Effectiveness and Enforceability of Mandatory Mediation and Arbitration Clauses

State arbitration is governed by Chapter 788.

"Generally, if a proceeding is subject to a valid arbitration clause, the court shall stay the proceeding until arbitration has occurred. However, there are several reasons where a right to arbitration may be waived or the clause may not be enforced. For instance, a party may waive their right to a stay of a proceeding by failing to demand arbitration in a timely manner. Meyer v. Classifed Insurance Corp. of Wisconsin, 179 Wis. 2d 386, 507 N.W.2d 149 (Ct. App. 1993). Additionally, where a court grants a temporary stay, but a party fails to initiate arbitration during the stay, a party may waive arbitration. J.P. Morgan Chase Bank v. Allen, 2010 WI App 84, 326 Wis. 2d 266, 787 N.W.2d 60.

In extreme cases, a court may refuse to enforce an arbitration clause on the grounds of substantive unconscionability where the clause is one-sided, unfair, unreasonable, harsh, overreaching, or oppressive. See Wisconsin Auto Title Loans v. Jones, 2006 WI 53, 209 Wis. 514, 714 N.W.2d 155. But, the threshold for substantive unconscionability is high. For example, clauses that disallow class action lawsuits are not substantively unconscionable. Cottonwood Financial Ltd. v. Estes, 2012 WI App 12, 339 Wis. 2d 472, 810 N.W.2d 852 (citing AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011) (holding that the Federal Arbitration Act preempts state laws that prohibit contracts from disallowing class action lawsuits). It should also be noted, however, that as of February 2013, the Wisconsin Court of Appeals issued a certification to the Wisconsin Supreme Court, asking the Wisconsin Supreme Court to decide, in light of the Cottonwood and Concepcion decisions, whether the Jones decision should be overruled."

Arbitration based on contract where the intent of the parties to arbitrate is clear, is generally referred to as common law arbitration. A statutory arbitration is one in which the courts must interpret the contractual intent of the parties, whether with regard to the degree to which the parties intend to be bound by the arbitrator’s decision or the administrative particularities of the arbitration. An arbitrator’s decision in a common-law arbitration is presumed valid and can be overturned only with clear and convincing evidence, but courts apply a less strict standard of review to decisions made in statutory arbitrations. Compare Scherrer Construction Co., Inc. v. Burlington Memorial Hospital, 221 N.W.2d 855, 863 (1974) with Stradinger v. City of Whitewater, 277 N.W.2d 827, 833 (1979). ?