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Legal Memorandum: Unlawful Arbitration Clause

Issue: Does an unlawful arbitration clause void an agreement?

Area of Law: Alternative Dispute Resolution, Business Organizations & Contracts
Keywords: Arbitration clause; Unlawful; Void
Jurisdiction: Federal
Cited Cases: 923 F.2d 1062
Cited Statutes: None
Date: 11/01/2005

  Very recently, in In re Cotton Yarn Antitrust Litigation, M.D.N.C. Nov. 9, 2005 (No. Civ. A. 1:04 MD 1622), a federal district court excised the arbitration clauses from the parties’ contracts and denied a motion to compel arbitration because the arbitration agreements were inconsistent with state statutory law.  See also O’Leary v. Liberty Mut. Ins. Co., 923 F.2d 1062, 1066 (3d Cir. 1991) (courts must decide whether a provision in an arbitration agreement is contrary to legislation).

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