David N. Cinotti Discusses Infinite Arbitration Clauses with ABA Journal

David N. Cinotti, partner at Pashman Stein Walder Hayden P.C., was recently quoted in an article titled “Did You Read the Small Print? 'Infinite' Arbitration Clauses are on the Rise,” published in the American Bar Association Journal. The article discusses infinite arbitration clauses used by companies, often in their Terms and Conditions, which sometimes mandate arbitration for any disputes against the company and its affiliates or related entities in perpetuity.

“Such arbitration clauses are problematic in consumer agreements, which are ordinarily not negotiated between the parties, because they are not limited to disputes tied to the agreement in which they are contained. They can, therefore, lead to absurd results that are far afield from what a reasonable consumer might believe an arbitration clause in a consumer agreement covers,” said Cinotti.

Federal appellate courts have reached different conclusions about the scope and enforceability of infinite arbitration clauses under the Federal Arbitration Act (“FAA”). In one case decided in 2020, the 4th U.S. Circuit Court of Appeals at Richmond, Virginia, ruled that an arbitration clause in a woman’s AT&T wireless agreement covered claims that she filed against DirecTV for allegedly making unlawful telemarketing calls. The agreement broadly required arbitration for disputes with AT&T affiliates, even if DirecTV was not an affiliate at the time that the agreement was signed, Cinotti says.

In another case with similar facts, also decided in 2020, the 9th Circuit at San Francisco reached the opposite conclusion. And in a concurring opinion, Cinotti says, one 9th Circuit judge argued that the FAA’s Section 2 does not require enforcement of arbitration clauses as to disputes that do not “arise out of” the contract where the clauses are contained.

“So the appellate courts are just beginning to address these types of clauses under the FAA, and there is disagreement on how to interpret and apply them,” said Cinotti.

“Unless Congress amends the FAA to address consumer arbitration, courts will continue to have to work out the extent to which consumer arbitration agreements apply to particular disputes and are enforceable,” Cinotti concluded.

Cinotti represents parties in disputes under the FAA, including relating to enforcement of consumer and commercial arbitration agreements.  He also frequently writes and comments about the FAA.

To read the full article in ABA Journal, click here.