Ninth Circuit Reaffirms that “Arbitrability” Issue Is To Be Decided By The Courts Unless The Parties Agree Otherwise

When there is a dispute as to whether a given dispute must be arbitrated, who decided that question:  the arbitrator or a judge?

The general rule is that unless the parties contract to refer the “arbitrability” issue to the arbitrator, it must be decided by the court.  Recently, the Ninth Circuit reaffirmed this principle in Bridge Funds Capital Corporation v. Fastbucks Franchise Corporation.  The court also held that the arbitration clause in this case, which would have required a California franchisee to litigate in Texas under Texas law, was unenforceable because it was unconscionable. “If the ‘place and manner’ restrictions of a forum selection provision are ‘unduly oppressive,’ or have the effect of shielding the stronger party from liability, then the forum selection provision is unconscionable.” 

For your convenience, a complete copy of the court’s opinion is attached.

We regularly advise clients about arbitration issues and other legal issues pertinent to the business environment.  Feel free to give us a call if you have questions or issues in this area.