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In ordering arbitration of a telecommunications dispute, a federal court applied the Buckeye doctrine that a challenge to the validity of a contract as a whole is a matter for the arbitrator.
In Qwest Communications Corp. v. Ansari, No. 05-1836 (EGS), 2007 WL 172318 (D.D.C. Jan. 23, 2007), Qwest and Broadband Utility Resources (BUR) entered into a contract whereby BUR could use part of Qwest's telecommunications network. Two years later, BUR sued Qwest in federal court in Colorado, alleging several torts and violations of the Federal Communications Act. Qwest filed a motion to compel arbitration pursuant to the parties' contract.
The Colorado district court denied Qwest's motion to compel on the ground that it lacked authority to order arbitration in Washington, D.C., which was the arbitration venue designated in the parties' agreement. The Tenth Circuit Court of Appeals affirmed the district court ruling in a decision adopting the rule that where parties have agreed to arbitrate in a particular forum, only a district court in that forum has authority to compel arbitration under section 4 of the Federal Arbitration Act (FAA). See Ansari v. Qwest Communications Corp., 414 F.3d 1214 (10th Cir. 2005).
Qwest subsequently filed suit in the United States District Court for the District of Columbia (the Court), seeking an order to arbitrate the dispute underlying the Colorado lawsuit.
In opposing arbitration, BUR argued that the contract containing the arbitration clause was void ab initio because federal law prohibited Qwest from providing the services promised in the contract. Finding Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 126 S.Ct. 1204 (2006) to be "directly on point," the Court ruled that BUR's argument raised a question for the arbitrator because the challenge was directed at the contract as a whole.
BUR also opposed arbitration on the ground that its claims under the Federal Communications Act (FCA) were not subject to arbitration. In making this argument, BUR cited section 207 of the FCA, which provides that "[a]ny person claiming to be damaged by any common carrier subject to the [FCA] may either make complaint to the [FCC] . . . or may bring suit for the recovery of the damages . . . in any district court of the United States of competent jurisdiction."
In rejecting this argument, the Court ruled that BUR had failed to meet its burden of proving that Congress intended to preclude arbitration of the statutory claims at issue. Specifically, the Court construed section 207 of the FCA as nothing more than a provision granting subject matter jurisdiction to district courts and the FCC.
Buckeye eliminated the void/voidable distinction that had lingered in the wake of Prima Paint Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395 (1967). However, footnote one in Buckeye has created a distinction between (1) challenges to the validity of a contract and (2) challenges to the existence of a contract. See Buckeye, 126 S.Ct. at 1208 n. 1. The latter category of challenges involves issues relating to the formation of the contract; the former category includes defenses to the enforcement of the contract.
Under this distinction, courts decide formation questions regarding the existence of the underlying contract. Such questions include whether a party's signature was forged, whether an agent lacked authority to bind the principal, and whether a party lacked mental capacity to assent. See, e.g., Rowe Enterprises LLC v. Int'l Sys. & Electronics Corp., 932 So.2d 537 (Fla. Dist. Ct. App. 2006); Rhymer v. 21st Mortg. Corp., No. E2006-00742-COA-R3CV, 2006 WL 3731937 (Tenn. Ct. App. Dec. 19, 2006).
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