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Doctor's Assocs. v. Casarotto

Doctor's Assocs. v. Casarotto

Supreme Court of the United States

April 16, 1996, Argued ; May 20, 1996, Decided

No. 95-559.

Opinion

 [***906]   [*682]   [**1654]  JUSTICE GINSBURG delivered the opinion of the Court.

 This case concerns a standard form franchise agreement for the operation of a Subway sandwich shop in Montana.  [*683]  When a dispute arose between parties to the agreement, franchisee Paul Casarotto sued franchisor Doctor's Associates, Inc. (DAI), and DAI's Montana development agent, Nick Lombardi, in a Montana state court. DAI and Lombardi sought to stop the litigation pending arbitration pursuant to the arbitration clause set out on page nine of the franchise agreement.

] The Federal Arbitration Act (FAA or Act) 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." 9 U.S.C. § 2. Montana law, however, declares an arbitration clause [****6]  unenforceable unless "notice that [the] contract is subject to arbitration" is "typed in underlined capital letters on the first page of the contract." Mont. Code Ann. § 27-5-114(4) (1995). The question here presented is whether Montana's law is compatible with the federal Act. We hold that Montana's first-page notice requirement, which governs not "any contract," but specifically and solely contracts "subject to arbitration," conflicts with the FAA and is therefore displaced by the federal measure.

Petitioner DAI is the national franchisor of Subway sandwich shops. In April 1988, DAI entered a franchise agreement with respondent Paul Casarotto, which permitted Casarotto to open a Subway shop in Great Falls, Montana. The franchise agreement stated, on page nine and in ordinary type: "Any controversy or claim arising out of or relating to this contract or the breach thereof shall be settled by Arbitration . . . ." App. 75.

 [***907]  In October 1992, Casarotto sued DAI and its agent, Nick Lombardi, in Montana state court, alleging state-law contract and tort claims relating to the franchise agreement. DAI demanded arbitration of those claims, and successfully moved in the [****7]  Montana trial court to stay the lawsuit pending arbitration. Id., at 10-11.

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517 U.S. 681 *; 116 S. Ct. 1652 **; 134 L. Ed. 2d 902 ***; 1996 U.S. LEXIS 3244 ****; 64 U.S.L.W. 4370; 96 Cal. Daily Op. Service 3502; 96 Daily Journal DAR 5705; 9 Fla. L. Weekly Fed. S 599

DOCTOR'S ASSOCIATES, INC. AND NICK LOMBARDI, PETITIONERS v. PAUL CASAROTTO ET UX.

Prior History:  [****1]  ON WRIT OF CERTIORARI TO THE SUPREME COURT OF MONTANA.

Disposition: 274 Mont. 3, 901 P.2d 596, reversed and remanded.

CORE TERMS

arbitration, arbitration agreement, arbitration clause, revocation, franchise agreement, contracts, subject to arbitration, requirement of notice, provisions, grounds, notice

Business & Corporate Compliance, Contracts Law, Contract Conditions & Provisions, Arbitration Clauses, Civil Procedure, Arbitration, Federal Arbitration Act, General Overview, International Trade Law, Dispute Resolution, International Commercial Arbitration, Arbitration, Alternative Dispute Resolution, Labor & Employment Law, Collective Bargaining & Labor Relations, Labor Arbitration, Enforcement, Preliminary Considerations, Federal & State Interrelationships, Erie Doctrine, Arbitration Coverage Limits, Contracts Law, Affirmative Defenses, Fraud & Misrepresentation, Arbitration Agreements, Coercion & Duress, Defenses, Unconscionability, Pretrial Matters, Judicial Review