In Federal Court Invalidates Spotify’s Arbitration Clause Using a Clever Argument, Professor Imre Szalai summarizes a recent decision by a federal district court in California regarding the validity of “delegation clauses” in arbitration agreements.

Professor Szalai notes that in Ingalls v. Spotify USA, No. C 16-03533 (N.D. Cal. Nov. 14, 2016), the court found a clever way to get around delegation clauses:

“Spotify’s Terms and Conditions incorporated the American Arbitration Association’s rules, which provide that an arbitrator can decide whether the parties agreed to arbitrate.  The court found that incorporation of the AAA rules was not sufficient to establish delegation where one party is not sophisticated.  The court reasoned that the relatively unsophisticated consumers in the case, who had no “business or legal acumen,” could not be expected to appreciate the significance of the incorporation of a delegation clause.  Using this case as a building block, perhaps one can argue that delegation clauses should not be enforceable against any unsophisticated party, consumer or employee, who cannot appreciate the significance of a delegation clause.  Without appreciating the significance of a delegation clause, a party cannot clearly and unmistakably intend to delegate the issue of the enforceability of an arbitration clause to an arbitrator.”