Will Louisiana courts enforce this arbitration clause, even if only one side is actually bound to arbitrate?
Yes, as a matter of strong statutory policy, but a clause that binds only one party can fail as a contract of adhesion. Louisiana's Binding Arbitration Law, La. R.S. 9:4201: "A provision in any written contract to settle by arbitration a controversy thereafter arising out of the contract ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." Once such an agreement exists, § 9:4202 makes a stay near-automatic, on its own stated condition and on a party's application: "If any suit or proceedings be brought upon any issue referable to arbitration under an agreement in writing for arbitration, the court in which suit is pending, upon being satisfied that the issue involved in the suit or proceedings is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until an arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with the arbitration." But the Louisiana Supreme Court has struck down an arbitration clause on ordinary contract grounds where it lacked mutuality: in James Duhon v. Activelaf, LLC (the Sky Zone trampoline-park case), the Court reversed the court of appeal, "holding the arbitration clause in the Sky Zone agreement is adhesionary and therefore unenforceable," because the clause bound only the patron and not Sky Zone, and "the lack of mutuality in the arbitration clause fortifies our finding that it is adhesionary."
The trap
Duhon does NOT create a per se rule that any degree of non-mutuality voids an arbitration clause: the majority says so in terms, that "Aguillard did not create a per se rule that any degree of non-mutuality in an arbitration agreement renders it unenforceable," and it acknowledged "requiring term-for-term mutuality in an arbitration clause could risk running afoul of the [Federal Arbitration Act]." Be careful how the earlier case is described, though, because Duhon does NOT say Aguillard enforced a non-mutual clause; it says the opposite: "in Aguillard, we found the arbitration clause did not lack sufficient mutuality to invalidate the clause as adhesionary because the arbitration clause severely limited both the defendants' and the plaintiff's right to litigate, and the defendants did not reserve their right to litigate in the document." The line Duhon draws is between a clause that bound both sides and one that bound only the patron, not between degrees of imperfect mutuality. The dissents in Duhon make the trap concrete, and they are dissents, not the holding. Justice Weimer opened his by agreeing that the Aguillard factors were "an appropriate starting point for analyzing the issue presented in this matter" and closing that passage with "I find the arbitration clause to be valid and enforceable." They argued the four Aguillard factors the majority itself set out ("(1) the physical characteristics of the arbitration clause, (2) the distinguishing features of the arbitration clause, (3) the mutuality of the arbitration clause, and (4) the relative bargaining strength of the parties") must be WEIGHED together, not resolved by mutuality alone, and that the majority never reached the fourth at all ("Indeed, this is one of the four factors delineated in the Aguillard analysis. Yet, the majority opinion does not mention, much less weigh, this factor in conducting its analysis"), and that the majority's focus on mutuality to the exclusion of the other factors (the clause was in the same size and font as the rest of the agreement, and the patron checked a box at the top of the paragraph that contained it, though, as the majority stressed, "significantly no check box was placed next to the arbitration language," which sat eleven lines into a multi-topic paragraph) was itself contestable. A reviewer should therefore check the clause's physical presentation and the signing mechanism, not just whether both sides are bound, before predicting enforceability. Separately, § 9:4201's own text preserves ordinary contract defenses ("save upon such grounds as exist at law or in equity for the revocation of any contract"): fraud, lack of consent, and adhesion analysis under general Louisiana contract law remain live even though the statute otherwise strongly favors arbitration.
12 authorities
- statuteLa. R.S. 9:4201enactment date not established
The words that state the rule
A provision in any written contract to settle by arbitration a controversy thereafter arising out of the contract, or out of the refusal to perform the whole or any part thereof, or an agreement in writing between two or more persons to submit to arbitration any controversy existing between them at the time of the agreement to submit, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
- statuteLa. R.S. 9:4202enactment date not established
The words that state the rule
If any suit or proceedings be brought upon any issue referable to arbitration under an agreement in writing for arbitration, the court in which suit is pending, upon being satisfied that the issue involved in the suit or proceedings is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until an arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with the arbitration.
- caseNo. 2016-CC-0818 (La. Oct. 19, 2016)James Duhon v. Activelaf, LLC, D/B/A Skyzone Lafayette and Underwriters at Lloyds, LondonLa.decided 2016
The words that state the rule
For the following reasons, we reverse the ruling of the court of appeal, holding the arbitration clause in the Sky Zone agreement is adhesionary and therefore unenforceable.
- caseNo. 2016-CC-0818 (La. Oct. 19, 2016)James Duhon v. Activelaf, LLC, D/B/A Skyzone Lafayette and Underwriters at Lloyds, LondonLa.decided 2016
The words that state the rule
Additionally, the lack of mutuality in the arbitration clause fortifies our finding that it is adhesionary.
