Citation: 22 Franchise L.J. 128 2002-2003

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Arbitration: A Review of the LiteratureJONATHAN J. TORONTO

his article identifies some ofthe literature on arbitrationthat may be useful to the

franchise practitioner. Specifical-ly, this review identifies and sum-marizes articles addressing thefollowing subjects:*Arbitration in franchising* Interplay of the Federal Arbi-

tration Act (FAA) and the Uni-form Arbitration Act (UAA)

* Interstate commerce under the Jonathan J. Toronto

FAA and federal preemption ofstate law

* Drafting arbitration agreements* Enforcement of forum selection and choice-of-law clauses* Arbitration procedure* Who decides arbitrability* Actions to compel arbitration, stay proceedings, or con-

firm awards* Arbitration and class actions* Mutuality of arbitration agreements* Contractual expansion of judicial review• Contesting arbitration clauses• Challenging arbitration awards* Collateral estoppel and the effect of an arbitration award• Privatization of law through arbitration* Waiver of contractual arbitration rights* Ethics and arbitration

Arbitration in FranchisingChristopher R. Drahozal, "Unfair" Arbitration Clauses,2001 U. ILL. L. REV. 695 (Contains Professor Drahozal'sanalysis of arbitration clauses of leading franchisors, filedwith the State of Minnesota. Discusses whether so-called"unfair" provisions in arbitration clauses truly are unfair.Concludes that under appropriate market conditions, fullyinformed individuals may actually find it beneficial toexecute predispute arbitration clauses containing "unfair"provisions.).

Keith N. Hylton and Christopher R. Drahozal, The Eco-nomics of Litigation and Arbitration: An Application toFranchise Contracts, BOSTON U. SCHOOL OF L. WORKING

PAPER SERIES, L. AND ECON., WORKING PAPER No. 3, 2001,available at <http://www.bu.edu/law/faculty/papers/Hyl-tonK040601abstract.html> (Provides an economic analysisof motivating factors for franchising parties to include arbi-tration clauses in their agreements. Presents empirical datasupporting premise that contracting parties choose forum for

Jonathan J. Toronto practices with the law.firm of Groy Plant Mootv

in its Minneapolis office.

dispute resolution that maximizes difference between deter-rence benefits-defined as avoided harms net of avoidancecosts-and dispute resolution costs. Concludes that: (1) viewthat arbitration generally involves coercive forfeiture of legalrights is weak in franchise context, where both parties arebusinesses represented by counsel and both have incentive tochoose dispute resolution forum that offers the greatest deter-rence benefit per dollar invested; and (2) certain laws thatmake arbitration less attractive, such as state franchisee pro-tection statutes, may have substantial wealth effects.).

Edward Wood Dunham, Flatter, Will Get You Nowhere,20 FRANCHISE L.J. 103 (Winter 2001) (Editorial commentsidentify reasons for the enforcement of arbitration clauses infranchise agreements, including the following: (1) fran-chisees are businesspeople-not vulnerable, helpless con-sumers-pursuing entrepreneurial opportunity; (2)franchisees receive detailed presale disclosure regarding afranchisor's dispute resolution history and mandated proce-dures; (3) franchisees' failure to read plain contractual provi-sions, where applicable, should not relieve franchisees; and(4) franchisees can choose from competing franchise sys-tems-many of which do not mandate arbitration. Arguesthat arbitration is beneficial to franchisees based on: (a) lackof meaningful discovery, dispositive motions, rules of evi-dence, and appellate review; (b) certain arbitrators' disdainof big business; and (c) arbitrators' focus on equity (includ-ing compromise awards), rather than the law.).

Jean R. Sternlight, Protecting Franchisees from AbusiveArbitration Clauses, 20 FRANCHISE L.J. 45 (Fall 2000) (Criti-cizes use of arbitration clauses by franchisors as means ofsecuring unfair advantages with respect to franchisees. Dis-agrees with Professor Drahozal's conclusion that arbitrationclauses, even so-called unfair clauses, may in fact secureadvantages to franchisees as well as franchisors, as fran-chisors pass certain gains to franchisees. Suggests that fran-chisees lack the "perfect information" requisite to make themarket function efficiently, and thus that franchisors will notnecessarily share their gains with franchisees. Invites legisla-tors to take action by enacting protective legislation.). (Seealso Jean R. Sternlight, Fighting Arbitration Clauses inFranchisor Contracts, TRIAL, Oct. 2000, at 65.)

Ted P. Pearce, Ronald K. Gardner, and Robert L. Zisk, ACritical Look at Alternative Dispute Resolution, 1 INT'L

FRANCHISE ASSOC. LEGAL SYMP., at Tab 7 (2000) (Providesoverview of mediation and arbitration through the eyes offranchisee lawyers, franchisor lawyers, and in-house counsel.Discusses: (1) how arbitration differs from litigation; (2)advantages and disadvantages of arbitration; (3) drafting sug-gestions for arbitration clauses; and (4) how franchisors andfranchisees view arbitration.).

Barry M. Heller and Allan P. Hillman, Essentials of Dis-pute Resolution for Business Lawyers, 1 ABA FORUM ON

128 Franchise Law Journal U Fall 2002

FRANCHISING, at Tab W5 (1998) (Provides general overviewof various dispute resolution issues to be considered by fran-chise lawyers. Contains suggested substance and text formediation or arbitration provisions to be included in fran-chise agreements.).

Edward Wood Dunham, Mitchell S. Shapiro, and JasonM. Murray, Advanced Litigation Topics: The Franchisor andFranchisee Perspectives, 2 ABA FORUM ON FRANCHISING, atTab W13 (1998) (Presents overview of legal issues arising insystemwide franchise disputes. Among other things, discuss-es franchise agreement provisions, including arbitrationclauses, commonly used to manage risks related to system-wide disputes. Concludes that, with respect to arbitrationclauses, notwithstanding any aversion that a franchisor mayhave to arbitrating, the one key advantage is that enforcementof an arbitration agreement is virtually automatic in federalcourt, absent irregular facts or blunders by counsel. Also dis-cusses the increasing trend toward mandatory mediation as aprecursor to arbitration, and briefly considers the concept ofres j udicata within the arbitration context.).

