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Reversing a trial court order abating arbitration, the Texas Court of Appeals held that the Federal Arbitration Act (FAA) preempts state law vesting the Texas Motor Vehicle Board (TMVB) with primary jurisdiction over dealership disputes.
In In re Sonic-Carrolton V, L.P., No. 05-07-00574-CV, 2007 WL 1990396 (Tex. App. July 11, 2007), Millennium sued Sonic and Volvo over a dispute arising out of the purchase and sale of an automobile dealership. Sonic and Volvo moved to compel arbitration. Although all the parties asserted the arbitration agreement covered their disputes, Millennium moved to abate arbitration to allow the TMVB to hear the dispute. Millennium argued that the TMWB had primary jurisdiction under the Texas Occupation Code. The trial court abated arbitration until the TMVB heard the dispute. Sonic and Volvo appealed.
The Court held that the FAA and strong policy favoring arbitration preempted state law vesting the TMWB with jurisdiction over dealership disputes. In a similar case, the Fifth Circuit concluded that federal policy favoring arbitration preempts state law vesting the TMVB with jurisdiction to hear dealership disputes. The Court found "the trial court's order abating the arbitration so that the dispute could be considered by a third forum, the TMWB, flies in the face of the speedy dispute resolution intended by the parties' broadly framed arbitration agreement and the FAA."
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