April 26, 2022, brought us two new arbitration rulings to sink our teeth into. One ruling was issued by the Supreme Court and the other by the Court of Appeals. I think the court of Appeals decision might get reversed.
In Car Credit, Inc v. Pitts, the Supreme Court considered a challenge to a judgment confirming an arbitration award. The appellant claimed that the award should be vacated because the arbitration forum designated in the arbitration clause was not utilized because it was unavailable. In my opinion, the Supreme Court (and Federal courts) go out of their way to confirm arbitration awards. This case was no different, but it relied upon a rule that the Supreme Court has repeatedly articulated. It is highly technical but lawyers in this field need to know it. The Court found that the arbitration agreement contained an enforceable delegation clause and the appellant failed to challenge the validity and enforceability of that clause.
The appellant did challenge the AAA arbitrator’s authority to hear the case on jurisdictional grounds. The arbitrator denied that challenge. But the appellant failed to challenge the arbitrator’s jurisdiction to make that ruling. Regardless, the Court of Appeals ruled in her favor. But the Supreme Court reversed, noting in part that “the delegation provision is an agreement to arbitrate threshold issues concerning the arbitration agreement”, citing the Seminal case of Rent-A-Center, W., Inc. v. Jackson.
In what may be the next arbitration ruling to be reversed by the Supreme Court, the Court of Appeals ruled in favor of the appellant in Wind v. McClure. In that case, the Court of Appeals held that the Circuit Court was correct in refusing to enforce an arbitration agreement because its language and format failed to comply with state law mandates. To be specific, the arbitration agreement failed to include certain large font warnings, regarding the existence of an arbitration clause. The requirement in question, however, is not included in the Federal Arbitration Act, the supremacy of which the Supreme Court strictly enforces. Perhaps the appellate will not appeal. Food for thought.