Are Arbitration Clauses Enforceable in Illinois?
As we’ve mentioned before, these days relatively few legal disputes are resolved in court. Most go through one or another of several methods of alternative dispute resolution, such as arbitration. Arbitration has become something of a controversial topic in the United States, because many big businesses build arbitration clauses into their contracts to prevent their customers from filing a lawsuit against them.
An arbitration clause is a contract provision that requires or permits a person to submit any disputes to arbitration, rather than filing a lawsuit. A clause that requires arbitration is known as a mandatory arbitration clause. Today’s question is: Are such clauses enforceable in Illinois?
The short answer is yes, and the long answer doesn’t really change much. Keep reading for more.
The Federal Arbitration Act
Both Congress and the Illinois General Assembly have enacted laws governing arbitration clauses, the Federal Arbitration Act (FAA) and the Illinois Uniform Arbitration Act (UAA). The FAA applies nationwide, and usually governs even in cases that involve the UAA. So, this post focuses on the FAA.
Section 2 of the FAA states that arbitration clauses included in “contracts evidencing a transaction involving commerce” are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”
Let’s start with the FAA’s focus on “contracts evidencing a transaction involving commerce.” At first, you might think that means the FAA has little application in the personal-injury context. Often, that’s true. If someone is involved in a car wreck, for instance, he or she probably doesn’t have a contract with the other driver requiring arbitration.
But many personal-injury actions do involve contracts with arbitration clauses. For example, nursing-home residents (or someone authorized to act on their behalf) are required to sign contracts with the nursing home before they are allowed to move in. Those contracts increasingly include arbitration clauses.
Section 3 requires courts to stay court proceedings when one of the parties produces a contract with an arbitration clause that applies to the dispute that is the subject of those proceedings.
In interpreting the FAA, the U.S. Supreme Court has held that it applies in state courts and preempts contrary state laws that try to render arbitration clauses in certain types of agreements unenforceable.
In short, under the FAA, an arbitration clause is enforceable in state and federal court, and regardless of state laws that say otherwise. If a party signs a contract that includes an arbitration clause, then that clause will generally be enforceable, even if the dispute that results involves personal injury.
Avoiding an Arbitration Clause
But let’s return to the language of section 2: The FAA makes arbitration clauses “valid, irrevocable, and enforceable,” except “upon such grounds as exist . . . for the revocation of any contract.” So, what does that mean?
In reality, not a whole lot. In an appropriate case, that exception can be an important tool in protecting an injured party’s right to sue, but those cases are relatively few and far between. The kinds of grounds that might support an exception under the FAA include things like fraud or duress.
What Does This Mean for Injured Illinoisans?
Alternative dispute resolution procedures can be a quick and cost-effective method of resolving personal-injury claims. In some cases, they can also be unfair. Ideally, a person would have the right to choose whether to submit a claim to arbitration, mediation, or go to court after the claim arises, when he or she can assess the advantages and disadvantages of each strategy.
Unfortunately, that’s not always an option. If you have been injured and think an arbitration clause might apply to your claim, contact the knowledgeable Chicago lawyers of Costa Ivone. We can help you determine what your options are for pursuing your claim and provide expert representation in or out of court.