Untangling Arbitration: A Three-Part Solution

Isy Kristick

ABSTRACT

Over the past century, the Supreme Court has expanded the authority of arbitrators. When both parties have equal bargaining power and sophistication, this expansion of authority raises few concerns. However, when corporations include arbitration clauses in their consumer agreements, the corporation usually holds most of the power and is more legally sophisticated. Today, crafty corporations are expanding the scope of their arbitration agreements to non-signatories by referencing undefined groups of third parties, essentially creating a limitless arbitration agreement. The use of these types of arbitration agreements shines a light on the entangled, unclear, and inconsistent state of arbitration law. The limitless expansion of arbitration agreements has raised questions about how broad arbitration agreements can and should be, the role of the courts in policing these agreements, and what restrictions the Federal Arbitration Act (FAA) places on them.

To resolve these questions, this Note proposes a three-part solution. First, courts should enforce parties’ expansion of arbitration agreements only when they meet the “clear and unmistakable” standard because it balances restrictive contract principles with expansive agency principles and the presumption in favor of arbitration. Second, courts should determine which non-signatories are parties to the agreement in the first step of the analysis, rather than allowing an arbitrator to decide in the second step, because it ensures that the parties agreed to arbitrate before compelling arbitration. Third, courts should enforce the FAA’s textual requirement that the dispute “arise out of” the underlying contract in order to be subject to arbitration despite that portion of the FAA having long been forgotten by courts.

Finally, this Note applies these solutions to Piccolo. On February 22, 2024, Jeffrey Piccolo, as personal representative of Kanokporn Tangsuan’s estate, brought a negligence suit against Raglan Road Irish Pub and Restaurant and Disney Springs (collectively, Disney). This case highlights several of the issues identified in this Note during Disney’s initial attempt to compel arbitration based on a Disney+ subscription.