Interplay of the FAA and the UAA,Interstate Commerce Under the FAA,and Federal Preemption of State LawStephen L. Hayford and Alan R. Palmiter, Arbitration Feder-alism: A State Role in Commercial Arbitration, 54 FLA. L.REV. 175 (2002) (Provides detailed discussion of the conceptof arbitration federalism, and particularly considers areas inwhich the FAA preempts state legislation regarding arbitra-tion and those areas in which it does not. Asserts that statesmust serve critical roleof filling gaps left bythe FAA, reviews and cri-tiques the Revised Uni- Enforcement4form Arbitration Act(RUAA), and outlines con- agreement is visiderations to be heeded by in federal courtstate legislators in draftingstate legislation consistent facts or blun(with the U.S. SupremeCourt's philosophy of arbi-tration federalism.).

Sarah Rudolph Cole, Unifbrm Arbitration: "One Size FitsAll" Does Not Fit, 16 OHIO ST. J. ON DisP. RESOL. 759 (2001)(Suggests that uniform approach to regulating predisputearbitration agreements may be inappropriate. Specificallyadvocates distinct treatment of traditional arbitration, as prac-ticed by repeat players including merchants and labor unions,and modem arbitration, as imposed by repeat players on one-time participants, such as consumers and employees. Propos-es revision of the FAA, or adoption of an additional federalarbitration law, to accommodate the differences betweenthese groups.).

Charles Davant IV, Note, Tripping on the Threshold: Fed-eral Courts' Failure to Observe Controlling State Law Underthe Federal Arbitration Act, 51 DUKE L.J. 521 (2001)(Argues that the case of Perry v. Thomas, 482 U.S. 483

of

rt

Je

(1987), has been largely overlooked. States that under Perry,the U.S. Supreme Court found that state law, rather than fed-eral law, controls the question of whether parties have agreedto arbitrate. Criticizes courts for continuously creating feder-al contract law rather than recognizing federalist intent ofPerry. Concludes that "sedulous application of state contractprinciples, as mandated by recent Supreme Court decisions,remains the best way to protect parties against the unintend-ed waiver of their right to judicial redress.").

Stephen L. Hayford, Federal Preemption and Vacatur:The Bookend Issues Under the Revised Uniform ArbitrationAct, 2001 J. DisP. RESOL. 67 (Prepared by one of the two aca-demic advisors to the drafting committee responsible forrevising the UAA, article describes delicate, complex processundertaken by RUAA Drafting Committee in preparing use-ful, viable state arbitration legislation. Focuses particularattention on issues of federal preemption and vacatur.).

Timothy J. Heinsz, The Revised Uniform Arbitration Act:An Overview, Disp. RESOL. J., May-July 2001, at 28 (Pro-vides an extensive discussion of changes embodied in therecently drafted RUAA. Suggests that additional legislativereform is also needed at the federal level, in light of the doc-trine of federal preemption, to account for changes that haveoccurred since the FANs enactment. Concludes that adop-tion of the RUAA will yield an efficient, modem, and fairarbitration system, assuming that long-awaited reform of theFAA follows.).

Nancy R. Kornegay, Comment, Prima Paint to FirstOptions: The Supreme Court's Procrustean Approach to theFederal Arbitration Act and Fraud, 38 Hous. L. REv. 335

(2001) (Examines U.S.Supreme Court's decisionin Prima Paint Corp. v.

an arbitration Flood & Conklin Mfg.Co., 388 U.S. 395 (1967),

:ually automatic and related cases. Focuses

absent irregular on application of FAA inface of claims of fraudu-

rs by counsel. lent inducement. Criti-

cizes: (1) Court's adoptionof separability doctrinewith respect to charges of

fraudulent inducement of contracts containing arbitrationclauses; (2) inconsistency of Prima Paint decision withCourt's stated emphasis on respecting legislative intent; and(3) Court's usurpation of state arbitration and contract law.).

Todd Baker, Comment, Arbitration in the 21"' Century:Where We've Been, Where We're Going, 53 OKLA. L. REV.653 (2000) (Provides overview of the history of arbitration inthe United States and considers the legislative history of theFAA. Analyzes judicial decisions regarding the scope andapplicability of the FAA and considers various revisions tothe FAA.).

Edmond Seferi, Note, FAA and Arbitration Clauses HowFar Can It Reach? The Effect of Allied-Bruce Terminix, Inc.v. Dobson, 19 CAMPBELL L. REV. 607 (1997) (AnalyzesCourt's decision in Allied-Bruce Terminix, Inc. v. Dobson,

Fall 2002 U Franchise Law Journal 129

513 U.S. 265, 115 S. Ct. 834 (1995), in which Court heldthat the FAA governs all arbitration agreements affecting orinvolving commerce. Concludes that the Court's decision"guarantees that if a contract involves or affects interstatecommerce, the pro-arbitration standards contained in theFAA will govern the enforcement of an arbitration provisionin the contract" and that the "[p]arties submitting to arbitra-tion will no longer face the legislative barriers of differingstate standards or the judicial hostility against the enforce-ment of arbitration clauses.").

Megan P. Davis, Comment, From Procedural Law to Pre-emption: The Supreme Court's Transformation of the FederalArbitration Act, I HARV. NEGOTIATION L. REV. 169 (1996)(Criticizes Allied-Bruce and the Court's affirmation of sup-posedly flawed cases leading up to it. Discusses historic evo-lution of FAAs preemptive power over state law.). (See alsoLauri Washington Sawyer, Allied-Bruce Terminix Compa-nies v. Dobson: The Implementation of the Purposes of theFederal Arbitration Act or an Unjustified Intrusion Into StateSovereignty?, 47 MERCER L. REV. 645 (1996).)

