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U.S. Supreme Court Settles Whether Illegality Claims Go to Arbitrator
Until the recent decision in Buckeye Check Cashing, Inc. v. Cardegna, 126 S.Ct. 1204 (Feb. 21, 2006), there was some uncertainty as to how claims of illegality would fare against attempts to enforce arbitration agreements. The decision did not turn on whether the contract was void or voidable, as did earlier lower court decisions, but simply on whether the illegality claim was directed to the underlying contract or the arbitration clause itself. Relying on Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967), the Court treated the illegality claim in the same manner as a claim of fraud in the inducement and held that 'unless the challenge is to the arbitration clause itself, the issue of the contract's validity is considered by the arbitrator in the first instance.' 126 S.Ct. at 1206.
Buckeye was brought as a class action in the Florida state court, claiming that a check-cashing firm charged usurious interest. The allegedly usurious contract contained a standard arbitration clause and provided it would be governed by the Federal Arbitration Act ('FAA'). On a motion to compel arbitration by the check-cashing firm, the trial court ruled that since the contract was void ab initio (because it was illegal), the arbitration clause could not be enforced. The intermediate appellate court went the other way, holding that since the arbitration clause itself was not challenged as illegal, it could be enforced. The Florida Supreme Court reversed on the basis that to enforce an arbitration clause in an illegal agreement would 'breathe life into a contract that not only violates state law, but also is criminal in nature.' Id. at 1207.
The U.S. Supreme Court reversed, applying the reasoning of Prima Paint that 'unless the challenge is to the arbitration clause itself, the issue of the contract's validity is considered by the arbitrator in the first instance.' 126 S.Ct. at 1206. The Court referred to the 'rule of severability' enunciated in Prima Paint (that the court treat the arbitration agreement as a separate agreement) as a means of ensuring that arbitration contracts will be enforced in the same manner as other contracts as commanded by '2 of the FAA. (9 U.S.C. '2 provides in pertinent part: 'A written provision in … a contract … to settle by arbitration a controversy thereafter arising out of such contract … or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract … shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.')
Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
Legal Possession: What Does It Mean?
Possession of real property is a matter of physical fact. Having the right or legal entitlement to possession is not "possession," possession is "the fact of having or holding property in one's power." That power means having physical dominion and control over the property.
The Stranger to the Deed Rule
In 1987, a unanimous Court of Appeals reaffirmed the vitality of the "stranger to the deed" rule, which holds that if a grantor executes a deed to a grantee purporting to create an easement in a third party, the easement is invalid. Daniello v. Wagner, decided by the Second Department on November 29th, makes it clear that not all grantors (or their lawyers) have received the Court of Appeals' message, suggesting that the rule needs re-examination.