Mandatory arbitration has no legal basis over and above litigation in dispute resolution.
- posted: May 30, 2022
For decades corporate America has sewn “mandatory arbitration” clauses into their contracts and agreements with American workers and consumers, often relying on the Federal Arbitration Act of 1925.
In what is clearly a sea change in arbitration, a unanimous bench of the U.S. Supreme Court, agreed on May 23, 2022 in the case of Morgan v. Sundance, Inc., that that was a misapplication of the Federal Arbitration Act.
Led by the Honorable Justice Kagan, the court turned years of precedent on its’ head by holding that the act only put arbitration on equal and not higher footing with litigating via jury and bench trials.
In essence, the Federal Arbitration Act is only applicable to enforce agreed upon arbitration clauses, but cannot be interpreted to mandate arbitration in resolving employment, commercial and related disputes.
Noteworthy is that Morgan v. Sundance was decided on the basis that the corporation initially litigated in court, prior to deciding to arbitrate. As an added outcome however, the long held narrative spun by corporations that courts should “favor” arbitration in these disputes, is bogus and has no basis in law or statute.
A debt of gratitude to attorneys Karla Gilbride and Leah Nicholls of Public Justice, for achieving such a rare victory for American workers and consumers. Their thoroughly researched and flawless arguments convinced the nine Supreme Court justices, conservative and progressive, that Corporations should no longer be allowed to falsely elevate and force arbitration over and above litigation in resolving disputes.