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Vanderbilt Law Review

James F. Nooney

First Page

607

Abstract

With increasing frequency attorneys are confronted with disputes arising under commercial contracts which contain arbitration agreements. Before the attorney can advise the client as to his legal position and recommend a course of conduct, he must interpret the effect of the arbitration agreement. Often the first question for the attorney is whether the client (or, in turn, the opposing party) can be forced to arbitrate. The answer depends upon whether agreements to arbitrate future disputes are enforceable under the law applicable to the transaction. Where both parties to the contract are citizens of the same state, the answer is readily found since the arbitration law of that state will govern the transaction. But in our increasingly mobile society, a growing number of commercial contracts involve parties of different states. In the disputes arising under many of these contracts, federal diversity jurisdiction will lie. The major problem faced by the attorney in such a case is whether the enforceability of the arbitration clause in the contract will be governed by federal law or state law, since in many instances the two will be diametrically opposed. Of course, if state law is found to govern the diversity case, the enforceability question cannot be answered until it is determined which of the two or more states' law applies. This raises a conflicts choice of law question, with which this paper is not directly concerned. The conflicts methods of choosing the state law applicable to a transaction involving many states will be used only as an illustration of a process which may also be useful in deciding whether federal or state law should apply to a particular enforceability problem in a diversity case.

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