Buckeye Check Cashing, Inc. v. Cardegna , 546 U.S. 440 (2006), is the case of the United States Supreme Court on contract law and arbitration. The case arises from a class action lawsuit filed in Florida against a payday lender who alleges a loan agreement signed by the plaintiff is unenforceable because they are essentially charging a higher rate than permitted under Florida law.
The loan agreement calls for all disputes between the borrower and the lender to be settled in arbitration. The original plaintiffs argued that all contracts, including the arbitration clause, were invalid for violating the law. When filed to the Court of Appeal, Judge Antonin Scalia wrote for a majority of seven people that the Federal Arbitration Law, previously interpreted by the Court, set a question that has long been debated by jurists and lower court judges. The opinion distinguishes voidable and voidable contracts, requiring that in the latter an arbitrator rules over all matters including the legality of the contract unless the arbitration clause itself is challenged. The only thing that did not agree was Clarence Thomas, who reiterated his belief that the Arbitration Act did not replace state law.
Video Buckeye Check Cashing, Inc. v. Cardegna
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In 1978, the Marquette Bank court ruling, which stated that under the National Banking Act of 1863 declared unable to enforce an anti-usury law against national-chartered banks based in other countries, opening the door for increased credit card spending by Americans. Other forms of consumer loans, such as title loans and payday, become available to those who can not even get the most stringent credit cards. Social activists criticize banks and companies involved in such practices, calling them predatory lenders targeting the poor with the promise of no credit checks and easy money that only come at very high interest rates, favorable when loans are extended well beyond short original terms.
Most of these lenders have their customers sign a credit agreement that includes an arbitration clause stipulating that all disputes must be resolved through the process rather than litigation. Arbitration is in turn criticized as a business friendly forum that encourages the exploitation of the most in need of money. The lawsuits on these contracts, however, are increasingly closed by lower courts that follow Supreme Court Cat Prima Corp v. Flood & amp; Conklin Mfg. Co. The case, which creates the doctrine of separateness, in which all problems in the contract with the arbitration clause, retains the clause itself, must be decided by the arbitrator and not the court, under the Federal Arbitration Act of 1925. At Southland Corp v. Keating , the Court held the FAA, and thus the doctrine of separation, applies to contracts held under the laws of the country as well. Maps Buckeye Check Cashing, Inc. v. Cardegna
Litigation history
In 1999, John Cardegna, operator of Palm Beach County 9-1-1, issued a $ 337.50 salary loan from the local branch of The Check Cashing Store, a subsidiary of Buckeye Check Cashing, Inc., a company based in Dublin, Ohio. (Now Checksmart). Then he took another loan, for $ 150. Can not pay back from his salary, he keeps rolling his loan by paying a fee to do so. This eventually reached more than $ 1,000, and with the help of a group of activist lawyers, the Trial Lawyers for Public Justice (TLPJ), he filed a class action lawsuit stating that the charges charged to him were effective interest payments at an annual rate of 1,300%, more than the legal limit Florida by 45%. The class will eventually be certified to include all store customers before September 30, 2001, reflecting changes in Florida law allowing fees.
The company moved to cancel the case and force the arbitration. When it was rejected, he petitioned to Florida Fourth District Court, which ruled that arbitration was necessary as all contracts had been challenged, not a broken arbitration clause. But then the decision was filed to the Florida Supreme Court, which was canceled on the grounds that the contract was illegal ab initio and thus the arbitration clause could not be implemented. It reads Prima Cat to distinguish between canceled contracts that can never have legal standing, as is the case, and a revocable contract in which the result may ensue as a result of a dispute settlement but where the contract is legal on his face. One court justice, Raoul Cantero, disagrees, saying that the majority disregarded the FAA's true language.
Buckeye filed a petition to the Supreme Court for certiorari, and it was awarded in 2005. Since some of the appeals circuits have voted in favor of arbitration in similar cases, the Supreme Court of Alabama has agreed with its Florida counterpart, the case closely monitored by the arbitration industry and consumer advocates.
Before the Trial
Brief
Christopher Landau from Washington firm Kirkland & amp; Ellis, a former scribe to judges Antonin Scalia and Clarence Thomas, argues for Buckeye Check; Paul Bland of TLPJ represents Cardegna. Many banking and business groups propose amici briefs on behalf of the company.
Landau briefly repeats many arguments Florida Justice Cantero has made in his disagreement: that it does not matter whether the claim is that the contract has been fraudulently induced as in Prima Paint or that it is illegal in his company. face, like here. "Whether the underlying contract is good, bad or indifferent is no legal concern to the court," he wrote. "If the parties agree to mediate their dispute, and not to oppose the arbitration agreement itself or their agreement to the underlying contract, that is the end of the matter as far as the court is concerned." Otherwise, the arbitration clause is useless because anyone can avoid it by filing a lawsuit that challenges the contract. Bland argues that illegal contracts can not exist, let alone enforced in any way:
Under the generally accepted principles of Florida law - and most other jurisdictions - treaties to commit crimes do not form contracts. There may be agreements to sell cocaine, for example, but there is no such thing under Florida law as a "contract" to sell cocaine (let alone an arbitration provision that can be enforced in a "contract" to sell cocaine). The principle governs this case.
He also reminded the judges of the preconceived notions of the preceding state law, particularly in the field of contract formation, and that Prima Cat is not applicable to FAA sections in the matter.
In short answer Landau insists again that the court's previous jurisprudence made it quite clear that the arbitration clause can only be negated if it is challenged separately. He accused respondents of having a secret agenda to override control cases. "The reason that
Another report amicus was filed by Theis Research, a California corporation with a certiorari petition before the Court in a similar case filed against a failed law firm revealing a potential conflict of interest prior to patent litigation in which it representing Theis. While different on some procedural points with Brief Bland, Theis lawyer Paul Johnson also urged the courts to rule in favor of Cardegna in case the Arbitration Act became a "Trojan Horse to attack vested force police powers in countries".
