Ninth Circuit Splits From The Second, Third And Fourth Circuits In "Brain Twister" Arbitration Case

Arbitration provisions are common features of commercial agreements.  Arbitration is often touted as a cost-effective alternative to litigation that provides contract parties the freedom to decide everything from what law the arbitrator should apply, to what issues the arbitrator should resolve.  The parties can even delegate to the arbitrator the issue of what should and should not be arbitrated (also known as arbitrability issues) by incorporating a delegation clause in their arbitration agreement.

Arbitration, however, does have limits.  One such limit is that arbitration agreements are invalid if they would cause a party to lose the right to bring a federal statutory claim – also known as the "prospective waiver" doctrine.  This could occur, for example, if a contract has a choice-of-law clause that precludes the application of federal law.