Arbitration Clauses Are Voided.
In a series of recent cases, California and federal courts have weakened the presumption in favor of arbitration. As we noted in an accompanying article, arbitration has, for some years, been favored by courts and agreements to arbitrate strictly enforced. Many companies, following what we consider to be bad legal advice, have insisted on arbitration clauses in their various contracts on the mistaken idea that arbitration is quicker and cheaper than litigation. Companies have also often favored arbitration for the unstated reason that they believe arbitrators will favor companies they believe may send them more business and people with less influence will have less success before them, thus providing corporations a leg up in any dispute.
California and federal courts, recognizing this unstated and less than honorable truth, have, over the last several years, chipped away at the presumption of the enforceability of arbitration agreements, particularly with regard to consumers, employees and companies with little bargaining power in contract.
So, for example, an arbitration clause in a contract for an “extreme vacation†that involved mountain climbing, was found to be unenforceable because it was presented on a “take it or leave it basis†to the traveler and limited the damages to a refund of the money paid for the trip. As a result, his survivors were allowed to proceed in court with their claims. (Lhotka v. Geographic Expeditions, Inc.)
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