Jottings By An Employer's Lawyer

Thursday, January 30, 2003

Fee Splitting and Arbitration - 6th Cir. En Banc View


The 6th Circuit issues its en banc decision today, Morrison v. Circuit City, (6th Cir. 1/30/03) setting forth their standard on how courts should determine whether or not a fee splitting provision in an arbitration clause precludes it from being enforced. Surveying the approach of other circuits, they set forth their own standard to ensure that the courts are looking at the effect not only of the provision on the individual before the court, but also of the 'chilling impact' on other individuals. Under their new standard, Circuit City's plan initially strikes out as being too costly and improperly limiting remedies. Ultimately, however, it is bailed out by the Court's holding that the two offending provisions are severable. There is a dissent, mainly complaining of the complexity introduced by the Court's creation of a "pre-arbitration quasi-class action litigation". I note that my friend from law clerking days, Judge R. Guy Cole, sided with the majority. Thanks to Howard Bashman's How Appealing for the quick notice on the decision.

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