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A federal court in North Carolina held that a party is estopped from claiming that the Federal Arbitration Act (FAA) should not govern a transaction because it does not involve interstate commerce when the agreement expressly states that the transaction does involve interstate commerce and is governed by the FAA.
In Bishop v. Green Tree Servicing, LLC, No. 1:06CV355, 2007 WL 959524 (W.D. N.C. Mar. 28, 2007), Bishop signed an installment contract in connection with his purchase of a mobile home from Southern Showcase Housing. Southern Showcase assigned its rights under the installment contract to Green Tree.
When Bishop defaulted on payments under the contract, Green Tree exercised its right to repossess the home. Bishop then brought a variety of state tort and statutory claims against Green Tree, and Green Tree asked the court to compel arbitration of these claims pursuant to the FAA and a broad arbitration clause in the installment contract.
Bishop argued that the FAA did not apply to his claims because the transaction did not involve interstate commerce. However, the Court held that Bishop was estopped from making this argument because the installment contract specified that "[t]his agreement is made pursuant to a transaction in interstate commerce and shall be governed by the [FAA]."
There, since Bishop's claims fell within the broad scope of the arbitration clause and because Bishop did not attack the validity of the installment contract, the Court compelled arbitration of Bishop's claims.
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