.1 See, e.g., Doctors Associates v Casarotto, 517 US 681 (1986); National Union Fire Ins Co of Pittsburgh, Pa v Beleo Petroleum Corp, 88 F3d 129, 133 (CA 2, 1996) (citations omitted). Federal courts key their enthusiasm to the participants’ supposed consent to this alternative, but not, supposedly, inferior procedures. Id.

State courts, however, have been less willing to accept this concept, finding various reasons to nullify arbitration agreements on grounds of procedural unfairness. See Heurtibise v Reliable Business Computers, Inc, 452 Mich 405; 550 NW2d 243 (1996) (court held that ‘‘public policy favoring arbitration can be outweighed by contrary constitutional or legislative intent’’); State v Nebraska Ass’n of Pub Employees, 477 NW2d 577, 580 (Neb 1991) (predispute arbitration violates public policy that courts should settle disputes). In addition, the court’s embrace of arbitration has received steady, although not very influential, criticism. See, e.g., Nebraska Ass’n of Pub Employees, supra.

Time and again, courts have affirmed the supposed sanctity of contract and have refused to interfere with an ‘‘Arbitration Agreement.’’ See Casarotto, supra; see also Sverdrup Corp v WHC Constructors, Inc, 989 F2d 148, 152-155 (CA 4, 1993) (acknowledging that although remedies existed outside of arbitration, the agreement to arbitrate must be upheld). In doing so, the United States courts have firmly accepted one of the two views of private arbitration that have split courts throughout the world during the past two centuries. On the one hand, courts have viewed arbitration as an intrusion on judicial sovereignty and only permitted arbitration under close judicial scrutiny. On the other hand, courts such as the current U.S. Supreme Court have taken all steps in their power to enforce such agreements broadly.2

Even as this judicial love affair with arbitration continues unabated, challenges to arbitration are almost always couched as challenges to the fairness of the procedures. Nevertheless, courts have embraced even apparently unfair procedures on the grounds of ‘‘consent.’’ See Mastrobuono, infra. However, despite the flood of arbitration case law, courts rarely examine issues of consent, even in cases where the consent is arguably fictitious. Even more rarely examined is the interaction between presumed or fictitious consent, and the fairness or integrity of the proceedings.

Through this article, we wish to highlight two interrelated points. First, we wish to identify what we would loosely call consent issues in arbitration and sensitize practitioners to these issues, both in drafting clauses and litigating cases involving arbitration agreements. Consent is an often overlooked component of arbitration matters. Second, we wish to identify what has been unexplored judicial territory, the relationship between fictitious consent, the fairness of the proceedings, and the remedy offered through the arbitration clause. The courts have not often addressed these issues, and in representing clients, we believe it is an appropriate area to explore in drafting and in litigating arbitration issues.

ARBITRATION BASICS

The Federal Arbitration Act

The Federal Arbitration Act, 9 USC 1, et seq. (FAA), provides parties to a contract autonomy to fashion their agreement and eliminates the judicial supervision common to analogous state law provisions. The FAA applies to contracts affecting interstate commerce. 9 USC 2; Burke County Public Schools Board of Education v The Shaver Partnership, 308 NC 408; 279 SE2d 816 (1981) (contract to design two school buildings for the plaintiff board of education held to constitute commerce for purposes of the FAA). Given the historically generous construction of that phrase, the FAA likely applies to most contracts of economic significance.

Because virtually any desirable feature of state arbitration law may be explicitly set forth in a contract governed by the FAA, an arbitration clause should, absent unusual and compelling circumstances, reference the FAA because it increases the certainty that a court will enforce the clause as written. The FAA, in contrast to more restrictive state arbitration frameworks, places virtually no limits on the parties’ freedom to agree on the method of dispute resolution, including the course of prehearing discovery. See, e.g., Stanton v Paine Webber Jackson & Curtis, Inc, 685 F Supp 1241 (SD Fla 1988); Cf. City of Dearborn v Freeman-Darling, Inc, 119 Mich App 439, 326 NW2d 831 (1982). In turn, again in contrast with state arbitration law, the FAA limits judicial power to review the merits of an award. See Merrill Lynch v Jaros, 70 F3d 418 (CA 6, 1995) (interpretation of law by arbitrators is not subject, in federal courts, to judicial review for error in interpretation); Cf. DAIIE v Gavin, 4116 Mich 407, 331 NW2d 418 (1982) (erroneous interpretation of law on face of award is subject to judicial review).

