Buckeye Check Cashing Inc. v. Cardegna

No. 04-1264 (U.S. filed Aug. 12, 2005); Clearinghouse Number: 55836

Description

U.S. Supreme Court Grants Review to Determine Whether State Courts or Arbitrators Determine Contract's Legality Before Arbitration

Abstract

The U.S. Supreme Court granted certiorari in a Florida case over whether a court or an arbitrator determined a contract's legality before a party must comply with the contract's arbitration provision. The Florida Supreme Court had held that, where a party sufficiently alleged that a contract was void for violation of Florida's usury laws, the Florida courts, and not an arbitrator, must first determine the contract's legality before a party was required to submit to arbitration under a provision of the contract. In a putative class action, appellee-petitioners (respondents before the U.S. Supreme Court)—borrowers who entered into numerous "payday loan" transactions—alleged that appellant-respondent lender (petitioner before the U.S. Supreme Court) made illegal usurious loans disguised as check-cashing transactions in violation of state law. Lender moved to compel arbitration pursuant to mandatory binding arbitration provisions in an agreement that borrowers had signed. The trial court denied the motion, the appellate court reversed the decision, and the Florida Supreme Court reversed the appellate court. Asking the U.S. Supreme Court to reverse the Florida high court, lender argues that, under Prima Paint Corp. v. Flood and Conklin Manufacturing Company, 388 U.S. 395 (1967), unless a party challenges its assent to arbitration—which lender says borrowers have not done—any challenge to the validity of the underlying contract (as opposed to the arbitration clause itself) must be presented first to the arbitrator. Borrowers argue that Prima Paint is limited to federal court proceedings and does not govern this state court case, lender cannot overcome the presumption against federal preemption of state contract law, and the Federal Arbitration Act does not provide a statutory basis for extending Prima Paint to state court cases. Lender notes that six federal appellate courts' conclusion is that a party may not avoid arbitration under Prima Paint by challenging the underlying contract as illegal.

Additional Information

Attorney Information
Appellants represented by F. Paul Bland, Michael Quirk, Trial Lawyers for Public Justice PC, 1717 Massachusetts Ave. NW, Suite 800, Washington, DC 20036 (202.797.8600); Arthur Bryant, Leslie Bailey, Trial Lawyers for Public Justice, PC, 555 Twelfth St., Suite 1620, Oakland, CA (510.622.8150).
Docket Date
2005-08-12 05:00:00+00:00
Attorney Email
abryant@tlpj.org