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This article sets out a number of legal arguments that franchisees can potentially use to defeat arbitration clauses that seek to accomplish ends that would not be permissible in litigation. Drawing from decisions protecting consumers and employees from unfair arbitration clauses, as well as from opinions in the franchise context, this article analyzes arguments that can be based on the U.S. Constitution, federal statutes, state statutes, and common law. By way of this analysis, it suggests that some courts are misapplying arbitration precedents and preemption arguments to support decisions that allow franchisors to effectively exempt themselves from legislation and even constitutional provisions that would protect franchisees. This article also calls for legislative reform. To the extent that courts go too far in allowing franchisors and others to use arbitration clauses to insulate themselves from legal liability, Congress will need to take corrective action. Several bills currently pending in Congress are summarized in the conclusion of this article.

Publication Citation

Franchise L.J., Fall 2000, at 45.