Repeal The Federal Arbitration Act's "Arising Out Of" Requirement

American University Business Law Review American University Business Law Review

Article 2

Repeal The Federal Arbitration Act's "Arising Out Of" Requirement Repeal The Federal Arbitration Act's "Arising Out Of" Requirement

Stephen J. Ware University of Kansas, [email protected]

American University Business Law Review American University Business Law Review

Article 2

Repeal The Federal Arbitration Act's "Arising Out Of" Requirement Repeal The Federal Arbitration Act's "Arising Out Of" Requirement

Stephen J. Ware

REPEAL THEFEDERALARBITRATIONACT(cid:182)S (cid:179)ARISIN(cid:42)OUTOF(cid:180)RE(cid:52)UIREMENT

I.Introduction..................................................................................536 II.The(cid:179)ArisingOutOf(cid:180)Requirement............................................539 A.TheLost(cid:179)ArisingOutOf(cid:180)RequirementandItsFinders539 B.CasesonAdhesiveAgreementstoArbitrateClaimsthatDo

NotAriseOutoftheContractContainingtheArbitration Agreement......................................................................543 C.AdhesiveandNegotiatedArbitrationAgreements..........549 III.The(cid:179)ArisingOutOf(cid:180)Requirement(cid:182)sShortcomings.................549

A.DisputesArisingOutofaDifferentContractBetweenthe

SameParties...................................................................549

B.CombiningContractClaimsArisingOutoftheContract

withWhollyUnrelatedNon-ContractClaims................551 C.DisputesArisingOutofNoContract...............................552 D.ExpandingSophisticatedParties(cid:182)AgreementstoArbitrate

CanHelpCourtsAllocateTheirResources....................553 IV.Federalism:WhyNotLeaveArbitrationtoStateLaw(cid:34)...........554 V.Conclusion..................................................................................556

SupposePfi(cid:93)erandCVSagreetoarbitratenotonlyanydisputesthatmight ariseoutoftheircontractcontaininganarbitrationagreementbutalsoany disputesthatmightariseoutofanyofthemanyearliercontractsbetween thesetwolargecorporations.OrAppleandSamsungagreetoarbitrateany patentinfringementclaimseitherhasagainsttheotherforthenextfiveyears. OrFedExandUPSagreetoarbitrateanytortclaimseitherhasagainstthe otherduetoanycollisionoftheirvehiclesinthenexttenyears.Ormembers oftheWalton(Walmart)familyagreetoarbitrateanydisputerelatedtoany existingorfuturewillortrust,includingitsvalidity,overthenexttwenty years.

Thesehypotheticalagreementsshouldbeenforceable,buttheFederal ArbitrationAct(FAA),asitiscurrentlywritten,maynotprovidesuch enforcement. TheFAAmakespredisputearbitrationagreements enforceableonlyasto(cid:179)acontroversythereafterarisingoutof(cid:62)the(cid:64)contract(cid:180) containingthearbitrationagreement.1However,someorallofthedisputes coveredbyeachofthearbitrationagreementsdescribedabovedonotarise outofthecontractscontainingthoseagreements. These,andother enforcement-worthyarbitrationagreements,areexcludedbytheFAA(cid:182)s(cid:77)ustquoted(cid:179)arisingoutof(cid:180)requirement.

ThisabsenceofFAAenforcementfortheseagreementswouldbeless concerningifallstates(cid:182)lawsprovidedsuchenforcement,buttheydonot. Therefore,CongressshouldrepealtheFAA(cid:182)s(cid:179)arisingoutof(cid:180)requirement. CongressshouldamendtheFAAtoenforce(cid:179)anagreementtosubmitto arbitrationanyexistingorsubsequentdisputeinvolvingcommerce,save uponsuchgroundsasexistatlaworinequityfortherevocationofany contractorasotherwiseprovidedinchapter4.(cid:180)

Concernsthatthisproposalwouldstrengthenoverlybroadarbitration clausesintheadhesioncontractsofconsumersandworkersaremisplaced. So-called(cid:179)infinite(cid:180)arbitrationclauses(cid:179)mandatearbitrationforalldisputes betweenanyrelatedpartyinperpetuity.(cid:180)2Concernsaboutsuchclausesin adhesivearbitrationagreementsarebetterhandledbyotherlegaldoctrines thanbyretainingthe(cid:179)arisingoutof(cid:180)requirement.Thoseotherlegal doctrines,suchasunconscionabilityorafederalagency(cid:182)srule,targetthe

particularproblemsofadhesioncontractsinvolvingconsumers,workers,and otherunsophisticatedparties.3Thoseproblemsare:

Theseproblemsarisenot(cid:77)ustfromoverlybroad(cid:179)infinite(cid:180)arbitration clausesbutalsofromroutineadhesiveagreementsmerelyrequiring arbitrationofdisputesthatplainlyariseoutofthecontractcontainingthe agreement.Inotherwords,theproblemsofadhesivearbitrationagreements transcendtheproblemsofadhesive(cid:179)infinite(cid:180)arbitrationagreements,and thustranscendtheissueofenforcingagreements(cid:178)suchastheabove examplesinvolvingPfi(cid:93)er(cid:18)CVS,Apple(cid:18)Samsung,FedEx(cid:18)UPS,andthe Waltons(cid:178)toarbitratedisputesthatdonotariseoutofthecontract containingthearbitrationagreement.

Whiletheproblemsofadhesivearbitrationagreementstranscendthe (cid:179)arisingoutof(cid:180)requirement,thatrequirementun(cid:77)ustifiablylimitstheoptions ofsophisticated,well-advisedpartieslikethosehypothesi(cid:93)edabove.Ifsuch partieswantenforceableagreementstoarbitratedisputesthatdonotariseout ofthecontractcontainingtheirarbitrationagreement,whydeprivethem(cid:34) Freedomofcontract(partyautonomy)isreasonenoughtoenforcethese parties(cid:182)contractswithoutinquiringintothewisdomoftheirterms.Andthe parties(cid:182)reasonsforagreeingtoarbitratedisputesthatdonotariseoutofthe contractcontainingthearbitrationagreementmaybequitethoughtful. Perhapsthesepartiesconsultedwiththeirlawyers,madewell-considered decisionsabouttheprosandconsofarbitrationversuslitigationfortheir situations,andchosearbitrationbecausetheybelievethat,comparedwith

litigation,arbitrationtendstobequickerandcheaper,aswellasmore confidential,andwithamoreexpertdecisionmaker.

Inadditiontogivingthesepartiestheenforceableagreementstheyseek, makingtheir(cid:179)infinite(cid:180)arbitrationagreementsenforceablewouldprovide opportunitiestousepublicresourcesmoreeffectively.Whilelitigation receivesasi(cid:93)ablegovernmentsubsidy,arbitrationdoesnot.5Subsidi(cid:93)ing Pfi(cid:93)er(cid:18)CVS,Apple(cid:18)Samsung,FedEx(cid:18)UPS,andtheWaltonsisdifficultto (cid:77)ustifyforseveralreasonsdiscussedbelow,6includingthefactthattheparties canaffordtopayad(cid:77)udicatorcostsontheirown,withoutanysubsidy. Movingtheseparties(cid:182)disputesfromlitigationtoarbitrationfreesupthetime of(cid:77)udgesandothersinthecourtsystem,sothattimecaninsteadbedevoted toothercases.Ifenoughdisputesofsophisticatedpartieslessdeservingof thepublicsubsidyoflitigationmovetoarbitration,thiswouldpresumably relievedocketpressureonthecourtsystem,andthuspresumablylowerthe averagedelayfacedbyotherlitigantsmoredeservingofthesubsidy.And perhapsthearbitrationsystemsdevelopedbythesesophisticatedpartieswill discovertechniquesthatattractotherpartiestoarbitrationorinspireimitation bythecourtsystem,thusimprovingad(cid:77)udicationinboththeprivateand publicsectors.

Inshort,(cid:179)infinite(cid:180)andotherarbitrationagreementscoveringdisputesthat donotariseoutofthecontractcontainingthearbitrationagreementcanvary, muchasotherarbitrationagreementsdo.So,when(cid:179)infinite(cid:180)arbitration agreements,likeotherarbitrationagreements,areinadhesioncontracts involvingconsumers,workers,andotherunsophisticatedparties,concerns aboutadhesioncontractstakecenterstage.Incontrast,sophisticated,welladvisedpartiesalsomayagreetoarbitratedisputesthatdonotariseoutof thecontractcontainingthearbitrationagreement,andthoseagreements deserveenforcement,whichmaynotcurrentlybeprovidedbytheFederal ArbitrationAct.SuchenforcementcanbeprovidedbyrepealingtheFAA(cid:182)s (cid:179)arisingoutof(cid:180)requirement.

AfterthisIntroduction,PartIIbrieflysummari(cid:93)esthehistoryofthe (cid:179)arisingoutof(cid:180)requirement,itslongyearsofbeing(cid:179)lost,(cid:180)andthenitsmore recentrediscovery.PartIIshowsthatitsrediscovery(cid:178)byscholarsand courts(cid:178)hasbeenatoolforpopulistopponentsof(cid:179)corporatepower(cid:180) manifestedinconsumers(cid:182)adhesivearbitrationagreements.PartIIIcontrasts thisadhesivesettingwithawidevarietyofhypotheticalcontractsamong moresophisticatedpartiesthatagreetoarbitratedisputesthatdonotarise outofthecontractcontainingthearbitrationagreement.Further,PartIII

arguesthattheseagreementsshouldbeenforcedandthatrepealingthe FAA(cid:182)s(cid:179)arisingoutof(cid:180)requirementwouldfurtherthatenforcement.PartIV discussesfederalismissues,andPartVbrieflyconcludes.

