Will a Maine court enforce this arbitration clause?
Yes, if the parties actually formed the agreement, and once they have, Maine leans hard the other way. 14 M.R.S. § 5927 makes a written agreement to arbitrate an existing controversy, or a written contract provision to arbitrate future ones, "valid, enforceable and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract", and the chapter reaches employer-employee agreements unless the agreement provides otherwise. Section 5928(1) directs the court, on a party's application showing such an agreement and the other side's refusal, to order arbitration, but where the opposing party denies that the agreement exists, to "proceed summarily to the determination of the issue so raised and shall order arbitration if found for the moving party, otherwise, the application shall be denied". Formation is where Maine cases are decided: in Sarchi v. Uber Technologies, Inc. the Law Court held that "to be enforceable, an arbitration agreement must constitute a validly formed contract", applied ordinary mutual-assent principles, and affirmed the order denying Uber's motion to compel because Uber "could have designed its rider app to incorporate scrollwrap or clickwrap contracts that provided adequate notice" and did not, so Sarchi "was not bound by either the original Terms or the updated Terms". Where formation is not in doubt, the presumption runs the other way: Anderson v. Banks records that Maine has a "broad presumption favoring substantive arbitrability", and upheld an arbitrator's authority to decide whether the very agreement containing the clause was illusory or void under the statute of frauds.
The trap
Maine's older Nisbet v. Faunce is still cited for the proposition that an arbitration agreement must be signed or live in writings exchanged between the parties. Sarchi's footnote 6 says that reading "went beyond the holding of the case on which we relied to support it", because in Maine Central Railroad "we decided that an exchange of writings was sufficient to manifest an intent to arbitrate but not that it was necessary", so do not build (or attack) a Maine clause on the assumption that a signature is required. Sarchi decided the case on assent, not on form, and said so in a footnote: "we need not rest our conclusion in her favor on Nisbet because Uber has not shown that Sarchi assented". Nor does a failure to read help the resisting party: Sarchi restates that "a party need not actually have read the terms of the contract in order to be bound by them". The second trap is the opposite of what a reader might assume from § 5928(1). That subsection sends a DENIED-EXISTENCE question to the court; it does not keep a challenge to the agreement's validity away from the arbitrator. In Anderson v. Banks, 2012 ME 6, the Law Court affirmed a judgment confirming an award where the arbitrator himself decided whether the settlement agreement was illusory and whether it satisfied the statute of frauds, holding that the Superior Court's reading of the clause as containing "the authority to allow the arbitrator to decide the validity of the Agreement as a whole was not an error of law": on clause language covering "any dispute regarding the interpretation, enforcement, or implementation or execution of this agreement". So a Maine clause can effectively delegate validity. Third, two tools in § 5928 that a party resisting arbitration should know about before relying on the formation argument alone: subsection (2) lets a court stay an arbitration "commenced or threatened on a showing that there is no agreement to arbitrate", and Anderson confirms that not using it does not waive the point; and subsection (5) forecloses a merits-based objection entirely: "[a]n order for arbitration shall not be refused on the ground that the claim in issue lacks merit or bona fides".
16 authorities
- statute14 M.R.S. § 5927enactment date not established
The words that state the rule
A written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract.
- statute14 M.R.S. § 5927enactment date not established
The words that state the rule
This chapter also applies to arbitration agreements between employers and employees or between their respective representatives, unless otherwise provided in the agreement.
- statute14 M.R.S. § 5928enactment date not established
The words that state the rule
On application of a party showing an agreement described in section 5927 and the opposing party's refusal to arbitrate, the court shall order the parties to proceed with arbitration, but if the opposing party denies the existence of the agreement to arbitrate, the court shall proceed summarily to the determination of the issue so raised and shall order arbitration if found for the moving party, otherwise, the application shall be denied.
- statute14 M.R.S. § 5928enactment date not established
The words that state the rule
On application, the court may stay an arbitration proceeding commenced or threatened on a showing that there is no agreement to arbitrate. Such an issue, when in substantial and bona fide dispute, shall be forthwith and summarily tried and the stay ordered if found for the moving party. If found for the opposing party, the court shall order the parties to proceed to arbitration.
- statute14 M.R.S. § 5928enactment date not established
The words that state the rule
An order for arbitration shall not be refused on the ground that the claim in issue lacks merit or bona fides or because any fault or grounds for the claim sought to be arbitrated have not been shown.
The words that state the rule
However, to be enforceable, an arbitration agreement must constitute a validly formed contract.
The words that state the rule
Under Maine contract law principles, “[a] contract exists when the parties mutually assent to be bound by all its material terms [and] the assent is either expressly or impliedly manifested in the contract.”
The words that state the rule
Although the parties have not raised the issue, we note that our decision in Nisbet v. Faunce can be read to imply that, to be bound by an arbitration provision, a party must have either signed an agreement containing it or agreed to it in a separate writing.
The words that state the rule
we need not rest our conclusion in her favor on Nisbet because Uber has not shown that Sarchi assented to Uber’s arbitration provision by any sufficient means, whether through her signature, in a writing, or otherwise.
The words that state the rule
We have held, however, that a party need not actually have read the terms of the contract in order to be bound by them. See Francis v. Stinson, 2000 ME 173, ¶ 42, 760 A.2d 209 (stating that “parties to a contract are deemed to have read the contract and are bound by its terms”).
The words that state the rule
However, that conclusion went beyond the holding of the case on which we relied to support it. See Me. Cent. R.R. Co. v. Bangor & Aroostook R.R. Co., 395 A.2d 1107, 1121 (Me. 1978). There, we decided that an exchange of writings was sufficient to manifest an intent to arbitrate but not that it was necessary.
The words that state the rule
Uber could have designed its rider app to incorporate scrollwrap or clickwrap contracts that provided adequate notice of Uber’s original and updated Terms and required consumers to express actual assent, and it apparently decided not to do so. The consequence of that choice is that Sarchi was not bound by either the original Terms or the updated Terms. The entry is: Order denying motion to compel arbitration affirmed.
The words that state the rule
This appeal primarily concerns whether a Settlement Agreement, 1 which contains an arbitration clause, gave the arbitrator the authority to determine whether the Agreement was valid and enforceable. We conclude that it did and affirm the judgment of the Superior Court.
The words that state the rule
The Superior Court’s conclusion that the Agreement contained within it the authority to allow the arbitrator to decide the validity of the Agreement as a whole was not an error of law. Maine has a “broad presumption favoring substantive arbitrability,” Macomber v. MacQuinn-Tweedie, 2003 ME 121, ¶ 13 , 834 A.2d 131 (quotation marks omitted), and the language of this arbitration clause, that “any dispute regarding the interpretation, enforcement, or implementation or execution of this agreement or the documents necessary to effectuate it will be decided by binding arbitration,” warrants the application of this presumption.
The words that state the rule
Also, as we have already established, the sisters did not waive their substantive arbitrability challenge when they failed to file a motion to stay the arbitration pursuant to section 5928.
The words that state the rule
In conclusion, the Superior Court did not err in affirming the arbitrator’s award and in concluding that the arbitrator had the authority to hear and decide the challenges to the validity of the Agreement as a whole. The entry is: Judgment affirmed.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.