Thursday, August 10, 2006
In a pair of recent cases, New Jersey courts have knocked out arbitration clauses on unconscionability grounds. In his LawMemo blog, Ross Runkel has posts here and here. which notes the two decisions and provide links. Between them, the two cases seem to hold that a clause will be unconscionable if it tends to work to the disadvantage of a consumers, as by requiring them potentially to pay the costs of the arbitration, or limiting the discretion of an arbitrator to award them fees.
An odd thing about the cases are that the court seems to be using "unconscionable" simply as a synonym for "contrary to public policy." This use of language is presumably because states aren't permitted to have public policies that contradict the Federal Arbitration Act, but can rely on common law contract doctrines like "unconscionability."