A.TheLost“ArisingOutOf”RequirementandItsFinders

TheFAAmakespredisputearbitrationagreementsenforceableonlyasto (cid:179)acontroversythereafterarisingoutof(cid:62)the(cid:64)contract(cid:180)containingthe arbitrationagreement.7This(cid:179)arisingoutof(cid:180)requirement,DavidHorton argues,(cid:179)wasadeliberatechoice.(cid:180)8TheFAA,enactedin1925,largely followsthestatutesoftheonlytwostatesthathadpreviouslymade predisputearbitrationagreementsenforceable,New(cid:60)orkandNew(cid:45)ersey. However,whileNew(cid:60)ork(cid:182)sstatutebroadlyenforcedpredisputeagreements toarbitrateanyclaim(cid:179)arisingbetweenthepartiestothecontract,(cid:180)New (cid:45)ersey(cid:182)snarrowerenforcementofpredisputearbitrationagreementswas limitedtoclaims(cid:179)arisingoutthecontract.(cid:180)9TheFAA(cid:182)stextresemblesNew (cid:45)ersey(cid:182)sinmakingpredisputearbitrationagreementsenforceableonlyasto (cid:179)acontroversythereafterarisingoutof(cid:62)the(cid:64)contract(cid:180)containingthe arbitrationagreement.10

This(cid:179)arisingoutof(cid:180)limitationonFAAenforcementseemsnottohave matteredmuchinthefirstsixdecadesfollowingtheFAA(cid:182)s1925enactment. Arbitrationagreementsofthateraapparentlycoveredalmostexclusively disputesarisingoutofthecontractcontainingthearbitrationagreement.For example,aslateas1985,aSupremeCourt(cid:45)usticeasserted(cid:179)thatarbitration hasfunctionedalmostentirelyineithertheareaoflabordisputesorin

(cid:181)ordinarydisputesbetweenmerchantsastoquestionsoffact.(cid:182)(cid:180)11 Inthese twocontexts(cid:178)laborandmerchant(cid:178)arbitratorstraditionallyheardalmost entirelybreach-of-contractclaims.Laborarbitrationtraditionallyconsisted almostentirelyofassertionsthataparty,typicallyanemployer,hadbreached acollectivebargainingagreement.12Similarly,merchantsallegedbreachof contractsforthesaleofgoodsandraised(cid:179)questionsoffact(cid:178)quantity, quality,timeofdelivery,compliancewithtermsofpayment,excusesfor non-performance,andthelike.(cid:180)13So,fromtheFAA(cid:182)s1925enactmentinto the1980s,the(cid:179)arisingoutof(cid:180)limitationonFAAenforcementmaynothave matteredbecausepartieswerenotaskingcourtstoenforceagreementsto arbitrateclaimsthatdidnotariseoutofthecontractcontainingthearbitration agreement.

Thisstartedtochangeinthe1980swhentheSupremeCourtbegan enforcingpredisputeagreementstoarbitrateclaimsarisingundervarious employment federal discrimination14(cid:178)andarbitrationagreementsgrewtoinvolveparties beyondbusinesses,suchasindividualconsumersandworkers.15Although theSupremeCourtcaseseffectingthesechangesfromthe1980stothefirst

statutes(cid:178)fromantitrust

securities

decadeofthe2000s(cid:178)suchasSouthlandCorp.v.Keating,16Mitsubishi MotorsCorp.v.SolerChrysler-Plymouth,Inc.,17andGreenTreeFinancial Corp.-Alabamav.Randolph18(cid:178)reliedontheFAA,theydidnotdiscussthe FAA(cid:182)s(cid:179)arisingoutof(cid:180)requirement.19

ThisomissionbytheCourtwascritici(cid:93)edina2012articlebyStephen Friedman(cid:30)hearguedthatthe(cid:179)arisingoutof(cid:180)requirementshows(cid:179)that CongressintendedtheFAAtoapplyonlytocontractdisputesarisingoutof anagreementthatcontainsanarbitrationprovision.(cid:180)20 Inotherwords, FriedmanarguedthattheSupremeCourt(cid:182)senormousexpansionoftheFAA byapplyingittostatutoryclaimsshouldhavebeenpreventedbytheFAA(cid:182)s (cid:179)arisingoutof(cid:180)requirement,buttheCourtsimplyignoredthatrequirement. Consequently,Friedmancharacteri(cid:93)edtheFAA(cid:182)s(cid:179)arisingoutof(cid:180) requirementas(cid:179)lost(cid:180)bycourts.21The(cid:179)arisingoutof(cid:180)requirementwas apparentlylostbymostscholarsaswell,asFriedmancitesnoscholarshipon point.22However,Ibrieflyarguedina2006bookthatthe(cid:179)arisingoutof(cid:180) requirementshouldberepealedbecauseitprovidesanargumenttowithhold theFAA(cid:182)senforcementfromwhatIcontendedthen(asinthisessay)are enforcement-worthyarbitrationagreements.23

WhilelittleattentionwaspaidtotheFAA(cid:182)s(cid:179)arisingoutof(cid:180)requirement muchbeforeFriedman(cid:182)sarticlecharacteri(cid:93)editas(cid:179)lost,(cid:180)afewothercourts andscholarswerealso(cid:179)finding(cid:180)itaroundthen.In2011,theWestVirginia SupremeCourtapparentlyalludedtothe(cid:179)arisingoutof(cid:180)requirementwhen itsaid,(cid:179)CongressdidnotintendfortheFAAtobe,inanyway,applicable topersonalin(cid:77)uryorwrongfuldeathsuitsthatonlycollaterallyderivefrom awrittenagreement....(cid:180)24Accordingly,theWestVirginiacourtheldthat theFAAdidnotpreemptstatelaw,refusingtoenforcearbitration agreementsagainstwrongfuldeathsuitsbyrelativesofnursinghome patientswhohaddiedallegedlyduetothehomes(cid:182)negligence.25However, theSupremeCourtreversedinMarmetHealthCareCenter,Inc.v.Brown,26 apercuriamopinionthatdidnotconsiderwhetherthewrongfuldeathclaims aroseoutofthecontractcontainingthearbitrationagreement.27

Similarly,a2017SupremeCourtcase,KindredNursingCentersLtd.v. Clark28 cid:179)Kindred(cid:180 ,alsoinvolvedwrongfuldeathsuitsagainstnursing homes.29AnamicusbriefbyImreS(cid:93)alaiarguedthat,(cid:179)(cid:62)i(cid:64)fatortdoesnot arisefromacontract,thenitisimpossiblefortheFAAtocoversuchatort claim....(cid:180)30Whilethe(cid:46)entuckycourtsinKindreddeniedmotionsto compelarbitration,theydidnotdosobasedonS(cid:93)alai(cid:182)s(cid:179)arisingoutof(cid:180) argument.31TheSupremeCourtreversed,alsowithoutaddressingS(cid:93)alai(cid:182)s

argument.32Inshort,theSupremeCourtcontinuedtoavoidthe(cid:179)arisingout of(cid:180)requirementintheseconddecadeofthiscentury,evenastheWest VirginiaSupremeCourtandscholarswereconfrontingtheCourtwith argumentsbasedonit.TheseargumentscalledfortheCourttorulethatthe (cid:179)arisingoutof(cid:180)requirementexcludedfromFAAenforcementagreementsto arbitratenegligence(Brown)andwrongfuldeath(S(cid:93)alai(cid:18)Kindred)claims,as wellasagreementstoarbitratetostatutoryclaims(Friedman).33These effortstohighlightthe(cid:179)arisingoutof(cid:180)requirementhavebeenboostedby DavidHorton(cid:182)s2020articleInfiniteArbitrationClauses,whosetitleseems tohavecaughton,34includingamongcourts.35

B.CasesonAdhesiveAgreementstoArbitrateClaimsthatDoNotArise OutoftheContractContainingtheArbitrationAgreement

Sophisticatedpartieshavenotgeneratedmanycasesinvolvingthesortsof thisessay(cid:178)Pfi(cid:93)er(cid:18)CVS, agreementshypothesi(cid:93)edat thestartof Apple(cid:18)Samsung,FedEx(cid:18)UPS,andtheWaltons(cid:178)toarbitratedisputesthat

donotariseoutofthecontractcontainingthearbitrationagreement.Instead, consumers(cid:182)adhesioncontractshavegeneratedmostofthecasesinvolving agreementstoarbitratedisputesthatdonotariseoutofthecontract containingthearbitrationagreement.Courtshaveoftendeniedenforcement ofsuchagreements,buttheyhaveoverwhelminglydonesowithoutrelying ontheFAA(cid:182)s(cid:179)arisingoutof(cid:180)requirement.