Under the FAA, broad agreements to arbitrate encompass disputes arising from statutory schemes. For years, aggrieved parties have attacked the fairness of foreclosing judicial determination of statutory claims. These arguments have largely been unsuccessful. See, e.g., Beauchamp v Great West Life Assurance Co, 918 F Supp 1091 (ED Mich 1996); but see Heurtebise, supra. This principle extends to the parties’ decision to provide themselves substantive rights and protections, even if such rights are not available in the court that will ultimately enforce the award. See Mastrobuono v Shearson Lehman Hutton, Inc, 514 US 52 (1995) (observing that if contracting parties agree to include claims for punitive damages within the issues to be arbitrated, the FAA ensures that their agreement will be enforced according to its terms even if a rule of state law would otherwise exclude such claims from arbitration).

The FAA also provides for limited review of arbitration awards. The Sixth Circuit, for example, has consistently held that the burden of proving that an arbitration award should be vacated is very great.3 See In Re: Time Constr, Inc, 43 F3d 1041, 1045 (CA 6, 1995) (party seeking vacation must show abuse of discretion by clear and convincing evidence); Federated Dep’t Stores, Inc v JVB Indus, Inc, 894 F2d 862, 866 (CA 6, 1990) (burden to set aside award is very great).

State Arbitration Laws

State laws vary widely as to the principles governing arbitration proceedings. For example, some states provide that a court may stay an arbitration pending the resolution of a related court case or allow for substantial judicial review of arbitration decisions. E.g., DAIIE v Gavin, 416 Mich 407, 331 NW2d 418 (1982) (erroneous interpretation of law on face of award is subject to judicial review); Perini Corporation v Green Bay Hotel & Casino, Inc, 129 NJ 479; 610 A2d 364 (1992) (upholding arbitration award after careful review of legal issues).

As most of the readers of this article are aware, Michigan has its own Arbitration Act. MCL 600.5001, et seq. However, as we will explain in this article, this Act may be limited by the FAA. This is especially important, considering state public policy and other state statutes regarding issues of ‘‘consent.’’4

UNDERSTANDING CONSENT: THE TYPICAL AND THE EXCEPTIONAL CASE

Many sophisticated users of legal services draft careful and effective arbitration clauses.5 These sophisticated parties, having benefit of counsel and litigation experience, choose and/or consent to arbitration freely and often accept substantial limitations on their rights to litigate in exchange for the benefits of arbitration. Limitations involve discovery, evidence, remedies, appeal rights, the choice of administering agency (AAA or JAMS), and the availability of statutory attorneys fees and injunctive relief.6

Given arbitration’s private nature, it is impossible to determine a percentage of these sophisticated users among all arbitrations. Of all the participants in an arbitration, it is this group for whom the two-part arbitration syllogism fits most neatly. Indeed, if a party has negotiated and truly agreed to an arbitration provision, they should not be heard later to complain that it deprives them of their rights in any fashion, even if the restriction is substantial. However, even the sophisticated business participant, as well as other less sophisticated participants, can often be said not to have truly consented to the arbitration clause. Thus, the court’s all encompassing embrace of arbitration is not only of concern from a policy perspective, but an actual legal issue. In many situations, the freely consenting party is a legal fiction.

Prima Paint

The granddaddy of consent issues is the Prima Paint doctrine. In Prima Paint, 388 US 395 (1967), the U.S. Supreme Court concluded that even if the contract was induced by fraud, the resulting dispute is arbitrable, unless the arbitration clause was separately induced by fraud.7 While this approach appears counterintuitive, it has tremendous merit. If a party could avoid an arbitration by claiming fraud, the swiftness and value of an arbitration remedy would be lost to collateral litigation in court regarding the underlying fraud in the inducement claim. Nonetheless, Prima Paint is fictitious consent, because a party who has been induced to enter into a contract by fraud is not traditionally considered to have consented.8 See Midwest Matrix Mart, Inc, 350 Mich 559, 87 NW2d 186 (1957).

