Prima Paint Corp v. Flood & amp; Conklin Mfg. Co. (388 U.S. 395 (1967)), is the decision of the United States Supreme Court to establish what has been known as the "principle of separateness" in the contract with the arbitration clause. After the appeals court appealed a decade earlier, he read out the 1925 Federal Arbitration Act (FAA) to require that any challenge to the enforceability of such a contract was first heard by an arbitrator, not a court, unless the claim was that the clause itself had no power law.
The case arises from a claim by a New Jersey manufacturer that a Maryland company has misrepresented itself in a transaction and thus a contract between the two is unenforceable, precluding the agreed arbitration in the event of a dispute. Abe Fortas writes for the majority 6-3 that the FAA is wide enough to require arbitration of all issues except the arbitration clause itself. Hugo Black's difference of opinion is called the interpretation of the majority of the overbroad and goes against the intentions of Congress in passing the law. He worried about putting legal issues in the hands of arbitrators with little or no legal understanding or obligation to follow the law.
In subsequent cases regarding the FAA, the Court has reaffirmed the principle of separateness and stated that the FAA and this reading apply to arbitrary contracts under state law, even in cases where the contract is suspected to be illegal or state law provides administrative dispute. resolution. This has been seen as expanding the use of arbitration in contracts in the 20th century, not just between businesses but also between businesses and consumers.
Video Prima Paint Corp. v. Flood & Conklin Manufacturing Co.
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At the beginning of the 20th century, entrepreneurs in New York began promoting the legally binding arbitration idea to resolve disputes as a cheaper alternative to litigation. The tribunal was hostile to the idea, especially in interstate commerce, so that in 1925, arbitration advocates persuaded Congress to pass the Federal Arbitration Act (FAA), providing rules and legal frameworks for arbitration. Among the provisions is the requirement that the parties who have agreed to do the arbitration do so before going to court.
The FAA had no impact on federal courts until the 1958 Second Circuit decision at Robert Lawrence Co. v. Devonshire Fabrics, Inc. , stating that the requirement to arbitrate means that any challenge to the contract itself. must go before an arbitrator, not just a dispute over a possible breach of contract. Only the arbitration clause itself can be challenged in court first.
Instant dispute
Under this framework, in 1964, Cat Prima, Maryland reached an agreement with Flood & amp; Conklin, a New Jersey paint manufacturer, bought the last paint business for a percentage of revenue in annual payments of up to $ 225,000 over a six-year period. Instead, Flood & amp; Conklin agrees that his CEO, Jerome Jelin, will personally provide consultancy services for Prima and that it will not be sold to any of the previous customers while the agreement remains in effect. Two contracts govern the transaction; both have an arbitration clause.
One week after contract is executed, Flood & amp; Conklin declared bankruptcy. In 1965, shortly before the first annual payment was due, Prima paid his first installment into the shelter account and told Flood's lawyers that the consultation agreement was deemed to have been infringed. F & amp; C responds with notice of arbitrage intent. Toward the end of the permitted response period, Prima even petitioned the Southern District of New York to cancel the contract and ordered Flood & amp; Conklin from arbitration. Since the company has represented itself as a solvent during negotiations only to go bankrupt shortly after signing the deal, Prima said, the contracts have been fraudulently induced and thus the arbitration clause with the extension can not be enforced.
Maps Prima Paint Corp. v. Flood & Conklin Manufacturing Co.
Litigation history
Flood & amp; Conklin responded by rejecting fraud allegations in several written statements and noting that Prima had enjoyed the benefits of the contract for almost a year without complaint. It's impossible not to be aware of the bankruptcy process, says Flood, for having been present at one of the creditor's committee meetings.
The district court, quoting Robert Lawrence, refused Prima and ordered the parties to arbitrate. The appeal to the Second Circuit also did not work. Since the First Circuit reached a different conclusion in a similar case in 1960 that the Supreme Court has refused to hear, the Court received the Prima cialoria petition to resolve the matter.
Robert Herzog and Martin Cole argued for the parties on March 12, 1967. The American Arbitration Association filed an amicus curiae briefing supporting Flood & amp; Conklin.
