Originally from:

Journal of American Arbitration (JAA) - Vol. 5, No. 2

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ARTICLES

The United States Supreme Court
Reverses the Florida Supreme Court in
Buckeye Check Cashing, Inc. v. Cardegna,
Holding that an Arbitrator Must Decide
Challenges to the Validity of Contracts
Containing Arbitration Provisions
By Nicole J. Jones

I. OVERVIEW
John Cardegna and Donna Reuter sued Buckeye Check Cashing
(Buckeye), alleging that Buckeye charged usurious interest rates on the
various deferred-payment transactions that they entered into with
Buckeye. Buckeye Check Cashing, Inc. v. Cardegna, 126 S. Ct. 1204,
1207 (2006). Cardegna and Reuter signed a “Deferred Deposit and
Disclosure Agreement” for each transaction, which contained two
arbitration provisions; therefore, they agreed that any dispute arising out
of an individual agreement would be resolved through arbitration. Id.
Cardegna and Reuter first filed a putative class action claim in a
Florida state court, contending that the agreements “violated numerous
Florida lending and consumer protection laws.” Id. Buckeye
immediately moved to compel arbitration; however, the trial court denied
the motion, holding that a court, not an arbitrator, should resolve the
claim questioning the legality of a contract and whether it was void ab
initio. Id. The District Court of Appeal of Florida for the Fourth District
reversed and held that the agreement to arbitrate was enforceable
because the respondents had not challenged the validity of the arbitration
provision itself, but instead challenged the validity of the entire contract.
Id. Cardegna and Reuter appealed, and the Florida Supreme Court
reversed, reasoning that enforcing a provision of a contract that was
being challenged as unlawful “could breath life into a contract that not
only violates state law, but also is criminal in nature.” Id. (quoting Party
Yards, Inc. v. Templeton, 751 So. 2d 121, 123 (Fla. Ct. App. 2000)). The
United States Supreme Court granted certiorari to determine whether a
court or an arbitrator should decide if a contract containing an arbitration
provision is void for illegality. Buckeye, 126 S. Ct. at 1207. In a
majority opinion authored by Justice Scalia, the Court held that, when a
claim challenging a contract containing an arbitration provision is
brought, an arbitrator determines the validity of the contract as a whole.
Id. at 1210.
II. THE COURT’S DECISION
A. The Florida Supreme Court Erred by Holding that the
Contract Was Not Severable as a Matter of Florida Law
Because § 2 of the FAA Applied
The United States Supreme Court began its analysis by restating the
national policy favoring arbitration as indicated by the Federal