Donald E. Johnson, Recent Decision, Has Allied-BruceTerminix Cos. v. Dobson Exterminated Alabama's Anti-Arbi-tration Rule?, 47 ALA. L. REV. 577 (1996) (Examines rele-vance of Allied-Bruce and its potential impact on statearbitration law. Considers how expansion of FAA mayimpact consumer protectionism. Concludes that Allied-Bruce"effectively signals the end of presumptive unenforceabilityof predispute arbitration agreements in Alabama.").

Joseph T. Mclaughlin, Arbitrability: Current Trends in theUnited States, 59 ALB. L. REV. 905 (1996) (Traces U.S.Supreme Court decisions over past twenty years that foundthat "arbitration agreements covering claims arising undercongressional statutes are enforceable in accordance with theterms of the FAA." Considers arbitrability of punitive dam-age claims, and preemption of FAA over state law in thisregard. Summarizes recent trends regarding arbitrability ofemployment, consumer, family, tort, antitrust, bankruptcy,and intellectual property law claims.).

Scott R. Swier, Note, The Tenuous Tale of the TerribleTermites: The Federal Arbitration Act and the Court's Deci-sion to Interpret Section Two in the Broadest Possible Man-ner: Allied-Bruce Terminix Cos., Inc. v. Dobson, 41 S.D. L.REV. 131 (1995-1996) (Reviews the various tests used bystate and federal courts to determine whether certain activi-ties involve interstate commerce to a degree sufficient to trig-ger the FAA. Criticizes Allied-Bruce for its unduly broadconstruction of the interstate commerce requirement.).

Drafting Arbitration AgreementsNeal Blacker, Drafting the Arbitration/ADR Clause, 13 No. IPRAC. LITIGATOR 51 (2002) (Examines legal issues related tothe incorporation of institutional arbitration rules into agree-ments. Outlines strategic, and practical, considerations inframing the actual arbitration agreement. Provides extensivechecklist of items to be included in the arbitration agreement.).

Lucy E Reed, Drafting Arbitration Clauses, 670 P.L.I./LIT.553 (Mar. 2002) (Outlines key issues to be addressed in nego-

tiating and drafting arbitration clauses in international con-tracts. Considers "scope and content of the clause, the seat ofarbitration, choosing the arbitrators and choosing the arbitra-tion rules." Also provides model clauses.).

Erika Van Ausdall, Confirmation of Arbitral Awards:TheConfusion Surrounding Section 9 of the Federal ArbitrationAct, 49 DRAKE L. REV. 41 (2000) (Discusses split among theU.S. Courts of Appeals regarding the interpretation of sec-tion 9 of the FAA. In particular, considers the contractuallanguage required in order to authorize judicial enforcementof an arbitration award. For example, while some courts holdthat "section 9 requires a clear statement by the parties intheir arbitration agreement that judgment be entered uponissuance of the arbitration award," others hold that "whilesome indicia of the parties' intent to be bound by arbitrationis necessary, explicit language providing for judicial confir-mation is not mandated by the FAA. Concludes that "a courtshould have the authority to confirm an arbitration award ifthere is sufficient evidence that the parties intended the arbi-tration award to be final and binding.").

Jean R. Sternlight, Drafting a "Bulletproof" ConsumerArbitration Agreement: Is It Possible?, 1102 P.L.I./CoRP. 763(Feb. 1999) (Considers whether it is possible to draft failsafearbitration agreement in consumer context. Categorizes typesof clauses and ranks clauses by likelihood of enforceability.Concludes that the most enforceable clause is one thatsecures benefits of speed, low cost, and expertise for bothsides, rather than to the drafter alone.).

Enforcement of Forum Selectionand Choice-of-Law ClausesNote, An Unnecessary Choice of Law: Volt, Mastrobuono,and Federal Arbitration Act Preemption, 115 HARV. L. REV.

2250 (2002) (Addresses FAA preemption with respect togeneric choice-of-law clauses. Concludes that U.S. SupremeCourt has crafted line between protecting federal interest inarbitration and preserving local autonomy in an area tradi-tionally reserved to states. Discusses confusion of lowercourts in walking this line and offers suggestions withrespect to the proper resolution of this confusion.).

Nathan E. Ross, Note, Federalism versus the GreaterGood ... Should Powerful Franchisors be Allowed to Con-tract for the Home Court Advantage Through Forum Selec-tion Clauses?, 2000 J. DIsP. RESOL. 199 (Discusses whetherFAA preempts state laws that otherwise invalidate forumselection clauses contained in franchise agreements. In par-ticular, considers the case of KKW Enters., Inc. v. GloriaJean's Gourmet Coffees Franchising Corp., 184 F.3d 42 (1 stCir. 1999), and concludes: "The FAA should preempt con-trary state laws regarding the enforceability of forum selec-tion clauses contained in arbitration provisions.").