- caseNo. 2016-CC-0818 (La. Oct. 19, 2016)James Duhon v. Activelaf, LLC, D/B/A Skyzone Lafayette and Underwriters at Lloyds, LondonLa.decided 2016
The words that state the rule
Although patrons are required to check a box adjacent to the top of the third paragraph, significantly no check box was placed next to the arbitration language.
- caseNo. 2016-CC-0818 (La. Oct. 19, 2016)James Duhon v. Activelaf, LLC, D/B/A Skyzone Lafayette and Underwriters at Lloyds, LondonLa.decided 2016
The words that state the rule
Finding our analysis in Aguillard instructive, we consider the following factors to determine the enforceability of the arbitration clause in the Sky Zone Agreement: (1) the physical characteristics of the arbitration clause, (2) the distinguishing features of the arbitration clause, (3) the mutuality of the arbitration clause, and (4) the relative bargaining strength of the parties. After our review of the Agreement in light of the above factors, we hold the arbitration clause is adhesionary and not enforceable because of its placement in the Agreement and its lack of mutuality. Examining the physical characteristics of the arbitration clause, we observe the arbitration language is consistent in size and font with the other provisions in the Agreement.
- caseNo. 2016-CC-0818 (La. Oct. 19, 2016)James Duhon v. Activelaf, LLC, D/B/A Skyzone Lafayette and Underwriters at Lloyds, LondonLa.decided 2016
The words that state the rule
The factors discussed in Aguillard simply provided a template for considering consent to an arbitration clause contained in a standard contract. Aguillard did not create a per se rule that any degree of non-mutuality in an arbitration agreement renders it unenforceable, nor did Aguillard prescribe a definitive rule that arbitration agreements must be delineated a particular way to be enforceable. Considering the Aguillard analysis in its entirety, it is clear we viewed the arbitration provision in the context of the overall contract and the surrounding circumstances, and our determination was based on weighing several factors.
- caseNo. 2016-CC-0818 (La. Oct. 19, 2016)James Duhon v. Activelaf, LLC, D/B/A Skyzone Lafayette and Underwriters at Lloyds, LondonLa.decided 2016
The words that state the rule
Thus, in Aguillard, we found the arbitration clause did not lack sufficient mutuality to invalidate the clause as adhesionary because the arbitration clause severely limited both the defendants’ and the plaintiff’s right to litigate, and the defendants did not reserve their right to litigate in the document.
- caseNo. 2016-CC-0818 (La. Oct. 19, 2016)James Duhon v. Activelaf, LLC, D/B/A Skyzone Lafayette and Underwriters at Lloyds, LondonLa.decided 2016
The words that state the rule
We are mindful that setting forth a legal requirement relative to a particular form or method of distinguishing or highlighting arbitration clauses, or requiring term-for- term mutuality in an arbitration clause could risk running afoul of the FAA. However, the Supreme Court has made it clear that state courts may apply standard state law contract defenses to arbitration agreements.
- caseNo. 2016-CC-0818 (La. Oct. 19, 2016)James Duhon v. Activelaf, LLC, D/B/A Skyzone Lafayette and Underwriters at Lloyds, LondonLa.decided 2016
The words that state the rule
Finally, as to the third Aguillard factor, the mutuality of the obligation to arbitrate, the majority acknowledges that “Aguillard did not create a per se rule that any degree of non-mutuality in an arbitration agreement renders it unenforceable,”4 and that “requiring term-for-term mutuality in an arbitration clause could risk running afoul of the [Federal Arbitration Act],”5 but then inexplicably invalidates the arbitration clause in the Sky Zone Agreement precisely because it lacks the term-for- term mutuality that it acknowledges the law does not require, and may even prohibit.
- caseNo. 2016-CC-0818 (La. Oct. 19, 2016)James Duhon v. Activelaf, LLC, D/B/A Skyzone Lafayette and Underwriters at Lloyds, LondonLa.decided 2016
The words that state the rule
Pursuant to this definition, a predicate factor to consider in determining whether a contract is adhesionary is the existence of unequal bargaining power. Indeed, this is one of the four factors delineated in the Aguillard analysis. Yet, the majority opinion does not mention, much less weigh, this factor in conducting its analysis
- caseNo. 2016-CC-0818 (La. Oct. 19, 2016)James Duhon v. Activelaf, LLC, D/B/A Skyzone Lafayette and Underwriters at Lloyds, LondonLa.decided 2016
The words that state the rule
WEIMER, J., dissenting. I agree with the majority’s assessment that the factors outlined in Aguillard v. Auction Management Corp., 04-2804 (La. 6/29/05), 908 So.2d 1, are an appropriate starting point for analyzing the issue presented in this matter.1 See Duhon v. ActiveLaf, LLC, 16-0818, slip op. at 7 (La. 10/__/16). However, I respectfully disagree with the majority’s conclusion that analysis of the Sky Zone Agreement using Aguillard’s four-factor “framework” supports a finding that the arbitration clause is adhesionary and not enforceable. To the contrary, I find the arbitration clause to be valid and enforceable.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.