The earliest California cases applying the unconscionability concept to non-UCC contracts arose in the context of the entertainment business. Interestingly, some of the most significant early decisions concerned arbitration provisions. One of them, Graham v Scissortail, set out rules that have endured to form a basis for many of the more recent decisions. That case involved rock impresario Bill Graham and a dispute involving an AFTRA artist's contract. The contract contained an unconscionable arbitration clause that severely limited Graham's remedies for breach. The court found that even a businessman of Graham's sophistication and legendary shrewdness can fall victim to an unconscionable contract, especially where the offending provisions are contained in boilerplate language assumed to be "nonnegotiable."

2) After All, Arbitrators Are Human, Too.
A second, far subtler, method by which the stronger party can influence the arbitration process is by selecting an arbitrator who will favor its position. This technique takes advantage of the basic human need for self preservation, and even the most noble and ethical of arbitrators can fall victim to it.

For the economic giant, dispute resolution is a continuing and integral part of daily existence. For an arbitrator, the large client can become "a regular customer." On the other hand, for the smaller businessman, formal dispute resolution is not a part of his typical business life and he is usually quite thankful for that fact. Human nature being what it is, it is clear who the arbitrator is more likely to consciously or unconsciously want to please.

One would expect that this problem would be mitigated by the reluctance of the weaker party to an arbitration to utilize the services of an arbitrator who has previously presided over disputes involving the same stronger party. This is true, at least to the extent that the weaker party even thinks to inquire into the arbitrator's track record. Surprisingly, some onetime participants in arbitration never think to inquire into the arbitrator's track record. And, there is nothing inherently wrong - no inherent conflict of interest - that results from an arbitrator handling a dispute with a party that has used his services before - even if that use extends to multiple disputes over a period of years and involves thousands of dollars.

Furthermore, as more and more arbitrators seek to achieve operating economies of scale by forming dispute resolution groups or associations, it becomes increasingly difficult for parties to arbitration to spot these potential conflicts of interest. One must assume that an arbitrator who is a member of such a group or association has a desire to see the enterprise grow and prosper, since, either directly or indirectly, he will reap the economic benefits of the increased business. One way to assure growth and prosperity for the group is to produce a satisfied client base eager to again receive "fair" treatment.

As a practical matter, the only source of repeat business of significant magnitude to have an impact on the arbitrator's bottom line is, of course, the big commercial entity, typically the stronger party to the arbitration. Human nature and common sense dictate that the one time party to an arbitration is more likely to get the short side of "fair" treatment. Dealing with an arbitrator who is consciously or unconsciously influenced by the prospect of building a client base may effectively stack the deck against the small merchant. It is imperative that the small businessman enter into an arbitration with his eyes open, prepared to ask the probing questions that will increase the likelihood that he will receive fair treatment. Better yet, the small merchant must begin his diligence at the initial contract stage, to assure that he does not agree to an arbitration that he cannot win because someone else wrote the rule book.In conclusion, arbitration is often a useful method of avoiding costly and time-consuming litigation; however, parties must keep their eyes open to a process potentially fraught with pitfalls.