Verbal arguments
In an oral argument, Judge Sandra Day O'Connor (one of the two disagreeing at Southland) and John Roberts seem to accept Bland's argument that there is no illegal contract clause under state law, including clauses arbitration, may apply. "The state itself makes the decision that certain contracts can not be put in," O'Connor said. Ruth Bader Ginsburg is also not convinced that Prima , emerging from a lawsuit filed in federal court, applies to the state as well. Roberts and John Paul Stevens also see potential conflicts of interest in arbiters that legitimize contractual legality. "The arbitrator always has an interest in finding that the contract is legitimate and negotiable because it is the source of his business - arbitration disputes", the latter said.
On the other hand, Anthony Kennedy feels that Prima Cat and the subsequent decision has "definitely replaced state and state laws of this region [up] very far". It's up to the Court to resolve the confusion similar to that made in an instant case, he added. Antonin Scalia worries that ruling over Cardegna's good will open the flood gate of litigation. "All you have to do is open the door and you will litigate in court," Ginsburg agreed, "and then the court will decide what the arbitrator will decide."
Decision
Less than two months after the oral argument, the judges ruled 7-1 for Buckeye. O'Connor has retired and was replaced by Samuel Alito, who because he did not sit for an oral argument did not take part in the decision.
Antonin Scalia writes for the majority. The Florida Supreme Court difference between canceled and voidable contracts, as Cantero says, is irrelevant under
Clarence Thomas is the only one who disagrees. He wrote a paragraph quoting three people who had previously disagreed in similar cases and reiterated his belief that the FAA did not precede state law.
Aftermath
After the case was submitted to Florida court where it originated, the party eventually settled. In 2008 the company agreed to pay $ 7 million to fund. Of that amount, $ 2.1 million went to pay the plaintiff's lawyer. The class members, potentially numbering 70,000, split the rest.
Legacy
This case sets a precedent and is seen as expanding the scope of previous court decisions applying the FAA to the state. Courts themselves rely on it in the future, and legal scholars have discussed the effects and implications.
Advanced jurisprudence
Two years later, the Court heard Preston v. Ferrer, (552 US 346, (2008)), a case brought by former manager Alex Ferrer (television Judge Alex) against him. Ferrer has moved to pass the arbitration, arguing that Preston was not licensed by California to work as a talent agent and thus could not legally hire him for such services, and that the State Talent Act requires that all such disputes be considered by the office of the first state workers commission. He argues that this distinguishes the case from Buckeye Check .
This time it was Judge Ginsburg who wrote for an 8-1 majority that the FAA forced arbitration even when state law grants dispute resolution authorities within certain state regulatory bodies. Again, Thomas wrote a brief disagreement repeating his position and this time included Buckeye Check among the previous opinions for this effect.
Criticisms and comments
Proponents of arbitration and other means of alternative dispute settlement have seen in the decision reaffirming the affirmation of the principle of separateness that clears whether it encompasses a challenge to the legality of the underlying contract. "Although it seems to be just a repetition of holding Prima Paint," the International Institute for Conflict Prevention and Resolution (IICPR) writes, "Buckeye's decision both explains and extends the arbitrator's jurisdiction by adding a contract potentially void to the arbitrator's domain and firmly extend the principle of termination and validity to state courts. "The decision remains open to whether it is still for the courts to decide whether a contract is well established, however, and some lower courts have rejected the movement to forcing arbitration when it is a problem. Lawyer from the international arbitration department at White & amp; The case praising the decision to make US law "consistent with current international arbitration law and doctrine", where separateness has a stronger foundation than in the US "[This] avoids damage to the reputation of the United States as 'secure' host of international arbitration. "
Those who approach from the consumer's point of view do not really care. Texas arbitration expert Alan Scott Rau called Scalia's phrase "careless and unprotected," noting that he failed to recognize that some of the challenges to contracts made by law for courts, such as capacity and forgery, must include an arbitration clause. Stephen Ware of Kansas asks Congress to uproot the doctrine of separateness and requires that courts be allowed to force arbitration only after they hear and reject any challenge to the validity of the contract itself: "The doctrine of separation separates arbitration law from an important part of contract law - defense for enforcement - and by thus failing to grant the right to file a claim with the protection of the defense. "
"[T] he Buckeye decided to force a lower court to continue the search for workable or accepting rules undermines the moral foundations of contract law," said Timothy Hall of the University of Louisville Louis D Brandeis Law School. "Scalia's opinion on Buckeye is a surprising attempt to... [institutionalize]... an explicit federal policy that imposes arbitration and refuses legal settlement of many legal issues." He, too, notes the fundamental contradiction posed by allowing defenses to form contracts to remain tried by the courts. Before and after the verdict, most of the court cases he observed in challenging contracts on defenses were deeply accepting arguments, special ignorance.
With the outcome of all this it is possible that the Court, in an attempt to simplify the problem by submitting more claims to arbitration, has actually complicated matters by requesting an analysis of the nature of the defense of the alleged contract, rather than simply hearing the defense claims and, if invalid, then send the underlying claim to arbitration.
He suggests ways in which both the legislative and judicial bodies can handle this situation.
See also
- List of US Supreme Court cases, volume 546
- List of US Supreme Court cases
References
External links
- Text Buckeye Check Cashing, Inc. v. Cardegna , 546 US 440 (2006) is available from: CourtListener Ã, Findlaw Google Scholar Justia Oyez
Source of the article : Wikipedia
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