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In a case where the parties had agreed to non-binding arbitration, a federal district court in Louisiana held that the parties did not agree to arbitrate within the meaning of the Louisiana Arbitration Law because arbitration under that statute is, by definition, a binding procedure.
In Timber Source, LLC v. Cahaba Valley Timber Co., No. 06-9239, 2007 WL 2332318 (D. La. Aug. 13, 2007), Timber Source and Cahaba Valley entered into a contract for the purchase of pine lumber. The contract contained a provision for non-binding arbitration.
When Timber Source sued for breach of contract, Cahaba Valley filed a motion to compel arbitration pursuant to the contract. The Court denied the motion, citing McKee v. Home Builders Warranty Corp, 45 F.3d 981, 985 (5th Cir. 1995), which states that under Louisiana law, an agreement to non-binding arbitration is not an agreement to arbitrate.
The Court noted that Louisiana law does recognize arbitration as a valid alternative dispute resolution procedure. However, the Louisiana arbitration statute only applies to agreements to binding arbitration. The statute does not apply to "non-binding" arbitration agreements because arbitration under the statute is, by definition, a binding procedure.
Additionally, the section heading of the Louisiana Arbitration Law has been amended to read Louisiana Binding Arbitration Law, which indicates the state's intent to clarify this issue. Thus, if the parties agreed to non-binding arbitration, they did not agree to arbitration within the meaning of the statute.
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