Recent Federalism Issues

There are multiple state laws that also seek to ensure informed consent on arbitration. In Michigan, for example, state law arguably allows parties to seek to avoid requests for medical and consumer arbitration. See Michigan Consumer Protection Act, supra. Further, legal fee agreements requiring arbitration may be subject to state ethical restrictions. In Casarotto, supra, however, the validity of these Michigan restrictions, as well as other state law restrictions seeking informed consent, have come into question.

In Casarotto, the Montana Supreme Court refused to enforce an arbitration clause within a franchise contract because the arbitration language did not comply with a Montana state statute requiring such clauses to be ‘‘typed in underlined capital letters on the first page of the contract.’’ Id., at 684. The purpose of that requirement was to ensure that the person signing the agreement was consenting to the arbitration clause in a manner as determined appropriate by the state of Montana. Id. The U.S. Supreme Court reversed, holding that the Federal Arbitration Act governed interstate commerce and encouraged the free enforcement of arbitration awards, and therefore pre-empted any state law that served ‘‘specifically and solely’’ as a restriction on contracts subject to arbitration. Id., at 687.

The Casarotto opinion contained minimal explanation. The obvious import, however, is that all state laws that conflict with the Federal Arbitration Act by singling out arbitration clauses are pre-empted. See also Allied-Bruce Terminix Cos v Dobson, 513 US 265, 281 (1995) (‘‘states may not...decide that a contract is fair enough to enforce all its basic terms...but not fair enough to enforce its arbitration clause’’); Saturn Distribution Corp v Williams, 905 F2d 719 (CA 4), cert den, 498 US 983 (1990) (court held that state statute that prohibited arbitration is pre-empted by FAA). As a result, the Michigan Medical Arbitration Act, State Law Ethical Restrictions, Michigan Consumer Protection Act, as well as state cases dealing with disclosure and consent for arbitration, are null and void if they affect interstate commerce (and virtually any significant dispute will).9

The issue in Casarotto, however, is not entirely settled. Casarotto appears to be in conflict with Volt Information Sciences, Inc v Board of Trustees of Leeland Stanford, Jr, University, 489 US 468 (1989), even though the Supreme Court tried to distinguish Casarotto and Volt. Volt held that parties who included a California choice of law clause in their agreement had, in essence, opted out of the Federal Arbitration Act. Therefore, restrictions in California state law on arbitration, such as the ability to stay in arbitration pending parallel litigation, were, in fact, enforceable.

Casarotto and Volt are not easily reconciled. If it is a simple matter to opt out of the Federal Arbitration Act, as suggested by Volt, it is not apparent why the Supreme Court granted certiorari in Casarotto and discussed pre-emption. Indeed, it is left unclear in Casarotto as to whether there was any choice of law clause in their franchise agreement, as such a choice of law clause would obviously make the court’s discussion of the pre-emption effect of the Federal Arbitration Act irrelevant. For practitioners, the bottom line is that there is an important open issue regarding the interplay between the FAA, Casarotto, and Volt. The authority can be reconciled, but any reconciliation must invariably limit one decision or the other.10

Traditional Consent Issues

At this point, it should be noted that many standard issues regarding consent contracts are also relevant to analysis of arbitration clauses. In most contracts, all material terms need to be incorporated into the contract and presented to the parties. A material portion of most is the arbitration clause.11 It is more than likely that most individuals and many companies consent to arbitration without ever having read or considered such rules. Thus, one could argue that these contracts are unenforceable for lack of material terms. See, e.g., People v Swirces, 218 Mich App 133, 533 NW2d 357 (1996); Grouly v Carlson, 176 Mich App 484, 440 NW2d 644 (1989). However, given the zeal for arbitration, such holdings are few and far between. See, e.g., Sverdrup Corp, supra. As with the Casarotto issues, these matters are not decided by the courts.

