Introduction: Carter and the Federal Policy in Favor of Arbitration
United States Circuit Judge Judge Frank H. Easterbrook’s opinion in Carter v. SP Plus Corp., No. 25-2127, slip op. at 1-5 (7th Cir. Apr. 15, 2026), is important for two related reasons. First, it carefully distinguishes an immediately appealable denial of a motion to compel arbitration from a non-appealable order refusing to lift a Section 3 stay of litigation pending the district court’s decision on whether an arbitration agreement was formed. Second, and more significantly, it rejects an employer’s attempt to invoke the federal policy favoring arbitration as a reason to relax ordinary procedural and evidentiary rules and resolve doubts in favor of arbitration. The opinion instead applies Morgan v. Sundance, Inc., 596 U.S. 411, 418 (2022), according to its terms: arbitration agreements are to be enforced like other contracts, not a favored class of “super contracts” entitled to special treatment. (For a discussion of Morgan, see here.)
We have discussed how, even before Morgan, courts have recognized that the federal policy in favor of arbitration is of limited scope. (See here.) Essentially, the principle that doubts should be resolved in favor of arbitration is not at all a generally applicable rule of decision in arbitration law but rather allows, in a limited context, a pro-arbitration resolution of ambiguities concerning the scope of the arbitration agreement itself. See Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287, 301-303 (2010); Lamps Plus v. Varela, 139 S. Ct. 1407, 1418-19 (2019).
Nevertheless, arbitration proponents sometimes still contend that the the federal policy in favor of arbitration requires courts to select a pro-arbitration outcome whenever some doubt exists about an arbitration-law-related question.
Carter reminds us that is not so. The Federal Arbitration Act (the “FAA”) does not authorize arbitration-agreement exceptionalism. If ordinary litigation principles cut against agreement enforcement, then the result should be the same as obtains in any other ordinary contract action. See Carter, slip op. at 4-5; Morgan, 596 U.S. at 418. Outside of its limited role in requiring the summary resolution of contract ambiguities in the scope of the arbitration agreement itself—something that spares arbitration-law litigants (and courts) from having to conduct lengthy trials to resolve contract ambiguities about scope—the federal policy in favor of arbitration plays no meaningful role, apart from ensuring that arbitration agreements are on an equal footing with other contracts.
Carter is of interest because it concerns FAA Section 16 interlocutory appeals, FAA Section 4 formation disputes, and Morgan‘s continuing role in curbing overbroad invocations of pro-arbitration policy.
Background
Carter, an employee, sued SP Plus Corporation, the employer, under state and federal minimum-wage statutes. Shortly thereafter, the district judge stayed the litigation in favor of arbitration based on a checked box in Carter’s electronic “‘onboarding materials’” that allegedly reflected assent to a “Mutual Agreement to Arbitrate All Claims.” Carter, slip op. at 1.
But an FAA Section 3 stay was entered too quickly and without notice to Carter. After this initial ruling, Carter filed an affidavit describing a very different onboarding process from the one SP Plus had presented. According to Carter, a human-resources employee, Brenjy Etienne, filled out and signed most of the forms on Carter’s behalf, did not explain what they were, did not offer Carter the option to decline arbitration, and did not allow him to see the computer screen on which the choices were being made. If Carter’s account was true, then he had not consented to arbitration. Id. at 2.
On reconsideration, the district court lifted the Section 3 stay and denied SP Plus’s motion to stay pending arbitration, concluding that on the record the court could not determine that a valid arbitration agreement had been formed. Id. at 2. SP Plus appealed instead of submitting responsive evidence or asking the district court to conduct an evidentiary hearing.
The Section 16 Question
The first issue on appeal was appellate jurisdiction under FAA Section 16. SP Plus argued that the district court had entered an appealable order under 9 U.S.C. Section 16(a)(1), either by refusing a stay under Section 3 or by denying a petition to counder Section 4 to order arbitration to proceed. See 9 U.S.C. § 16(a)(1)(A) & (B). The Seventh Circuit acknowledged that the district court did not expressly state whether the district court was denying the request for arbitration. Id. at 2-3.
