Opinion ID: 1106431
Heading Depth: 1
Heading Rank: 4

Heading: Doctor's Associates, Inc. v. Casarotto

Text: ¶ 16. The United States Supreme Court  whose decisions the justices on this Court are bound by oath to follow  has clearly declared that Section 2 of the FAA prohibits courts (including this Court) from singling out arbitration provisions for special treatment. That is to say, it prevents courts from placing more stringent requirements for the enforcement of arbitration provisions than for other provisions in a contract. Doctor's Assoc., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996). ¶ 17. In Casarotto, a Subway sandwich shop franchisee filed suit against his franchisor alleging state-law contract and tort claims relating to the franchise agreement. Id. at 683, 116 S.Ct. 1652. The agreement included an arbitration provision in ordinary type on page nine. Id. The trial court stayed all proceedings pending arbitration as required by the agreement. The Montana Supreme Court reversed, holding that the arbitration provision was unenforceable under a Montana statute which required contracts to include notice of arbitration provisions in underlined capital letters on the first page of the contract. Mont.Code Ann § 27-5-114(4). ¶ 18. The Supreme Court granted certiorari, vacated the Montana Supreme Court's judgment, and remanded for further consideration in light of Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995), which held: States may regulate contracts, including arbitration clauses, under general contract law principles and they may invalidate an arbitration clause `upon such grounds as exist at law or in equity for the revocation of any contract.' 9 U.S.C. § 2 (emphasis added). What states may not do is decide that a contract is fair enough to enforce all its basic terms (price, service, credit), but not fair enough to enforce its arbitration clause. The Act makes any such state policy unlawful, for that kind of policy would place arbitration clauses on an unequal footing, directly contrary to the Act's language and Congress's intent. 513 U.S. at 281, 115 S.Ct. 834 (emphasis added). ¶ 19. On remand, the Montana Supreme Court, declining further briefing or oral argument, refused to change its prior decision to reverse the trial court's stay and order of arbitration. The United States Supreme Court again granted certiorari and this time, reversed. Casarotto, 517 U.S. at 686, 116 S.Ct. 1652. Using exceptionally clear and precise language agreed upon by eight justices, the Casarotto Court again set forth the rule of law which we must follow: By enacting § 2, we have several times said, Congress precluded states from singling out arbitration provisions for suspect status, requiring instead that such provisions be placed upon the same footing as other contracts. Scherk v. Alberto-Culver Co., 417 U.S. 506, 511, 94 S.Ct. 2449, 2453, 41 L.Ed.2d 270 (1974) (internal quotation marks omitted). Montana's [statute] directly conflicts with § 2 of the FAA because the State's law conditions the enforceability of arbitration agreements on compliance with a special notice requirement not applicable to contracts generally. The FAA thus displaces the Montana statute with respect to arbitration agreements covered by the Act. See 2 I. Macneil, R. Speidel, T. Stipanowich, & G. Shell, Federal Arbitration Law § 19.1.1, pp. 19:4-19:5 (1995) (under Southland and Perry [v. Thomas, 482 U.S. 483, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987)], state legislation requiring greater information or choice in the making of agreements to arbitrate than in other contracts is preempted). Casarotto, Id. at 687, 116 S.Ct. 1652 (emphasis added). The Court further stated: The `goals and policies' of the FAA, this Court's precedent indicates, are antithetical to threshold limitations placed specifically and solely on arbitration provisions. Section 2 mandate[s] the enforcement of arbitration agreements, Southland, 465 U.S., at 10, 104 S.Ct., at 858, save upon such grounds as exist at law or in equity for the revocation of any contract, 9 U.S.C. § 2. [Montana's statute] places arbitration agreements in a class apart from any contract, and singularly limits their validity. The State's prescription is thus inconsonant with, and is therefore preempted by, the federal law. Id. at 688, 116 S.Ct. 1652 (emphasis added). ¶ 20. Moreover, this Court has stated that we will respect the right of an individual or entity to agree in advance of a dispute to arbitration or other alternative dispute resolution. Russell v. Performance Toyota, Inc., 826 So.2d 719, 722 (Miss.2002). Indeed, it is not a matter of discretion since our duty requires us to follow the law. ¶ 21. Accordingly, all doubts concerning the scope of arbitrable issues, the construction of the contract language, and asserted defenses to arbitration must be resolved in favor of arbitration. See Taylor, 826 So.2d at 713 ( citing Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). Furthermore, this strong federal policy favoring arbitration places upon the party opposing arbitration the burden of establishing any alleged defense to the enforcement of the arbitration provision. American Heritage Life Ins. Co. v. Lang, 321 F.3d 533, 539 (5th Cir. 2003).
¶ 22. In determining the applicability of the FAA, and whether its provisions require the parties in a particular case to arbitrate their claims, we conduct a two-prong inquiry. Taylor, 826 So.2d at 713. The first prong requires a threshold finding that the agreement to be arbitrated must have a nexus to interstate commerce, 9 U.S.C.A. § 2, followed by a finding that the dispute in question is arbitrable, that is, the terms of the arbitration agreement require the parties to arbitrate the kind of dispute involved in the litigation. Id. The second prong addresses whether legal constraints external to the agreement, such as fraud, duress, or unconscionability, foreclose arbitration of the claims. Id. at 713.