Third-Party Beneficiaries

One of the most fertile areas for issues of consent is third-party beneficiaries. Although some contracts contain arbitration clauses that specifically limit arbitration to disputes between contracting parties, many times, contracting parties simply fail to make their intentions clear. Often times, in cases where it is difficult to determine the parties’ intentions, it becomes much more important to interpret the arbitration agreement literally. The crux of third-party beneficiary principles is that when a contract confers a benefit directly onto a third party, the third party shall have rights under the contract. Kuppers Co v Garling & Langlois, 594 F2d 1094, 1048 (CA 6, 1979); see also MCL 600.1405; MSA 27A.140J. However, questions remain as to how broadly arbitration agreements should be construed with respect to a third-party beneficiary. See, e.g., McPheeters v McGinn, Smith & Co, Inc, 953 F2d 771 (CA 2, 1992) (stating that there is no third-party beneficiary status, and thus no arbitration, unless ‘‘the parties to the contract intended to confer a benefit on him when contracting’’).

For example, when a signatory to an arbitration agreement brings a claim against a nonsignatory, is a nonsignatory third-party beneficiary, and, if so, can it take advantage of the arbitration agreement to which it is not a party and compel the contracting party to arbitrate its claim? Furthermore, is a third-party beneficiary bound to arbitrate claims brought against it, and is a third-party beneficiary required to arbitrate claims it brings itself? Such questions are closely related, but distinct.12 Regardless, third-party beneficiary issues raise issues of actual consent.13

Employment Law

In contrast to the issues addressed above, issues of consent have been extensively explored in employment situations. Federal courts have developed clear guidelines on the enforceability of arbitration clauses regarding Federal Civil Rights laws.14 For example, more than 20 years ago, the U.S. Supreme Court held that a union could not waive an individual member’s right to litigate a statutory discrimination claim in court. Alexander v Gardner-Denver Co, 415 US 36 (1974). Since then, the Supreme Court has become much more receptive to arbitration of statutory discrimination claims in the nonunion context. See, e.g., Gilmer v Interstate/Johnson Lane Corp, 500 US 20 (1991). Thus, a properly prepared agreement between an employer and each of its nonunion employees to use arbitration as the exclusive remedy for the resolution of statutory discrimination claims is enforceable.15 Cole v Burns International Security Services, 105 F3d 1465 (DC Cir 1996); Trumbull v Century Marketing Corp, 12 F Supp 2d 683 (ND Ohio 1998). Nonetheless, because the federal civil rights statutes are co-equal with the FAA, the federal courts can require notice and waiver of the rights at issue. See, e.g., Gilmer, supra.

Under Michigan law, however, the enforceability of arbitration agreements concerning employment issues is still unsettled.16 In Heurtebise v Reliable Services, supra, the Michigan Supreme Court dealt with a provision in an employee handbook providing for arbitration. The Court held that an employee handbook that required employees to arbitrate any and all claims, including claims brought under the Elliott-Larsen Civil Rights Act, was not enforceable. Id. at 414. The Court noted that for an employer’s arbitration policy to be enforceable, it must satisfy all elements of the contract. Id. at 413-414.

In his concurring opinion, Justice Cavanaugh acknowledged Michigan’s public policy favoring arbitration, but stated that it could be ‘‘outweighed by contrary constitutional or legislative intent.’’ Id., at 436. In the case of the plaintiff in Heurtibise, this meant that her claims under the Michigan Civil Rights Act against her employer where ‘‘nonnegotiable, constitutionally guaranteed, and legislatively articulated civil rights.’’ Id. As a result, the employer could not sever the plaintiff’s right to a judicial forum and remedies through a clause in its employment contract compelling arbitration. Id.;17 see also Rembert v Ryan’s Family Steak Houses, Inc, 235 Mich App 118; 596 NW2d 208 (1999). Nevertheless, whether state law restrictions, such as those articulated in Heurtibise, are still valid in view of the presumption holding in Casarotto is unclear.

