Illusoriness Gains In Popularity As An Arbitration Buster
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You hear more about Lena Dunham than you expect, given the audience for “Girls”, right? (Read this article for more.) The same is true, or should be true, for the contract defense of illusoriness. After decades of disuse, it is popping up more and more often as a defense to the enforcement of arbitration clauses (like in New Mexico and the Fifth Circuit), and therefore qualifies as the “it girl” of arbitration law. Just last week, the Sixth Circuit issued a new decision, affirming the district court’s denial of a motion to compel arbitration based on its conclusion that the arbitration agreement was illusory.
In Day v. Fortune Hi-Tech Marketing, Inc., 2013 WL 4859781 (6th Cir. Sept. 12, 2013), a number of independent sales representatives sued Fortune, alleging it was running an illegal pyramid scheme. The parties’ agreement had an arbitration clause. It also had a separate clause saying that Fortune could modify the agreement at any time, effective upon notice. Fortune moved to compel arbitration, and the district court denied the motion. The district court concluded the arbitration clause was unenforceable because Fortune had the ability to modify the contract at any time, making its promises illusory and meaning the agreement lacked consideration under Kentucky law. On appeal, the Sixth Circuit affirmed that ruling.
Read original articleTags: arbitration agreement, Arbitration Clause, arbitration clauses, Lena Dunham, Sixth Circuit
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