The Ninth Circuit today vacated an order compelling arbitration.  The court traced the district court’s error to its equation of issues that an arbitrator must decide — validity and enforceability of a contract containing an arbitration clause — with a question that a court must determine — whether the parties entered into a contract in the first place.  Sanford v. MemberWorks, Inc., No. 05-55175 (9th Cir. Apr. 16, 2007). 

The district court concluded that, because the formation question relates to the contract "as a whole" (instead of just the arbitration provision), the issue falls within the arbitrator’s bailiwick under Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967).  Wrong, wrong, wrong, the court of appeals held, pointing out the difference between not enforcing a contract that the parties did enter into (because, for example, it violates public policy) and refusing to enforce one on which the parties’ minds never met.  Validity/enforceability of actual contract — for arbitrator.  Did parties ever make a contract — for court.

The court also ordered the district court to let the plaintiff seek class certification on remand.  The arbitration clause, unlike many these days, apparently didn’t purport to bar class treatment.

Barry Barnett

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