Opinion ID: 4523975
Heading Depth: 2
Heading Rank: 1

Heading: Formation of a Valid Arbitration Agreement

Text: This Court has not expressly addressed whether a district court may decide whether a valid arbitration agreement has been formed prior to adjudicating a motion to compel arbitration, when a delegation clause purports to grant an arbitrator authority over contract formation issues. The Supreme Court recently noted that “before referring a dispute to an arbitrator, the court determines whether a valid arbitration agreement exists.” Henry Schein, Inc. v. Archer and White Sales, Inc., 139 S. Ct. 524, 530 (2019). In Granite Rock Co. v. International Brotherhood of Teamsters, 561 U.S. 287 (2010), the Supreme Court held that to be satisfied that the parties have agreed to arbitrate a particular dispute and thus may order arbitration of that dispute, a 1 Plaintiffs note in their brief that they “agreed that these documents exist, that Pilot produced them in discovery, and that filing the documents with the court was unnecessary.” Br. of Pls. at 18. Of course, “Plaintiffs’ counsel never conceded . . . that the documents proved the existence of valid and enforceable agreements to arbitrate.” Id. Nos. 18-6270/19-5410 Taylor v. Pilot Corp., et al. Page 6 district court “must resolve any issue that calls into question the formation or applicability of the specific arbitration clause that a party seeks to have the court enforce.” Id. at 297. The Supreme Court has expressly declined to decide the more specific question of whether an arbitration agreement can deprive a district court of the authority to decide the formation question. In Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006), the Supreme Court held that “[t]he issue of the contract’s validity is different from the issue whether any agreement between the alleged obligor and obligee was ever concluded.” Id. at 444 n.1. Importantly, the Court held that its “opinion today addresses only the former, and does not speak to the issue decided in the cases cited by respondents (and by the Florida Supreme Court), which hold that it is for courts to decide whether the alleged obligor ever signed the contract.” Id. This Court, however, has repeatedly observed that challenges to the existence of a contract appear to constitute valid challenges to an arbitration clause. E.g., Masco Corp. v. Zurich Am. Ins. Co., 382 F.3d 624, 630 n.2 (6th Cir. 2004) (“This is not like a case where, for instance, a contract is void for lack of a valid signature. In such cases, courts have indicated that an arbitration clause contained in the contract would not be binding.”); Moran v. Svete, 366 F. App’x 624, 631–32 (6th Cir. 2010) (finding the plaintiff challenged the “validity,” rather than “existence” of a contract containing an arbitration clause, in part because “[t]his is not a case in which it is alleged that the signor did not sign the contract”); Burden v. Check Into Cash of Ky., LLC, 267 F.3d 483, 489 (6th Cir. 2001) (stating but not holding that “we are inclined to find that Prima Paint [Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967)] supports, rather than prohibits, excluding nonexistent contracts from the severability doctrine,” and thus a district court may decide the formation question). These decisions reflect a central tenet of the FAA—that arbitration pursuant to the statute is “a matter of consent, not coercion.” Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 479 (1989). Because, as discussed below, this Court lacks jurisdiction over the instant appeals, we cannot at the present time decide the issue of whether the district court has jurisdiction over the formation issue. Nevertheless, we note that our case law strongly suggests that the district court has the authority to determine whether the signature on an arbitration agreement is valid in advance of compelling arbitration in accordance with that agreement. To the degree that the Nos. 18-6270/19-5410 Taylor v. Pilot Corp., et al. Page 7 alleged agreements in this case purport to delegate the formation question to the arbitrator’s sole discretion, the Supreme Court’s and our case law indicate that the district court retains the authority to first satisfy itself that the agreement was validly formed before granting a motion to compel arbitration. The FAA’s demand for consent-based arbitration agreements would be severely undermined if the law operated otherwise. As the Ninth Circuit cogently noted, “[a] contrary rule would lead to untenable results. Party A could forge party B’s name to a contract and compel party B to arbitrate the question of the genuineness of its signature.” Three Valleys Mun. Water Dist. v. E.F. Hutton & Co., 925 F.2d 1136, 1140 (9th Cir. 1991).