Arguing That (1) The Default Rule Under the Federal Arbitration Act is that the Court Decides Whether a Valid Arbitration Agreement Exists and (2) The Act Pre-Empts Any Massachusetts Policy Barring the Enforcement of Pre-Dispute Arbitration Agreements in Consumer Claims
The plaintiff, who died during this appeal, was a 78-year-old resident of Massachusetts who has sued her former investment/financial advisor and his firm, alleging, inter alia, fraud and deceit, intentional misrepresentation, breach of fiduciary duty, and violation of the Massachusetts Consumer Protection Law, Mass. G.L. c. 93A. The defendants moved to compel arbitration, based on an arbitration agreement in the contracts that the plaintiff entered into with LPL Financial. The defendants’ motion was denied (and denied again upon rehearing) on two grounds: first, that a question exists as to whether a valid arbitration agreement exists and, second, that under a 1982 Supreme Judicial Court decision, Hannon v. Original Gunite Aquatech Pools, Inc., 385 Mass. 813 (1982), an agreement to arbitrate a consumer claim under c. 93A is unenforceable on the grounds of public policy.
The defendants appealed the denial of their motion to compel arbitration to the Massachusetts Appeals Court, and then applied to the Supreme Judicial Court for direct appellate review. Their application was granted and the Court subsequently issued an invitation for amicus briefs on the following two issues: (1) whether its 1982 Hannon ruling remains viable under subsequent holdings by the United States Supreme Court and (2) whether the existence of an arbitration clause is a question of fact to be determined in the first instance by a court.
NELF has long supported the freedom of contracting parties to enter into binding arbitration agreements. Consistent with that position, NELF filed an amicus brief supporting the defendants and answering the SJC’s amicus question as follows. First, basing its argument on established principles set forth by the United States Supreme Court under the Federal Arbitration Act (FAA), NELF argued that, except where the contracting parties have expressly agreed otherwise, it is the role of the court, not of an arbitrator, to determine whether a valid agreement to arbitrate exists. Second, NELF argued that, as set forth clearly by the United States Supreme Court in Southland Corp. v. Keating, 465 U.S. 1 (1984) and in numerous subsequent decisions, where the FAA applies, as here, a court cannot refuse, on alleged state public policy grounds, to enforce an otherwise valid agreement to arbitrate a category of claims.
In its August 2013 decision, the Court agreed with NELF that Supreme Court law had overruled Hannon, and the Court recognized that, where the FAA applies, any state rule of law that prohibits a trial court from compelling arbitration of state claims is preempted.
The plaintiff, who died during this appeal, was a 78-year-old resident of Massachusetts who has sued her former investment/financial advisor and his firm, alleging, inter alia, fraud and deceit, intentional misrepresentation, breach of fiduciary duty, and violation of the Massachusetts Consumer Protection Law, Mass. G.L. c. 93A. The defendants moved to compel arbitration, based on an arbitration agreement in the contracts that the plaintiff entered into with LPL Financial. The defendants’ motion was denied (and denied again upon rehearing) on two grounds: first, that a question exists as to whether a valid arbitration agreement exists and, second, that under a 1982 Supreme Judicial Court decision, Hannon v. Original Gunite Aquatech Pools, Inc., 385 Mass. 813 (1982), an agreement to arbitrate a consumer claim under c. 93A is unenforceable on the grounds of public policy.
The defendants appealed the denial of their motion to compel arbitration to the Massachusetts Appeals Court, and then applied to the Supreme Judicial Court for direct appellate review. Their application was granted and the Court subsequently issued an invitation for amicus briefs on the following two issues: (1) whether its 1982 Hannon ruling remains viable under subsequent holdings by the United States Supreme Court and (2) whether the existence of an arbitration clause is a question of fact to be determined in the first instance by a court.
NELF has long supported the freedom of contracting parties to enter into binding arbitration agreements. Consistent with that position, NELF filed an amicus brief supporting the defendants and answering the SJC’s amicus question as follows. First, basing its argument on established principles set forth by the United States Supreme Court under the Federal Arbitration Act (FAA), NELF argued that, except where the contracting parties have expressly agreed otherwise, it is the role of the court, not of an arbitrator, to determine whether a valid agreement to arbitrate exists. Second, NELF argued that, as set forth clearly by the United States Supreme Court in Southland Corp. v. Keating, 465 U.S. 1 (1984) and in numerous subsequent decisions, where the FAA applies, as here, a court cannot refuse, on alleged state public policy grounds, to enforce an otherwise valid agreement to arbitrate a category of claims.
In its August 2013 decision, the Court agreed with NELF that Supreme Court law had overruled Hannon, and the Court recognized that, where the FAA applies, any state rule of law that prohibits a trial court from compelling arbitration of state claims is preempted.
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