Forexample,inSmithv.Steinkamp,36apaydayloanagreementrequired arbitrationnotonlyofclaimsarisingoutofthatloanagreementbutalsoany claimsarisingoutofanyotheragreements(pastorfuture)betweenthe partiesand(cid:179)allcommonlawclaims,baseduponcontract,tort,fraud,and otherintentionaltorts.(cid:180)37Thepartiesthenengagedinalaterloantransaction thatdidnotinvolveanadditionalarbitrationagreement,andtheborrower assertedusuryclaimsarisingoutofthatlatertransaction.TheSeventh Circuit,inanopinionby(cid:45)udgePosner,interpretedthearbitrationagreement narrowlytoconcludethatitdidnotapplytodisputesoverloanagreements laterthantheloanagreementcontainingthearbitrationagreement.Butthe SeventhCircuitopiniondidsoonlyaftersuggestingthatthealternative interpretation(advocatedbythelender)wouldleadto(cid:179)absurdresults(cid:180)and (cid:179)mightbethoughtunconscionable.(cid:180)38

the

earlier

Further,

suppose

corporate

borrower.

Thesesuggestionsofabsurdityandunconscionabilitymayberelated,so letusconsider theallegedabsurdityinasimilarsituationwithout unconscionability.Supposethat,insteadofaconsumer(cid:182)spaydayloan agreement,Smith-typefactsariseinaseriesofmultimillion-dollarloanstoa ma(cid:77)or loan agreement(cid:178)withitsarbitrationagreementcoveringdisputesnotonly arisingoutofthatloanbutalsofutureloans(cid:178)wasnegotiatedbythehighpricedlawyersofthelenderandthecorporateborrowerandthensignedby theirCEOs,whoalsoseparatelyinitialedthebroadarbitrationclause.Ifa disputearoseoutofalaterloanagreementthatdidnothaveanadditional arbitrationclause,onewonderswhethertheSeventhCircuitwouldhave foundabsurdthecontentionthattheearlierloan(cid:182)sarbitrationagreement coveredthedisputearisingoutofthelaterloan. Inotherwords,onecan doubtthattheSeventhCircuitwouldhavebeenasinclinedtointerpretthe earlierloan(cid:182)sarbitrationagreementnarrowly(cid:178)toconcludethatitdidnot applytodisputesoverlaterloans(cid:178)forama(cid:77)orcorporateborrowerina lawyeredtransactionasitwasforaconsumerusingpaydayloans.

SinceSmith,decidedin2003,anumberofothercaseshaveinvolved consumers(cid:182)adhesioncontractswithagreementstoarbitratedisputesthatdo notariseoutofthecontractcontainingthearbitrationagreement.These caseshaveoftenfollowedSmith(cid:182)sapproachofdenyingenforcementofsuch arbitrationagreementsbyinterpretingthemnarrowly,orengaginginother contractlawtechniques,ratherthanrelyingontheFAA(cid:182)s(cid:179)arisingoutof(cid:180) Forexample,a2012federaldistrictcourtdecisionin requirement. California,InreJiffyLubeInternational,Inc.,39heldunconscionablea consumers(cid:182)adhesioncontractprovidingforarbitrationofdisputesthatdo notariseoutofthecontractcontainingthearbitrationagreement.40

A2016federaldistrictcourtdecisioninNew(cid:60)ork,Wexlerv.AT&T Corp.,41(cid:179)share(cid:62)d(cid:64)theconcernsvoicedinJiffyLube,(cid:180)butworriedthat (cid:179)holdingthatMobility(cid:182)sarbitrationclauseisunconscionablybroadwouldbe intensionwith(cid:180)AT&TMobilityLLCv.Concepcion.42Wexlermentioned theFAA(cid:182)s(cid:179)arisingoutof(cid:180)requirement43butdidnotrelyonitindenying enforcementof Instead,Wexlerdenied enforcementofthearbitrationagreementdueto(cid:179)lackofmutualintent.(cid:180)44 Thisisquiteastretchofcontractlawbecause,asDavidHortonexplains, (cid:179)conventionalcontractlaw(cid:180)treatsaconsumer(cid:182)smanifestationofassenttoa contractasamanifestationofassenttoallofitsterms.45

thearbitrationagreement.

Alaterfederaldistrictcourtdecision,McFarlanev.AlticeUSA,Inc.,46 combinedSmith(cid:182)sapproachavoiding(cid:179)absurd(cid:180)resultswithWexler(cid:182)sstretch

ofcontractlawtodeemnarrowlyinterpretinganarbitrationagreementa matterof(cid:179)contractformation.(cid:180)47TheMcFarlanecourtstatedthatitneed notchoosebetweenthisapproachortheJiffyLubeapproachofholdingthat anarbitrationagreementwasunconscionable,becausebothpathsledtothe conclusionthatthearbitrationagreement(cid:179)(cid:62)did(cid:64)notapplytoclaimslacking anexustothe(cid:62)contractincludingthearbitration(cid:64)agreement.(cid:180)48

AnotherfactpatterninvolvingAT(cid:9)Thassplitthefederalcourtsof appeals.Aclose,literalofreadingAT(cid:9)T(cid:182)scellservicecontract(cid:182)sarbitration clause,coveringclaimsagainst(cid:179)affiliates,(cid:180)showsthatitcoversacellservice customer(cid:182)sclaimsagainstDIRECTV,eventhoughDIRECTVdidnot affiliatewithAT(cid:9)Tuntilafterthecellservicecontractwasformed.49Buta consumerwhodidnotreadthatclausemightwellbeshockedtolearnthat theyhaveallegedlyagreedtoarbitrateclaimsagainstDIRECTV.50Whether toenforcethisprovisionsplitthefederalcourtsofappeals,withtheFourth CircuitenforcingitinMeyv.DIRECTV,LLC,51andtheNinthCircuit refusingtoenforceitinRevitchv.DIRECTV,LLC.52Revitchissimilarto

SmithinthatRevitchdidnotrelyontheFAA(cid:182)s(cid:179)arisingoutof(cid:180)requirement butinsteadnarrowlyinterpretedthearbitrationagreementtofindthatthe consumerdidnotagreetoarbitrateherclaimagainstDIRECTV.53The RevitchcourtsaidCalifornialawdoesnotrequireinterpretingcontracts accordingtotheir(cid:179)writtentermsalone(cid:180)whendoingsowould(cid:179)leadtoabsurd results.(cid:180)54AndRevitchfoundabsurdthenotionthat(cid:179)Revitchwouldbe forcedtoarbitrateanydisputewithanycorporateentitythathappenstobe acquiredbyAT(cid:9)T,Inc.,evenifneithertheentitynorthedisputehas anythingtodowithprovidingwirelessservicestoRevitch(cid:178)andevenifthe entitybecomesanaffiliateyearsorevendecadesinthefuture.(cid:180)55

TheNinthCircuitagainavoidedtheFAA(cid:182)s(cid:179)arisingoutof(cid:180)requirement byinterpretinganarbitrationagreementnarrowlyinJohnsonv.Walmart Inc.56BymakinganonlinepurchaseoftiresfromWalmart,theconsumer plaintiffagreedthat(cid:179)alldisputesarisingoutoforrelatedtotheseTermsof therelationshipbetween(cid:62)theconsumer(cid:64)and Useoranyaspectof Walmart...(cid:62)would(cid:64)beresolvedthroughfinalandbindingarbitration.(cid:180)57 (cid:179)While(cid:62)ataWalmartAutoCareCenter(cid:64)waitingforhistirestobeinstalled, (cid:62)theplaintiff(cid:64)purchasedalifetimetirebalancingandrotationservice agreement cid:181)ServiceAgreement(cid:182 fromaWalmartemployeeataseparate, additionalcost.(cid:180)58WhenadisputearoseoutoftheServiceAgreement,the NinthCircuitengagedinsomeinterpretativegymnastics59toholdthedispute notcoveredbytheplaintiff(cid:182)stire-purchaseagreementtoarbitrate(cid:179)all disputesarisingoutoforrelatedto...anyaspectoftherelationshipbetween (cid:62)theconsumer(cid:64)andWalmart.(cid:180)60

Whiletheabovedecisionsrefusedtoenforceagreementstoarbitrate claimsnotarisingoutofthecontractcontainingthearbitrationagreement, thesedecisionsdidnotrelyontheFAA(cid:182)s(cid:179)arisingoutof(cid:180)requirement.In Perhapsfirstwas(cid:45)udge contrast,some(cid:77)udgeshavereliedonit. O(cid:182)Scannlain(cid:182)sconcurringopinioninRevitch.61 (cid:45)udgeO(cid:182)Scannlain

addressedthe(cid:179)arisingoutof(cid:180)requirementdirectly,observingthat(cid:179)theFAA doesnotrequiretheenforcementofanarbitrationclausetosettlea controversythatdoesnotariseoutofthecontractortransaction.(cid:180)62(cid:45)udge O(cid:182)Scannlainwrote,(cid:179)DIRECTV(cid:182)sdecisiontosendRevitchunsolicited advertisementsforitssatellitetelevisionproducts(cid:178)therebyallegedly violatingtheTelephoneConsumerProtectionAct(cid:178)(cid:62)did(cid:64)notinanyway involvetheformationorperformanceofacontractforwirelessservices betweenRevitchandAT(cid:9)TMobility.(cid:180)63So,(cid:179)thecontroversybetween DIRECTVandRevitch(cid:62)did(cid:64)notcomewithintheFederalArbitrationAct sinceit(cid:62)did(cid:64)not(cid:181)aris(cid:62)e(cid:64)outof(cid:182)thecontractbetweenRevitchandAT(cid:9)T Mobility.(cid:180)64

