Two New U.S. Supreme Court Decisions Will Likely Impact Companies Drafting Of Arbitration Provisions

Two recent United States Supreme Court decisions present significant new developments on the scope and interpretation of the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq., and will likely influence the manner in which companies draft future arbitration provisions.

*In Stolt-Nielsen S.A. v. AnimalFeeds Intern. Corp., 130 S.Ct. 1758 (2010), the Court held that the FAA prohibited arbitrators from imposing class arbitration in the absence of an agreement between the parties authorizing as such.

*In the more recent decision, Rent-A-Center, West, Inc. v. Jackson, 130 S.Ct. 2772 (2010), the Supreme Court held that, where an arbitration agreement expressly delegates the decision of the arbitration agreement’s enforceability to an arbitrator, a court may not intercede unless the claim of unconscionability is directed to that particular provision of the arbitration agreement.

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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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