Edward Wood Dunham, William A. Darrin, Jr., and Ben-jamin A. Levin, Franchisor Attempts to Control the DisputeResolution Forum: Why the Federal Arbitration Act Trumpsthe New Jersey Supreme Court's Decision in Kubis, 29 RUT-GERS L.J. 237 (1998) (Reviews: (1) state and federal legalstandards applied to judicial forum selection clauses; (2) the

130 Franchise Law Journal U FaIl 2002

New Jersey Supreme Court's decision in Kubis & PerszykAssoc., Inc. v. Sun Microsystems, Inc., 146 N.J. 176, 680A.2d 618 (1996); (3) state statutes and regulations aimed atinvalidating franchise agreement provisions that require out-forum litigation or arbitration; and (4) the impact of FAAwith respect to a franchisor's enforcement of arbitral forumselection clauses. Concludes that "franchisors with arbitra-tion clauses have the substantial comfort of knowing thattheir choice of forum should in almost every instance beenforced."). (See also Edward Wood Dunham, William A.Darrin, Jr., and Benjamin A. Levin, Choice of Forum in Liti-gation and Arbitration, 1 INT'L FRANCHISE Assoc. LEGAL

SYMP., at Tab 8 (1999).)James Zimmerman, Note, Restrictions on Forum-Selec-

tion Clauses in Franchise Agreements and the Federal Arbi-tration Act: Is State Law Preempted?, 51 VAND. L. REV. 759(1998) (Considers whether FAA should preempt state fran-chise laws limiting the use of forum selection clauses in fran-chise agreements. Argues that "state laws which voidforum-selection agreements do not hold arbitration clauses toa higher standard than other contracts and do not underminethe policy of the FAA," but rather "address the inherentunfairness in requiring individuals to seek redress in remoteforums.").

Arbitration ProcedureTheodore 0. Rogers, Jr., The Procedural DifferencesBetween Litigating in Court and Arbitration: Who Benefits?,16 OHIo ST. J. ON DisP. RESOL. 633 (2001) (Analyzes practi-cal differences between litigation or arbitration of employ-ment law claims. Covers issues related to pleading, pretrial,trial, and post-trial dispute stages. Concludes that notwith-standing some of the procedural advantages afforded toemployees by arbitration, employers continue to use arbitra-tion as a means of dispute resolution in an effort to establishgreater certainty as to the length and cost of disputes.).

Jean R. Sternlight, Mandatory Binding Arbitration andthe Demise of the Seventh Amendment Right to a Jury Trial,16 OHIO ST. J. ON DIsP. RESOL. 669 (2001) (Argues that thereis striking contrast between party's right to jury trial underSeventh Amendment to the U.S. Constitution and that party'sobligation to submit claims to arbitration under FAA. Criti-cizes court decisions that fail to reconcile the sacrosanct viewof the right to a jury trial on the one hand with the strongpreference for arbitration on the other. States that "[a]lthoughthe right [to a jury trial] is waivable, such waivers must begenuine; specifically, they must be knowing, voluntary, andintelligent. Companies cannot legitimately evade this strictconstitutional requirement by using arbitration clauses.").

Edward Wood Dunham, Enforcing Contract TermsDesigned to Manage Franchisor Risk, 19 FRANCHISE L.J. 91(Winter 2000) (Provides practical insight with respect to thecurrent legal landscape of risk management provisions con-tained in franchise agreements. Discusses use of compulsorymediation clauses, judicial forum selection clauses, arbitra-tion clauses, jury trial waiver provisions, and damages caps.Discusses recent case law interpreting these sorts of provi-

sions. Inquires whether construing mediation clause as formof arbitration subject to the FAA is appropriate legal analysis.Concludes that, with respect to forum selection clauses andarbitration clauses, careful drafting and measured enforce-ment of contract terms should enable a franchisor to structureits franchise agreement to provide for litigation of certainclaims while requiring a franchisee to arbitrate all claims.Indicates that where an arbitration clause is used, even wherelitigation has been used for past claims with respect to theparties, once franchisee asserts a new claim against the fran-chisor that the franchisor has not previously litigated butwants to arbitrate, the franchisor should be able to bringthose claims to arbitration.).

Julian J. Moore, Note, Arbitral Review (or Lack Thereof):Examining the Procedural Fairness of Arbitrating StatutoryClaims, 100 COLUM. L. REV. 1572 (2000) (Considers, inas-much as individual statutory claims may be subject to resolu-tion in mandatory arbitration, present status of judicialreview of individual statutory claims. Concludes, amongother things, that judicial review, and procedural safeguards,must be expanded if arbitrators are to be allowed to resolvesuch claims in both an efficient and fair manner.).

Who Decides ArbitrabilityAlan Scott Rau, The Arbitrability Question Itself, 10 AM.REV. INT'L ARB. 287 (1999) (Reviews First Options ofChicago v. Kaplan, 514 U.S. 938 (1995), which held that thearbitrator determines "arbitrability" where the agreement"clearly and unmistakably so provides. Determining arbitra-bility is deciding whether a particular dispute falls within acommitment to arbitrate. Considers, at length, the applicationof Kaplan by the courts and analyzes the ultimate impact ofthe case.).

Michael A. Hanzman, Arbitration Agreements: AnalyzingThreshold Choice of Law and Arbitrability Questions: AnOften Overlooked Task, FLA. B.J., Dec. 1996, at 14 (Intro-duces key issues to be addressed in drafting or disputingmandatory arbitration provisions. In particular, considers: (1)whether state or federal law will govern substantive and pro-cedural issues; (2) whether dispute fits within scope of clauseand is thus arbitrable; (3) whether contractual choice-of-lawprovision may impair otherwise valid arbitration agreementor limit arbitrator's jurisdiction; or (4) whether arbitrators orcourts will decide arbitrability issues. Emphasizes point thatbecause courts will construe arbitration clauses to effectuatethe parties' intentions, due care should be given in the draft-ing process to be sure that the clauses meet the parties'goals.).

Actions to Compel Arbitration, StayProceedings, or Confirm AwardsStephen H. McClain, Under a New Supreme Court Deci-sion, Litigants Seeking Arbitration of a Dispute Can Controlthe Timing of an Appeal, FED. LAW., Aug. 2001, at 22(Explains the impact of the U.S. Supreme Court's recentdecision in Green Tree Financial Corp. v. Randolph, 531U.S. 79 (2000), which ignored the independent and embed-

FaIl 2002 U Franchise Law journal 131

ded proceedings distinction applied by the majority of U.S.Courts of Appeals and held that if "the District Court hasordered the parties to proceed to arbitration, and dismissedall the claims before it, that decision is 'final' within themeaning of § 16(a)(3), and therefore appealable." Suggeststhat as a consequence of the case, "practitioners should keepin mind that an early tactical decision on whether to seek astay or dismissal will either enable or hinder an adversary'sability to appeal immediately," and may "ultimately deter-mine [the dispute's] outcome.").

