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Affirming a trial court's denial of a motion to compel arbitration, the Washington Court of Appeals held that the United States Supreme Court decision in Buckeye Check Cashing, Inc v. Cardegna, 546 U.S. 440 (2006), does not apply to a narrowly tailored arbitration agreement governed by state law.
In Nelson v. Westport Shipyard, Inc., No. 35308-3-II, 2007 WL 2274469 (Wash. Ct. App. Aug. 7, 2007), Nelson and Westport executed a Shareholders Agreement in which Nelson agreed to sell his shares back to Westport "upon unresolvable differences between shareholders" or "upon termination of [Nelson's] employment."
The Shareholders Agreement contained an arbitration provision specifying, "any disputes among any of the parties arising out of this Agreement" were subject to arbitration.
Westport terminated Nelson's employment at a special meeting of the Board of Directors and Shareholders, after Nelson suffered a medical emergency. Nelson then sued Westport for disability discrimination, breach of implied contract of employment, and minority shareholder oppression.
Westport moved to compel arbitration. The trial court denied the motion. Westport appealed, asserting that Buckeye mandates that a challenge to the enforceability of an agreement containing an arbitration clause is for the arbitrator to decide.
The Court held that Buckeye was not controlling, as the underlying facts of the case were distinct. The arbitration agreement in Buckeye specifically stated the Federal Arbitration Act governed the arbitration agreement and that it applied to all disputes. Conversely, Washington state law governed the 2004 Shareholders Agreement, and the agreement only required arbitration of disputes "arising out of this agreement." Moreover, the arbitration agreement in Buckeye was further distinguishable because it involved interstate commerce.
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