The Term In Review: The Good And The Bad In The Latest Arbitration Cases

It seems like there’s a steady stream of arbitration cases coming out of the Supreme Court.  From the perspective of the average West Virginia consumer, the news is mostly bad.  Arbitration clauses are inserted almost as a matter of routine into everyday contracts, forcing more and more consumers to give up important rights and to bear higher, sometimes prohibitive costs.  This term’s arbitration cases do little to stop that trend.

Bluestem Brands, Inc. v. Shade, No. 16-0793  

The plaintiff had a credit card from Fingerhut.  Over the next seven years, Fingerhut changed its credit partners four times.  The first two times, a copy of the new credit card agreement was sent to customers, including the plaintiff.  Each of these agreements included an arbitration clause.  The next two agreements also included arbitration language; however, the agreements themselves were never provided to customers.  Instead, they were given a written notice of changes to the agreement and an 800 number to call to get a copy or to have any questions answered.

The Good:

There is a kernel of good news here.  Bluestem argued that its written notice of the changes was enough to prove mutual assent.  After all, it argued, nothing was being hidden from the plaintiff.  All it would have required was for the plaintiff to pick up the telephone.  The Court rejected this, stating bluntly: “It is self-evident that a party cannot assent to a change of which it is unaware.”

The Bad:

That said, the plaintiff still lost because the earlier agreements had, in fact, been sent by mail.  The reason this is troubling is because companies often play hide-the-ball with arbitration language.  Here, the new agreement wasn’t mailed separately, but was simply inserted with other mailing–making it easy to overlook.  One of the agreements was sent with a welcome packet.  The other was sent with a monthly statement.  Unfortunately, this fact wasn’t enough to avoid arbitration.  In fact, it wasn’t even considered by the Court in determining whether the parties assented to arbitration.

SWN Production Co. v. Long, No. 16-1311

In this case, the Court dealt with an arbitration clause in an oil and gas lease.  The plaintiffs challenged the clause, arguing that other language in the lease specifically referred to court proceedings.  For example, the paragraph addressing forfeiture anticipated the possibility that disputes could be resolved by a “civil action.”  Elsewhere, the lease indicated what would happen “if any provision of this lease is held invalid or unenforceable by any court of competent jurisdiction.”  The Court, however, found the arbitration clause itself to be unambiguous and, therefore, no further analysis was necessary.

The Good:

Honestly, it’s hard to locate any good news here.  Earlier cases instructed courts to consider other contract provisions that “relate to, support, or are otherwise entangled with the operation of the arbitration clause.”  While this important instruction was not overruled, the Court made quick work of the lease’s references to other, non arbitration proceedings and refused to interpret the arbitration clause in light of them.

The Bad:

Companies will continue to send mixed signals, peppering their contracts with clear references to courts and court proceedings while also including arbitration language.  Instead of interpreting these ambiguities in the consumer’s favor, this case tips the scales in favor of the company writing the contract and forces consumers to submit to arbitration anyway.

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