## Facts

- Bill Graham, a concert promoter, agreed to provide promotional services for four concert dates on a planned tour for performer Leon Russell’s company, Scissor-Tail, Inc.
- The parties used standardized American Federation of Musicians (AFM) Form B contracts for each concert date.
- Each Form B contract required disputes to proceed through AFM processes culminating in arbitration by the AFM International Executive Board.
- The tour was less profitable than expected, and disputes arose over the parties’ financial arrangements.
- Graham sued Scissor-Tail for breach of contract and sought declaratory relief and rescission.
- Scissor-Tail petitioned to compel arbitration under the California Arbitration Act; the trial court compelled arbitration.
- The AFM International Executive Board issued an award in favor of Scissor-Tail.
- The trial court denied Graham’s petition to vacate and entered judgment confirming the award; Graham appealed.
- Scissor-Tail separately appealed a postjudgment cost order concerning attorney’s fees.

## Issues

1. Whether the AFM Form B agreements, as used in the music industry, were contracts of adhesion.
2. Whether an arbitration clause in such a contract is enforceable when it designates the AFM International Executive Board—an institution aligned with the musician/union side—as the arbitral tribunal.
3. Whether California’s policy favoring arbitration requires enforcement of an arbitral forum that fails minimum standards of neutrality and fairness in an adhesive setting.

## Decision

- The California Supreme Court reversed the judgment confirming the arbitration award.
- The court directed the trial court to vacate its order compelling arbitration and to conduct further proceedings on Graham’s claims in court.
- The court held the Form B contracts were contracts of adhesion in the relevant industry context.
- The court held the clause requiring arbitration before the AFM International Executive Board was unenforceable because the designated tribunal was not sufficiently neutral in an adhesive arrangement.
- The court dismissed Scissor-Tail’s appeal from the postjudgment cost order as moot.

## Legal Principles

- A standardized, nonnegotiable form imposed as a condition of obtaining services may be treated as a contract of adhesion even in a commercial setting with sophisticated parties.
- Courts may scrutinize arbitration provisions in adhesive contracts to ensure the selected forum is neutral and even-handed.
- California’s pro-arbitration policy does not require enforcement of an arbitration procedure that is structurally one-sided or creates an unacceptable risk of partiality.
- An arbitration clause may be refused enforcement when the designated decision-maker is institutionally aligned with one side, producing substantive unfairness when coupled with adhesive formation.

## Conclusion

The court held that, although arbitration is generally favored, an arbitration clause imposed through an industry-standard adhesive contract is unenforceable when it requires disputes to be decided by a tribunal structurally aligned with one side; the confirmed award was reversed and the matter returned to the trial court for litigation.


Graham v. Scissor-Tail, Inc., 28 Cal. 3d 807 (Cal. 1981)