Agreements to Arbitrate
The Mississippi Supreme Court established a watershed in arbitration law last summer. While it is not immediately applicable to state and local governments — it is not a case concerning a state or local government as a party — it is applicable to us all, including appropriate political entities.
The Mississippi Supreme Court has mandated that upon recognition that a suit is subject to arbitration, a defendant MUST file an immediate motion to enforce the arbitration and NOT participate in the more conventional, common law legal process — filing an answer, responding to discovery, etc. — or the arbitration is deemed waived.
The case is Century 21 Maselle and Associates, Inc., and Cindy Smith v. Tony L. Smith and Linda N. Smith, No. 2005-IA-01696-SCT, consolidated with No. 2005-CA-01814 (8/16/2007).
Presiding Justice Diaz has written a masterful dissent on one part of the opinion. It reminds us that protection from over-reaching and unconscionability should remain the right of every Mississippian. Justice Diaz notices that, while it is a matter of settled contract law that when parties contract to arbitrate under the Federal Arbitration Act [FAA], they are not required to establish that the transaction at issues involves or affects interstate commerce [In Re Choice Homes, Inc., 174 S.W.3d 408 (Tex. App. 2005)]. However, the FAA embodies a clear federal policy requiring arbitration unless the agreement to arbitrate is not part of a contract evidencing interstate commerce 0r unless the the agreement to arbitrate is revocable upon “such grounds as exist at law or in equity for the revocation of any contract.” (9 U.S.C. 2) The Presiding Justice concludes: “Congress and the U. S. Supreme Court acknowledge the primacy of state statutory and common law protections against overreaching and fraud, as often embodied in the doctrines of procedural and substantive unconscionability. We should not be so quick to toss aside those tools meant to safeguard the rights of Mississippians.
When I think of unconscionability in an arbitration context, I am reminded of the family that could not get a desperately sick man into suitable assisted living unless the family agreed to arbitrate any dispute under the FAA. It is not unreasonabled to believe that you have no other alternative in such a situation: deprive the desperately sick family member of the care he needs, that you cannot provide at home, or wait and hope to find a suitable living situation where the contract does not require arbitration of any claims. When choices are limited, circumstances in value-laden situations cause us to make decisions that we might not otherwise make. Isn’t that what unconscionable contracts are make of?