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Legal Memorandum: Determination of Arbitrability

Issue: Under federal law in the Third Circuit, what principles are to guide a court in determining whether an agreement to arbitrate is enforceable?

Area of Law: Alternative Dispute Resolution, Business Organizations & Contracts
Keywords: Arbitration agreement; Enforceability; Gateway questions of arbitrability
Jurisdiction: Federal
Cited Cases: 684 A.2d 1021; 363 U.S. 574; 537 U.S. 79; 921 F.2d 507; 169 F.3d 501
Cited Statutes: None
Date: 03/01/2005

Critically, “gateway” questions of arbitrability, such as whether the parties have a valid agreement to arbitrate or whether the dispute falls within an arbitration clause, are for the court, not an arbitrator, to decide.  Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 85 (2002).  While issues of procedural arbitrability, such as time limits, are for the arbitrator, issues of substantive arbitrability are for the courts.  Id. at 85.  “Courts should not assume that the parties agreed to arbitrate arbitrability unless there is ‘clear and unmistakable’ evidence that they did so.”  First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (quoting AT & T Techs. v. Communications Workers of Am., 475 U.S. at 643, 649 (1986)).

The first step in determining whether to compel arbitration is to determine whether the parties in fact agreed to arbitrate the dispute.  This determination requires the court to ask:  (1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement.  AT & T Techs., 475 U.S. at 649.  “[O]rdinary state-law principles that govern the formation of contracts” should apply when deciding whether the parties agreed to arbitrate the dispute in question.  First Options, 514 U.S. at 944.  “If a court determines that a valid arbitration agreement does not exist or that the matter at issue clearly falls outside of the substantive scope of the [arbitration] agreement, it is obliged to […]

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