Arbitration Clauses are Commonplace and Usually Enforceable
Litigations can get tied up for years in the courts and are often expensive. Arbitrations, in contrast, typically require much less time, and because the rules of evidence are often relaxed, end up costing less than trials. In addition, corporate defendants would often prefer to have a case decided by professional arbitrators than a lay jury. Sometimes personal-injury plaintiffs and their attorneys feel that way, too. Typically, there are two paths to arbitration. Either the parties elect to take a case pending in the courts to arbitration, or the parties are required to proceed to arbitration in the first place because of a preexisting arbitration clause in a contract.
Such arbitration clauses are becoming increasingly commonplace, and the courts are upholding them at times even when there are local or state laws invalidating their use. For example, in a case called Friedman v. The Hebrew Home for the Aged at Riverdale, a New York appellate court enforced an arbitration clause, even though the Public Health Law states that a patient may not waive the right to bring an action in court. The Plaintiff in Friedman brought an action alleging negligence after his mother was injured at defendant’s facility. But defendant moved to stay the action pending arbitration, pursuant to the arbitration clause in the admission agreement that plaintiff executed in placing his mother in its care. Although the lower court found that the arbitration clause was unenforceable due to the Public Health Law, the appellate court disagreed and reversed. It determined that because defendant was engaged in interstate commerce, the Federal Arbitration Act preempts the Public Health Law.
Always read the fine print in any contract that you sign. If you are going to relinquish your right to bring an action in court, you should know it up front.