As the Court explained, there were two different possibilities. If the district court’s next step was merits litigation, then the order effectively denied arbitration and could be appealed. But if the next step was merely an evidentiary hearing, or a trial under Section 4, to determine whether Carter himself checked the box and agreed to arbitrate, then the district court had not denied arbitration. It had only postponed decision while evaluating disputed evidence. A delay of that kind is different from an appealable denial, said the Court. Id. at 3.
The Court quoted Section 4, and the procedures Section 4 maps out for resolving disputes about whether arbitration should be compelled, including notice to parties resisting arbitration. The Court observed that the district court had acknowledged it made its original order without notice and without granting a trial, which is required when the making of the arbitration agreement is in issue. “This implies],]” said the Court, “that the order [on reconsideration] rescinding the premature directive to arbitrate is not final and that the appeal must be dismissed.” Id. at 3.
The Court’s Jurisdiction Analysis and Conclusion
But that was not the end of it. The Seventh Circuit ultimately concluded that in the circumstances, this particular order was appealable. That was so not because the district court had clearly denied arbitration in the first instance (it did not), but because SP Plus had forfeited any entitlement to the Section 4 hearing or trial that might otherwise have occurred as a result of the order. Absent such forfeiture, the order would have been non-appealable because it would not have denied the request for arbitration or otherwise constituted a final decision with respect to arbitration. See id. at 3-4; 9 U.S.C. §§ (a)(1)(A) & (B), (a)(3). But the forfeiture eliminated the necessity for a trial on the making of the agreement, and the order was thus appealable as a denial of a request for arbitration. See id. at 3-4.
The Court explained that a party entitled to a hearing or trial under Section 4 may “relinquish” that right. Id. at 3. SP Plus wanted the court of appeals to direct the district court to hold a hearing, yet it had never asked the district judge to grant one. Nor had SP Plus submitted any evidence responding to Carter’s affidavit. In the district court, SP Plus did not signal a desire to present testimony from Etienne or anyone else. It simply noticed an appeal. Id. at 4. “A party can’t keep the district court in the dark about the existence of an evidentiary dispute and then ask for relief on appeal[,]” the Court explained.
If SP Plus wanted a hearing, it had to request one and support the request with evidence. It did neither, and the Seventh Circuit held that SP Plus had accordingly forfeited any right to a hearing, which in turn meant that the district court’s order had become a conclusive—and thus appealable—denial of a motion to compel arbitration. Id. at 4.
The Court shows us it is telling to consider SP Plus’s litigation strategy in light of what might have transpired had it proactively asserted its rights. SP Plus could have easily filed an affidavit from Etienne attesting to Carter’s consent to arbitration, if he had consented and she had knowledge of facts showing that consent. Id. at 4. That might have led to an evidentiary hearing concerning the making of the agreement, see 9 U.S.C. § 4, or depending on what the two affidavits showed, perhaps a ruling on the merits on the consent question. If the result was an evidentiary hearing, or a grant of the request for arbitration, then there would be no appealable order yet.
Alternatively, had Etienne remembered things the way Carter did, and submitted an affidavit to that effect, then—assuming the electronic evidence was inconclusive––SP Plus’s request for arbitration would have “lack[ed] essential evidence.” Id. at 4. That would have resulted in an order denying the request for arbitration, which would have been appealable immediately.
Carter shows how a case that initially appears non-appealable can become appealable because the party seeking arbitration forfeits procedural rights that otherwise would have kept the matter in an interlocutory posture.
The Merits: Formation, Section 4, and Forfeiture
Once the Seventh Circuit determined that appellate jurisdiction existed, the merits were straightforward. Carter had submitted sworn testimony that he never assented to arbitration. Absent a fully formed and enforceable delegation agreement, whether a party agreed to arbitrate is ordinarily a question for the court, not the arbitrator. See, e.g., AT&T Technologies, Inc. v. Communications Workers, 475 U.S. 643, 649, 651 (1986); Granite Rock, 561 U.S. at 299-300, 301-03; Carter, slip op. at 4. On the record that SP Plus chose to make, the district court’s conclusion that no valid agreement had been shown was not clearly erroneous. Carter, slip op. at 4.
The opinion is especially instructive in what it says about Section 4 procedure. Section 4 does not automatically hand the proponent of arbitration an evidentiary do-over. It gives a right to a hearing or trial when formation is in issue, but like many procedural rights that right can be waived or forfeited. Carter therefore ties together contract formation, Section 4 procedure, and ordinary preservation principles.
