A federal court in New York has determined that even though challenges to the validity of a contract as a whole are questions for the arbitrator, challenges to the existence of the contract and, more specifically, to the signatory's authority to enter the contract remain questions for the court.

In Town of Amherst v. Custom Lighting Services, LLC, No. 07-CV-261S, 2007 WL 4264608 (W.D.N.Y. Nov. 30, 2007), the Town of Amherst (the Town) filed a lawsuit seeking a stay of arbitration after Custom Lighting Services (CLS) demanded arbitration in connection with a lighting services contract that contained an arbitration provision.

In support of its lawsuit, the Town claimed that the contract was unenforceable on three grounds: (1) fraudulent inducement; (2) noncompliance with competitive bidding laws; and (3) the Town Supervisor lacked authority to enter the contract.

The Court found that the first two grounds for challenging the contract related to the validity of the contract as a whole and thus raised a question for the arbitrator, rather than the court. See Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006).

However, the Court agreed with the Town that it is for the court to decide whether the Town Supervisor was authorized to sign the contract. Under footnote 1 of the Buckeye decision, it is for the court to decide the existence of the underlying contract and, more specifically, whether the signatory had authority to enter the contract.

Nevertheless, the Town failed to meet its burden of raising a material question on the threshold issue of whether the Town Supervisor had the requisite authority. Accordingly, the Court found no basis for staying arbitration and thus dismissed the lawsuit.