Section 18 Court Jurisdiction

• Library: Arbitration and Mediation 2011

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The courts have jurisdiction to decide what the Supreme Court has characterized as the “gateway question” of arbitrability—namely, whether the parties have entered into a valid and binding agreement to arbitrate. PacifiCare Health Sys., Inc. v. Book,538 U.S. 401, 407 (2003). But the court’s role in deciding this issue is basically limited to this one determination. Id. at 406–07. If the court decides in favor of arbitration, the matter proceeds in arbitration without further court involvement.

In Granite Rock Co. v. International Brotherhood of Teamsters, 130 S. Ct. 2847 (2010), the Supreme Court reaffirmed that the question of whether the parties are subject to arbitration is an issue for judicial determination. Id. at 2855–56. “To satisfy itself that such agreement exists, the 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 2856. The Court held that a dispute over the ratification date of a CBA (collective bargaining agreement) when the agreement contained an arbitration clause was a matter to be resolved by the district court rather than the arbitrator.

The FAA contemplates in 9 U.S.C. § 2 two types of challenges to the validity of an arbitration provision:

1. A challenge specifically directed at the validity of the agreement to arbitrate

2. A challenge to the contract as a whole

The latter challenge could be on a ground that directly affects the entire agreement (such as fraudulent inducement to enter into the contract) or on a ground that the illegality of one of the contract’s provisions renders the contract as a whole invalid. In re Crossroads Ford, Inc., 449 B.R. 366 (B.A.P. 8^th Cir. 2011). The party is entitled to have the first type of challenge—to the validity of the arbitration agreement—heard by a federal court before the dispute is subject to arbitration; the second type of challenge—to the contract as a whole—will be decided in arbitration. Id.

Once a court refers a matter to arbitration, the arbitrator has jurisdiction to decide the remainder of the dispute. The Supreme Court, in Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006), held that a challenge to the validity of a contract as a whole, and not specifically to an arbitration clause in the contract, must go to the arbitrator and not the court for ^resolution. This decision provides yet another major vote of confidence for arbitration and the ability of arbitrators to decide and determine how to enforce contracts. This result supports the continuation of a trend by the Supreme Court over a number of years that has expanded and widely endorsed...