Decision
Abe Fortas writes for six majority justices, and John Marshall Harlan adds a one-sentence agreement that says he believes Robert Lawrence is also a workable precedent. Black joins in long disagreement by Potter Stewart and William O. Douglas, who has written for the majority of eight justices at Bernhardt v. Polygraphic Co, the preliminary reading of the Arbitration Act, which refuses to force arbitration in the employment contract on the grounds that the FAA applies only to contracts involving admiralty or trade
Majority
After repeating the case history, Fortas considers the case by remembering Bernhardt . Because the consulting agreement was inevitably tied to the transfer of business assets from Flood to Prima, it was closed. "There can be no more clear contract cases that prove transactions in interstate commerce," he wrote, responding to the suggestion of those who disagreed that language should be interpreted more narrowly.
The Section 4 language of the Act is clear, he continued, that only explicit challenges to the arbitration or persuasion clause must be properly placed before the court in the first instance. "[I] can not imagine that Congress meant the rules to differ depending on which party the arbitration agreement first requested assistance from the federal court." Finally, he talks about the constitutionality of the courts that holds the power within Erie Railroad Co. v. Tompkins , which states that federal courts can not make federal general laws and should be subject to substantive substantive country interpretations. important.
The question in this case, however, is not whether Congress can form a federal substantive rule to regulate the questions that arise in the case of simple diversity. Instead, the question is whether Congress can prescribe how the federal courts to commit themselves in relation to the subject matter in which Congress clearly has the power to make laws. The answer can only be affirmative.
Dissent
The four-part Black contest is longer than the majority opinion he responded to. He questioned every aspect of Fortas's reasoning.
In the introductory paragraph, he is rude:
The Court believes, what to me is fantastic, that the legal issue of contract vacuum due to fraud should be decided by the persons appointed to mediate the factual controversy arising from the legitimate contract between the parties. And the arbitrators held by the Court are to decide the legal validity of a contract that does not need to be a lawyer, and will most likely become non-lawyers, entirely ineligible to decide on legal issues, and even if eligible to apply the law, do so. I am not at all convinced that by forcing a person to cancel his chance to try his legal case in a court where, unlike the situation in arbitration, he may have a jury trial and the right to appeal, not a denial of legal proceedings of the law. I am satisfied, however, that Congress does not impose such a procedure in the Arbitration Act.
He noted that Congress is explicitly excluded from the FAA language that is normally used to apply to all trades, leading it to doubt that the arbitration clause in the consultation agreement is covered by it. The law also does not provide a clear answer because the majority claim what kind of challenge to the formation or execution of the contract may have to be heard by the court first. And lastly the majority did not provide sufficient justification for his reading of Bernhardt and Erie Railroad. "The court agreed," he protested, "a rule that is not only contrary to state law, but contrary to the intentions of the parties and the principles of contract law accepted - a rule that does increase the arbitration provisions above all other contract terms"
The second and third sections discuss in detail about the legislative history of the FAA, citing Montana Senator Thomas J. Walsh's statement about it during the trials and lobbyists of the American Bar Association, who helped to compile and disseminate it, suggesting that it is not intended to be interpreted as a majority and Second Circuit. He noted that the New York State Arbitration Law, which forms the basis of federal law, explicitly states that the claims of misstatement in the contract with the arbitration clause must be heard by the judge. "Thus, 35 years after the passage of the Arbitration Act, the Second Circuit really rewrote", at Robert Lawrence , for which the Court now accepts.
"If Prima's accusation is true," Black concludes, "the sum total of what the Court is doing here is forcing Prima to arbitrate a contract that is null and void before the arbitrators are authorized to make final legal decisions of their jurisdiction alone, not even subject to effective review by the highest court in the country. "
Legacy
Prima Cat is established in federal jurisprudence known as the principle of "separateness" or "propriety" in the contract by the arbitration clause, in which legal fiction is made that the clause itself is a contract separate from the underlying, or "container ", the contract. This is similar to the principle of competence in international arbitration, in which arbitrators or arbiters are deemed competent to determine the limits of their own jurisdiction.
