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Consumer Arbitration Agreements: 11.7.3.4.1 Few state laws limit punitive damages in arbitration

The Supreme Court in Mastrobuono ruled that the FAA authorizes punitive damages in arbitration awards.349 Fifteen states have enacted the revised Uniform Arbitration Act (UAA),350 and the revised UAA specifically states: “An arbitrator may award punitive damages or other exemplary relief if such an award is authorized by law in a civil action involving the same claim and the evidence produced at the hearing justifies the award under the legal standards otherwise applicable to the cl

Consumer Arbitration Agreements: 11.7.6 Due Process Challenges to Punitive Damages Awards

A series of United States Supreme Court decisions have established constitutional due process standards for court-issued punitive damages awards.369 Corporations opposing an arbitrator’s punitive damages award are likely to claim that the award does not meet these due process standards, and that the arbitration process itself does not provide sufficient due process to allow for a punitive damages award.

Consumer Arbitration Agreements: 11.8.3 Preclusive Effect of Arbitration or Court Ruling on Subsequent Arbitration

While an arbitration proceeding may have a preclusive effect on a subsequent court action, the same is not the case for either an arbitration or court proceeding’s effect on a subsequent arbitration. There are few limits as to what an arbitrator can do in that subsequent arbitration. A challenge that the arbitrator, in failing to give preclusive effect to a prior decision, manifestly disregarded the law is unlikely to prevail.383

Consumer Arbitration Agreements: 8.2.1 Introduction

This section provides a brief overview of Federal Arbitration Act (FAA) preemption as applied to unconscionability, effective vindication of federal statutory rights, and impossibility. Much more is said about FAA preemption in Chapter 3, supra, particularly as it relates to unconscionability.

Consumer Arbitration Agreements: 8.2.2 FAA Preemption and Unconscionability

Section 2 of the FAA states that arbitration clauses are enforceable “save upon such grounds as exist at law or in equity for the revocation of any contract.”8 The Supreme Court has stated that arbitration clauses may be voided under state law, but only on grounds that would generally apply to any contract provision.9 The application of principles of unconscionability therefore is not generally preempted or otherwise foreclosed by the FAA.10

Consumer Arbitration Agreements: 8.2.3 FAA Preemption and the Vindication of Federal Statutory Rights

The courts have to apply the FAA slightly differently when considering the doctrine that arbitration provisions should not prevent the vindication of federal statutory rights. This doctrine is not based on state law rulings, but on the fact that arbitration is preventing the vindication of individual rights under federal statutes. The FAA does not preempt other federal statutes. Instead, the court must resolve the conflict between the federal statute and the FAA.

Consumer Arbitration Agreements: 8.5.1 Sources of Unconscionability Law

The doctrine of unconscionability is found in Uniform Commercial Code (UCC) Articles 2 and 2A covering the sale or lease of goods, and is also found in a number of consumer credit, deceptive acts or practices (UDAP), and other statutes. Courts will also adopt those unconscionability concepts for use in other types of transactions.

Consumer Arbitration Agreements: 8.6.1.2 Is a Contract of Adhesion Always Procedurally Unconscionable?

In California the mere fact that a contract is a contract of adhesion is sufficient to render it procedurally unconscionable to at least some degree99 (although the Ninth Circuit has at times suggested that, on its own, this factor establishes a low degree of procedural unconscionability).100 Courts applying the law of several different states similarly have found procedural unconscionability based on the factual circumstances surrounding a contract of adhesion, particularly when the part

Consumer Arbitration Agreements: 8.6.2.3 Complexity and Ambiguity of the Terms

Courts look at how the arbitration clause is presented within the contract and whether any of the contract’s terms or the course of dealing between the parties might create confusion120 or present arbitration in too favorable of a light.121 Some courts give special consideration to the important nature of the rights being waived and whether their waiver is within the consumer’s normal expectations.122 When finding an arbitration clause procedurally

Consumer Arbitration Agreements: 8.6.2.5 Importance of a Factual Record

Surprise as a factor in finding procedural unconscionability inherently depends on specific facts, and consumer lawyers are advised to build as full a factual record as possible about the manner in which an arbitration clause was communicated to their clients. When applicable, produce testimony from clients demonstrating that the clients did not know that they were waiving their constitutional rights.