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Document Type

Recent Case

Abstract

It is no secret that alternative dispute resolution (ADR) has become an important part of the contemporary American legal system. Compared to full-fledged judicial proceedings, ADR methods, including arbitration, offer a more cost-effective alternative. Both private and public entities have embraced the chance to address legal disputes while using resources more effectively. In 1998, for example, President Clinton issued a memorandum to the heads of executive departments and agencies encouraging the use of ADR “[a]s part of an effort to make the Federal Government operate in a more efficient and effective manner.” In spite of all of the benefits of ADR, concerns about the innate fairness of these methods of dispute resolution still abound. Nowhere are such concerns more evident than in the context of arbitration agreements between large, sophisticated entities and individual consumers.

Despite concerns as to the implicit fairness of ADR, the enforcement of arbitration agreements in American courts has been markedly strengthened by one important piece of legislation: the Federal Arbitration Act (FAA). The FAA was proclaimed as “[a]n Act [t]o make valid and enforceable written provisions or agreements for arbitration of disputes arising out of contracts, maritime transactions, or commerce among the States or Territories or with foreign nations.” This single piece of legislation has been the subject of a number of Supreme Court cases, including the important Southland Corp. v. Keating decision. In Southland, the Supreme Court held that the FAA applies in state courts and preempts conflicting state law. On December 14, 2015, the Supreme Court added an additional chapter to the history of the FAA through its decision in DIRECTV, Inc. v. Imburgia. The Supreme Court in DIRECTV held that California law making arbitration waivers unenforceable is preempted by the FAA.

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