Summary
The Massachusetts Supreme Judicial Court held that a state court must conduct an expedited evidentiary hearing when a material factual dispute exists concerning the formation of an arbitration agreement. The court concluded that Massachusetts procedural law governing motions to compel arbitration was not preempted by the Federal Arbitration Act and that fraudulent inducement directed to the arbitration agreement itself must be decided by a judge. The court vacated the denial of the employer's motion and remanded for a hearing to determine whether the parties entered into an agreement to arbitrate.
Topics
Practice areas
Questions Presented
- Whether a Massachusetts state court must apply the Federal Arbitration Act's procedure in 9 U.S.C. § 4 when deciding a motion to compel arbitration.
- What procedure Massachusetts courts must use under G. L. c. 251, § 2, when the existence or making of an arbitration agreement is disputed.
- Whether St. Fleur's evidence of fraudulent inducement created a material factual dispute requiring an evidentiary hearing.
- Whether a court or an arbitrator must decide a claim that the arbitration agreement itself was procured by fraudulent inducement.
- Whether the Superior Court properly relied on Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc. in denying WPI's motion to compel arbitration of claims brought under G. L. c. 151B.
Holdings
- Section 4 of the Federal Arbitration Act establishes a procedure for United States district courts and does not require state courts to follow that procedure.
- Under G. L. c. 251, § 2, a judge must determine whether a material factual dispute exists concerning the making or existence of the arbitration agreement; if a material dispute exists, the judge must conduct an expedited evidentiary hearing and decide the issue.
- St. Fleur's evidence that WPI knowingly misrepresented the nature and contents of the document, and that she reasonably relied on the misrepresentation, was sufficient to create a material factual dispute concerning whether an arbitration agreement was formed.
- A court, rather than an arbitrator, must decide a claim that fraudulent inducement prevented the formation of the arbitration agreement itself.
- Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc. was inapplicable because it was limited to claims under federal civil rights laws and relied on statutory language not present in G. L. c. 151B.
Key quotations
“That is, courts may apply generally applicable State-law contract defenses — such as fraud, duress, or unconscionability — to determine the validity of an arbitration agreement.” (450 Mass. at 350)
“Because the procedures in 9 U.S.C. § 4 do not apply to State courts, a State court may apply its own law.” (450 Mass. at 352)
“A claim of fraud in the inducement of the arbitration provision in a contract must be resolved by a court, but a claim of fraud in the inducement of the contract itself must be arbitrated.” (450 Mass. at 356)
Factual background
WPI employed Olga St. Fleur at its Chelsea assembly plant. The parties disputed the circumstances under which St. Fleur signed the final page of an arbitration agreement; St. Fleur alleged that WPI's general manager misrepresented the document as a non-arbitration agreement concerning discussion of workplace disagreements, while WPI claimed that she received and chose to sign its arbitration agreement. The agreement covered employment-related claims, including discrimination and harassment. After the MCAD dismissed her complaint, St. Fleur sued WPI in Superior Court, and WPI sought to compel arbitration.
Procedural history
St. Fleur filed a discrimination complaint with the Massachusetts Commission Against Discrimination, which dismissed it for lack of probable cause. She then filed suit in the Superior Court. WPI moved to dismiss and compel arbitration based on an alleged arbitration agreement. After a nonevidentiary hearing, the Superior Court denied the motion without determining through an evidentiary hearing whether the parties had entered into an arbitration agreement. The Supreme Judicial Court transferred the appeal on its own motion, vacated the order, and remanded for an expedited hearing.
Remand instructions
The Superior Court must conduct an expedited hearing under G. L. c. 251, § 2, to determine whether the parties entered into an agreement to arbitrate, including resolving the factual dispute concerning fraudulent inducement.