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Legal Memorandum: Enforcement of Arbitration Agreements

Issue: When should the newly-enacted law regarding the enforcement of arbitration agreements be applied retroactively to pending actions?

Area of Law: Alternative Dispute Resolution, Constitutional Law
Keywords: Arbitration agreements; Waiver of a right to jury trial; Retroactive application of law
Jurisdiction: Virgin Islands
Cited Cases: 301 U.S. 389
Cited Statutes: 5 V.I.C. § 815; 9 U.S.C. § 2; 5 V.I.C. § 321
Date: 10/01/2007

The new statute states in its entirety:  “An agreement that waives a right guaranteed by the Constitution of the United States, is unenforceable, unless the waiver of the right is agreed to knowingly and voluntarily.”  5 V.I.C. § 815.[1]  This statute changes the law governing the enforceability of an arbitration agreement.

The Court of Appeals for the Third Circuit has very recently reiterated both the fundamental nature of the right to a jury trial and the presumption that exists against the waiver of the right:  “The right to a jury trial in a civil case is a fundamental right[2] expressly protected by the Seventh Amendment to the United States Constitution . . . Because the ‘right of jury trial is fundamental, courts indulge every reasonable presumption against waiver.'”  Tracinda Corp. v. DaimlerChrysler AG, Nos. 05-2363, 05-2482, ___ F.3d ___, (3d Cir. Sept. 18, 2007) (quoting Aetna Ins. Co. v. Kennedy ex rel. Bogash, 301 U.S. 389, 393 (1937)).  The court of appeals also echoed 5 V.I.C. § 815:  “To be valid, a jury waiver must be made knowingly and voluntarily based on the facts of the case.”  Tracinda, supra.

The Federal Arbitration Act (FAA) generally compels enforcement of arbitration agreements, but not if those agreements fail to meet standards of state or territorial law, that are generally applicable to all contracts.  Arbitration agreements are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any […]

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