Commercial Litigation and Arbitration

Arbitration — Separate Consideration Required for Arbitration Clause?

The defendant in Accuride Corp. v. Forgitron, LLC, 2007 U.S. Dist. LEXIS 60508 (N.D. Ohio Aug. 17, 2007), signed an arbitration clause but did not want to arbitration. Opposing the plaintiff’s motion to compel, it argued that the arbitration clause was not valid because it was not supported by consideration — it was part of a supply contract under which the plaintiff promised to purchase steel from the defendant but never did so (the plaintiff was nonetheless seeking to enforce a contractual non-compete against the defendant). District Judge Dan Aaron Polster ruled that:

1. Separate consideration is not a requirement of a valid arbitration clause, provided the underlying contract is supported by consideration.

2. Because the defendant’s position was that the contract as a whole was not supported by consideration (because the plaintiff never intended to purchase steel from it), the matter was for the arbitrator to decide: ‛[A]lthough a challenge to the validity of an arbitration clause contained in a contract is a matter to be resolved by the Court, a challenge to the validity of the contract as a whole must be decided by an arbiter.“

3. Because an arbitration clause may be severable from the remainder of the contract, ‛in the absence of a legitimate challenge to the clause itself, it is enforceable regardless of the validity of the rest of the contract.“

4. ‛[A]ny ambiguities as to the scope of the arbitration clause must be resolved in favor of arbitration.“

5. The defendant’s tortious interference, unfair competition and spoliation counterclaims, because they arise out of the parties’ contractual relationship, are subject to mandatory arbitration.

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