Two recent decisions from the U.S. Court of Appeals for the Eighth Circuit show how hard it is for parties to invalidate arbitration agreements. The decisions in M.A. Mortenson Co. v. Saunders Concrete Co., Inc. and Owen v. Bristol Care demonstrate that it will either take an obvious defect in an arbitration clause or a special command from Congress before courts will limit the enforceability of arbitration agreements.
Arbitration Clause Enforceable Despite Invalid Contract Term
In Mortenson, a general contractor sought to compel a subcontractor to arbitrate a dispute pursuant to the contract between them. The subcontractor, however, argued that the arbitration provisions of the contract were unenforceable under New York law. The relevant paragraph in the contract provided that if the general contractor demanded arbitration then disputes would be resolved by arbitration in Minneapolis, Minnesota. When the general contractor made a demand for arbitration, the subcontractor filed a lawsuit in New York state court seeking a stay of arbitration and recovery for other claims. The general contractor then filed suit in federal district court in Minnesota to compel arbitration.