Darynne L. O'Neal, Note, Clarifying the Intent of Con-gress: Are the Federal Arbitration Act's Venue ProvisionsPermissive or Mandatory?, 2001 J. Disp. RESOL. 157 (Con-siders impact of Cortez Byrd Chips, Inc. v. Bill Harbert Con-struction Co., 529 U.S. 193 (2000), in questioning whetherFAA's venue provisions are optional or obligatory. In Har-bert, the Court rejected view that a motion to confirm,vacate, or modify an arbitration award must be brought insame district court in which award was granted. Instead, theCourt agreed with majority of U.S. Courts of Appeals, whichhold venue provisions under the FAA to be permissive. Thearticle contains analysis of pro and con arguments withrespect to construing the FANs venue provisions as permis-sive.). (See also Karyn A. Doi, Recent Development, CortezByrd Chips, Inc. v. Bill Harbert Construct. Co., 16 OHIO ST.J. ON Disp. RESOL. 409 (2001) (Analyzes Cortez decision andconcludes that it clearly establishes "that as long as partiesare able to show that the place they seek to confirm, vacate,or modify [an] arbitration award is proper under the generalvenue statute or proper as the place where the award wasissued, courts will have jurisdiction over the motion.").)

Jean R. Sternlight, Forum Shopping for Arbitration Deci-sions: Federal Courts' Use of Antisuit Injunctions AgainstState Courts, 147 U. PA. L. REV. 91 (1998) (Considers whenfederal courts should be allowed to enjoin state court deter-minations, for the purpose of allowing arbitration to proceed.Analyzes: (1) cases in which federal courts have, in the arbi-tration context, issued antisuit injunctions; (2) key policyconsiderations regarding the issuance of such injunctions;and (3) statutes and doctrines governing federal court injunc-tions of state court proceedings, allowing arbitration to goforward. Argues that federal courts that "issue arbitral anti-suit injunctions in defiance of dominant principles of federal-ism and comity ...disparage state courts' capacity forfairness more seriously than can be justified by the federalsupremacy interest.").

FAA Venue Provisions Are Permissive and Do Not Sup-plant the General Venue Provisions of Federal Law, 12WORLD ARH. & MEDIATION REP. 125 (2001) (Brieflyexplains Textile Unlimited, Inc. v. A. BMH and Co., 240 E3d781 (9th Cir. 2001), in which the Ninth Circuit upheld thedistrict court's determination that an action to enjoin arbitra-tion need not be brought in the district where arbitration pro-ceedings are being conducted.). (See also Arbitration-Venue-Injunction Barring Arbitration, FED. LITIGATOR, Apr. 2001,at 83 (Summarizes Textile Unlimited as follows: "Althoughan arbitration agreement designates the site for arbitration, an

application for an injunction barring arbitration does nothave to be filed in the district where arbitration will takeplace.").)

Arbitration and Class ActionsJean R. Sternlight, As Mandatory Binding Arbitration Meetsthe Class Action, Will the Class Action Survive?, 42 WM. &MARY L. REV. 1 (2000) (Explains that many corporate defen-dants use arbitration provisions as shield against class actionliability. Concludes that: (1) "federal statutes and contractualdoctrines, particularly unconscionability, will sometimes, butnot always, bar companies from entirely precluding plaintiffsfrom proceeding by way of class action"; (2) "while partiesmay elect to pursue their claims in classwide arbitrationrather than through class action litigation, the Due ProcessClause, federal statutes, and contractual doctrines will con-strain this choice"; (3) "courts should interpret arbitrationclauses that do not expressly deny the availability of classactions to permit classwide arbitrations"; and (4) "to theextent that courts do not step in to prevent companies fromusing mandatory arbitration clauses to eliminate classactions, Congress should enact legislation to protect the useof this important procedural device.").

Edward Wood Dunham, The Arbitration Clause as ClassAction Shield, 16 FRANCHISE L.J. 141 (Spring 1997)(Describes arbitration clauses as powerful tool for avoidingclass action lawsuits. Among other points, Dunham suggeststhat a "franchisor with an arbitration clause should be able torequire each franchisee in the potential class to pursue indi-vidual claims in a separate arbitration. Since many (and per-haps most) of the putative class members may never do that,and because arbitrators typically do not issue runawayawards, strict enforcement of an arbitration clause shouldenable the franchisor to dramatically reduce its aggregateexposure."). (See also Georgene M. Vairo, Classwide Arbi-tration: The Possibility of a Hybrid Procedure, ADR CUR-RENTS, June 1999, at 19 (Concludes that those who seek toavoid class actions should use arbitration provisions toachieve that end.).)

Mutuality of Arbitration Agreements (see alsoContesting Arbitration Clauses)Allyson K. Kennett, Case Notes, Showmethemoney CheckCashers, Inc. v. Williams: Show Me the Mutuality-A NewDemand Based on an Old Doctrine Changes the Rules JbrEnforceability of Arbitration Agreements in Arkansas, 54ARK. L. REV. 621 (2001) (Examines the Arkansas SupremeCourt's recent decision in the case of ShowmethemoneyCheck Cashers, Inc. v. Williams, 342 Ark. 112, 27 S.W.3d 361(2000). Suggests that in holding that arbitration agreementsmust be mutually binding on the respective parties in order tobe enforceable, the state's highest court "has departed some-what from its long-standing pro-arbitration policy."). (See alsoJeffrey R. Priebe, Recent Developments, ShowmethemoneyCheck Cashers, Inc. v. Williams, 53 ARK. L. REV. 983 (2000)(Explains that "[lin the Showmethemoney Check Cashersdecision, the Supreme Court of Arkansas determined that an

132 Franchise Law Journal U Fall 2002

arbitration clause must present mutual obligations on bothparties in order to be enforceable.").)

