Problematic Sports Industry Contract Provision No. 1 - The (Un)enforceability of Arbitration Provisions


The first problematic contract provision often found in sports industry contracts are arbitration provisions.

Many sports industry owners beleive that arbitration is a helpful way to resolve contractual disputes without incurring the costs often associated with civil litigation. In arbitration, the parties to a dispute agree that a governing body (such as the American Arbitration Association) will appoint an arbitrator(s) to "judge" the parties' case on his/her own and render a decision as to who wins/loses and what award (normally money) is appropriate. This type of contractual "dispute resolution" mechanism is traditionally though to be efficient and expedient. Many arbitrations are conducted in as few as three months, as opposed to civil litigation which can take years to resolve due to jammed Court dockets. Arbitration is likewise thought to avoid the uncertainty of a jury trial rendered by average and non-sports industry citizens that may lack educational background or sport-specific expertise.

But arbitration provisions have many traps for the unwary.

The enforceability of arbitration provisions is anything but certain in many states. While many contracts contain arbitration provisions, an alarming number of such provisions are drafted with outdated contractual language that renders them unenforceable in many states/jurisdictions. For example, Missouri law renders all arbitration provisions unenforceable if the provisions lacks certain "magic contractual language" in a certain sized font, placed in a very specific part of the contract (directly over the signature page). If the arbitration provision is not 100% consistent with the Missouri statute, it is rendered null, void, and virtually meaningless. Illinois has no such requirement, but does have arbitration laws specific to certain industries (healthcare for example) that could apply to sports industry clients performing services in these respective areas.

I have litigated the enforceability of this Missouri arbitration law and have found the Missouri Courts uniformly strict in their enforcement of the Missouri requirements. Many states have similar "magic language" that may or may not be consistent across jurisdiction or field. Sports industry clients that provide goods, services, or which have activities or events that cross state lines may find themselves hauled into Court in a foreign and inconvenient state jurisdiction without the ability to contractually arbitrate their dispute.

Sports industry businesses that wish to resolve their contractual disputes by arbitration should consult an attorney to make sure their contracts contain arbitration provisions that are valid and enforceable in the states in which they conduct business.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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