U.S. Supreme Court Contract Cases

The Supreme Court once again affirmed federal policy favoring arbitration this week as it reversed the Supreme Court of Appeals of West Virginia in Marmet Health Care Center, Inc. v. Brown.

The state high court had held unenforceable all predispute arbitration agreements that apply to claims alleging personal injury or wrongful death against nursing homes, based on West Virginia’s public policy. But the Supreme Court held that the public policy of a state is not a sufficient basis for refusing to enforce an arbitration agreement. The Supreme Court wasn’t subtle in disagreeing with the lower court’s decision:

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The United States Supreme Court reaffirmed its favor of arbitration yesterday in one of its first decisions of the year. InCompuCredit v. Greenwood, the high court once again reversed the Ninth Circuit in an arbitration case.

You might recall that the Supreme Court reversed the Ninth Circuit last April in its much discussed AT&T Mobility v. Concepcion decision. In that case the Supreme Court overturned California’s Discover Bank rule, which had rendered class arbitration waivers in consumer adhesion contracts all but unenforceable in California. AT&T Mobility effectively gives companies a way to opt out of class arbitrations altogether, albeit — unless the ruling is broadened in future cases — at the cost of providing individual consumers a more effective remedy in arbitration than they would likely have via class action. See my discussion of the opinion in AT&T Mobility v. Concepcion: Is Class Arbitration Dead?

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The U.S. Supreme court issued its opinion in AT&T Mobility v. Concepcion yesterday. The Court held that California’s Discover Bank rule is preempted by the Federal Arbitration Act. The Discover Bank rule states that a class action waiver in an arbitration agreement is unconscionable and should not be enforced

  • when it is found in a consumer contract of adhesion
  • in a setting in which disputes between the contracting parties predictably involve small amounts of damages, [click to continue…]
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