When the Supreme Court decided Stolt-Nielsen v. Animal-Feeds Int’l Corp. in April, the decision was widely viewed as a victory for arbitration and for many of the businesses that prefer arbitration to litigation. In particular, companies that include arbitration provisions in consumer contracts, such as credit card, cell phone and software companies, or in employment contracts had some assurance from the Supreme Court that they could not be forced into an unappealable class-wide arbitration without their consent.
However, the Supreme Court’s decision raises the possibility of an unforeseen and potentially unfortunate outcome — the invalidation of tens of millions of arbitration provisions in consumer and employment contracts on state law unconscionability grounds. It seems unlikely that the Supreme Court had such an outcome in mind, and less than a month after its decision, the court agreed to hear a case next term in which it will have the opportunity to clarify this very question.
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