Adam M. Nahmias, The Enforceability of Contract Claus-es Giving One Party the Unilateral Right to Choose BetweenArbitration and Litigation, CONSTRUCTION LAw., Summer2001, at 36 (Briefly discusses several cases-includingMontana Supreme Court's recent decision in Iwen v. U.S.West District, 977 P.2d 989 (Mont. 1999), in which courtswere unwilling to enforce arbitration agreements on the basisof a lack of mutuality of obligation. Concludes that "[w]hilethere seems to be a trend toward enforcing [unilateral arbitra-tion] provisions, despite claims concerning lack of mutuality,absence of consideration, and unconscionability, the legalauthorities discussed [in this article] demonstrate that there isclearly not a majority rule or consensus among the state andfederal courts regarding this issue.").

Contractual Expansion of judicial ReviewRecent Cases, Arbitration-Standard f Review-Tenth Cir-cuit Rejects Contractual Expansion of Judicial Review ofArbitration Awards-Bowen v. Amoco Pipeline Co., 254E3d 925 (10th Cir 2001), 115 HARv. L. REV. 1267 (2001)(Explains that contrary to decisions in two other U.S. Courtsof Appeals-allowing pri-vate parties to contractaround the proceduralaspects of the FAA-the Where courts firTenth Circuit has con-cluded "that enforcement clauses simply enaof contractual provisions the other party, orproviding for expandedjudicial review would clauses will likelundermine federal poli-cies and interfere with thejudicial process." Con-cludes that "the Tenth Circuit's concerns over permittingprivate parties to expand judicial review of arbitrationawards find little support in the language, legislative history,or underlying policies of the FAA." Suggests that permittingparties such flexibility increases their perception of arbitra-tion as a fair, voluntary, and sensible dispute resolutionalternative.).

Karon A. Sasser, Comment, Freedom to Contract forExpanded Judicial Review in Arbitration Agreements, 31CUMB. L. REV. 337 (2001) (Considers the contractual expan-sion of judicial review of arbitration awards. Provides his-toric background, and judicial interpretation, of the FAA.Finds that due to the contractual nature of arbitration, variouspolicy considerations, and the U.S. Supreme Court's view ofarbitration, parties should be allowed to agree, in arbitrationprovisions, to expand the scope of judicial review.).

Stephen P. Younger, Agreements to Expand Scope of Judi-cial Review of Arbitration Awards, 63 ALBANY L. REV. 241(1999) (In light of the risk of maverick arbitration decisions,considers "whether or not parties should agree to judicialreview and risk losing the time and cost savings that makearbitration so attractive." Discusses the advantages and disad-

bi"b

vantages of agreeing to judicial review of arbitration awards.Considers the enforceability of such agreements.).

Contesting Arbitration ClausesEllen R. Lokker, Allan P. Hillman, and Craig R. Tractenberg,Ninth Circuit Panel Holds Arbitration Clause Uncon-scionable, 21 FRANCHISE L.J. 164 (Winter 2002) (Summa-rizes recent cases, including Ticknor v. Choice Hotels Int'l,Inc., 265 F.3d 931, 938 (9th Cir. 2001), cert. denied, ChoiceHotels Int'l, Inc. v. Ticknor 122 S. Ct. 1075 (2002) (findingarbitration provision in franchise agreement to be uncon-scionable and unenforceable under Montana law).).

Charles Lee Eisen, What Arbitration Agreement? Com-pelling Non-Signatories to Arbitrate, Disp. RESOL. J., May-July 2001, at 40 (Discusses circumstances where party tobusiness transaction may be required to arbitrate, despitenever having signed an arbitration agreement. Specificallyconsiders legal theories-including alter ego, incorporationby reference, assumption, agency, and equitable estoppel-applied by courts in finding nonsignatories bound by an arbi-tration agreement.).

Charles G. Miller and Darryl A. Hart, The FAA on a Colli-sion Course with the Unconscionability Doctrine, 21 FRAN-

CHISE L.J. 4 (Summer 2001)(Sharply criticizes recentdecision of California Court

that arbitration of Appeal, Bolter v. Superi-or Court, 87 Cal. 4th 900,

e a party to cheat 104 Cal. Rptr. 2d 888 (Cal.reak the law, such App. 4th 2001), arguing

that the court avoided theiot be enforced, preemptive constraints of

the FAA in effort to do jus-tice to California fran-chisees. In so doing, the

court ignored the terms of the parties' franchise agreement andmisapplied established California common law with respect tothe doctrine of unconscionability. Claims that the court erro-neously skirted the FAA's strong, preemptive policy in its deci-sion. Provides valuable insight as to ongoing tension betweenstate policy concerns and interpretation of the FAA.).

F. Paul Bland, Jr., To Fight Arbitration Abuse, the Devil Isin the Details, TRIAL, July 2000, at 31 (Outlines severalpotential arguments for resisting mandatory arbitration claus-es. Argues that contractual waiver of constitutional rights, tobe valid, must be effected in voluntary, knowing, and intelli-gent manner. Further, suggests that viability of contract lawarguments is grounded in concept of fairness, such as uncon-scionability, mutuality, unavailability of remedies or classactions, excessive costs, or biased forum. Concludes thatwhere courts find that arbitration clauses simply enable aparty to cheat the other party, or break the law, such clauseswill likely not be enforced.).

Katherine Van Wezel Stone, Rustic Justice: Communityand Coercion Under the Federal Arbitration Act, 77 N.C. L.REV. 931 (1999) (Criticizes "the trend toward increased def-erence to private judicial systems." Proposes that where par-

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ties are of an unequal status in a relationship, courts shouldscrutinize arbitration agreements to protect against uncon-scionable results, to ensure baseline standards of proceduralfairness, and to ensure appropriate review of legal issues.With respect to the franchise context, notes that "[a]rbitrationdoes not emerge from participation in a shared normativecommunity in which both parties participate. In the franchise• ..cases, the party seeking to avoid arbitration-the fran-chisee... -did not play a participatory role in framing therules, norms, and customs of the community.").