THE INTERPLAY BETWEEN THE TERMS OF AN ARBITRATION CLAUSE AND FICTITIOUS CONSENT

One of the obvious advantages of an arbitration clause is the ability to control both the procedure and the available remedies. Consequently, courts have extended their willingness to enforce arbitration clauses from procedural modifications that are not, on their face, outcome determinative to agreements that will, by their nature, determine the outcome. To highlight these two issues we present two cases: Engalla v Permanente Medical Group, Inc, 15 Cal 4th 951; 938 P2d 903 (1997), in which the California Supreme Court evaluated self-administered dispute resolution procedures of a health services company; and Mastrobuono v Shearson Lehman Hutton, Inc, supra.

The cases had different outcomes. In Engalla, the California Supreme Court closely examined an internal arbitration system for resolving health care claims presented by a health care company. Id. at 961-969. In other words, the HMO would decide if it were liable for malpractice or if its patients owed it money. The California court was not enamored with this idea, focusing on the fairness of the procedures rather than the consent issues. The court held that this modified procedure was inadequate. Id. at 978-981.

With regard to Mastrobuono, the U.S. Supreme Court reached an opposite conclusion, concluding that if contracting parties agree to include claims for punitive damages within the issues to be arbitrated, federal law ensures that the agreement would be in force according to its terms even if the rule of state law would otherwise exclude such claims from a judgment. Thus, two courts faced with substantial deviations from what we considered ‘‘fair procedures under applicable law’’ reached different results. Neither court, however, approached the issue in terms of consent.

Restricted Procedure and Fictitious Consent

Today, after Casarotto, a strong case can be made that the state law examination of the California health care system in Engalla is pre-empted. On the other hand, after Casarotto, Mastrobuono is still good and enforceable law. The question becomes, however, would the same result be achieved, or should it be achieved, if the parties had not fully consented to the arbitration clause. Engalla and Mastrobuono are merely small steps in the type of aggressive arbitration clauses that have been propounded in many commercial contexts. This is especially apparent in cases involving franchise litigation.18

Clauses we have recently reviewed included prohibitions on the ability of the franchisee to bring its lawyer to an arbitration hearing, as well as restrictions on the individual to join a class action lawsuit and the right of the franchisor to choose between litigation and arbitration while denying the same right to the franchisee. Perhaps, if consent is full and complete, this clause can be justified as an economic saving to the franchise system that benefits franchisees. However, if consent is fictitious, as it is if induced by fraud, or is extended to third-party beneficiaries, are these procedures acceptable as a natural consequence of a voluntary agreement? To our knowledge, no court has addressed this issue, but it is worthy of analysis.

Restrictive Remedies With or Without Fictitious Consent

Consent issues with arbitration clauses go beyond issues of unfair or improper procedures. The relationship between consent and remedies is currently an open issue, and one not recognized by the courts. As noted above, the infamous Mastrobuono case involved an award of punitive damages even though such an award is prohibited at law. Similarly, courts will enforce arbitration awards of injunctive relief, even if the court itself was unable to do so. Courts again have endorsed this principle under the innocuous concept of consent (i.e., you have chosen to do so and therefore you have to live up to your agreement), but this principle raises some serious issues with regard to the application of substantive law, most importantly in relation to the issue of remedies.

Courts do not blindly enforce agreements. There may be situations where courts strike down voluntary agreements or provide alternative remedies despite issues of consent. Two prominent examples are: Restrictions on employment or remedial provisions under the UCC. Courts throughout the country routinely limit, or otherwise change, covenants not to compete, even if they were voluntarily agreed to.19 Furthermore, other restrictions on employment are even more odious. See, e.g., Quinonez v NASD, Inc, 540 F2d 824 (CA 5, 1996). Similarly, under the Uniform Commercial Code, remedial limitations are struck down if they fail their essential purpose regardless of consent.20 UCC 2-719(1)(b); see also Severn v Sperry Corp, 212 Mich App 406; 538 NW2d 50 (1995). There are other examples, including, among other things, restrictions on enforcing holdover penalties and tenancies. Under existing law, however (Mastrobuono and Casarotto), an arbitrator may be justified to conclude that not only may he enforce provisions with severe limitations that would otherwise be oppressive but that he must do so. Further, once he has done so under the FAA, the decision would not even be subject to review for clear legal error or misunderstanding on the part of the arbitrator. See In Re: Time Constr, Inc, supra, at 1054. If arbitration is an alternative, but not an inferior procedure, why should consent be construed more broadly?

