Posts Tagged ‘contract formation’

Carter v. SP Plus Corp. and the Federal Policy in Favor of Arbitration: Seventh Circuit Rejects Arbitration Exceptionalism in an FAA Section 16 Ruling Finding no Appellate Jurisdiction

April 21st, 2026 Appellate Jurisdiction, Appellate Practice, Application to Compel Arbitration, Application to Stay Litigation, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Law, Arbitration Practice and Procedure, Challenging Arbitration Agreements, Contract Formation, Employment Arbitration, Enforcing Arbitration Agreements, Equal Footing Principle, Existence of Arbitration Agreement, FAA Chapter 1, FAA Section 2, FAA Section 3, FAA Section 4, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 2, Federal Arbitration Act Section 3, Federal Arbitration Act Section 4, Gateway Disputes, Gateway Questions, Moses Cone Principle, Policy, Practice and Procedure, Pre-Award Federal Arbitration Act Litigation, Presumption of Arbitrability, Questions of Arbitrability, Section 2, Section 3 Stay of Litigation, Section 4, Stay of Litigation, Stay of Litigation Pending Arbitration, United States Court of Appeals for the Seventh Circuit No Comments »

Introduction: Carter  and the Federal Policy in Favor of Arbitration

federal policy in favor of arbitration | affidavitUnited 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 Continue Reading »

Does a Clear and Unmistakable Delegation Provision Require the Parties to Arbitrate Disputes About the Existence of an Arbitration Agreement?

April 27th, 2019 Arbitrability, Arbitration Agreements, Arbitration and Mediation FAQs, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Arbitration Provider Rules, Authority of Arbitrators, Existence of Arbitration Agreement, Federal Arbitration Act Section 2, Federal Arbitration Act Section 3, Federal Arbitration Act Section 4, Rights and Obligations of Nonsignatories, Separability, Severability, United States Court of Appeals for the Fifth Circuit, United States Supreme Court Comments Off on Does a Clear and Unmistakable Delegation Provision Require the Parties to Arbitrate Disputes About the Existence of an Arbitration Agreement?
Arbitrability Question 5 | Delegation Clause | Delegation Provision

Parties can, and frequently do, agree to include in their contract a so-called
“Delegation Provision” that clearly and unmistakably delegates to the arbitrators questions of arbitrability. (See, e.g., Loree Reinsurance and Arbitration Law Forum posts here, here, here, and here.) Questions of arbitrability include questions concerning: (a) the scope of an arbitration agreement, that is, whether the parties agreed to arbitrate particular disputes or categories of disputes; (b) the validity or enforceability of an arbitration agreement “upon upon such grounds as exist at law or in equity for the revocation of any contract[,]” 9 U.S.C. § 2; or (c) whether an arbitration agreement has been formed or concluded, that is, whether an arbitration agreement exists in the first place. (See Loree Reinsurance and Arbitration Law Forum post here.)

Typically, a “delegation provision” states in clear and unmistakable terms that arbitrability questions are to be decided by the arbitrators. For example, by making part of their contract Rule 8.1 of the 2018 version of the International Institute for Conflict Prevention and Resolution (CPR)’s Non-administered Arbitration Rules, parties agree to the following broad Delegation Provision:

Rule 8: Challenges to the Jurisdiction of the Tribunal

8.1 The Tribunal shall have the power to hear and determine challenges to its jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement. This authority extends to jurisdictional challenges with respect to both the subject matter of the dispute and the parties to the arbitration.

CPR Non-Administered Arbitration Rule 8.1 (2018) (emphasis added).

Who Gets to Decide whether the Parties Entered into a Delegation Provision?

Federal Arbitration Act | Who Gets to Decide? | Delegation Provision

Suppose that Agent A, without the knowledge and consent of Party A, purports to bind Party A to a written contract with Party B, which includes a broad arbitration agreement that expressly incorporates by reference, and makes part of the purported contract, the 2018 version of CPR’s Non-administered Arbitration Rules. Party B and Agent A deal with each other concerning the subject matter of the contract, and a dispute arises.

Party B demands arbitration of the dispute, and serves an arbitration demand on Party A, who is understandably surprised at being named a party in an arbitration proceeding concerning a purported agreement of which it had no knowledge, objects to the arbitration demand, and Party B commences an action to compel arbitration.

In the proceeding to compel arbitration, Party A argues that Agent A had no actual or apparent authority to bind it to the agreement that contained the arbitration agreement. Party B responds that because the Delegation Clause made part of the agreement requires arbitration of issues concerning the “existence” of the arbitration agreement, Party A must arbitrate the issue of whether Agent A had authority to bind it to the agreement.

Must Party A arbitrate the issue whether Agent A had authority to bind it to the agreement because the agreement contains a Delegation Provision? If the only consideration were the text of Rule 8.1, then the answer would be “yes.”

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