There’s a lesson here. Counsel who seek arbitration sometimes assume that once the opponent submits an affidavit disputing assent, the district court must on its own set a hearing and continue protecting the arbitration request from adverse consequences. Carter exposes that assumption as unfounded. The burden remains on the party seeking arbitration to request the hearing, preserve the record, and adduce evidence on the existence of an arbitration agreement. If it does not, the district court is entitled to treat the record as closed and decide the issue against the party bearing the burden of proving an agreement.
The Federal Policy in Favor of Arbitration Cannot Save the Day
The opinion’s most significant contribution comes in its final section. SP Plus argued that the Seventh Circuit should effectively “place a thumb on the scale in favor of” a pro-arbitration outcome because of the federal policy in favor of arbitration. Id. at 4. The Court—quite correctly, the author thinks—emphatically rejected that proposition, relying on Morgan, where the Supreme Court made clear that the federal policy in favor of arbitration is to make arbitration agreements “as enforceable as other contracts, but not more so.” Morgan, 596 U.S. at 418 (citation and quotation omitted); Carter, slip op. at 4-5; Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n.12 (1967).
Carter applies Morgan in an important context. Morgan is, not surprisingly, often cited in waiver cases, because Morgan itself rejected arbitration-specific waiver rules. But as Morgan’s text strongly suggests, and Carter confirms, Morgan’s discussion of the federal policy in favor of arbitration has implications outside of the waiver context. Morgan rejects arbitration exceptionalism generally; Carter demonstrates that the point extends beyond waiver to formation disputes, evidentiary burdens, forfeiture of procedural rights, and appellate arguments under Section 16. If ordinary rules would counsel against enforcement of an ordinary contract, they also counsel against enforcement of an arbitration contract. Carter, slip op. at 5.
The import of Carter on the Morgan issue is that the federal policy in favor of arbitration does not extend past the narrow purpose for which it was judicially designed: to resolve in favor of arbitration ambiguities in the scope of an arbitration agreement itself. See, e.g., Granite Rock, 561 U.S. at 301-303.
The Court also rejected SP Plus’s effort to denigrate Carter’s affidavit as merely “self-serving.” Citing Hill v. Tangherlini, 724 F.3d 965 (7th Cir. 2013), the Court explained that affidavits made on personal knowledge are not to be discounted simply because they are favorable to the affiant. Carter, slip op. at 5. The Seventh Circuit tersely concluded by remarking that “[a] brief that repeats canards expressly rejected by decisions such as Morgan and Hill is hard to take seriously.” Id. at 5.
Conclusion: The Employer wins on Appellate Jurisdiction, Loses on the Merits, and Receives no Help from the Federal Policy in Favor of Arbitration
Carter deserves close attention. It is a compact but important Seventh Circuit opinion that clarifies how FAA Section 16 operates when a district court reconsiders a premature stay in favor of arbitration, how Section 4 hearing rights can be forfeited, and why Morgan v. Sundance is significant well beyond waiver doctrine.
Most importantly, Judge Easterbrook’s well-reasoned opinion rejects the notion that courts should “place a thumb on the scale in favor of arbitration” when ordinary evidentiary and procedural rules point the other way. Id. at 4. The FAA requires equal treatment for arbitration contracts, not favored treatment. Id. at 4-5. Carter states that proposition clearly and applies it rigorously.
Contacting the Author
If you have any questions about this article, arbitration, arbitration-law, or arbitration-related litigation, then please contact Philip J. Loree Jr., at (516) 941-6094 or PJL1@LoreeLawFirm.com.
Philip J. Loree Jr. is principal of the Loree Law Firm, a New York attorney who focuses his practice on arbitration and associated litigation. A former BigLaw partner, he has 35 years of experience representing a wide variety of corporate, other entity, and individual clients in matters arising under the Federal Arbitration Act, as well as in insurance- or reinsurance-related, and other disputes.
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Tags: Appellate Jurisdiction, Carter v. SP Plus Corp., contract formation, FAA Section 16, FAA Section 4, Federal Policy in Favor of Arbitration, Forfeiture, Interlocutory Appeal, Judge Easterbrook, Morgan v. Sundance, Motion to Compel Arbitration, Seventh Circuit
