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Valparaiso Univ. Law School

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Friday, November 25, 2011

Continued Fall-Out from the Supreme Court's "Third Arbitration Trilogy"

There has been a steady stream of interesting and high-profile arbitration law cases following in the footsteps of what Pepperdine Law's Thomas J. Stipanowich has identified as the Supreme Court's Third Arbitration Law TrilogyStolt- Nielsen S.A. v. AnimalFeeds International, 130 S. Ct. 1758 (2010); Rent-A-Center, West v. Jackson, 130 S. Ct. 2772 (2010); andAT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011).

  • In KPMG v. Cocchi, the U.S. Supreme Court granted cert. to review a decision from Florida's Fourth District Court of Appeals.  The state appellate court upheld a trial court’s refusal to compel arbitration of respondents’ claims after determining that two of the four claims in a complaint were nonarbitrable.  The Supreme Court, per curiam, vacated and remanded the case for a determination of whether the remaining two claims are arbitrable.  Because of the emphatic federal policy in favor of alternate disptue resolution, courts must compel arbitration of claims even if the result is piecemeal litigation in which some claims must be arbitrated while others are resolved through the court system.  Because the Court of Appeals did not rule on the arbitrability of two of the claims, the Supreme Court vacated its refusal to compel arbitration.
  • In Sanchez v. Valencia Holding Company, California's Court of Appeals for the Second District found a way around the Supreme Court's holding in Concepcion by ruling that an entire arbitration provision in a sales contract from a car dealership was unconscionable because it involved oppression and surprise due to unequal bargaining poiwer as well as harsh, one-sided terms in favor of the car dealer.  The arbitration provision was substantively unconscionable because its location on the back of the last page in small font with reduced line spacing made it unnoticeable to the buyer.  It was substantively unconscionable because of four facially neutral provisions that, practically speaking, imposed an unduly harsh burden on the buyer.  The Court of Appeals upheld the trial court's denial of Valencia's motion to compel and the case was cleared to proceed as a class action.

[JT]

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