Put differently, the courts have left open the issue of whether limitations on contractual remedies available in the court system are disclaimed through arbitration clauses under the guise of consent. One could suppose that if a large, sophisticated business agrees that it shall have either no or extremely limited remedies for breach of a contract under the Uniform Commercial Code, that the decision was made with the benefit of full legal advice and knowledge of what was being sacrificed, and there is a corresponding benefit to the company that will either be received, thereby justifying the decision, or that the company will not agree to the same limitation in the next contract.

Even with such a large, sophisticated consumer of arbitration services, what if the arbitration was induced by fraud? Certainly, under Prima Paint, supra, the dispute would still proceed to arbitration, but would the absence of consent justify the enforcement of a remedy a court would otherwise set aside? On review, the Court has no jurisdiction to address the matter. Surprisingly, no court has yet addressed this issue. Perhaps one of the readers will raise it for the first time.

ANALYSIS AND CONCLUSION

We believe most readers would agree that there must be some limit to the ability to modify the procedure and remedies available in a contract subject to arbitration. A party shall not be able to commit fraud and then use highly limited remedies to avoid fraud that, for all practical purposes, deprived the victim of a remedy. Similarly, parties who have signed an arbitration agreement with a hospital should be entitled to bring an attorney to the arbitration proceeding, even if the arbitration agreement prohibits such representation. At the same time, there is little policy sense (and little chance even if there was policy sense) in undermining the principles of consent and enforcement of contract that have swept arbitration since the enactment of the FAA in the 1920s. Many arbitration agreements are the subject of free consent. Further, measuring consent with a detailed standard would simply produce collateral litigation. Sweeping new rules are therefore inappropriate.

One solution could be found in the existing judicial concepts of duty to arbitrate. Whether a party has an obligation to arbitrate is always a judicial issue. See, e.g., Casarotto, supra. For example, a party that challenged the validity of the signature on a document is challenging his duty to arbitrate. By contrast, the scope of an arbitration is typically a matter for the arbitrators. Prima Paint thus is not a duty case. The issue of real, as opposed to fictitious, consent may perhaps be addressed as a duty to arbitrate issue. Upon a finding of fictitious consent, the Court may then subject the arbitration proceeding to an analysis of the provisions under a real consent lens, striking or altering procedures that were outcome determinative in light of the fictitious consent. This is the concept addressed in federal employment law cases. The proceeding would: (a) validate arbitration clauses; and (b) be the core concept of consent. It is beyond the scope of this paper to prepare a model, but this is a workable concept.

By and large, it seems apparent that sophisticated entities will be forced to live up to the letter of their agreements. This is apparent even though state courts have for years bubbled with indignation at the mandate of the FAA, resisted in subtle ways, or have outright refused to follow its mandate. What is needed is attention to the issue of consent. As drafters and litigators address the issue, courts should be able to fashion rules that leave most arbitration agreements alone, but recognize that much of what passes for consent is fictitious.

Footnotes

1 Virtually every subject matter has been brought within the broad sweep of the Federal Arbitration Act, including, but not limited to anti-trust, securities (including RICO), and employment law. SeeSteven Walt, Decision By Division: The Contractarian Structure of Commercial Arbitration,51 Rutgers L Rev 369, 373 n 6 (1999).

2 Jeffrey J. Mayer, Recent Mexican Arbitration Reform: The Continued Influence of the Publicistas.47 U Miami L Rev 913 (1993).

3 See Eric Lucentini,Taking a Fresh Look at Vacatur of Awards under the Federal Arbitration Act, 7 Am Rev Int’l Arb 359 (1996).

