A blog for employment lawyers, human resources professionals, and union representatives.
« Arbitration Law Memo | Main | "Reverse" discrimination violates public policy »
July 14, 2005
Forum clause controls which court can order arbitration
An arbitration agreement specified Washington, DC as the place for arbitration, but one of the parties asked a Colorado federal court to order arbitration. Held:
- Can't order them to arbitrate in Colorado, because the agreement requires arbitration in Washington, DC.
- Can't order them to arbitrate in Washington, DC, because FAA Section 4 requires a geographical nexus between the arbitration forum and the district court issuing the order.
So says the 10th Circuit in Ansari v. Qwest Communications (10th Cir 07/12/2005).
It's all about Federal Arbitration Act (FAA) Section 4, which deals with federal district court orders to compel arbitration:
A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under Title 28, in a civil action . . . of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement. . . . The court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. The hearing and proceedings, under such agreement, shall be within the district in which the petition for an order directing such arbitration is filed. If the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof.
It turns out courts have taken three different approaches when deciding whether a district court may compel arbitration when the arbitration agreement states that arbitration shall take place in another district:
- One is the 5th Circuit: A district court may compel arbitration in the district specified in the arbitration agreement, even though that district is outside its own district. Dupuy-Busching Gen. Agency, Inc. v. Ambassador Ins. Co., 524 F.2d 1275, 1276, 1278 (5th Cir. 1975). Wrong, says the court, because "no statutory language supports this approach."
- Two is the 9th Circuit: A district court can compel arbitration in its own district and ignore the forum specified in the arbitration clause. Unlimited, Inc. v. A..BMH & Co., 240 F.3d 781, 783 (9th Cir. 2001). Wrong, says the court, because Section 4 says "the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement."
- Three is the majority rule: Where the parties agreed to arbitrate in a particular forum only a district court in that forum has authority to compel arbitration under Section 4. Correct, says the court, finding in Section 4 a "mandate that arbitration and the order compelling arbitration issue from the same district."
My view:
- A court cannot order arbitration at a venue different from the one chosen by the parties. Section 4 is clear on that.
- Section 4 is less clear on whether one district court can order arbitration in another district. Still, it's a good idea not to.
- I like the outcome. It creates a bright line, and prevents forum-shopping.
- What does the Colorado District Court do with the fact that a law suit has been filed there, yet that court cannot compel arbitration? Simple. Just stay the court proceedings pending a decision in the District of Columbia as to whether the matter is arbitrable. That's what happened in the Ansari case.
Posted by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.
