676 F.3d 1153
8th Cir.2012Background
- Mortenson sued to compel arbitration against Saunders under the subcontract for a wind-turbine project; Saunders provided by Hartford via a performance bond.
- Subcontract Article 21 contains four sections (21.1–21.4) governing disputes; 21.2 creates arbitration when the contract documents do not provide for arbitration.
- Mortenson filed AAA arbitration demand naming Saunders and Hartford; Saunders sued in New York state court and sought to stay arbitration.
- The Minnesota district court ordered arbitration; Saunders appeals arguing 21.4 violates New York lien law and that the Disputes article is a unified, unenforceable agreement, including an unconscionability challenge.
- Rent-A-Center holds that a specific arbitration provision is severable from the contract; the court applied New York law to interpret the subcontract.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 21.2 is severable from the other Disputes sections. | Mortenson argues § 21.2 is a separate arbitration agreement. | Saunders contends all Disputes sections form a single agreement. | § 21.2 is severable; arbitration enforced under AAA rules. |
| Whether § 21.4 pay-if-paid violates New York lien law and voids the Disputes article. | Saunders argues § 21.4 renders the Disputes article unenforceable. | Mortenson contends § 21.2 governs arbitration; § 21.4 validity is irrelevant. | Irrelevant to enforceability of § 21.2; the arbitrable provision stands. |
| Whether the arbitration clause is unconscionable. | Saunders claims procedural and substantive unconscionability. | Mortenson argues lack of negotiation is not enough; forum and discretion are acceptable. | Not unconscionable under New York law. |
| Whether the district court properly compelled arbitration under FAA §4. | Saunders challenges enforcement given NY law defenses. | Mortenson seeks to enforce the specific arbitration provision. | District court correctly granted arbitration. |
Key Cases Cited
- Rent-A-Center, West, Inc. v. Jackson, 130 S. Ct. 2772 (U.S. 2010) (arbitration clause severable from contract; specific agreement governs arbitration)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (U.S. 2006) (courts cannot rule on contract validity to defeat arbitration except for the specific agreement)
- Donaldson Co., Inc. v. Burroughs Diesel, Inc., 581 F.3d 726 (8th Cir. 2009) (state-law interpretation of arbitration agreements; contract governs)
- 3M Co. v. Amtex Sec., Inc., 542 F.3d 1193 (8th Cir. 2008) (review of arbitration motion under FAA; liberal policy favoring arbitration)