
Robert E. Levy
Partner
201-896-7163 rlevy@sh-law.comFirm Insights
Author: Robert E. Levy
Date: June 5, 2013
Partner
201-896-7163 rlevy@sh-law.comDuring a contract dispute, the parties often disagree about whether the terms of the agreement require them to arbitrate. Not surprisingly, many of these disagreements end up in court.
The Third Circuit Court of Appeals recently clarified the standard for deciding motions to compel arbitration. It specifically articulated the circumstances under which district courts should apply the standard for a motion to dismiss and those under which they should apply the summary judgment standard.
As noted by the Third Circuit, the question is important because the two standards differ in several important ways. The test for reviewing a motion to dismiss for failure to state a claim under Rule 12(b)(6) is whether, under any “plausible” reading of the pleadings, the plaintiff would be entitled to relief. The court generally only considers the complaint and any exhibits attached when making its decision. In contrast, a “court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). Summary judgment motions are supported by affidavits, depositions, interrogatory answers and other discovery.
In reaching its decision in Guidotti v. Legal Helpers Debt Resolution, the Third Circuit concluded that each standard has its merits. Determining the appropriate one to apply is based on the specific facts of the case.
As explained in the opinion:
When it is apparent, based on “the face of a complaint, and documents relied upon in the complaint,” that certain of a party’s claims “are subject to an enforceable arbitration clause, a motion to compel arbitration should be considered under a Rule 12(b)(6) standard without discovery’s delay.”
But if the complaint and its supporting documents are unclear regarding the agreement to arbitrate, or if the plaintiff has responded to a motion to compel arbitration with additional facts sufficient to place the agreement to arbitrate in issue, then “the parties should be entitled to discovery on the question of arbitrability before a court entertains further briefing on [the] question.”
While the Third Circuit’s decision is intended to provide clarity to the district courts, it also provides businesses with much-needed guidance about the burden of proof that will be required when seeking to compel arbitration. It also makes clear when parties to a contract will have the opportunity to provide additional evidence regarding the enforceability of an arbitration provision.
If a business wishes to require arbitration to resolve contractual disputes the contractual language should be clear and unambiguous. In addition, it would be prudent to clearly identify the person who or the entity that will conduct the arbitration as well as the location of the arbitration. We have seen arbitration clauses that require arbitration at a location inconvenient to our client.
If you have any questions about this case or would like to discuss the legal issues involved, please contact me, Robert Levy, or the Scarinci Hollenbeck attorney with whom you work.
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Secured transactions form the backbone of a wide range of business dealings, including business loans, mortgages, and inventory financing. Because the stakes are often high and relatively minor oversights can have drastic consequences, lenders and borrowers should thoroughly understand how to form an enforceable security agreement that protects their legal rights. What Is a Secured […]
Author: Dan Brecher
Cashing a check marked “paid in full” can be a risky endeavor, particularly if you don’t fully understanding the legal implications. If you are owed more than the amount of the check you accept and deposit, you may waive your right to collect the full disputed amount. That is why you should consider either rejecting […]
Author: Dan Brecher
The One Big Beautiful Bill Act of 2025 (OBBBA) significantly impacts federal taxes, credits, and deductions. A key change relating to Qualified Small Business Stock (QSBS) allows greater tax-free gains for investments in startups and other qualifying small businesses. Company founders and other investors should understand how the enhanced tax strategy works or risk missing […]
Author: Dan Brecher
Corporate consolidation involves two or more businesses merging to become a single larger entity. The result is often a stronger and more competitive company that can better navigate today’s competitive marketplace. What Is Corporate Consolidation? Corporate consolidation closely resembles a basic merger transaction. The primary difference is that a consolidation creates an entirely new business […]
Author: Dan Brecher
Business law plays a critical role in nearly every aspect of running a successful enterprise, from negotiating a commercial lease to drafting employee policies to fulfilling corporate disclosure obligations. Understanding what is business law and your legal obligations can help your business run smoothly and build productive relationships with clients, business partners, regulators, and others. […]
Author: Dan Brecher
Corporate transactions can have significant implications for a corporation and its stakeholders. For deals to be successful, companies must act strategically to maximize value and minimize risk. It is also important to fully understand the legal and financial ramifications of corporate transactions, both in the near and long term. Understanding Corporate Transactions The term “corporate […]
Author: Dan Brecher
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!