Legal Memorandum: Voluntarily Agreeing to an Arbitration

Issue: May financial considerations prevent a waiver from being voluntary?

The court in Walker v. Ryan’s Family Steak Houses, Inc., 400 F.3d 370 (6^th Cir.) reasoned that the foremost factor was that most of the plaintiff employees had not finished high school and desperately needed money at the time they applied for employment and signed the waiver.  Id. at 381.  The court observed that many of the plaintiffs were in “desperate” need of the low-wage jobs offered by the employer and were “in dire financial circumstances” at the time they signed the arbitration agreements.  Id. at 374.  The Walker court held that the district court did not err when it found that this factor demonstrated that the plaintiffs did not knowingly and voluntarily agree to arbitration.  Id. at 381.

A “gross inequality in bargaining power suggests . . . that [an] asserted waiver was neither knowing nor intentional.”  Nat’l Equip. Rental, Ltd. v. Hendrix, 565 F.2d 255, 258 (2d Cir. 1977) (holding that lessee’s purported waiver of right to jury trial was neither knowing nor intentional, especially given that he “did not have any choice but to accept the [defendant’s] contract as written if he was to get badly needed funds”).

[…]