Express invocation of arbitration rules that reserve questions of arbitrability for the arbitrator defeats the normal presumption that courts decide questions of arbitrability, according to a federal district court in California.

In Visa USA, Inc. v. Maritz Inc., No. C 07-05585 JSW, 2008 WL 744832 (N.D. Cal. Mar. 18, 2008), Maritz entered into a contract with Visa to provide certain software. After delays and difficulties with implementation, Visa terminated the parties’ contract. This contract did not contain an arbitration agreement.

However, Visa later proposed that the parties resolve their outstanding claims against each other through a dispute resolution process, which could ultimately include binding arbitration. Maritz agreed, and an agreement was executed that provided for direct negotiations, followed by non-binding mediation, followed by binding arbitration pursuant to the American Arbitration Association (AAA) Commercial Rules.

Later, Visa communicated its claims to Maritz. Maritz stated that it did not anticipate the amount and magnitude of Visa’s claims, maintained that it would not have agreed to the aforementioned dispute resolution process had it known the extent of Visa’s claims, and alleged that the dispute resolution agreement was not valid.

Despite Maritz’s objections, Visa submitted a demand for arbitration with the AAA. Maritz opposed, claiming that the dispute resolution agreement was not valid and that AAA had no jurisdiction in the matter. AAA rejected Maritz’s arguments and stated that any jurisdictional dispute would be resolved before the arbitrator. After Maritz still refused to participate, Visa filed a motion to compel arbitration.

The Court first addressed whether Maritz was claiming fraud in the inducement of the entire agreement or just the portion regarding arbitration. While Maritz had originally maintained that the entire agreement was fraudulently induced, it later amended its complaint to only alleged inducement as to the arbitration portion, which allowed the court rather than the arbitrator to consider Maritz’s claim.

However, the Court found that the agreement "clearly and unequivocally reserved for the arbitrator all questions regarding its validity." Specifically, the Court found this clear reservation in the express language invoking "the rules and procedures of the … AAA." Since the AAA Commercial Rules reserved the issue of jurisdiction for the arbitrator, the presumption that a court should decide issues of arbitrability was defeated.

Therefore, even when Maritz challenged only the arbitration agreement’s validity, this express invocation of the AAA Commercial Rules in the agreement deprived the court of jurisdiction in the matter and required the Court to grant Visa’s motion to compel.