LegalZoom.com, Inc. v. McIllwain
2013 Ark. 370
| Ark. | 2013Background
- LegalZoom.com, Inc. appeals a circuit court order denying its motion to compel arbitration in a case alleging unauthorized practice of law.
- Mclllwain filed a class-action alleging LegalZoom’s online will service violated Arkansas law and the Arkansas Deceptive Trade Practices Act.
- The arbitration clause in LegalZoom’s terms of service provides mandatory arbitration, governs via FAA, and forbids class arbitration.
- The circuit court denied arbitration, citing the alleged unauthorized practice of law as a reason to keep the dispute out of arbitration.
- LegalZoom argues FAA preempts Arkansas law and that the contract defenses should not defeat the arbitration clause; the court’s reversal remands to compel arbitration.
- Dissent argues the circuit court correctly denied arbitration, maintaining state regulatory authority over the practice of law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does FAA preempt Arkansas rule prohibiting arbitration of UPL claims? | Mclllwain argues state law blocks arbitration of UPL claims; FAA preempts. | LegalZoom contends FAA preempts state barriers to arbitration of these claims. | FAA preempts; arbitration should proceed. |
| Are contract defenses to arbitration (e.g., unconscionability) for the court or arbitrator to decide when UPL is alleged? | Cardegna/Nitro-Lift require defenses go to arbitration clause validity; court should decide. | Unconscionability or illegality of the contract may bar arbitration altogether. | Defenses to the arbitration clause, not the contract subject matter, are to be considered; clause valid. |
| Did the circuit court err in treating the entire contract as unconscionable due to UPL allegations? | Allegations about UPL render the contract unconscionable and invalidate the arbitration clause. | ALP defenses to the clause do not render the clause unenforceable; FAA governs. | Reversed; arbitration clause remains enforceable; remand to compel arbitration. |
Key Cases Cited
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (U.S. 2006) (contract defenses to arbitration must be to the arbitration clause itself)
- Cardegna v. Buckeye Check Cashing, Inc., 546 U.S. 1204 (U.S. 2006) (invalidity of contract defenses reserved for arbitrator; FAA governs)
- Nitro-Lift Technologies, LLC v. Howard, 133 S. Ct. 500 (U.S. 2012) (reaffirms Cardegna; contract defenses go to arbitrator)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (U.S. 2011) (state-law rules that obstruct arbitration disabled by FAA)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (U.S. 1967) (threshold question: validity of arbitration clause resolved by court)