Terra Finance LLC brought an action to compel arbitration. Defendant Acrow Corporation moved to dismiss the action under Fed. R. Civ. P. 12(b)(6), arguing that the arbitration clause was unconscionable, and therefore unenforceable. Defendant attached two other arbitration agreements as evidence that the subject provision was unconscionable. As a result, the Court converted the motion to a motion for summary judgment.
To support unconscionability, Acrow argued: “(1) the clauses constitute contracts of adhesion; (2) at the time that each arbitration clause was executed, [Plaintiff] did not seek assistance of legal counsel; and (3) during negotiations over the… agreement, [Defendant’s] representative stated that arbitration before the ICC would be cheaper than litigation in U.S. courts.”
The Court rejected Acrow’s arguments, and compelled arbitration as Acrow “failed to come forward with evidence from which the Court might conclude that the arbitration clauses are procedurally or substantively unreasonable.”
The Court further declined Acrow’s request for the Court to appoint a substitute arbitrator in ICC’s place, on the grounds that ICC is “unavailable” due to the “exorbitant administrative fee.” Pursuant to Section 5 of the FAA, “exorbitant” administrative fee does not amount to a “lapse in the naming of an arbitrator” which would allow the Court to appoint a substitute.
Terra Finance, LLC, et al. v. Acrow Corp. of Am.a>, 16-0075 (USDC D.N.J. Feb. 7, 2017)
This post written by Nora A. Valenza-Frost.
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