Originally from World Arbitration And Mediation Review (WAMR)

Preview Page

FOURTH CIRCUIT HOLDS THAT THE

ARBITRAL FORUM IS APPROPRIATE
FOR ANTITRUST CLAIMS

The U.S. Fourth Circuit Court of Appeals recently held that the arbitral
forum is appropriate for claims brought under antitrust statutes.1 In so
holding, the Fourth Circuit concluded that the plaintiffs failed to establish
that the terms of the arbitration agreement at issue prevented them from
“vindicating their statutory rights.”2

In Cotton Yarn, North Carolina yarn manufacturers (“defendants”) faced
a class action suit for allegedly engaging in a price-fixing scheme in
violation of the Sherman Act. Cotton purchasers and poly-cotton yarn
purchasers (“plaintiffs”) brought suit in the Middle District of North
Carolina. The defendants filed a motion to dismiss the suit based on the fact
that the plaintiffs were subject to arbitration agreements “broad enough to
encompass the antitrust claims.” The district court denied the motion for
dismissal on the grounds that some of the contracts did not contain
arbitration clauses, and, further, that those contracts that did contain
arbitration clauses were unenforceable “because they prevented the plaintiffs
from effectively vindicating their statutory antitrust claims.”

The defendants appealed, and the Fourth Circuit Court of Appeals found
that all of the relevant arbitration agreements had “binding” arbitration
clauses. The court further held that “the plaintiffs failed to establish that the
terms of the arbitration provisions prevent[ed] them from effectively
vindicating their statutory rights.”3

The court first addressed the issue of whether the contracts provided for
binding arbitration. The defendant manufacturers in this case were Avondale
Inc. and Avondale Mills, Inc. (“Avondale”) and Frontier Spinning Mills,
Inc. (“Frontier”). The district court found that all of Avondale’s contracts
and most of Frontier’s contracts included binding arbitration provisions.

The district court, however, also found that some of defendant Frontier’s
contracts did not provide for binding arbitration.