Originally from:

World Arbitration and Mediation Review (WAMR) - 2007 Vol. 1 No. 2

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RECENT DEVELOPMENTS

NINTH CIRCUIT HOLDS THAT
COURT DETERMINES VALIDITY OF
ARBITRATION CLAUSE

I. OVERVIEW
Connie Nagrampa, a California resident, became a franchisee of
MailCoups, Inc. and executed an agreement that provided for arbitration, in
Boston, of all disputes arising from the agreement. Nagrampa v.
MailCoups, Inc. 469 F.3d 1257, 1265 (9th Cir. 2006). Nagrampa later
terminated the agreement, and MailCoups initiated arbitration against her
seeking more than $80,000 in fees. Nagrampa responded with proof of
extensive personal debt and payment of more than $400,000 in various fees
to MailCoups. Id.
MailCoups initiated arbitration in Los Angeles, California. Id.
Nagrampa’s maintained that she was not “ready or willing to proceed with
arbitration” and that he had “serious concerns about the validity of the
arbitration clause.” Id. at 1266. Nagrampa objected to the venue selection,
requesting that the arbitration be moved to Contra Costa, California and
refused to file an answer to the demand for arbitration, which was
subsequently moved to Boston. Id. Although the American Arbitration
Association suggested moving the arbitration to Fresno, California,
MailCoups refused, and the arbitration remained scheduled for Boston. Id.
When Nagrampa was not able to obtain a fee waiver from the American
Arbitration Association, she sent a letter stating she would not participate in
the arbitration. Id.
Nagrampa then filed an action against both MailCoups and the
American Arbitration Association in California state court, alleging several
different causes of action ranging from common law torts to specific
challenges of the arbitration provision, i.e., the provision was substantially
one-sided and part of a contract of adhesion: She did not seek to set aside
the entire franchise agreement. Id.
MailCoups removed the action to federal district court and filed a
motion to compel arbitration. The federal district court dismissed
Nagrampa’s action and allowed MailCoups to hold the arbitration action in
Boston. Id. at 1267. Nagrampa appealed. A three-judge panel affirmed the
district court in an opinion that has since been withdrawn. Id. The Ninth
Circuit heard the case en banc to determine the validity of the arbitration
clause in the franchise agreement between MailCoups and Nagrampa. Id.
The majority opinion by Justice Wardlaw held: 1) the court, not the
arbitrator, must determine the validity of the arbitration clause; and 2) the