What You Should Know About Arbitration Clauses

What You Should Know About Arbitration Clauses

Anyone reading this blog may have signed a paper that contains an arbitration clause. Certainly if you’ve ever owned stock, you signed an agreement with your broker promising to arbitrate your case with a group called FINRA.  The arbitration takes the matter out of the court system and puts your case into the world of arbitration.  Likewise, if you’ve purchased a cell phone or many other products, if a loved one entered a nursing home recently or if you have signed an oil and gas lease, there’s a strong chance that the document you signed contains an arbitration agreement. 

The arbitration clauses are favored by most large corporations in this country in an effort, they say, to cut costs and to speed up disputed matters. That, in my opinion as a lawyer who’s been practicing since 1972, is not the real reason. The real reason that companies fight so hard to stick arbitration clauses in documents they want you to sign is to prevent a jury of your peers from deciding an issue. The reason is that a company, such as AT&T, a stock brokerage company or an oil and gas company, will have hundreds, if not thousands of arbitration cases each year. You will have only one.

The problem may be readily apparent to you even at this juncture, but if it’s not, let me tell you that what happens in an arbitration hearing. You are provided, in most cases, with a panel of arbitrators. From the panel, you may eliminate a certain number of arbitrators based on information that is provided to you in order to ultimately come up with either one, two or three arbitrators. The problem is that these arbitrators, in many cases, make either part or all of their living by this arbitration work, and if one party has 1,000 cases and you only have one, it seems reasonable to me to assume that it’s likely that the arbitrator may be somewhat biased towards the party that’s, for the most part, providing his or her livelihood. 

Also, in my opinion, the arbitration system has been neither faster nor cost effective. The long and short of this, and the reason I write this blog, is because I’m presently at my desk reading the most recent appeal filed by an oil and gas company, SWN Production Company, against my clients appealing an Order of one of our local judges to the West Virginia Supreme Court of Appeals. The local judge ruled that the arbitration clause was not valid and binding. SWN Production Company filed a Petition to the Supreme Court asking them to reverse the ruling of the Circuit Court and force arbitration on my clients.  

It is our responsibility as the attorneys for landowners to respond to West Virginia Supreme Court petitions by drafting and filing our own brief, designating a record, and finally by appearing before the Court and arguing the case. Our Supreme Court then will rule, and there’s a good chance if the ruling goes against us, the matter will,  in all likelihood, be further appealed to the United States Supreme Court. This in an effort not to resolve the merits of the case, but to simply eliminate my client’s ability to allow a jury of their peers to hear the case that they brought against this oil and gas production company.

The moral of the story, in my opinion, is to avoid at all costs, if you can, entering into agreements that have arbitration provision or clauses. You should also ask lawyers to review those contracts that you know have these clauses and to offer advice. 

Finally, if nothing else can be done, and if you’ve been hurt as a result of these clauses and contracts you’ve signed, contact your legislature in an effort to try to get these arbitration clauses removed.   


Anyone reading this blog may have signed a paper that contains an arbitration clause. Certainly if you�ve ever owned stock, you signed an agreement with your broker promising to arbitrate your case with a group called FINRA. The arbitration takes the matter out of the court system and puts your case into the world of arbitration. Likewise, if you�ve purchased a cell phone or many other products, if a loved one entered a nursing home recently or if you have signed an oil and gas lease, there�s a strong chance that the document you signed contains an arbitration agreement.