The U.S. Supreme Court has long argued that arbitration is only appropriate if it does not involve the loss of material legal rights. The Court first expressed this principle in 1985 in Mitsubishi Motors v. Soler Chrysler-Plymouth, in which the court held that a party is required to settle an application under the Sherman Antitrust Act.16 In support of its decision in Mitsubishi, the court held that arbitration could only be ordered if the applicant “could justify its legal appeal to the court of arbitration.” 17 The Court also stated that “[t]he consent does not give consent to the reconciliation of a legal right to the material rights of the statute.” 18 At the same time, the Court has repeatedly rejected attempts by states to legislate to protect consumers and workers from unfair arbitration agreements. Beginning in the late 1980s and 1990s, the Court cracked down on state legislative efforts to protect consumers and workers from repressive arbitration agreements. One case concerned a Montana law of 1985, which requires arbitration agreements in consumer contracts to appear on the first page of the contract in appropriate size (Mont. Code Ann. The purpose of the legislation was to ensure that consumers be aware that they have accepted arbitration when they enter into a contractual relationship with a large company. In 1992, a Subway franchise owner and his wife filed a complaint in Montana, claiming that Subway had deceived them by refusing to give them the privileged place they had been promised, which caused their business to fail and their credit security – in this case their life savings – to lose. Your franchise agreement with Subway had a compromise clause stipulating that all disputes in Connecticut, away from Montana, must be resolved. Going there and hiring a Connecticut lawyer would have cost Casarottos, who is almost bankrupt. Moreover, the compromise clause did not meet the requirements of Montana law: instead of appearing prominently in the contract, it had been buried on a small scale.
The Montana Supreme Court refused to enforce the compromise clause, but the United States.