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Legal Memorandum: Rules for Deciding a Motion to Compel Arbitration

Issue: Under the Federal Arbitration Act, what are the rules for deciding a motion to compel arbitration?

Area of Law: Business Organizations & Contracts, Litigation & Procedure
Keywords: Motion to compel arbitration; Rules
Jurisdiction: Federal
Cited Cases: 514 U.S. 938; 363 U.S. 574; 921 F.2d 507; 473 U.S. 614; 500 U.S. 20; 475 U.S. 643
Cited Statutes: None
Date: 11/01/2004

In deciding a motion to compel arbitration under the Federal Arbitration Act (“FAA”), a court must conduct a two-step inquiry.  John Hancock Mut. Life Ins. Co. v. Olick, 151 F.3d 132, 137 (3d Cir. 1998).  The first step is to determine whether the parties agreed to arbitrate the dispute in question.  This determination involves two considerations:  (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.  Id. at 137; AT&T Techs. v. Communications Workers of Am., 475 U.S. 643, 649 (1986); PaineWebber, Inc. v. Hartmann, 921 F.2d 507, 511 (3d Cir. 1990).  “[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 Inc. v. Kaplan, 514 U.S. 938, 944 (1995).  “Arbitration agreements . . . are subject to all defenses to enforcement that apply to contracts generally.”  Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1170 (9th Cir. 2003), 124 S. Ct. 1169 (Jan. 26, 2004).

The second step is to determine “whether legal constraints external to the parties’ agreement foreclosed the arbitration of those claims.”  Mitsubishi Motors Corp. v. Solar Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985).  When the arbitration agreement involves statutory claims, the court must ask whether Congress or the state legislature intended to preclude arbitration of those claims.  Green Tree Fin. Corp. […]

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