Will Montana enforce this arbitration clause, and can Montana law impose extra formalities on it?
Yes, and no: Montana's Uniform Arbitration Act enforces a written arbitration agreement on the same footing as any other contract, and Montana learned the hard way that it cannot add arbitration-only conditions on top. The section has two operative halves and they are not interchangeable. § 27-5-114(1), MCA: “A written agreement to submit an existing controversy to arbitration is valid and enforceable except upon grounds that exist at law or in equity for the revocation of a contract.” § 27-5-114(2), MCA says the same of an agreement “to submit to arbitration any controversy arising between the parties after the agreement is made”, the ordinary pre-dispute clause, and it is subsection (2) alone that carries the four subject-matter exclusions set out below. Historically Montana's own statute added a formality on top, and it did not survive. The Montana Supreme Court quoted the provision while applying it: “Specifically, § 27-5-114(4), MCA, stated that” the provision reading “notice that a contract is subject to arbitration pursuant to this chapter shall be typed in underlined capital letters on the first page of the contract; and unless such notice is displayed thereon, the contract may not be subject to arbitration.” It added that “This section (since repealed) was in effect in November 1993”. The purpose was disclosure: “the legislature sought to ensure that parties to a contract were aware, when they signed a contract subject to an arbitration clause, that they were waiving their constitutional right to access the courts.” It was struck down as preempted by the Federal Arbitration Act in Doctor's Associates, Inc. v. Casarotto, and the Montana Supreme Court has since recorded the result plainly: “The law imposing the notice requirements as to contractual arbitration clauses was subsequently overturned by the United States Supreme Court and repealed by the Montana Legislature.” Montana's current § 27-5-114 carries no notice or typeface requirement of any kind, so the lesson holds in both directions: Montana may apply its general contract defences to an arbitration clause, and may not impose a formality that applies to arbitration clauses alone. Procedurally, § 27-5-115 lets a party move to COMPEL arbitration on a showing of the agreement and a refusal to arbitrate, or to STAY one where no agreement to arbitrate exists, with the court deciding that threshold question summarily.
The trap
§ 27-5-114(2) itself excludes four categories from the after-the-fact arbitration agreement rule (subject to a trade/professional-organization exception in subsection (3)): claims arising out of personal injury (contract or tort), a consumer's acquisition of property, services, or credit worth $5,000 or less, most insurance or annuity contracts, and workers' compensation claims. General, judge-made unconscionability remains a live defense even to a facially valid arbitration clause: in Global Client Solutions, LLC v. Ossello the Montana Supreme Court held that “[t]his arbitration provision unreasonably favors Global to the detriment of Ossello and is therefore unconscionable and unenforceable”, applying ordinary Montana contract law rather than any arbitration-specific rule, which is exactly the kind of generally applicable contract defence the Federal Arbitration Act leaves open. The clause there made the consumer arbitrate everything while the drafter kept its own claims for court, so one-sidedness about WHO must arbitrate is the feature to check. Labor/employment arbitration agreements are handled by a DIFFERENT, narrower incorporation rule (§ 27-5-113): they are valid and enforceable, and pull in the rest of the chapter, ONLY “if the agreement so specifies,” except that §§ 27-5-115, 27-5-311, 27-5-312(1) and (3)-(5), 27-5-313, and 27-5-322 apply regardless. Of those, only § 27-5-115 (the motion to compel or stay) is stated here; the rest are the chapter's award, vacatur and appeal provisions and are not set out in this answer.
10 authorities
- statuteMont. Code Ann. § 27-5-114enactment date not established
The words that state the rule
A written agreement to submit to arbitration any controversy arising between the parties after the agreement is made is valid and enforceable except upon grounds that exist at law or in equity for the revocation of a contract.
- statuteMont. Code Ann. § 27-5-115enactment date not established
The words that state the rule
On the application of a party showing an agreement described in 27-5-114 and the opposing party's refusal to arbitrate, the district 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 that issue raised and shall order arbitration if it finds for the applying party or deny the application if it finds for the opposing party.
- statuteMont. Code Ann. § 27-5-113enactment date not established
The words that state the rule
Arbitration agreements between employers and employees or between their respective representatives are valid and enforceable and may be subject to all or portions of this chapter if the agreement so specifies, except 27-5-115 , 27-5-311 , 27-5-312 (1) and (3) through (5), 27-5-313 , and 27-5-322 apply in each case.
- statuteMont. Code Ann. § 27-5-114enactment date not established
The words that state the rule
Except as permitted under subsection (3), this subsection does not apply to: (a) claims arising out of personal injury, whether based on contract or tort; (b) any contract by an individual for the acquisition of real or personal property, services, or money or credit when the total consideration to be paid or furnished by the individual is $5,000 or less; (c) any agreement concerning or relating to insurance policies or annuity contracts except for those contracts between insurance companies; or (d) claims for workers' compensation.
- statuteMont. Code Ann. § 27-5-114enactment date not established
The words that state the rule
A written agreement between members of a trade or professional organization to submit to arbitration any controversies arising between members of the trade or professional organization after the agreement is made is valid and enforceable except upon grounds that exist at law or in equity for the revocation of a contract.
- statuteMont. Code Ann. § 27-5-114enactment date not established
The words that state the rule
A written agreement to submit an existing controversy to arbitration is valid and enforceable except upon grounds that exist at law or in equity for the revocation of a contract.
- case1998 MT 219City of Cut Bank v. Tom Patrick Construction, Inc.Mont.decided 1998read it at the source ↗
The words that state the rule
Specifically, § 27-5-114(4), MCA, stated that "notice that a contract is subject to arbitration pursuant to this chapter shall be typed in underlined capital letters on the first page of the contract; and unless such notice is displayed thereon, the contract may not be subject to arbitration." This section (since repealed) was in effect in November 1993, at the time that Cut Bank entered into the construction contract with Tom Patrick.
- case1998 MT 219City of Cut Bank v. Tom Patrick Construction, Inc.Mont.decided 1998read it at the source ↗
The words that state the rule
In so providing, the legislature sought to ensure that parties to a contract were aware, when they signed a contract subject to an arbitration clause, that they were waiving their constitutional right to access the courts.
- case982 P.2d 1053Holm-Sutherland Co., Inc. v. Town of ShelbyMont.decided 1999read it at the source ↗
The words that state the rule
The law imposing the notice requirements as to contractual arbitration clauses was subsequently overturned by the United States Supreme Court and repealed by the Montana Legislature.
The words that state the rule
This arbitration provision unreasonably favors Global to the detriment of Ossello and is therefore unconscionable and unenforceable.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.