Challenging Arbitration AwardsBonnie Roach, Recent Development, George Watts & Son v.Tiffany & Co., 17 OHIo ST. J. ON DisP. RESOL. 503 (2002)(Considers Seventh Circuit's recent decision in George Watts& Son v. Tiffrany & Co., 248 E3d 577 (7th Cir. 2001), and theissue of "whether parties to arbitration should be bound by theterms of an arbitration award when the arbitrator has clearlydisregarded the law or has violated some basic public policytenets." Discusses potential impact of Seventh Circuit's rejec-tion of the manifest disregard standard in favor of a more liber-al agency theory under which an arbitrator's only duty is toissue an award that the parties themselves could have crafted.).

David M. Glanstein, A Hail Mary Pass: Public PolicyReview of Arbitration Awards, 16 OHIO ST. J. ON DisP. RESOL.297 (2001) (Considers "how courts have interpreted the prin-cipal elements of public policy scrutiny outlined in UnitedPaperworkers Int'l Union v. Misco, Inc., 484 U.S. 29 (1987),as well as the burdens faced by parties seeking vacatur ofawards on public policy grounds." Reviewing recent caselaw, concludes "that if cer-tain public policies areviolated, parties can stillovercome the strong defer- "if certairence courts show towardarbitration."). are violated,

Laird E. Lawrence and overcome theChristopher R. Ward, TheAvailability and Scope of courts show toNAppeal of ArbitrationAwards Under the Feder-al, Uniform and StateActs, 29 BRIEF 32 (2000) (Provides brief overview of the var-ious means of challenging arbitration awards under statutory,common law, and contractual grounds. Concludes thatregardless of route taken, challenging and overturning anarbitration award is an extremely difficult task. Nevertheless,for practitioner looking for various avenues to attempt such achallenge, the article provides many insights. Highlights pre-sent division among U.S. Courts of Appeals regardingwhether parties can agree to expand court's scope of reviewof an arbitration award.).

Marcus Mungioli, Comment, The Manifest Disregard ofthe Law Standard: A Vehicle for Modernization of the Feder-al Arbitration Act, 31 ST. MARY'S L.J. 1079 (2000) (Focuseson "manifest disregard of the law standard" as interpretedand applied by the U.S. Courts of Appeals. Considers the

'F

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advantages and disadvantages of the current approachestaken by these courts. Proposes incorporation of a plainlydefined manifest disregard standard into the FAA.).

Paul Turner, Preemption: The United States ArbitrationAct, the Manifest Disregard of the Law Test for Vacating anArbitration Award, and State Courts, 26 PEPP. L. REV. 519(1999) (Considers whether state courts are required to followthe "manifest disregard of the law" test-as articulated bythe U.S. Supreme Court in First Options of Chicago, Inc. v.Kaplan, 514 U.S. 938, 942 (1995)-in the face of a motionto vacate an arbitration award. Concludes that the answer isnegative, in that the manifest disregard of the law doctrine isa creature of federal common law and not the FAA, and thusthat "the [FAA] cannot be read as requiring state court judgesto set aside an arbitration award when there has been a mani-fest disregard of the law by an arbitrator.").

Collateral Estoppel, Effect of an Arbitration AwardThurston K. Cromwell, Note, Arbitration and Its CollateralEstoppel Effect on Third Parties, 2000 J. Disp. RESOL. 425(Considers why California's supreme court has elected not toapply judicially confirmed arbitration awards to third parties.Suggests that the court's decision in Vandenberg v. SuperiorCourt, 88 Cal. Rptr. 2d 366, 982 P.2d 229 (Cal. 1999),"undermines the credibility of the arbitration process andfails to consider the negative impact relitigation of issues willhave on the California courts.").

Cal fbrnia Supreme Court Recognizes Possibility of Lia-bility Insurance Coverage jbr Contract Damages, 11 No. 8CAL. INS. L. & REG. REP. 191 (Aug. 1999) (Discusses recent

decision of CaliforniaSupreme Court in Vanden-berg, in which the court

ublic policies found that findings in pri-vate arbitration proceed-

rties can still ings have no collateral

rong deference estoppel effect in litigationregarding insurance cover-

Lrd arbitration." age.). (See also CaliforniaCourt of Appeal HoldsThat a Decision in a Pri-vate, Non-Judicial Arbitra-

tion May Not be Given Collateral Estoppel Effect, 9 WORLDARB. & MEDIATION REP. 160 (1998) (Discusses initial appel-late proceedings in the Vandenberg case.).)

Par y to Binding Arbitration Who Is Awarded Recovery inUnderlying Tort Claim Is Collaterally Estopped from Reliti-gating the Damages Issue in Subsequent Action to RecoverUnderinsured Motorist Benefits, 8 WORLD ARB. & MEDIATION

REP. 258 (1997) (Discusses Minnesota Court of Appeals case,Butzer v. Allstate Insurance Co., 567 N.W.2d 534 (Minn. Ct.App. 1997), in which the court held that "in a subsequentaction to recover underinsured motorist benefits, an underin-sured motorist policy holder was collaterally estopped fromseeking recovery of an amount greater than the damagesdetermined in arbitration of the underlying tort claim.").

Timothy J. Heinsz, Grieve It Again: Of Stare Decisis, Res

134 Franchise Law Journal U FaIl 2002

Judicata and Collateral Estoppel in Labor Arbitration, 38B.C. L. REV. 275 (1997) (Considers whether prior award onsame issue binds future arbitrators, in light of the legal doc-trines of stare decisis, res judicata, and collateral estoppel.Concludes that "[a] review of awards indicates that under theprinciple of constraint, most arbitrators viewing the sameissue between the same parties will follow the prior decisionunless ... it is 'preposterously wrong.' ").

