Business Law 13th Edition by Frank Cross, Kenneth Clarkson, Roger LeRoy Miller

Exercise 17

IN THE LANGUAGE OF THE COURT
Evelyn N. KEYES, Justice.
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[Texas] Business and Commerce Code section 272.001 provides:
If a contract contains a provision making * * * any conflict arising under the contract subject to * * * arbitration in another state, that provision is voidable by the party obligated by the contract to perform the construction * * *.
Levco argues * * * that it "exercised its option to void the requirement in the Contract to arbitrate in Lake County, Ohio."
The FAA preempts all otherwise applicable inconsistent state laws * * * under the Supremacy Clause of the United States Constitution. The FAA declares written provisions for arbitration "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." [Emphasis added.]
* * * Applying section 272.001 as Levco asks us to do here would prevent us from enforcing a term of the parties' arbitration agreement-the venue-on a ground that is not recognized by the FAA or by general state-law contract principles. We hold that the FAA preempts application of this provision under the facts of this case. * * * By allowing a party to * * * declare void a previously bargained-for provision, application of section 272.001 would undermine the declared federal policy of rigorous enforcement of arbitration agreements.
DECISION AND REMEDY?The Texas appellate court reversed the trial court, holding that the FAA preempts the Texas statute. CCI could compel arbitration in Ohio.
THE LEGAL ENVIRONMENT DIMENSION?How would business be affected if each state could pass a statute, like the one in Texas, allowing parties to void out-of-state arbitration?
THE SOCIAL DIMENSION?Considering the relative bargaining power of the parties, was it fair to enforce the arbitration clause in this contract? Why or why not?