(cid:45)udgeO(cid:182)Scannlain(cid:182)sconcurringopinion(cid:179)persuaded(cid:180)theEleventhCircuit inCalderonv.SixtRentACar,LLC.65InCalderon,aconsumerreserveda SixtrentalcaronOrbit(cid:93),whosecontractrequiredtheconsumertoarbitrate disputesrelatedto(cid:179)anyservicesorproductsprovided.(cid:180)66Sixtarguedthat thisagreementcoveredservicesorproductsprovidednot(cid:77)ustbyOrbit(cid:93)but alsobySixt.67TheEleventhCircuitdisagreedinanopinionthatnarrowly interpretedtheagreementtoexcludetheclaimagainstSixt.68However,Sixt challengedthisnarrowinterpretationbycitingtheSupremeCourt(cid:182)s statementinMosesH.ConeMemorialHospitalv.MercuryConstruction Corp.69that(cid:179)anydoubtsconcerningthescopeofarbitrableissuesshouldbe resolvedinfavorofarbitration.(cid:180)70TheEleventhCircuitre(cid:77)ectedthis challengebecausetheconsumer(cid:182)s(cid:179)suitagainstSixt(cid:62)did(cid:64)not(cid:181)aris(cid:62)e(cid:64)outof(cid:182) hiscontractwithOrbit(cid:93)withinthemeaningof(cid:62)FAAsection(cid:64)2(cid:178)and, accordingly,thatMosesH.Cone(cid:182)spro-arbitrationcanonofconstruction (cid:62)did(cid:64)notapply.(cid:180)71

C.AdhesiveandNegotiatedArbitrationAgreements

Thecases(cid:77)ustdiscussedintheprevioussubpartofthisessayariseoutof adhesioncontractsthatbusinessesdraftandpresentonatake-it-or-leave-it basistoconsumersandworkerswhomaynotnotice,letalonereadand understand,thearbitrationclause.Nearlyeveryexamplediscussedin Friedman(cid:182)sandHorton(cid:182)sarticles involvesanadhesivearbitration agreement.72Thisadhesivecontextpervadesbothofthesearticles,which argueforthe(cid:179)arisingoutof(cid:180)requirementasaprotectionagainstwhatHorton calls(cid:179)forcedarbitration.(cid:180)73So,botharticlestreattheFAA(cid:182)s(cid:179)arisingoutof(cid:180) requirementlargelyasanunder-enforced(cid:179)checkoncorporatepower.(cid:180)74

Thatpopulistapproach,whateveritsmeritwithrespecttoconsumers(cid:182) adhesivearbitrationagreements,isinapplicabletoarbitrationagreements betweensophisticatedpartieswhoselawyersdraftedtheagreements.Inthe sophisticated,lawyeredcontext,(cid:45)udgeO(cid:182)Scannlain(cid:182)sassertion(madeinthe contextofadhesioncontracts)isimplausible:(cid:179)Apartycanhardlybesaidto consenttoarbitratedisputesthathavenothingatalltodowiththesub(cid:77)ectof thecontractthepartysignedortheprovider-customerrelationshipthe contractcreates,letaloneaclaimagainstanentitynoteveninpartyatthe time.(cid:180)75Theimplausibilityofthisstatementinthesophisticated,lawyered contextisshownbytheexamplesinthenextpartofthisessay.

A.DisputesArisingOutofaDifferentContractBetweentheSameParties

Considertheexampleabove,wherePfi(cid:93)erandCVScarefullynegotiatea contractinwhichtheyagreetoarbitratenotonlyanydisputesthatmight ariseoutoftheircontractcontainingthisarbitrationagreementbutalsoany disputesthatmightariseoutofanyofthemanyearlier,unrelatedcontracts betweenthesetwolargecorporations.Insigningthiscontract,thepresident

ofeachcorporationseparatelyinitialstheclauseagreeingto(cid:179)arbitrateall disputesbetweenPfi(cid:93)erandCVS,includingbutnotlimitedto,disputes arisingoutofearliercontractsbetweenPfi(cid:93)erandCVS.(cid:180)Afterthis arbitrationagreementisformed,adisputearisesoutofoneoftheearlier contracts.Asamatterofstandardcontractlaw,eachpartyshouldhavethe dutytoarbitratethisdisputebecauseeachpartyassumedthisdutyinavalid contract,andnothinglateroccurredtodischarge,modify,orexcusethisduty. ButthisdutywouldnotlikelybeenforcedbytheFAAifcourtsappliedits requirementthatitsenforcementofpredisputeagreementsbelimitedto (cid:179)controvers(cid:62)ies(cid:64)arisingoutofsuchcontract,(cid:180)with(cid:179)suchcontract(cid:180)referring tothecontractcontainingthearbitrationclause.76

TheOklahomaCourtofAppealsrefusedtoenforceanarbitration agreementinacasethatwassimilar,exceptthatitinvolvednotacarefully negotiatedcontractwithanarbitrationclauseseparatelyinitialedby corporatepresidentsbutabereavedfamily(cid:182)sadhesioncontractwitha cemetery.77TheRustsmadetwocontractswithacemeteryyearsapart.78 Thefirstcontract,tobuyacrypt,didnothaveanarbitrationagreement.79 Butthesecondcontract,tobuyabench,said,(cid:179)B(cid:60)SI(cid:42)NIN(cid:42)THIS A(cid:42)REEMENT,(cid:60)OUAREA(cid:42)REEIN(cid:42)TOHAVEAN(cid:60)ANDALL DISPUTESBETWEEN(cid:60)OUANDTHESELLERRESOLVEDB(cid:60) ARBITRATION.(cid:180)80TheOklahomaappellatecourtrefusedtocompel arbitrationoftheRusts(cid:182)tortclaims,whichdidnotariseoutofthebench contractbutatleastarguablyaroseoutofthecryptcontract.81

Whyinsistthatadutytoarbitratedisputesarisingoutofthe1993crypt contractcanariseonlyinamodificationofthoseearliercontractsratherthan inalaterseparatecontract(cid:34)Andevengiventhisinsistence,whywasthe Rustsexpressly(cid:179)A(cid:42)REEIN(cid:42)TOHAVEAN(cid:60)ANDALLDISPUTES B(cid:60) THE BETWEEN ARBITRATION(cid:180)(cid:178)asdistinguishedfromthecommonagreement to arbitrate this contract(cid:180)(cid:178)insufficienttoshowthatthey(cid:179)intendedthearbitrationclausein theBenchContracttoretroactivelymodifythe1993contracts(cid:180)(cid:34)83

RESOLVED

SELLER

disputes

relating

arising

(cid:60)OU

AND

(cid:179)all

out

of

or

Partiesshouldbefreetomakeenforceableagreementstoarbitrateyet-toarisedisputesarisingoutoftheirearliercontracts,andtheexpresstermsof suchagreements,likeothercontracts,shouldordinarilybeenforced.

Butcontractlawhaslong-developeddoctrinescraftingexceptionsthat denyenforcementofparticulartermsandevenofentirecontracts.These exceptions(cid:178)rangingfromunconscionability(cid:182)sconcernwithunfairsurprise tointerpretingagainstthedrafterandagainstabsurdresults(cid:178)morelikely applytoadheringpartiesliketheRuststhantothebusinessthatdraftedthe Rusts(cid:182)adhesioncontractortocontractscompanieslikePfi(cid:93)erandCVS negotiatethroughtheirlawyers.

Theseexceptionstoenforcement,likethepresumptionofenforcement, shouldapplytoarbitrationagreements,includingagreementstoarbitrateyetto-arisedisputesarisingoutoftheparties(cid:182)earliercontracts.So,arbitration lawshouldenforceanagreementtoarbitrateanyexistingorsubsequent dispute(cid:178)not(cid:77)ustadispute(cid:179)arisingoutof(cid:180)thecontractcontainingthis agreement(cid:178)(cid:179)saveuponsuchgroundsasexistatlaworinequityforthe revocationofanycontract.(cid:180)84 Inotherwords,theFAA(cid:182)ssavingsclause permitscase-by-caseanalysisseparatingagreementsthatshouldandshould notbeenforced,incontrasttothe(cid:179)arisingoutof(cid:180)requirement,whichthrows outthebaby(agreementsthatshouldbeenforced)withthebathwater (agreementsthatshouldnotbeenforced).

