LL&D Law
Understanding Arbitration

by Susan B. Loving
2/27/2012 12:18:00 PM

     Arbitration is a process for resolving disputes outside the normal legal process. The underlying premise of arbitration, at one time, at least, was that it is simpler, faster, and less expensive than going to court. However, depending on the terms of the agreement to arbitrate and the matter to be decided, arbitration can easily now be as complicated as litigation in court, and so expensive that individuals simply can not afford to vindicate their rights under a contract.

     Nevertheless -- or perhaps because arbitration can be so onerous for individuals -- contracts requiring arbitration are becoming more and more common in every day life, particularly where an individual is contracting with a large corporation. These clauses are now included in many employment agreements, and often exist in contracts such as insurance policies, cell phone agreements, and so on.

      Often these agreements not only require arbitration, they require it to be conducted in venues that may be convenient to a large corporation, but extremely inconvenient to the individual on the other side of the table. For instance, an insurance policy in Oklahoma may require an insured to arbitrate a claim in New York City.

    While with only very narrow exceptions (such as fraud), Oklahoma courts will enforce agreements to arbitrate, under very limited circumstances courts may refuse to require an arbitration to take place in a far away locale. Oklahoma courts evaluate whether there was an absence of meaningful choice on the part of one of the parties, together with contractual terms that are unreasonably favorable to the other party. However, setting aside a distant venue requirement is by far the exception, not the rule. For instance, an Oklahoma federal district court recently required an employee in Tulsa to arbitrate in Minnesota against his Minnesota employer. While the employee argued she was forced to sign the agreement as a condition of getting her job, the court found the employee was not forced to accept the job thus it was not unfair to enforce the choice of venue clause.

     Moreover, in order to get an unreasonable venue provision in an arbitration agreement set aside, a party will first have to file an action in court. This will require payment of court filing fees, and will waste the time and create the expense of litigating the issue. 

     Next week, we will continue our discussion of arbitration clauses. 



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