Managing Exposure Through Carefully Crafted Arbitration Clauses
Thursday, February 25th, 2010By: Nancy J. Glidden
Pennsylvania businesses seeking to minimize class action exposure and generally seeking to enforce arbitration provisions should be aware of a recent decision issued by the Federal District Court for the Eastern District of Pennsylvania, Clerk v. Ace Cash Express, Inc.. Historically, Pennsylvania courts have enforced arbitration provisions in contracts. Recently, the Court (applying Pennsylvania law) added to the body of law which favors enforcing arbitration provisions.
At issue in Clerk was the enforceability of an Arbitration Agreement that was part of a loan transaction, and which mandated submitting all disputes to arbitration on an individual (ie. non-class action) basis. The Court found the Arbitration Agreement was neither procedurally nor substantively unconscionable, and enforced the Agreement according to its terms – which eliminated all class claims and required Clerk to arbitrate her individual claims.
Significant to the outcome was the fact that the Arbitration Agreement gave Clerk thirty (30) days to opt-out without any adverse effect on the terms of the underlying loan transaction, but Clerk failed to exercise the opt-out.
Clerk is a good read because the analysis it provides concerning the elements necessary for arbitration provisions to survive challenge is useful background when drafting.
Please contact Nancy J. Glidden for more information.