B.CombiningContractClaimsArisingOutoftheContractwithWholly UnrelatedNon-ContractClaims

SupposeCostcosellsawarehousetoAma(cid:93)oninacarefullynegotiated contractrequiringarbitrationnotonlyofdisputesarisingoutofthisreal

estatetransactionbutalso(cid:179)anyotherdisputebetweentheparties,including butnotlimitedtoautoaccidents.(cid:180)Supposethepresidentofeachcorporation separatelyinitialsthearbitrationclause.Ifvehiclesofthesetwocorporations collide,wouldenforcingtheiragreementtoarbitratetheresultingtortclaims beabsurd(cid:34)No.Ifthatisright,thenwhydid(cid:45)udgePosner,writingforthe SeventhCircuitinSmith,find(cid:179)absurd(cid:180)thenotionofenforcingapayday loan(cid:182)sagreementtoarbitrate(cid:179)allcommonlawclaims,baseduponcontract, tort,fraud,andotherintentionaltorts(cid:180)(cid:34)85

Althoughanagreementtoarbitratebothclaimsarisingoutofthecontract containingthearbitrationagreementandwhollyunrelatedtortclaimsis unusual,partiesshouldbefreetomakeenforceableagreementswithunusual terms.However,theexceptionsfromenforcementdiscussedaboveare especially therefore surprising(cid:178)provisionsofadhesioncontracts. Incontrast,sophisticated partieslikeCostcoandAma(cid:93)oncannegotiate,draft,andformtheirunusual contractsundercircumstanceslikelytoconvinceacourtthat,yes,theyreally didwantthoseunusualterms.

unusual(cid:178)and

likely

apply

Soagain,arbitrationlawshouldenforceanagreementtoarbitrateany existingorsubsequentdispute(cid:178)not(cid:77)ustadispute(cid:179)arisingoutof(cid:180)the contractcontainingthisagreement(cid:178)(cid:179)saveuponsuchgroundsasexistat laworinequityfortherevocationofanycontractorasotherwiseprovided inchapter4.(cid:180)86Thecase-by-caseanalysisoftheFAA(cid:182)ssavingclauseis betterthanthe(cid:179)arisingoutof(cid:180)requirementthrowingoutenforcementworthyagreements.

C.DisputesArisingOutofNoContract

ThehypotheticalPfi(cid:93)er(cid:18)CVSandCostco(cid:18)Ama(cid:93)onarbitrationagreements covereddisputesarisingoutofthecontractcontainingtheagreement,but partiescanalsoformstandalonepredisputearbitrationagreementsthat includeonlythepromisetoarbitrate.Forexample,supposeAppleand Samsungagreetoarbitrateanypatentinfringementclaimseitherhasagainst

theotherforthenextfiveyears.OrFedExandUPSagreetoarbitrateany tortclaimeitherhasagainsttheotherduetoanycollisionoftheirvehiclesin thenexttenyears.OrmembersoftheWalton(Walmart)familyagreeto arbitrateanydisputerelatedtoanyexistingorfuturewillortrust,including itsvalidity,overthenexttwentyyears.

Thesehypotheticalstandalonearbitrationagreementsareprobablynot enforceableundertheFAA,whichlimitsitsenforcementofpredispute agreementsto(cid:179)controvers(cid:62)ies(cid:64)thereafterarisingoutofsuchcontract.(cid:180)87The disputescoveredbystandalonearbitrationagreementsdonotariseoutofthe contractscontainingthoseagreementsandmightinsteadbesaidtoariseout ofnewproducts(Apple(cid:18)Samsung),automobileaccidents(FedEx(cid:18)UPS),and willsortrusts(Waltons).Butthatshouldbenoobstacletotheirenforcement. Apple(cid:18)Samsung,FedEx(cid:18)UPS,andtheWaltonsdeservelegalenforcementof theiragreementsforallthereasonscourtshavebeenenforcingcontractsfor centuries.Nopublicpolicyisviolatedbythesehypotheticalagreements.To thecontrary,theseagreementsadvancethepolicyofaccessto(cid:77)ustice.

D.ExpandingSophisticatedParties’AgreementstoArbitrateCanHelp CourtsAllocateTheirResources

(cid:179)Whilelitigationreceivesasi(cid:93)ablegovernmentsubsidy,arbitrationdoes Subsidi(cid:93)ingPfi(cid:93)er(cid:18)CVS,Apple(cid:18)Samsung,FedEx(cid:18)UPS,andthe

not.(cid:180)88 Waltonsisdifficultto(cid:77)ustifybecause:

Movingtheseparties(cid:182)disputesfromlitigationtoarbitrationfreesupthe time(cid:77)udgesandothersinthecourtsystemwoulddevotetothesedisputes,so thattimecaninsteadbedevotedtoothercases.Movingenoughdisputesof partieslessdeservingofthepublicsubsidyoflitigationwouldrelievedocket

pressureonthecourtsystem,andthuspresumablylowertheaveragedelay facedbyotherlitigantsmoredeservingofthesubsidy.90Perhapsthe arbitrationsystemsdevelopedbythesesophisticatedpartieswilldiscover techniquesthatattractotherpartiestoarbitrationorinspireimitationbythe courtsystem,thusimprovingad(cid:77)udicationinboththeprivateandpublic sectors.

Above,

tosubmit

thisessayarguesforrepealingtheFAA(cid:182)s(cid:179)arisingoutof(cid:180) requirement,sotheFAAwouldenforce(cid:179)anagreement to arbitrationanyexistingorsubsequentdisputeinvolvingcommerce,save uponsuchgroundsasexistatlaworinequityfortherevocationofany contractorasotherwiseprovidedinchapter4.(cid:180)ButretainingtheFAA(cid:182)s (cid:179)arisingoutof(cid:180)requirement(cid:178)evenifcourtsapplyitasstringentlyas FriedmanorS(cid:93)alaisuggest(cid:178)wouldnotnecessarilypreventenforcementof theagreementsIhaveidentifiedasenforcement-worthy.Courtscould enforcetheseagreementsunderstatelaw.AsHortonnotes,(cid:179)evenif (cid:62)section(cid:64)2oftheFAAdoesnotapply,statearbitrationlegislationcan providetheinfrastructuretoenforceinfinitelanguage.(cid:180)91Manystates(cid:182) statutesenforcepredisputeagreementstoarbitratenotonlydisputesarising outofthecontractcontainingthearbitrationagreement,but(cid:179)anyexistingor subsequentcontroversyarisingbetweentheparties.(cid:180)92Thisisthelanguage oftheRevisedUniformArbitrationAct,whichhasbeenenactedbytwentythreestates.93 Inaddition,theoriginalUniformArbitrationAct,still

governingtwelvestates,similarlyenforcesagreements(cid:179)tosubmit arbitrationanycontroversythereafterarisingbetweentheparties.(cid:180)94

at

arbitrationagreements

fromenforcingpredispute

However,astatuteinatleastonerecalcitrantstate,Alabama,stillprohibits all.95 courts Additionally,someotherstates(cid:182)arbitrationstatutesexcludevariousclaims, suchastortclaims,fromenforcementofpredisputearbitrationagreements.96 Moreover,eventherelativelybroaduniformactslimitenforcementto disputes(cid:179)betweentheparties,(cid:180)whichmaydenyenforcementofsome enforcement-worthyagreementsintendingsomepromisestobeenforceable bynonparties. Forinstance,suppose(cid:42)eneralElectric cid:42)E)carefully negotiatesacontractinwhichitagreestomakeandinstallmotorsfora constructionfirmthatisbuildingafactorypursuanttotheconstructionfirm(cid:182)s contractwithamanufacturer.(cid:42)E(cid:182)scontractwiththeconstructionfirm obligates(cid:42)Etoarbitratenotonlyitsdisputeswiththeconstructionfirmbut alsoitsdisputeswiththemanufacturer.(cid:42)Esuesthemanufacturer,alleging thatthemanufacturer(cid:182)snegligencerequired(cid:42)Etoincurextraworker-safety coststoperformitscontractwiththeconstructionfirm.Themanufacturer(cid:182)s motiontocompelarbitrationshouldbegrantedunderlong-established principlesofgeneralcontractlaw,whichholdthat(cid:179)(cid:62)a(cid:64)promiseinacontract createsadutyinthepromisortoanyintendedbeneficiarytoperformthe promise,andtheintendedbeneficiarymayenforcetheduty.(cid:180)97

However,(cid:42)E(cid:182)spromisetoarbitrateitsclaimagainstthemanufacturer maynotbeenforcedbyuniformstateactslimitingenforcementtodisputes (cid:179)betweentheparties,(cid:180)whichpresumablyreferstothepartiestothecontract. Whilecourtsgenerallyhaveenforcedpromisestoarbitratewithintended thirdparties,98thosecaseshavebeendecidedundertheFAA,whichdoesnot limitenforcementtodisputes(cid:179)betweentheparties.(cid:180)So,leavingsuchcases tostatelaw,bymorerigorouslyenforcingtheFAA(cid:182)s(cid:179)arisingoutof(cid:180) requirement,mightleadtobackslidingawayfromcourts(cid:182)enforcementof promisestoarbitratewithintendedthirdparties.

