Tuesday, May 1, 2012

Who decides the gateway issues? Judge or Arbitrator?

Generally the Court resolves the treshhold issue of arbitrability, but the underlying agreement may allocate that function to the arbitrator or panel of arbitrators, as demonstrated by the following caselaw snippet from a recent opinion by the El Paso Court of Appeals:   
Court Or Arbitrator?           
El Paso courthouse
When a dispute involving an agreement to arbitrate is brought to a court for resolution, it is the court's obligation to determine whether the parties agreed to submit a particular issue to arbitration. See United Steelworkers of America v. American Mfg. Co., 363 U.S. 564, 80 S.Ct. 1343, 4 L.Ed.2d 1403 (1960); Del E. Webb Const. v. Richardson Hosp. Authority, 823 F.2d 145 (5th Cir. 1987).
An arbitration provision may give the arbitrator the power to resolve gateway issues regarding validity and enforceability of the arbitration agreement. In that event, the entire matter of arbitrability is transferred from the courts to the arbitrator. Unless the agreement clearly demonstrates that the parties intended to confer on the arbitrator the power to determine what disputes are arbitrable, the court retains the duty to decide that issue. Arbitration agreements that clearly and unmistakably show intent to assign gateway issues to the arbitrator are fully enforceable. See Rent-A-Center, ___ U.S. ___, 130 S.Ct. at 2777; First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1985)(holding question of primary power to decide arbitrability "turns upon what the parties agreed about that matter"); AT&T Technologies, Inc. v. Communications. Workers, 475 U.S. 643, 649, 106 S.Ct. 1415, 1418, 89 L.Ed.2d 648 (1986)(holding parties may agree to arbitrate arbitrability). Accordingly, under First Options, gateway questions which are normally decided by a court will be submitted to an arbitrator where the agreement was clear and unmistakable. See First Options, 514 U.S. at 943; AT&T Technologies, Inc., 475 U.S. at 649, 106 S.Ct. at 1418.

SOURCE: EL PASO COURT OF APPEALS - 08-11-00091-CV – 4/25/2012
CASE: HIS Acquisition No. 131 v. Iturralde (Tex.App.- El Paso [8th Dist.] April 25, 2012)

Here, the Agreement provided that "any and all claims challenging the validity or enforceability of this Agreement . . ." are subject to arbitration. It thus clearly and unmistakably provided for issues of validity and enforceability to go to the arbitrator. Iturralde argues that whether the contract is supported by adequate consideration is not an issue of validity or enforceability but rather an issue of formation for the court to decide. We disagree. The Agreement bears Iturralde's signature evidencing her assent to its terms and clearly provides for an arbitrator to decide all issues of arbitrability.
In Rent-A-Center, the Supreme Court clarified how courts must treat challenges to an arbitration agreement's delegation provision. See Rent-A-Center, ___ U.S. ___, 130 S.Ct. 2772.
The Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to interpretation, applicability, enforceability or formation of this Agreement including, but not limited to any claim that all or any part of this Agreement is void or voidable.
Id. at 2775-76. According to the Supreme Court, the analysis in situations challenging a stand-alone arbitration agreement containing a delegation provision depends on the kind of challenge being made. Id. If the challenge relates to the arbitration agreement as a whole, and the agreement contains a provision delegating issues of arbitrability to the arbitrator, then the challenge must be directed to arbitration. Id. If the challenge is specific to the issue of delegation, however, then the court must resolve the challenge. Id.
The Agreement presented clearly and unmistakably provides that issues of validity and enforceability go to the arbitrator. Iturralde signed the Agreement, manifesting her intent that gateway issues be arbitrated. Additionally, Iturralde challenges the entire arbitration agreement based on the assertion that the term provision renders the Agreement illusory. Under Rent-A-Center, because there is a specific delegation provision, and Iturralde challenges the Agreement as a whole, rather than the specific delegation provision, the issue goes to the arbitrator. Therefore, the determination of whether the agreement is illusory is for the arbitrator and not the court.
SOURCE: EL PASO COURT OF APPEALS - 08-11-00091-CV – 4/25/2012

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