Opinion ID: 1817898
Heading Depth: 1
Heading Rank: 3

Heading: Arbitration Law

Text: At the outset, we note the positive law of Louisiana favors arbitration. See La.Rev. Stat. § 9:4201. La.Rev.Stat. § 9:4201 specifically provides: A provision in any written contract to settle by arbitration a controversy thereafter arising out of the contract, or out of the refusal to perform the whole or any part thereof, or an agreement in writing between two or more persons to submit to arbitration any controversy existing between them at the time of the agreement to submit, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. Moreover, La.Rev.Stat. § 9:4202 states that if any suit or proceedings are brought upon any issue referable to arbitration, the court in which suit is pending shall stay the trial of the action pending arbitration: If any suit or proceedings be brought upon any issue referable to arbitration under an agreement in writing for arbitration, the court in which suit is pending, upon being satisfied that the issue involved in the suit or proceedings is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until an arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with the arbitration. Such favorable treatment echos the Federal Arbitration Act (FAA), 9 U.S.C. § 1, et seq. Section 2 of the FAA provides: A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. Section 3 requires a stay of proceedings in a suit in which a matter is found to be referable to arbitration: If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration. Unquestionably, the FAA embodies a liberal federal policy favoring arbitration agreements. See Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). This favorable treatment continues as well in the United States Supreme Court jurisprudence in which the Court has instructed that the effect of Section 2 is to create a body of federal substantive law of arbitrability and any doubt concerning the scope of arbitrable issues should be resolved in favor of arbitration. See Moses, 460 U.S. at 24, 103 S.Ct. 927. This construction is applicable 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. Id. at 25, 103 S.Ct. 927. The United States Supreme Court has made it clear that the substantive provisions of the FAA preempt state law and govern all written arbitration agreements in contracts connected to transactions involving interstate commerce. Collins v. Prudential Ins. Co. of America, 99-1423, p. 2 (La.1/19/00), 752 So.2d 825, 827. Moreover, whether a claim is brought in state or federal court, and whether a claim is based on state or federal law, courts must enforce arbitration agreements in contracts covered by the FAA, notwithstanding any state statutory or jurisprudential rules to the contrary. Collins, 99-1423, p. 2, 752 So.2d at 827, citing Southland Corp. v. Keating, 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984). The phrase involving commerce has been interpreted as the functional equivalent of affecting commerce. Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 277, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995). Furthermore, the Supreme Court has concluded that Congress intended to exercise its commerce powers to the fullest in legislating in favor of arbitration. Id. Although the FAA clearly preempts state law in cases involving transactions which affect commerce, see Allied-Bruce, 513 U.S. at 273, 115 S.Ct. 834, the states do retain the ability to regulate contracts involving arbitration agreements and may do so under general contract law as is referenced in the final section of 9 U.S.C. § 2. Id. at 281, 115 S.Ct. 834. Thus, states may invalidate an arbitration clause upon such grounds as exist at law or in equity for the revocation of any contract. Id. at 281, 115 S.Ct. 834. 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' intent. See Volt Information Sciences, Inc., 489 U.S. [468], at 474, 109 S.Ct. [1248], at 1253[, 103 L.Ed.2d 488]. Allied-Bruce, 513 U.S. at 281, 115 S.Ct. 834. In accordance with La.Rev.Stat. § 9:4202, the defendants in this case sought to have the plaintiff's civil proceeding for breach of contract filed in district court stayed, arguing that under the clear provisions of the arbitration agreement contained in the Auction Terms and Conditions signed by plaintiff prior to participation in the March 25, 2003 auction, the issues raised in plaintiff's civil petition were referable to arbitration. In response, plaintiff requested the district court under its authority provided by La. Rev.Stat. § 9:4201 and 9 U.S.C. § 2 and recognized by Allied-Bruce to regulate contracts involving arbitration agreements under general contract law to declare the arbitration agreement invalid and unenforceable as a contract of adhesion.