Cengage Advantage Books: Business Law Today, The Essentials 10th Edition by Roger LeRoy Miller

تمرين 19

Cleveland Construction, Inc. v. Levco Construction, Inc.
FACTS Cleveland Construction, Inc. (CCI), was the general contractor on a project to build a grocery store in Houston, Texas. CCI hired Levco Construction, Inc., as a subcontractor to perform excavation and grading. The contract included an arbitration provision stating that any disputes would be resolved by arbitration in Ohio. When a dispute arose between the parties, Levco filed a suit against CCI in a Texas state court. CCI sought to compel arbitration in Ohio under the Federal Arbitration Act (FAA), but a Texas statute allows a party to void a contractual provision that requires arbitration outside Texas. The Texas court granted an emergency motion preventing arbitration. CCI appealed.
ISSUE Does the FAA preempt the Texas statute, which denies enforcement of arbitration clauses that require a party to submit to arbitration outside Texas?
DECISION Yes. The Texas appellate court reversed the trial court, holding that the FAA preempts the Texas statute.
REASON The FAA requires courts to enforce valid arbitration agreements, and it "preempts... inconsistent state laws... under the Supremacy Clause of the United States Constitution." (See page 15 in Chapter 1.) In this case, the Texas statute provided that an agreement to arbitrate was voidable if it required arbitration outside Texas. Thus, if the court applied the Texas statute, it would void the parties' agreement to arbitrate any disputes in Ohio. Voiding the agreement, however, the court found "would undermine the declared federal policy of rigorous enforcement of arbitration agreements." The court ruled that the parties had a valid arbitration agreement, so the FAA preempted the Texas statute.
CRITICAL THINKING-Legal Consideration How would business be affected if each state could pass a statute, like the one in Texas, allowing parties to void out-of-state arbitrations?