Jottings By An Employer's Lawyer

Tuesday, April 01, 2003

3rd Circuit Severs Offending Cost Provisions and Enforces Arbitration Agreement

Weighing in on an issue that has arisen in several circuits, the 3rd Circuit finds that the determination of whether a provision that requires that attorneys' fees be borne by each party, regardless of other statutory law, and that the employee should pay 1/2 the cost of the arbitration, makes an arbitration agreement unenforceable is a question of state law. Applying, Pennsylvania law, they find the test is whether the primary purpose of the contract can be carried out after the offending provisions are struck. In Spinnetti v. Service Corp. International (3rd Cir. 3/31/03) [pdf], the answer is yes. After striking the offending provisions, the primary purpose, resolving disputes through arbitration rather than traditional litigation, could still be accomplished. The court upheld the district court's striking the provisions which left the employer responsible for the costs of the arbitration and subject to responsibility for attorneys fees under applicable statutes, like Title VII, if appropriate.

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