The United States Supreme Court has broadly held that challenges to a contract as a whole, and not specifically to the arbitration clause, must go to the arbitrator.
Plaintiff customers brought an action against defendant video service provider alleging violations of 18 U.S.C.S. § 2710 of the Video Privacy Protection Act. Pending before the court was the provider's motion to compel individual arbitration. The customers alleged that the provider disclosed personally identifiable information without consent. They further argued that the arbitration provision was unenforceable because it was illusory and unconscionable. The court denied the provider's motion, finding that the provision was illusory under Texas law. T
Was the arbitration provision of the contract illusory and unenforceable?
There was nothing in the terms and conditions that prevented the provider from unilaterally changing any part of the contract other than providing that such changes would not take effect until posted on the website. Further, there was no savings clause as there was nothing to suggest that once published the amendment would be inapplicable to disputes arising out of events occurring before the publication. The court found that the rule applied even when no retroactive modification had been attempted. Finally, the customers' challenge was to the arbitration provision, and therefore the challenge was properly before the court.