Third Circuit Clarifies Standards for Deciding Motions to Compel Arbitration

Arbitration

On May 28, the U.S. Court of Appeals for the Third Circuit resolved an inconsistency in the circuit regarding the standard a court should apply when deciding a motion to compel arbitration. Guidotti v. Legal Helpers Debt Resolution, L.L.C., No. 12-1170, 2013 WL 2302324 (3rd Cir. May 28, 2013). In this case, several debt settlement firms moved to compel arbitration after being sued by a debtor who claimed the firms defrauded her and similarly situated persons. The court granted arbitration for most of the defendants but denied with regard to two, holding that the debtor’s pleading demonstrated that the parties had no meeting of the minds on an agreement to arbitrate. On appeal, the court held that the record before the district court was insufficient to prove that there was no genuine dispute of material fact regarding the agreement to arbitrate. In doing so, the court explained that it has inconsistently applied a motion to dismiss standard and a motion for summary judgment standard to motions to compel arbitration, which the court believes is in part explained by the Federal Arbitration Act’s (FAA) alternating emphasis on speed and enforcement of private agreements. To reconcile the conflict, the court held that the FAA favors resolving a motion to compel arbitration under the speedier motion to dismiss standard when the affirmative defense of the arbitrability of claims is apparent on the face of the complaint or its supporting documents. However, the court held, when the motion does not have as its predicate a complaint that clearly indicates the affirmative defense of arbitrability, a “more deliberate pace is required” and a summary judgment standard is more appropriate. The court vacated and remanded the district court’s order denying arbitration.