Regulating Mandatory Arbitration

Mandatory arbitration is a recent phenomenon, and it poses a seemingly intractable problem. After the Supreme Court’s Southland Corp. v. Keating decision in 1984, companies increasingly began adding arbitration provisions to their consumer, employee, and franchisee agreements—often using those provisions to restrict or eliminate the nondrafting parties’ rights. While these provisions usually lacked bilateral consent, the Court instructed lower courts to allow their use, claiming that parties should have autonomy to negotiate the manner in which they resolve disputes. At the same time, the Court steadily expanded the Federal Arbitration Act’s scope, thereby increasing the number of mandatory arbitration agreements governed by the Act.

The Court took these steps despite the evidence of mandatory arbitration’s negative effects on nondrafting parties’ rights.