Friday, February 4, 2011

Agreements to Arbitrate - Update on Carr v. Gateway

Last February I wrote about the 5th District Appellate Court's decision in Carr v. Gateway, Inchere.  In this case, the designated arbitration forum stopped accepting consumer disputes.  The arbitration agreement was very specific as to the private forum for the arbitration and the rules to be used, and even included a clause to penalize any party seeking to arbitrate the dispute in another forum.  Well, the Illinois Supreme Court reviewed the decision and released its opinion this week, affirming the Appellate Court's judgment.  Particularly emphasizing the penalty clause, the Court noted that the arbitration forum was integral to this agreement, Section 5 of the federal Arbitration Act did not apply to appoint a substitute arbitrator, and therefore the plaintiff's claims could proceed in court.

Although this was an Illinois case, the Court considered precedent from other jurisdictions, and I believe really made a thorough analysis and wrote a well-reasoned opinion.  It would not surprise me to see this opinion cited as persuasive as future courts in other jurisdictions consider the same issue.

Does your business have a mandatory arbitration provision in its form contracts?    If so, you may wish to review such provisions with your attorney in light of this decision.  This particular case involved a contract for purchase of consumer goods, but the reasoning could readily apply to other contracts, and to jurisdictions outside of Illinois.

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