Opinion ID: 1711563
Heading Depth: 1
Heading Rank: 6

Heading: To Settle by Arbitration.

Text: Alternatively, the Kelleys argue that a predispute contract clause requiring nonbinding arbitration cannot be considered an agreement to settle by arbitration within the meaning of § 2 of the AA. In essence, the Kelleys argue that nonbinding arbitration settles nothing in the sense that there is a finality to the controversy. Since nonbinding arbitration is not a final settlement, it must not be within the scope of § 2. The Kelleys' argument is not supported by the construction of the AA given by other courts. The act was an attempt by Congress to place an arbitration agreement upon the same footing as other contracts and to overrule the judiciary's longstanding refusal to enforce agreements to arbitrate. Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985). The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability. Moses H. Cone Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983). The contract clause agreed to by the Kelleys provided that they would submit to an impartial third-party arbitration hearing, administered through a Home Buyers Warranty approved arbitration service, any dispute arising out of the BSS warranty as a condition precedent to the commencement of any litigation to compel compliance with the BSS warranty. The AA requires that this contract provision be given the same effect as any other contract provision. In considering this issue, other courts have found that contract clauses which require that parties submit to nonbinding arbitration or clauses that require arbitration as a condition precedent to the commencement of litigation are within the scope of the act. For example, an agreement between competing bowling equipment manufacturers to obtain a nonbinding advisory opinion concerning disputes which might arise over comparative advertising claims was found to be within the scope of the AA. AMF Inc. v. Brunswick Corp., 621 F.Supp. 456 (E.D.N.Y. 1985). In construing the scope of the Illinois Uniform Arbitration Act, the Illinois Court of Appeals stated: It is not necessary for the parties to an arbitration agreement to be able to solve all disputes between them at arbitration. Rather, the court must give effect to the arbitration agreement and require those issues to be arbitrated which are covered by the agreement. Heiden v. Galva Foundry Co., 223 Ill.App.3d 163, 168, 165 Ill.Dec. 339, 343, 584 N.E.2d 518, 522 (1991). When a plaintiff `bases its right to sue on the contract itself, not upon a statute or some other basis outside the contract, the provision requiring arbitration as a condition precedent to recovery must be observed.' Cheshire Place v. West of England Ship Owners Mut., 815 F.Supp. 593, 597 (E.D.N.Y. 1993). Accordingly, the Home Buyers Warranty clause requiring that the parties submit to nonbinding arbitration a dispute arising under their agreement as a condition precedent to litigation is within the scope of the AA and must be given the same effect as any other contract provision. Therefore, the district court's denial of Benchmark's motion to stay the proceedings with respect to the BSS Home Buyers Warranty agreement is in error and requires reversal.