Would you ever agree to an arbitration provision that only gives the other party the right to arbitrate? Think I'm kidding? Albert M. Higley Company v. N/S Corporation involved an arbitration provision that did precisely that.
Higley is a prime contractor on a project with the City of Cleveland. Higley hired N/S as a subcontractor. The parties entered into a written agreement, authored by Higley. The agreement contained an arbitration provision:
Should [N/S] and [Higley] be unable to resolve said dispute(s) through mediation, any and all dispute(s), at the sole discretion of [Higley], shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association.
N/S notified Higley that it would be unable to comply with certain provisions of the agreement. After attempting to resolve the dispute that followed through negotiation and mediation, Higley filed suit against N/S in federal court. N/S filed a motion to compel arbitration, which the court denied.
The Sixth Circuit affirmed. It held:
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that a one-sided arbitration provision is enforceable absent evidence of fraud, coercion, or lack of consideration;
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that N/S' argument, i.e., Higley could have drafted the clause to unambiguously state that it had the sole discretion to decide whether to arbitrate so Higley must not have meant this clause to be interpreted as giving it sole discretion, must be rejected because it would require the court to interpret the clauseas it could have been written, not as it is written;
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that N/S' interpretation of the clause, i.e., the clause only gives Higley the discretion to decide whether a dispute continues to exist, must be rejected because it would lead to irrational results.
Key takeaways: First, don't agree to a one-sided arbitration provision. Second, if you agree to a one-sided arbitration provision, don't expect a court to bail you out. Third, don't agree to a one-sided arbitration provision.
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