546 U.S. 440 (2006), 04-1264, Buckeye Check Cashing, Inc. v. Cardegna

Docket Nº:No. 04-1264.
Citation:546 U.S. 440, 126 S.Ct. 1204, 163 L.Ed.2d 1038
Party Name:BUCKEYE CHECK CASHING, INC., Petitioner, v. John CARDEGNA et al.
Case Date:February 21, 2006
Court:United States Supreme Court
 
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Page 440

546 U.S. 440 (2006)

126 S.Ct. 1204, 163 L.Ed.2d 1038

BUCKEYE CHECK CASHING, INC., Petitioner,

v.

John CARDEGNA et al.

No. 04-1264.

United States Supreme Court

February 21, 2006

Argued Nov. 29, 2005.

CERTIORARI TO THE SUPREME COURT OF FLORIDA

Page 441

[126 S.Ct. 1205] SYLLABUS [*]

For each deferred-payment transaction respondents entered into with Buckeye [126 S.Ct. 1206] Check Cashing, they signed an Agreement containing provisions that required binding arbitration to resolve disputes arising out of the Agreement. Respondents sued in Florida state court, alleging that Buckeye charged usurious interest rates and that the Agreement violated various Florida laws, rendering it criminal on its face. The trial court denied Buckeye's motion to compel arbitration, holding that a court rather than an arbitrator should resolve a claim that a contract is illegal and void ab initio. A state appellate court reversed, but was in turn reversed by the Florida Supreme Court, which reasoned that enforcing an arbitration agreement in a contract challenged as unlawful would violate state public policy and contract law.

Held:

Regardless of whether it is brought in federal or state court, a challenge to the validity of a contract as a whole, and not specifically to the arbitration clause within it, must go to the arbitrator, not the court. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270, and Southland Corp. v. Keating, 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1, answer the question presented here by establishing three propositions. First, as a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract. See Prima Paint, 388 U.S. at 400, 402-404, 87 S.Ct. 1801. Second, unless the challenge is to the arbitration clause itself, the issue of the contract's validity is considered by the arbitrator in the first instance. See id., at 403-404, 87 S.Ct. 1801. Third, this arbitration law applies in state as well as federal courts. See Southland, supra, at 12, 104 S.Ct. 852. The crux of respondents' claim is that the Agreement as a whole (including its arbitration provision) is rendered invalid by the usurious finance charge. Because this challenges the Agreement, and not specifically its arbitration provisions, the latter are enforceable apart from the remainder of the contract, and the challenge should be considered by an arbitrator, not a court. The Florida Supreme Court erred in declining to apply Prima Paint's severability rule, and respondents' assertion that that rule does not apply in state court runs contrary to Prima Paint and Southland. Pp. 1207-1211.

894 So.2d 860, reversed and remanded.

SCALIA, J., delivered the opinion of the Court, in which ROBERTS, C. J., and STEVENS, KENNEDY, SOUTER, GINSBURG, and BREYER, JJ., joined. THOMAS, J., filed a dissenting opinion. ALITO, J., took no part in the consideration or decision of the case.

COUNSEL

Amy L. Brown, Pierre H. Bergeron, Squire, Sanders & Dempsey LLP, Washington, DC, Christopher Landau, Counsel of Record, Michael Shumsky, Kirkland & Ellis LLP, Washington, DC, for petitioner.

E. Clayton Yates, Yates & Mancini, LLC, Fort Pierce, Florida, Christopher C. Casper, James, Hoyer, Newcomer, & Smiljanich, P.A., Tampa, Florida, Richard A. Fisher, Richard Fisher Law Office, Cleveland, Tennessee, F. Paul Bland, Jr., Counsel of Record, Michael J. Quirk, Trial Lawyers for Public Justice, P.C., Washington, DC, Arthur H. Bryant, Leslie A. Bailey, Trial Lawyers for Public Justice, P.C., Oakland, California, for Respondents.

[126 S.Ct. 1207]

OPINION

SCALIA, JUSTICE

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We decide whether a court or an arbitrator should consider the claim that a contract containing an arbitration provision is void for illegality.

I

Respondents John Cardegna and Donna Reuter entered into various deferred-payment transactions with petitioner Buckeye Check Cashing (Buckeye), in which they received cash in exchange for a personal check in the amount of the cash plus a finance charge. For each separate transaction they signed a "Deferred Deposit and Disclosure Agreement" (Agreement), which included the following arbitration provisions:

"1. Arbitration Disclosure By signing this Agreement, you agree that i[f] a dispute of any kind arises out of this Agreement or your application therefore or any instrument relating thereto, th[e]n either you or we or third-parties involved can choose to have that dispute resolved by binding arbitration as set forth in Paragraph 2 below ....

2. Arbitration Provisions Any claim, dispute, or controversy . . . arising from or relating to this Agreement ... or the validity, enforceability, or scope of this Arbitration Provision or the entire Agreement (collectively 'Claim'), shall be resolved, upon the election of you or us or said third-parties, by binding arbitration .... This arbitration Agreement is made pursuant to a transaction involving interstate commerce, and shall be governed

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by the Federal Arbitration Act ('FAA'), 9 U.S.C. Sections 1-16. The arbitrator shall apply applicable substantive law constraint [sic] with the FAA and applicable statu[t]es of limitations and shall honor claims of privilege recognized by law ...."

Respondents brought this putative class action in Florida...

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