PENNSYLVANIA UNIFORM ARBITRATION ACT

Subsection (a), Waiver or variance, starting on line 21, p.17 My Comment: I would like to see added to the “absolute prohibition” list line 23, p. 18 any issue related to contracts of adhesion.

Subsection (a), Waiver or variance, starting on line 21, p.17 Your Response: I don’t know whether it is a good idea in the this section to prohibit waiver of arbitration clauses, even if there is a contract of adhesion. For example, if a customer of a big box store winds up signing a contract that contains an arbitration clause, and it is a contract of adhesion, the customer may want the short-cut of an arbitration procedure for a few hundred dollar dispute rather than going through a full court hearing.

Subsection (a), Waiver or variance, starting on line 21, p.17 Your Response Cont’d: “Nothing in this bill should modify the right of any party to challenge the enforceability of an arbitration agreement on the grounds that it is a contract of adhesion, in that it was imposed upon a party without the opportunity for negotiation, or if the agreement or any term of the agreement affords an unreasonable advantage to the drafting party.

§7321.7, p. 20, line 1 My Comment: Validity of agreement to arbitrate. The general rule is that an agreement "contain in a record to submit to arbitration any existing or subsequent controversy arising between the parties" is valid unless there is a ground existing at law or in equity for revocation of a contract. I think that is too narrow. The agreement should not be binding if it violates "public policy" or is inconsistent with any other state or federal statute or regulation. Further, I would like to see this general rule applied only to commercial disputes rather than to consumer or personal injury disputes.

§7321.7, p. 20, line 1 Your Response: With respect to this clause, the language is almost identical to existing law under 42 Pa.C.S. §7303, which also contains language, “save upon grounds as exist at law or in equity relating to the validity, enforceability or revocation of any contract.” I would think “grounds as exist at law” would include violation of public policy, but I don’t think there would be much of a problem changing the language to read, “except upon a ground that exists at law or in equity for the revocation of a contract or that violates public policy.”

§7321.7, p. 20, line 1 Rejoinder: I would agree to the language in your second paragraph.

Initiation of Arbitration § My Comment: For consumer arbitrations and personal injury arbitrations, if it is determined that they are included in this legislation, there should be a revocation period after the dispute between the parties arises.

Initiation of Arbitration § Your Response: You are asking for a drastic change in the law, which is far beyond the purpose of the RUAA, which is merely procedural. The existing law, 42 Pa.C.S.A. §7303, provides clearly that pre-dispute arbitration clauses are allowed, and, as noted, the U.S. Supreme Court has prohibited denying arbitration for certain classes of cases. Nowhere are there revocation clauses.

Initiation of Arbitration § Rejoinder: As you know, there are many examples for rescission, including in Pennsylvania. I agree that the U.S. Supreme Court has ruled that California may not prohibit a whole class of arbitration claims; however, the court also has made clear that the right to arbitrate is subject to preexisting state law principles. All I am trying to do is make sure those state law principles are preserved. A revocation period would be excellent because it is consistent with other consumer oriented statutes in Pennsylvania and would be completely consistent with the United States Supreme Court. We would not be outlawing any type of arbitration, predispute or otherwise, but rather simply providing revocation of the arbitration agreement in consumer transactions. I see no problem with that.

Venue § My Comment: Sometimes arbitration agreements have very unreasonable venue provisions. There ought to be a general rule that venue is going to follow the state rule in general. Exceptions, in commercial disputes, should be permitted only between parties of equal bargaining strength.

Venue § Your Response: This was considered in the RUAA, and it was noted that there is a problem if a weaker party is required to travel to a distant location. The courts generally will void these clauses as unconscionable. There are cases in both New York and California. It might be an idea to put in specific language dealing with situations where the choice of venue is unconscionable as part of a contract of adhesion.

Venue § Rejoinder: “Venue shall be subject to laws of unconscionability, public policy and the bargaining strength of the parties. Generally, a Pennsylvania consumer shall not be required to litigate outside of his county of residence.”

Attorney’s Fees “No attorney’s fees shall be granted other than is permitted by Pennsylvania, federal statutory authority or common law.”

Remedies “No remedies or procedures are intended by this Act than which exist with respect to applicable Pennsylvania, or federal statutory or common law.”

Arbitrators “In the event the parties cannot agree upon an arbitration system, and in the consumer transaction where the consumer will not agree to the arbitrators, each party may name an arbitrator and a court of common pleas for the county in which the consumer is a resident may appoint a third.”