Thesebackslidingconcernsgrowwiththelistofintendedbeneficiaries. Forexample,(cid:42)Emightagreetoarbitratewithnotonlytheconstructionfirm andmanufacturer,butalsotheir(cid:179)subsidiaries,affiliates,agents,employees, predecessorsininterest,successors,andassigns.(cid:180)Whenthislanguage appears,asitdid,inaconsumer(cid:182)sadhesioncontract,99thecontractdoctrines discussedabove(suchasunconscionability)mightwellprevent its enforcement.Butif(cid:42)E(cid:182)slawyercarefullynegotiatedtheclause(cid:178)perhaps inexchangeforahigherpriceonitsmotors(cid:178)and(cid:42)E(cid:182)spresidentseparately initialedit,thenthosedoctrinesshouldnotstandinthewayofenforcement. Thus,contractdoctrinespermitacase-by-caseanalysissuperiortothe (cid:179)betweentheparties(cid:180)requirementofstatestatutesformuchthesamereasons case-by-caseanalysisissuperiortotheFAA(cid:182)s(cid:179)arisingoutof(cid:180)requirement. Insum,manystates(cid:182)statutesarenotcurrentlyuptothetaskofenforcing predisputearbitrationagreementsthatshouldbeenforced,andcourts(cid:182) inclinationstoprovidesuchenforcementasamatterofcommonlawisin doubt.So,whilethereisacaseforleavingarbitrationlawtothestates,itis acasethatacceptssomebackslidingtothebadolddays,denying enforcementofpredisputearbitrationagreementsthatshouldbeenforced. Further,thecaseforfederalismisdifficulttoreconcilewiththepolitical realityofrecentdecades.ThatrealityincludestheSupremeCourt(cid:182)slong recordofbroadlyinterpretingtheFAA.Additionally,itincludesCongress andthePresidentcontinuingtonationali(cid:93)earbitrationlaw,asintheir2022 enactmentofanewchapter4oftheFAA,whichnationali(cid:93)es(precluding state-by-statevariationof)aruleprohibitingenforcementofpredispute arbitrationagreementsagainstapartyassertingsexualharassmentorsexual assaultclaims.100

CongressshouldrepealtheFAA(cid:182)s(cid:179)arisingoutof(cid:180)requirement.TheFAA shouldbeamendedtoenforce(cid:179)anagreementtosubmittoarbitrationany existingorsubsequentcontroversyinvolvingcommerce,saveuponsuch groundsasexistatlaworinequityfortherevocationofanycontractoras otherwiseprovidedinchapter4.(cid:180)101

--- FOOTNOTES ---

Part of the Business Organizations Law Commons, Commercial Law Commons, Contracts Commons,

and the Dispute Resolution and Arbitration Commons

Part of the Business Organizations Law Commons, Commercial Law Commons, Contracts Commons,

and the Dispute Resolution and Arbitration Commons

STEPHEN(cid:45).WARE(cid:13)

(cid:13)FrankEdwardsTylerDistinguishedProfessorofLaw,Universityof(cid:46)ansas.Thanks toDavidHorton,ChrisDraho(cid:93)al,andAndrewTorranceforhelpfulsuggestions,andto (cid:46)ylerWomack,MichaelMoore,ReaganHoskin,TheaHack,IsraelNelson,(cid:46)aegan Cowan,ValFrench,andEmmaBishopforresearchandeditorialassistance.An abbreviatedversionofthisarticlewaspublishedasStephen(cid:45).Ware,Section2’s“Arising outof”Requirement:AnArgumentforRepeal,inTHEFEDERALARBITRATIONACT: SUCCESSES,FAILURES,ANDAROADMAPFORREFORM(RichardA.Bales(cid:9)(cid:45)illI.(cid:42)ross eds.,2024).

I.INTRODUCTION

1.9U.S.C.(cid:134)2. 2.DavidHorton,InfiniteArbitrationClauses,168U.PA.L.REV.633,633(2020).

(1)theseparabilitydoctrine,whichpreventscourtsfromhearingdefenses tocontractenforcement,suchasmisrepresentationandduress,when thecontractatissuehasanarbitrationclause(cid:30)

(2)overlydeferential

correcting arbitrators(cid:182)erroneousrulingsonquestionsof(evenmandatory)law(cid:30) and

reviewinadequate

(cid:77)udicial

for

(3)enforcementofarbitrationclausesprecludingclassactions,evenin circumstancesinwhichnonarbitrationclausessimilarlyprecluding classactionswouldbeunenforceable.4

3.See,e.g.,Stephen(cid:45).Ware,TheCentristCaseAgainstCurrent(Conservative) ArbitrationLaw,68FLA.L.REV.1227,1279app.A(2016)(cid:62)hereinafterWare,The CentristCaseAgainstCurrent (proposingan arbitration-focusedrulebytheConsumerFinancialProtectionBureau)(cid:30)STEPHEN(cid:45). WARE(cid:9)ARIANAR.LEVINSON,PRINCIPLESOFARBITRATIONLAW(cid:134)24(2ded.2023) (explainingunconscionabilityandsimilarregulationofarbitration).

(Conservative)ArbitrationLaw(cid:64)

4.Ware,TheCentristCaseAgainstCurrent(Conservative)ArbitrationLaw,supra

note3,at1231(cid:177)32.

5.Seeinfranote67andaccompanyingtext. 6.SeeinfraPartIII(D).

II.THE(cid:179)ARISIN(cid:42)OUTOF(cid:180)RE(cid:52)UIREMENT

7.9U.S.C.(cid:134)2 cid:179)Awrittenprovisioninanymaritimetransactionoracontract evidencingatransactioninvolvingcommercetosettlebyarbitrationacontroversy thereafterarisingoutofsuchcontractortransaction,ortherefusaltoperformthewhole oranypartthereof,oranagreementinwritingtosubmittoarbitrationanexisting controversyarisingoutofsuchacontract,transaction,orrefusal,shallbevalid, irrevocable,andenforceable,saveuponsuchgroundsasexistatlaworinequityforthe revocationofanycontractorasotherwiseprovidedinchapter4.(cid:180 .

8.Horton,supranote2,at679. 9.

Id.(internalquotationsomitted)(quotingMetro.Cas.Ins.Co.ofN.(cid:60).v.Lehigh

ValleyR.R.,109A.743,744(N.(cid:45).Ct.Err.(cid:9)App.1920 .

10.Seeid.(quotingArbitrationofInterstateCommercialDisputes:JointHearings onS.1005andH.R.646BeforetheSubcomms.oftheComms.ontheJudiciary,68th Cong.2(1924 .

11.MitsubishiMotorsCorp.v.SolerChrysler-Plymouth,Inc.,473U.S.614,650 (1985)(Stevens,(cid:45).,dissenting)(cid:30)seealsoWARE(cid:9)LEVINSON,supranote3,(cid:134)5(e) cid:179)(cid:62)F(cid:64)romtheFAA(cid:182)s1925enactmentintothe1980s,...courtsgenerallyrefusedto enforcepre-disputeagreementstoarbitratefederalstatutoryclaims.(cid:180 .

12.See,e.g.,ArianaR.Levinsonetal.,PredictabilityofArbitrators’Relianceon ExternalAuthority?,69AM.U.L.REV.1827,1832(2020) cid:179)Laborarbitrationwasused byemployersandunionstoresolvedisputesaboutthemeaningoftheircollective bargainingagreementslongbeforethemorerecentriseinarbitrationofstatutory employmentlawclaims.(cid:180 (cid:30)id.at1833 cid:179)Laborarbitratorshavebeensettlingdisputes overworkplacegrievancesandtheinterpretationofCBAsforhundredsofyearsaspart ofagrievance-arbitrationsysteminunioni(cid:93)edworkplaces.(cid:180 .

13.MistubishiMotorsCorp.,473U.S.at646n.11.Inthisregard,merchants(who buygoodsforresale)shouldbedistinguishedfromthebroadercategoryofbusinesses. SeeSTEPHEN(cid:45).WARE(cid:9)ALANSCOTTRAU,ARBITRATION32(cid:177)33,36(4thed.2020) (distinguishingmerchants(cid:182)tradeassociationarbitrationfromthe(cid:179)generalcommercial arbitration(cid:180)typifiedbytheAmericanArbitrationAssociationwithwhichlawyerstend tobemorefamiliar).

14.WARE(cid:9)LEVINSON,supranote3,(cid:134)5(e)(1) cid:179)Inadditiontosecuritiesand antitrust,pre-1980scourtsheldmanyotherfederalstatutoryclaimsnonarbitrable, includingRICO,patent,copyright,(cid:181)non-core(cid:182)bankruptcyproceedings,TitleVII, ADEA,andERISA.Theninthe1980s,theSupremeCourtrevolutioni(cid:93)edarbitration lawtorequireenforcementofagreementstoarbitratefederalstatutoryclaims.(cid:180 .

15.Seeid.(cid:134)5(c),(d).

16.465U.S.1(1984). 17.473U.S.614(1985). 18.531U.S.79(2000). 19.SeeStephenE.Friedman,TheLostControversyLimitationoftheFederal

ArbitrationAct,46U.RICH.L.REV.1005,1021,1023(cid:177)28(2012).

20. 21.

Id.at1007. Id.at1006 cid:179)ThelanguagetheSupremeCourthaslargelyignoredisthe(cid:62)FAA(cid:182)s(cid:64) limitationtoarbitrateacontroversyonlyifit(cid:181)aris(cid:62)es(cid:64)outof(cid:182)acontractwithan arbitrationprovisionor(cid:181)aris(cid:62)es(cid:64)outof(cid:182)thefailuretoperformthatcontract.(cid:180 .Friedman similarlyidentifiesnotasinglelowercourtcaseaddressingtheFAA(cid:182)s(cid:179)arisingoutof(cid:180) requirement.Id.at1021,1023(cid:177)28.

22.Seegenerallyid. 23.Stephen(cid:45).Ware,InterstateArbitration:Chapter1oftheFederalArbitration

Act,inARBITRATIONLAWINAMERICA:ACRITICALASSESSMENT88,104(cid:177)05(2006).

