Infinite Arbitration

“Infinite arbitration” pushes the scope of arbitration to a breaking point. These provisions attempt to bind consumers or employees to arbitrate any dispute, with a wide scope of entities, forever, often based on a fleeting transaction.

The modern doctrine has been analyzed by  David Horton, Infinite Arbitration Clauses, 168 U. Pa. L. Rev. 633 (2020). Horton documents a trend in which companies draft clauses that apply to all disputes including those unrelated to an initial agreement to arbitrate.

The most recent case that brought “infinite arbitration” into the mainstream involved a Disney+ trial subscription and a subsequent wrongful‑death claim. Disney argued that a husband’s click‑wrap agreement for a free trial to Disney + years prior bound him to arbitrate a wrongful‑death claim arising from a completely unrelated incident when his wife died after eating at a restaurant in Disney World years later. Disney received adverse publicity when it filed a motion to compel arbitration. It has been reported that this matter has settled. Rogers v Disney Streaming Services, No. 3:22-cv-00045 (M.D. Tenn. 2022).

There is a circuit split on this issue.

The Fourth Circuit has enforced an infinite arbitration clause. Mey v. DIRECTV, LLC, 971 F.3d 284 (4th Cir. 2020).

May alleges that DIRECTV and its marketing agents called her call phone to advertise DIRECTV in violation of the Telephone Consumer Protection Act because her number was on the national do not call registry. DIRECTTV argued that Mey’s claims must be sent to arbitration because she had previously agreed to arbitration in her AT&T Mobility wireless service contract. AT&T Mobility and DIRECTTV are corporate affiliates.

The district court held that the TCPA dispute did not fall within the scope of the AT&T arbitration agreement.

The Fourth Circuit, with one dissent, vacated and remanded holding the scope of the arbitration clause was broad enough to cover the TCPA claims against DIRECTV.

The Ninth Circuit reached an opposite result in Revitch v. DIRECTV, LLC, 977 F.3d 713 (9th Cir. 2020) holding that a claim for arbitration must “relate to” the contract.

Revitch was a customer of AT&T Mobility, his wireless carrier. His contract with AT&T Mobility included a broad arbitration clause covering “all disputes” between him, AT&T Mobility and it’s affiliates,

Years later AT&T, Inc. acquired DIRECT making DIRECTV and AT&T Mobility corporate affiliates under the same parent company. Revitch received unsolicited prerecorded telemarketing calls on his cell phone promoting DIRECTV satellite television service. He had never been a DIRECTV customer, had no prior relationship with DIRECTV and never provided his number to DIRECTV. Revich sued under the Telephone Consumer Protection Act.

The Ninth Circuit affirmed the district court’s denial of a motion to compel arbitration noting DIRECTTV was not a party to the wireless contract, the telemarketing calls had no relationship to the wireless service and stated flatly the clause could not be stretched to cover unrelated future disputes.

There is one possible legal distinction. In Mey, DIRECTV was already an affiliate at the time of the contract and the arbitration contract was enforced. In Revitch, DIRECTV became an affiliate years later and arbitration was rejected.

Apparently some states have statues or case law making infinite arbitration clauses unlawful even if they are part of a contract.

Arbitration organizations do not address the issue head-on but do have rules that deal with it tangentially.

AAA’s Commercial Rules assume a dispute arises out of or relates to the contract between the parties.  AAA’s guidance stresses reasonable expectations and mutual assent, both inconsistent with perpetual, unrelated arbitration.

JAMS rules similarly require a dispute to arise from the agreement. JAMS commentary stresses party autonomy which is undermined when a clause binds parties to arbitrate unforeseeable future claims.