4 For example, the Michigan Consumer Protection Act prohibits waivers of consumer ‘‘right, benefit or immunity’’ unless the consumer ‘‘specifically consented to it.’’ MCL 445.903(1)(t).

5 See Jeffrey J. Mayer, Drafting International Arbitration Clauses, State Bar of Michigan, Business Law Section (1994); see also John R. Trentacosta, Michigan Contract Law, § 16.39 (ICLE 1st ed 1998). The creative use of these limitations is a separate and critically important topic.

6 See Frederick L. Miller, Consumer Law: Arbitration Clauses in Consumer Contracts: Building Barriers to Consumer Protection, 78 MI Bar Jnl 302 (1999).

7 See Jeffrey W. Stempel, A Better Approach to Arbitrability, 65 Tul L Rev 1377, 1456-59 (1991) (criticizing the Prima Paint doctrine and urging courts to consider attacks on the contract containing the arbitration clause ‘‘so long as the party resisting arbitration can establish a prima facie case that it would not have agreed to the contract at issue and its arbitration clause’’).

8 See Trentacosta, supra, at §§ 3.1-3.7.

9 Presently, there are no cases existing on the construction of the Interstate Commerce Requirement and Federal Arbitration Act.

10 In short, the case can be reconciled because Casarotto involved a statute that invariably served as a hindrance to arbitration while Volt involved simply an alternative procedure for arbitration. However, this distinction is not presented in the cases and needs to be resolved.

11See Trentacosta, supra, at §§ 16.33, 16.36 and 16.39.

12 Jeff DeArman, Resolving Arbitration’s Nonsignatory Issue: A Critical Analysis of the Application of Equitable Estoppel in Alabama Courts, 29 Cumb L Rev 645, 649-656 (1999).

13 Courts have most often dealt with third-party beneficiary questions as they relate to arbitration in the context of security claims. See, e.g., Spear, Leeds & Kellog v Central Life Assurance Co, 85 F3d 21 (CA 2, 1996) (third-party beneficiaries of security contract containing an arbitration clause may insist on exercising the right to arbitration). See Richard E. Spiedel, Securities Arbitration: A Decade After McMahon: Contract Theory and Securities Arbitration: Wither Consent? 62 Brooklyn L Rev 1335 (1996).

14 See Stephen J. Ware, Employment Arbitration and Voluntary Consent, 25 Hofstra L Rev 83, 84-95 (1998).

15 See Edrie A. Pfeiffer, Employment Arbitration Agreements: The Case for Freedom of Contract, 7 Regent U L Rev 223 (1996).

16 See Frank T. Mamat, Contract Law I: An Overview of Employment Agreements—Covenants Not to Compete and Arbitration Agreements, 76 MI Bar Jnl 1090 (1997).

17 Justices Boyle, Brickley, Riley, and Weaver declined to address the issue of public policy and arbitration clauses, instead concurring only in the decision that there was no intent to arbitrate. Mamat, supra; see also George T. Roumell, Jr., Feature: Alternative Dispute Resolution: Yes, Virginia, Arbitration Can Be Binding, 76 MI Bar Jnl 168, 170-172 (1997).

18 See Edward Dunham, et al., Franchise Attempts to Control the Dispute Resolution Forum: Why the Federal Arbitration Act Trumps the New Jersey Supreme Court’s Decision in Kubis, 29 Rutgers LJ 237 (1998).

19 Id., at 1093.

20 See Trentacosta, supra, at § 13.6.



Jeffrey J. Mayer
Jeffrey J. Mayer is a shareholder with the Southfield firm of Raymond & Prokop, P.C. He is a member of the Michigan, Illinois, and Ohio bars and maintains the firm’s Chicago office. He is a frequent lecturer and commentator on the drafting and litigating of arbitration clauses. Mr. Mayer is a graduate of Duke University, Washington University School of Law and received his L.L.M. from the University of Michigan.

Theodore W. Seitz
Theodore W. Seitz is an associate at the Southfield firm of Raymond & Prokop, P.C. Mr. Seitz is a graduate of Michigan State University and the Washington University School of Law and focuses his practice on commercial litigation.

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