Forexample,supposethatparties(cid:59)and(cid:60)formtwocontractsayearapart,andin thesecondcontractthereisnoarbitrationclause,butinthefirstcontractthereisa clauseprovidingforarbitration,notonlyofdisputesarisingoutofthatcontract, butalsodisputesarisingoutofanylatercontractsbetweentheparties.Whatif(cid:59) and(cid:60)haveadisputeaboutperformanceofthesecondcontract(cid:34)Asamatterof standardcontractlaw,eachpartyshouldhavethedutytoarbitratethedisputeabout thesecondcontractbecauseeachpartyassumedthisdutyinthefirstcontractand nothinglateroccurredtodischarge,modifyorexcusethisduty.Butitisnotclear thatthisdutyisenforcedbytheFAAbecausetheFAAlimitsitsenforcement

mandateto(cid:179)controvers(cid:62)ies(cid:64)arisingoutofsuchcontract,(cid:180)with(cid:179)such(cid:180)contract referringtothecontractcontainingthearbitrationclause.

Id.(internalcitationsomitted).(cid:179)Similarly,itisnotclearthattheFAArequirescourtsto enforcethearbitrationagreementintheoppositefactpatterninwhichthesecondcontract containsaclauseprovidingforarbitration,notonlyofdisputesarisingoutofthat contract,butalsodisputesarisingoutofanyearliercontractsbetweentheparties.Courts, nevertheless,generallyseemtoenforcetheseagreements.(cid:180) Id.at105n.56(citing MACNEILETAL.,FEDERALARBITRATIONLAW(cid:134)20.3.6(1994(cid:9)Supp.1999 .

24.Brownexrel.Brownv.(cid:42)enesisHealthcareCorp.,724S.E.2d250,291(W.Va. 2011),cert.granted,judgmentvacatedsubnom.MarmetHealthCareCtr.,Inc.v.Brown, 565U.S.530,534(2012).

Id.at533.

25.Brown,724S.E.2dat291. 26.565U.S.530(2012). 27. 28.581U.S.246(2017). 29. 30.BriefofArbitrationScholarImreS.S(cid:93)alaiasAmicusCuriaeinSupportof Respondentsat7,(cid:46)indredNursingCtrs.Ltd.v.Clark,581U.S.246(2017)(No.16-32). 31.(cid:46)indredNursingCtrs.Ltd.v.Cox,486S.W.3d892,893 cid:46)y.Ct.App.2015)

Id.at247. cid:179)Under(cid:46)entuckyprecedent,wrongfuldeathclaimsarenotsub(cid:77)ecttoarbitration.(cid:180 .

32.SeeClark,581U.S.at255(cid:177)56 cid:179)The(cid:46)entuckySupremeCourtspecially impededtheabilityofattorneys-in-facttoenterintoarbitrationagreements.Thecourt thusfloutedtheFAA(cid:182)scommandtoplacethoseagreementsonanequalfootingwithall othercontracts.(cid:180 .

33.SeeBrown,724S.E.2dat291(cid:30)BriefofArbitrationScholarImreS.S(cid:93)alaias AmicusCuriaeinSupportofRespondents,supranote30,at7(cid:30)Friedman,supranote19. 34.See,e.g.,ContractLaw—FederalArbitrationAct–NinthCircuitRefusesto EnforceInfiniteArbitrationAgreement.-Revitchv.DIRECTV,LLC,977F.3d713(9th Cir.2020),134HARV.L.REV.2871,2877(2021)(referringtothe(cid:179)problemofinfinite arbitrationclauses(cid:180 .

35.See,e.g.,McFarlanev.AlticeUSA,Inc.,524F.Supp.3d264,275(S.D.N.(cid:60). 2021)(citingHorton,supranote2,at639(cid:177)40) cid:179)TheArbitrationProvisionisthusan exampleof...(cid:62)what(cid:64)onescholarhasaptlydubbedan(cid:181)infinitearbitrationclause.(cid:182)(cid:180 (cid:30) Meyv.DIRECTV,LLC,971F.3d284,302(4thCir.2020)(Harris,(cid:45).,dissenting)(citing Horton,supranote2,at639) cid:179)Thatkindofarbitrationclause(cid:177)whatonescholarhas termedan(cid:181)infinitearbitrationclause(cid:182)(cid:177)isrelativelynewanduntested.(cid:180 (cid:30)Revitchv. DIRECTV,LLC,977F.3d713,720(9thCir.2020)(citingHorton,supranote2,670(cid:177) 78) cid:179)Moreover,weareawarethatwithourdecisiontoday,weareopeningacircuitsplit onthisdifficultissue:Cananythinglessthanthemostexplicit(cid:181)infinitelanguage(cid:182)ina consumerservicesagreementbindtheconsumertoarbitrateanyandalldisputeswith (yet-unknown)corporateentitiesthatmightlaterbecomeaffiliatedwiththeservice provider(cid:178)evenwhenneithertheentitynorthedisputebearanymaterialrelationtothe servicesprovidedundertheinitialagreement(cid:34)(cid:180 (cid:30)Davitashviliv.(cid:42)rubhubInc.,No.20CV-3000(LA(cid:46 ,2023WL2537777,at(cid:13)10n.100(S.D.N.(cid:60).Mar.16,2023)(citing Horton,supranote2,at639(cid:177)40) cid:179)Defendants(cid:182)arbitrationclausesareexamplesof(cid:181)a (cid:179)relativelynewanduntested(cid:180)speciesofarbitrationclause,(cid:182)whichonescholaraptlyhas describedasan(cid:181)infinitearbitrationclause.(cid:182)(cid:180 .

36.318F.3d775(7thCir.2003). 37.Seeid.at776(cid:177)77. Id.at777(cid:177)78. 38.

39.847F.Supp.2d1253(S.D.Cal.2012). 40.Seeid.at1262(cid:177)63. 41.211F.Supp.3d500(E.D.N.(cid:60).2016). 42.563U.S.333(2011). 43.SeeWexler,211F.Supp.3dat505 cid:179)(cid:62)T(cid:64)heFAAexplicitlylimitsitselfto agreements(cid:181)tosettlebyarbitrationacontroversythereafterarisingoutofsuchcontract ortransaction,ortherefusaltoperformthewholeoranypartthereof.(cid:182)(cid:180 (emphasis omitted).

44.Seeid.(cid:30)seealsoid.at504 cid:179)Notwithstandingtheliteralmeaningoftheclause(cid:182)s language,noreasonablepersonwouldthinkthatcheckingaboxacceptingthe(cid:181)termsand conditions(cid:182)necessarytoobtaincellphoneservicewouldobligatethemtoarbitrate literallyeverypossibledisputeheorshemighthavewiththeserviceprovider.... Rather,areasonablepersonwouldbeexpressing,atmost,anintenttoagreetoarbitrate disputesconnectedinsomewaytotheserviceagreementwithMobility.(cid:180 .

45.SeeDavidHorton,AccidentalArbitration,102WASH.U.L.REV.(forthcoming 2025)(manuscriptat22),https:(cid:18)(cid:18)papers.ssrn.com(cid:18)sol3(cid:18)papers.cfm(cid:34)abstract(cid:66)id(cid:32)4898026 (emphasisomitted) cid:179)Byfindingthatanindividualonlypartiallyconsented,these(cid:77)udges seemtoberewritingratherthanapplyingconventionalcontractlaw.(cid:180 .

46.524F.Supp.3d264(S.D.N.(cid:60).2021).

47.

Id.at277 cid:179)First,asamatterofcontractformation,New(cid:60)orklaw,like(cid:42)eorgia law,providesthat(cid:181)acontractshouldnotbeinterpretedtoproducearesultthatisabsurd, commerciallyunreasonableorcontrarytothereasonableexpectationsoftheparties.(cid:182)(cid:180 .

48. 49.See,e.g.,Meyv.DIRECTV,LLC,971F.3d284,291(4thCir.2020).Walmart andAirbnbhavealsousedarbitrationclausesthatclearlycoverdisputesbeyondevena broadreadingof(cid:179)arisingoutof(cid:180)thecontractcontainingthem.SeeSmithv.Walmart, Inc.,No.7:22-CV-00568,2023WL5215376,at(cid:13)2(W.D.Va.Aug.14,2023) cid:179)Except asitotherwiseprovides,thisArbitrationProvisionisintendedtoapplytotheresolution ofalldisputesbetweentheParties,andrequiresallsuchdisputestoberesolvedonan individualbasisandonlybyanarbitratorthroughfinalandbindingarbitrationandnot bywayofacourtor(cid:77)urytrial,noraproceedingbeforeanyothergovernmentalbody, andnotbywayofaclass,collective,mass,orrepresentativeactionorproceeding.(cid:180 (cid:30) Airbnb,Inc.v.Rice,518P.3d88,89(Nev.2022) cid:179)(cid:60)ouandAirbnbmutuallyagreethat anydispute,claimorcontroversyarisingoutoforrelatingtotheseTermsorthebreach, termination,enforcementorinterpretationthereof,ortotheuseoftheAirbnbPlatform, theHostServices,the(cid:42)roupPaymentService,ortheCollectiveContent(collectively, (cid:181)Disputes(cid:182 willbesettledbybindingarbitration(the(cid:181)ArbitrationAgreement(cid:182 .(cid:180 .

50.Suchshockledtoa(cid:179)publicrelationsbacklash(cid:180)againstDisneywhenitmovedto enforceitsDisney(cid:14)streamingservice(cid:182)sarbitrationagreementagainstaDisney(cid:14) customerwhobroughtawrongfulclaimagainstDisneyduetotheplaintiff(cid:182)swife(cid:182)sdeath ataDisneythemeparkrestaurant.DanielleBraff,DidYouReadtheSmallPrint? ‘Infinite’ArbitrationClausesAreontheRise,A.B.A.(cid:45).(Sept.6,2024,11:46AM), https:(cid:18)(cid:18)www.aba(cid:77)ournal.com(cid:18)web(cid:18)article(cid:18)did-you-read-the-small-print-forcedarbitration-cases-are-on-the-rise(cid:6)google(cid:66)vignette.