Beginning in the mid-1980s, the Court has expanded the reach of Prima Cat in later cases. Since some have been applied to the use of expanded arbitration clauses in adhesion contracts between companies and consumers, some consumer and legal supporters have criticized the decision as an accidental opening wedge of attacks on the right to file lawsuits, and weakening of the law the state contract and the Erie Railroad principle to respect state law. The defenders have responded that it is only beginning to bring the US more in line with international arbitration practices, helping American companies compete in the global economy. One, Alan Rau, also argues that it is justified not only by the Arbitration Act but by general contract law principles.
Advanced jurisprudence
The court will not consider cases involving the FAA for 17 years. When that happens, at Southland Corp v. Keating, Supreme Court Warren Burger writes for a 7-2 majority not only enforced Prima Paint but states that the law is applied to an arbitration clause in a contract that is executed under state law as well. The Rehnquist and O'Connor judges disagreed, as in the subsequent cases where the court upheld the verdict.
It increases the use of such clauses, as well as legal challenges for them. In the 1990s and 2000s (decades), Courts have forced arbitration even when the time frame for filing alleged claims has expired, the contract has been declared illegal under state law or where state law imprisoning the settlement authority disputes in state agencies. Clarence Thomas is the only person who disagrees with these two opinions, believing that Rehnquist and O'Connor do that the FAA does not apply to contracts that are held under state law.
When it comes to contracts in which one party denies whether it has been properly established, rather than the validity of the contract established, the Court has been willing to let the court decide on this matter. Judge Stephen Breyer wrote for the court unanimously in First Options v. Kaplan that upholds the decision of the district court overturning the arbitral award in which it is unclear that the respondent has agreed to arbitrate the question to the arbitrator.
Comments and criticism
Prima Paint draws a bit of analysis and commentary on its time, but as it forms the basis for the expansion of the Court over the Arbitration Act and its subsequent application to contracts between consumers and businesses as well as among businesses, the reason has been the subject of more legal documents. Criticism has repeated Black's concerns in focusing on how decisions have subsequently uncovered a fundamental weakness in Cat Prima, while human rights defenders have found them to strengthen their fundamental health.
Labor lawyer Zeb-Michael Curtin from Minneapolis Dorsey & amp; Whitney said the Court "muddles the clear language of [FAA]" and "allows results that conflict with the intentions of the FAA drafter" by embracing the doctrine of separateness. Richard Barnes of the University of Mississippi argues that, contrary to Fortas's statement, Prima Cat and its offspring has created a fundamental problem with the Erie Railroad doctrine. "The FAA has become a substantive rule of federal common law applied in virtually all state and federal system settings and levels", he said.
Richard Reuben of the Missouri law school, the old compulsory arbitration critic, calls Prima Paint adopting the doctrine of separation "a seemingly unchallenged display of judicial sophist". He feared it could have negative consequences for society as a whole: "By denying citizens the right to a day in court, the arbitration imposed through the mandatory process and separation cultivates cynicism and distrust in the rule of law, undermining its legitimacy."
Defenders of decision and separateness say that the arbitration clause needs to have any power, otherwise the parties will be able to avoid it easily by filing a lawsuit for a number of reasons. Those whose practice involves arbitrage of disputes internationally within the scope have credited him with bringing the US arbitration law closer to European norms, helping American companies compete and making the US a viable place for arbitration.
In some papers, Alan Scott Rau from the University of Texas law school has gone to a greater extent than Fortas did grounding Prima Paint and the doctrine of separation. He noted that the challenge to the arbitration clause is often inseparable from the underlying claim, and that some public policy objectives may be better served by allowing the case to be heard by an arbitrator first. Instead, he also notes that some of the challenges to contract formation must include challenges to the arbitration clause in any event, contrary to some of the newer lower court decisions.
See also
- List of US Supreme Court cases, volume 388
- Kompetenz-kompetenz
References
External links
- 388 U.S. 395 (1967) Full text case in findlaw.com
Source of the article : Wikipedia
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