Supreme Court of Illinois Rules Consumer Arbitration Clause Unenforceable
In yet another chapter of the long fight over the enforceability of consumer arbitration agreements, on February 3, 2011 the Supreme Court of Illinois held that a consumer arbitration agreement was unenforceable in refusing to dismiss a putative class action in favor of arbitration. The Court in Carr v. Gateway, Inc. reasoned that the contract’s requirement that the National Arbitration Forum (“NAF”), which had stopped accepting consumer arbitrations, arbitrate all disputes between the parties “was so central to the agreement to arbitrate that the unavailability of the NAF brought the agreement to an end.” Critical to the Court’s interpretation of the arbitration provision was a clause penalizing either party for bringing a dispute outside the NAF, even in another arbitration forum, which in the Court’s view severely undercut any notion that “the agreement to arbitrate was paramount” over the agreement to use the unavailable NAF.
The Court chose not to address the trial court’s ruling that the arbitration agreement also was unenforceable because, among other reasons, the consumer “would be prohibited from pursuing his claim as a class action.” This issue of generally applicability already has been briefed and argued in the United States Supreme Court in the pending case of AT&T Mobility LLC v. Concepcion. Therefore, as framed, Carr is a narrow decision based on the exact wording of the arbitration clause at issue. However, it joins the long and complex list of court decisions, pro and con, which need to be consulted in drafting effective arbitration agreements and in litigating the enforceability of these agreements.