Fourth Circuit Issues Opinion Creating Good Policy For Arbitration Law
By Outsourcing Justice, November 24, 2017
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In Goodwin v. Branch Banking & Trust Co, No. 17-1412 (4th Cir. Oct. 31, 2017) (click here for a copy of the decision), the Fourth Circuit issued a brief opinion discussing an inappropriate tactic sometimes used in litigating the enforceability of an arbitration clause.
Suppose a hypothetical arbitration clause with a consumer or employee contains 2 unconscionable, harsh, one-sided terms (e.g., all arbitration must take place in a distant state on the opposite side of the country; and the consumer or employee bears all costs of the arbitration). To avoid the invalidation of the entire arbitration clause, some corporate parties will stipulate to waive the harsh terms when a consumer or employee challenges the validity of the agreement in court. However, the Fourth Circuit appropriately recognized that courts should not accept such waivers or stipulations: “a party’s offer to waive certain limitations in arbitration provisions should be rejected because one party cannot unilaterally alter the terms of a contract after it is formed and courts are not authorized to remake a contract.”
