Will a Minnesota court send this dispute to arbitration under our clause, and who decides challenges to the contract itself?
For an arbitration clause within the reach of the Federal Arbitration Act, the Minnesota Supreme Court analyses the clause under the FAA and the federal cases interpreting that Act, and it overruled its own prior decision in Atcas v. Credit Clearing Corp. to the extent Atcas conflicts with Allied-Bruce Terminix v. Dobson (Onvoy). Applying federal law, the Court concluded that the words 'arising under' in the clause before it were broad enough to encompass some issues regarding contract formation; Onvoy draws the line where Prima Paint draws it, so a claim that the contract is void goes to the court and a claim that it is voidable goes to the arbitrator.
The trap
Onvoy limited itself on its face, and a drafter who reads it as a general 'arbitration clauses are broad' rule is reading past the opinion: 'In concluding that the arbitration clause in question is broad and prescribes arbitration of most claims, we do not mean to indicate that we will find all future arbitration clauses broad enough to encompass all claims.' The Court's own drafting instruction is the useful part: parties who want a court, not an arbitrator, to keep matters of contract formation or any other foreseeable issue must expressly say so in the clause. Two things this rule does NOT establish: Minnesota's arbitration statute (Minn. Stat. ch. 572B, the Revised Uniform Arbitration Act) is not among the Minnesota statutes available for this research and no part of it is quoted here, so nothing in this rule establishes what it requires about notice, waiver or vacatur, though Minnesota Supreme Court opinions we hold do reach it, § 572B.23(a) for the narrow grounds on which a court may vacate an award (City of Richfield v. Law Enforcement Labor Services, 2019) and § 572B.07(f) for the stay that must follow an order compelling arbitration (City of Rochester v. Kottschade, 2017), so those subjects are reachable in Minnesota law and are simply not carried here; and whether the FAA reaches a particular contract is a federal question this rule does not answer.
7 authorities
The words that state the rule
It is now clear that Minnesota courts must apply the FAA to transactions that affect interstate commerce. Because respondents do not dispute that the fiber-optic transmission lease involves interstate commerce within the meaning of Terminix, the arbitration clause in the lease between SHAL and Onvoy must be analyzed under federal law and, therefore, the district court and court of appeals erred in analyzing this case under Atcas . We overrule Atcas to the extent it conflicts with the holding in Allied-Bruce Terminix v. Dobson, 513 U.S. 265 , 115 S.Ct. 834 , 130 L.Ed.2d 753 (1995). The instant case must be analyzed under the Federal Arbitration Act and the federal cases interpreting that act.
The words that state the rule
Applying the reasoning set forth in these cases, we conclude that the language "arising under" in the arbitration clause at issue appears broad enough to encompass some issues regarding contract formation.
The words that state the rule
In concluding that the arbitration clause in question is broad and prescribes arbitration of most claims, we do not mean to indicate that we will find all future arbitration clauses broad enough to encompass all claims. [6] We limit our determination to the facts of this case and the particular arbitration clause at issue. Parties who want the courts to retain jurisdiction over matters of contract formation, or any other particular issues they foresee may arise in the business relationship, must expressly state such an intent when drafting the arbitration clause in the contract.
The words that state the rule
This exception allows a court to hear a plaintiff's claim that the disputed contract is void, while claims that a contract is voidable must be arbitrated.
The words that state the rule
We find the distinction made by the Second Circuit in Sandvik persuasive and adopt the exception to the Prima Paint doctrine enunciated therein; parties may not be compelled to arbitrate claims if they have alleged that the contract at issue never legally existed. Therefore, allegations that a contract is void may be heard by a court, even if not specifically directed to the arbitration clause, while allegations that a contract is voidable must be sent to arbitration.
The words that state the rule
Therefore, we remand to the district court to determine whether this lease is the product of an interested-director transaction sufficient to void the lease under Minn.Stat. § 302A.255.
The words that state the rule
We reverse and remand to the district court for further proceedings in accordance with this opinion.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.