51.SeeMey,971F.3dat295. 52.977F.3d713(9thCir.2020).

Id.at717. Id.(quoting(cid:46)ashmiriv.RegentsofUniv.ofCal.,156Cal.App.4th809,845

Id.at728.

53. 54. (2007 . 55. 56.57F.4th677,681(9thCir.2023). Id.at679. 57. Id.at680. 58. 59.Seeid.at682. 60. 61.Revitchv.DIRECTV,LLC,977F.3d713,721(9thCir.2020).

Id.(emphasisomitted). Id.at724(emphasisomitted). Id.

62. 63. 64. 65.5F.4th1204(11thCir.2021). 66. 67. 68.

Id.at1206(cid:177)07(internalcitationomitted). Id.at1208. Id.at1209 cid:179)(cid:62)T(cid:64)hephrase(cid:181)anyservicesorproductsprovided(cid:182)referstoservices orproductsprovidedbyOrbit(cid:93),notservicesorproductsbyanyone.Accordingly,Sixt(cid:182)s rental-carservicedoesn(cid:182)tfallwithinthecategoryofarbitrable(cid:181)Claims.(cid:182)(cid:180 .

69.460U.S.1(1983). 70.Calderon,5F.4that1212(citingMosesH.ConeMem’lHosp.,460U.S.at24(cid:177)

25).

71.

Id.at1213(cid:177)14(cid:30)seealsoDavitashviliv.(cid:42)rubhubInc.,20-CV-3000(LA(cid:46 ,2023 WL2537777,at(cid:13)9(cid:177)11(S.D.N.(cid:60).Mar.16,2023)(relyingatleastpartiallyon(cid:179)arising

III.THE(cid:179)ARISIN(cid:42)OUTOF(cid:180)RE(cid:52)UIREMENT(cid:182)SSHORTCOMIN(cid:42)S

outof,(cid:180)inwhichthecourtrefusedtocompelarbitrationofaclassactionclaimby consumersagainst(cid:42)rubHub,Uber,andPostMates,althoughthecourtfoundtheclaim wouldbecoveredbythearbitrationagreementsifliterallyinterpreted). 72.SeegenerallyFriedman,supranote19(cid:30)Horton,supranote2. 73.SeeHorton,supranote2,at649 cid:179)Forcedarbitrationclausesbecamearoutine partofconsumerandemploymentcontracts(cid:62)(cid:64)....(cid:180 (cid:30)seealsoid.at1006(cid:177)07 cid:179)This articlechallengesthe(cid:77)udicialdisregardofthecontroversylimitation....Arbitration provisionsthatexceedthescopeoftheFAAarequitecommon,anditisoftentheparty withsuperiorbargainingpower,suchasanemployer,whoinsistsonsuchaprovision.(cid:180 .

74.Seeid.at678. 75.Revitchv.DIRECTV,LLC,977F.3d713,724(9thCir.2020).

Rusts(cid:182)tortclaims,totheextenttheyarisefromacontractualrelationship betweentheparties,relateonlytothe1993cryptpurchasecontracts.In thosecontracts,thepartiesexpressednointenttosubmitdisputesto arbitration.TheBenchContractdoesclearlyexpresssuchanintent. However,thenatureofRusts(cid:182)claimsdonotdependontheexistenceof theBenchContract,anddonotarisefromthatcontractualrelationship. Onlyifwedeterminedthepartiesintendedthearbitrationclauseinthe BenchContracttoretroactivelymodifythe1993contractscouldwe compelarbitration.TheBenchContractdoesnotstatesuchanintent. Therefore,weholdtheBenchContractarbitrationclausedidnot retroactivelymodifytheearlieragreements,anddoesnotapplytodisputes

Id.at721.

76. 77.Rustv.CarriageServs.ofO(cid:46),Inc.,173P.3d805,807(Okla.Civ.App.2007). 78. 79. 80. 81.

Id. Id. Id.(emphasisinoriginal). Id.808(cid:177)09.

arisingfromtherelationshipofthepartiescommencedbytheearlier agreement.82

82.Rust,173P.3dat808(cid:177)09. 83. Id.at807. 84.9U.S.C.(cid:134)2.

85.Smithv.Steinkamp,318F.3d775,776(cid:177)78(7thCir.2003)(statingthatthecase involvedaninitialtransactionpursuanttoanagreement(cid:179)toarbitrate(cid:181)alldisputes(cid:182) betweenthe(cid:62)p(cid:64)arties(cid:180)followedbyalatertransactionwhichdidnotinvolveanadditional argument.Inre(cid:77)ectingthelender(cid:182)sargumentthatusuryclaimsdirectedtothesecond transactionwerecoveredbythearbitrationagreement,(cid:45)udgePosnersuggestedthatsuch aninterpretationwouldleadto(cid:179)absurdresults(cid:180)and(cid:179)mightbethoughtunconscionable(cid:180 (cid:30) ConsolidatedReplyBriefofDefendants-Appellantsat1,Smith,318F.3d775(Nos.022649,02-2650),2002WL32171900.

86.9U.S.C.(cid:134)2.

(1)thepartiescanaffordtopayad(cid:77)udicatorcostsontheirown,without anysubsidy(cid:30) (2)thepartieshadapre-disputecontractandthusanopportunityto includeagoodpre-disputearbitrationclauseinthatcontract(cid:30) (3)thepartiesandtheirlawyersweresophisticatedenoughtoincludea goodpre-disputearbitrationclauseintheircontract(cid:30)and (4)anad(cid:77)udicator(cid:182)sdecisionin(cid:62)manyofthese(cid:64)case(cid:62)s(cid:64)isunlikelyto produceanysignificant(cid:179)publicgood,(cid:180)(ineithertheeconomicornoneconomicsenseofthatterm).89

87. 88.Stephen(cid:45).Ware,IsAdjudicationaPublicGood?“OvercrowdedCourts”and thePrivateSectorAlternativeofArbitration,14CARDO(cid:61)O(cid:45).CONFLICTRESOL.899,905(cid:177) 06(2013)(internalquotationsomitted).

89.

Id.at909.

IV.FEDERALISM:WH(cid:60)NOTLEAVEARBITRATIONTOSTATELAW(cid:34)

90.Seeid.at917. 91.Horton,supranote2,at682. 92.UNIFORMARBITRATIONACT(UAA)(cid:134)6(NAT(cid:182)LCONF.OFCOMM(cid:182)RSONUNIF.

STATEL.2000).

a

of

93.Seeid. cid:179)Anagreementcontainedinarecordtosubmittoarbitrationanyexisting isvalid, orsubsequentcontroversyarisingbetweenthepartiestotheagreement enforceable,andirrevocableexceptuponagroundthatexistsatlaworinequityforthe COMM(cid:182)N, revocation https:(cid:18)(cid:18)www.uniformlaws.org(cid:18)committees(cid:18)community-home(cid:18)librarydocuments(cid:34) communitykey(cid:32)a0ad71d6-085f-4648-857a-e9e893ae2736(cid:9)LibraryFolder(cid:46)ey(cid:32)(cid:9) DefaultView(cid:32)(cid:9)5a583082-7c67-452b-9777-e4bdf7e1c729(cid:32)ey(cid:45)saW(cid:45)y(cid:60)(cid:59)(cid:45)5(cid:61)W 50cnkiOiIyNTA(cid:93)N(cid:77)VkMC05M(cid:42)MyLT(cid:52)5(cid:61)D(cid:60)tOTBmMi0(cid:93)M(cid:77)Fl(cid:61)mI(cid:93)(cid:60)2U5N2Mif(cid:52) (cid:8)3D(cid:8)3D(lastvisited(cid:45)an.13,2025).

contract.(cid:180 (cid:30)

Arbitration

UNIF.

Act,

L.

94.UAA(cid:134)1 cid:179)Awrittenagreementtosubmitanyexistingcontroversytoarbitration oraprovisioninawrittencontracttosubmittoarbitrationanycontroversythereafter arisingbetweenthepartiesisvalid,enforceableandirrevocable,saveuponsuchgrounds asexistatlaworinequityfortherevocationofanycontract.(cid:180 .

95.SeeALA.CODE(cid:134)8-1-41(3)(1975) cid:179)Thefollowingobligationscannotbe specificallyenforced:...Anagreementtosubmitacontroversytoarbitration(cid:62)(cid:64)....(cid:180 .

96.See,e.g.,AR(cid:46).CODEANN.16-108-233(b)(1)(West2016). 97.RESTATEMENT(SECOND)OFCONTS.(cid:134)304(AM.L.INST.1981). 98.SeeWARE(cid:9)LEVINSON,supranote3,(cid:134)27(a).

V.CONCLUSION

99.Meyv.DIRECTV,LLC,971F.3d284,287(4thCir.2020).

100.EndingForcedArbitrationofSexualAssaultandSexualHarassmentActof

2021,Pub.L.No.117-90,136Stat.136(cid:177)37(codifiedat9U.S.C.(cid:134)(cid:134)401(2),402(a .

101.Cf.9U.S.C.(cid:134)2(currentlanguage).