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The Eighth Circuit Court of Appeals has held that an Arkansas choice-of-law provision within a contract does not mean that the Arkansas Uniform Arbitration Act (AUAA) and its prohibition on tort arbitration should apply when the contract also contains a broadly worded arbitration agreement and involves interstate commerce.
In Hudson v. ConAgra Poultry Co., No. 06-2596, 2007 WL 984106 (8th Cir. Apr. 04, 2007), David and Donna Hudson ("the Hudsons") and ConAgra had a contract by which the Hudsons raised chickens for ConAgra. The Hudsons pursued arbitration against ConAgra after a dispute arose between the parties. Subsequent to an arbitration award, the Hudsons brought a tort claim against ConAgra in state court. The district court compelled arbitration of these claims and the arbitration panel found that the tort claims were barred by res judicata. The Hudsons moved to vacate or modify the arbitration award and the district court denied their motion. The Hudsons appealed.
The Court addressed the conflict between the broadly-worded arbitration clause and the choice-of-law provision; ultimately adopting the district court's interpretation. The arbitration clause encompassed the Hudsons' tort claim; while the choice-of-law provision providing for application of Arkansas law did not because the AUAA prohibits arbitration of tort claims. The conflicting choice-of-law and arbitration clauses were in different sections of the contract and did not reference each other.
Adopting the approach used in Mastrobuono v. Shearson Lehman Hutton, Inc., the Court reasoned that the arbitration clause should be interpreted broadly. See Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995). Because the contract involved interstate commerce, the Federal Arbitration Act, not the AUAA, applied, and the agreement was interpreted in favor of arbitration. See Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983). As a result, the Court affirmed the denial of the motion to vacate or modify the arbitration award.
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