The decline of unconscionable arbitration clause provisions?

Yesterday I taught my final class of the semester in my Mediation & Arbitration course. I have been teaching this class, or a version of it, six years in a row. Each year, I ask students to find and bring in to class a pre-dispute arbitration clause in a consumer or employment agreement to which they are a party. Six years ago, I had no problem locating unfair, unreasonable or arguably unconscionable provisions in at least one student’s arbitration clause. From class action waivers to remedy-stripping provisions to venue shifts, students’ own life experiences paralleled courts’ narrative in arbitration law opinions. This year, for the first time, no student in my class (31 enrollees this semester) could identify an arguably unconscionable provision in a pre-dispute arbitration clause. Sample clauses from wireless service providers, cable TV providers and credit card companies contained 30 day opt-out provisions, references to due process protocols, mechanisms to choose consumer-friendly venues for arbitration hearings, and remedy-preserving terms. Many students observed that the clauses they had read appeared to be overly favorable to the consumer, as if the company was bending over backward to make sure the consumer didn’t have a valid challenge to the enforceability of the clause. Some companies that used to be a showcase for unconscionable terms now have eliminated mandatory arbitration entirely from their adhesive agreements. Other companies have added steps, requiring or strongly incentivizing mediation before arbitration or litigation. While I am certain that plenty of companies still include one-sided, unfair clauses in their consumer or employment agreements, my students’ anecdotal experience this semester cannot be just an anomaly. It appears that judicial policing of the one-sided consumer arbitration clause has achieved at least incremental reform.

6 thoughts on “The decline of unconscionable arbitration clause provisions?”

  1. Interesting. But, perhaps some of the changes look better than they really are? 30 day opt outs, for example, may sound good to judges or others, but in reality have very little impact. Typically consumers will not be aware of the right to opt out nor know, within 30 days, that they have any reason to opt out. If companies are still using arbitration to eliminate consumers’ ability to proceed in class actions then many other aspects of the clause may be irrelevant. In many types of smaller claims if consumers can’t join together in a class action they can’t bring any claim at all.

  2. This is interesting. In my class we spent some time looking at cases with unconscionable clauses and I guess I just assumed similar clauses still existed. However, after reading this I looked at some of my agreements and could not really find anything. The closes was my software agreement, which limited the amount of damages to $50.00, but even that contained pro-consumer exceptions.

  3. I like your idea for class discussion very much. I plan on incorporating it in my class next time I teach this topic!

  4. I have to agree with this post.

    What I have been doing with my class is asking the students to identify how certain procedures are handled under the clause (such as discovery, location, fees, judicial review, etc.), and then I ask half the class to make recommendations to modify the clauses as if they were in-house counsel for the company and half to make recommendations as if they were consumer advocates.

    In my little experience, I find that this works well, giving students something to talk about looking at the problem from both angles. I find that the discussion can get particularly interesting when discussing class action issues, as the consumer arb clauses on this issue have gone through so many compromises over the past few years!

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