In a much-anticipated ruling on the applicability of the unconscionability doctrine to arbitration clauses in consumer loan contracts, the Supreme Court of Pennsylvania has rejected the anti-business, anti-arbitration approach taken by some of the lower courts in Pennsylvania. In Salley v. Option One Mortgage Corp., No. 50 EAP 2005, 2007 WL 1583359 (Pa. May 31, 2007), the Supreme Court expressly rejected lower courts’ holdings that arbitration clauses in consumer loan contracts that require most disputes to be arbitrated, but that allow in rem proceedings (including foreclosures) to proceed in court are unconscionable and unenforceable.

Salley, which was before the Supreme Court on a certified question of law from the U.S. Court of Appeals for the Third Circuit, resolved the tension between the Third Circuit's formulation of Pennsylvania law and a much-criticized opinion the Superior Court of Pennsylvania had issued in 2002. In doing so, the Court sent the message that Pennsylvania courts are not to scrutinize agreements to arbitrate more closely than they scrutinize other consumer contracts, and restores Pennsylvania’s historical respect for agreements to arbitrate disputes.

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