Eric C. Christensen, Note, Civil Procedure/AlternativeDispute Resolution-New Mexico Applies Collateral Estop-pel to Issues Fully and Fairly Litigated in Arbitration Pro-ceedings: Rex, Inc. v. Manufactured Housing Committee ofNew Mexico, Manufactured Housing Division, 26 N.M. L.REV. 513 (1996) (focuses on New Mexico Supreme Court'sdecision in Rex, Inc. v. Manufactured Housing Comm. ofNew Mexico, Manufactured Housing Div., 119 N.M. 500,892 P.2d 947 (1995), in which the court elected to apply thedoctrine of collateral estoppel to prior arbitration decisions.Provides background leading to, and considers implicationsarising from, the court's decision.).

Andrew L. Pickens, Applying Collateral Estoppel fromFindings Made in Arbitration, Hous. LAW., Mar.-Apr. 1995,at 33 (Explains that applicable Texas and federal authoritymay support view that once issue is determined in arbitra-tion, a party may be precluded from relitigating the issue insubsequent court proceedings. States that "[tihe absence ofcontrolling Texas authority and the Fifth Circuit's reliance in[Universal American Barge Corp. v. J-Chem, Inc., 946 E2d1131 (5th Cir. 1991)] on law journals and Eleventh Circuitauthority suggest that the issue of whether to apply collateralestoppel from arbitral findings is underdeveloped in Texaslaw" but that "Texas courts' reluctance to distinguishbetween the state and federal law of collateral estoppel indi-cates Texas courts may be persuaded to look to Fifth Circuitdecisions, as well as the Restatement (Second) of Judgmentsas persuasive authority on this question.").

Arbitration Decision Collaterally Estops Litigation ofNon-Arbitrated Claims, COMPUTER LAW., Aug. 1991, at 36(Explains Sixth Circuit's decision in Central Transport, Inc.v. Four Phase Systems, Inc., 936 F.2d 256 (6th Cir. 1991), inwhich the court "affirmed a district court's ruling giving col-lateral estoppel effect to an arbitration decision on a contractclaim, finding that it precluded litigation of non-arbitratedmisrepresentation and tortious interference claims and aclaim for civil violation of [RICO].").

Hiroshi Motomura, Arbitration and Collateral Estoppel:Using Preclusion to Shape Procedural Choices, 63 TUL. L.REV. 29 (1988) (Considers U.S. Supreme Court's invitationin Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 221-23(1985), to reexamine the widely held assumption that arbitra-tion awards, like court judgments, may have the same collat-eral estoppel effect. Reviews cases considering the issue.Suggests that arbitral findings should not have collateralestoppel effect unless the parties to arbitration agreementexpressly provide for that result.).

G. Richard Shell, Res Judicata and Collateral EstoppelEffects of Commercial Arbitration, 35 U.C.L.A. L. REV. 623

(1988) (Contemplates circumstances, in the commercial arbi-tration context, in which collateral estoppel and res judicatashould bar litigation of previously decided issues or claims.Concludes that "courts should be free to apply preclusion inany case in which contractual intention supports it, regardlessof the traditional boundaries of res judicata and collateralestoppel. The basis of arbitration is contract, and the preclu-sive effects of an arbitration award may legitimately extendas far as the contractual agreement to arbitrate warrants.").

Privatization of Law Through ArbitrationStephen J. Ware, Default Rules from Mandatory Rules: Pri-vatizing Law Through Arbitration, 83 MINN. L. REV. 703(1999) (Considers the extensive privatization of law throughthe medium of arbitration. In particular, considers the impactof current arbitration law on the privatization of other areasof law. Suggests that what conventional wisdom may deemto be mandatory laws, or laws providing for rights or dutiesthat cannot be avoided by contract, may in fact be alterableby contract-by means of an arbitration agreement.).

Waiver of Contractual Arbitration RightsMatthew Forsythe, The Treatment of Arbitration WaiversUnder Federal Law, DISp. RESOL. J., May 2000, at 8 (Ana-lyzes recent federal cases addressing waiver of contractualarbitration rights. Identifies key factual considerations andstandards applied by U.S. Courts of Appeals in arbitrationwaiver cases. Concludes that although federal cases mayseem unrelated, each case generally "involves a review of theamount of delay involved, some speculation concerning theparties' intent to arbitrate, and, to varying degrees, whetherthe party opposing arbitration has suffered prejudice." Furtherfinds that "[federal courts remain reluctant to allow litigantsto invoke arbitration at a late date, after they have deliberatelyelected to participate in expensive and protracted litigation.").

Ethics and ArbitrationStephen K. Huber, The Role of Arbitrator: Conflicts of Inter-est, 28 FORDHAM URB. L.J. 915 (2001) (Considers uniquerole of arbitrators, who may have greater power than civiljudges due to standards of review under the FAA and UAA.Discusses factors influencing the neutrality of arbitrators.Argues that arbitration raises important ethical issues thatshould receive greater emphasis in legal education.).

Matthew J. Clark, The Legal and Ethical Implications ofPre-Dispute Agreements Between Attorneys and Clients toArbitrate Fee Disputes, 84 IOWA L. REV. 827 (1999) (Consid-ers legal and ethical consequences of predispute agreementsbetween clients and attorneys to resolve fee disputes by arbi-tration. Discusses the treatment of such agreements by barassociations, state courts, and commentators. Concludes thatpredispute fee arbitration agreements are most appropriate ifexecuted postdispute, in that these agreements "limit the vol-untary nature of a client's decision to arbitrate and inhibit theclient from being able to consider fully the facts and circum-stances surrounding a dispute before deciding on the appro-priate forum for its resolution.").

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