“Arbitration Agreement with Conflicting Provision in Two Languages Saved by FAA Default Rule”

John Lewis of Baker Hostetler has this article, available in Lexology, discussing a California appellate court’s decision in Western Bagel Co. Inc. v. Superior Court of Los Angeles County and Jose Calderon, in which the trial court had rejected an employer’s motion to compel binding arbitration because the agreement contained a material inconsistency. Paragraph 1 of the agreement provided that “to the maximum extent permitted by law,” the parties “mutually agree to resolution through binding arbitration for all claims or causes of action…” Elsewhere, however, the agreement provided that, “if any provision of this Agreement…is found to be unenforceable….this finding will not affect the validity of the rest of the Agreement and the Agreement will be carried out to the fullest possible extent to ensure that the resolution of all disputes between the parties . . . are resolved via neutral non-binding arbitration.”

The trial court, applying the doctrine of contra proferentem to interpret the agreement against the drafter (i.e., the employer), determined that the ambiguity warranted a finding that the arbitration must be non-binding.

As the article explains, the appellate court reversed, “focus[ing] on the use of contra proferentem doctrine in an agreement where the FAA governs.” The appellate court, holding that “the FAA provides a ‘default rule’ that ‘ambiguities about the scope of arbitration must be resolved in favor of arbitration.’”

The takeaway from the case, according to the article, is that “[w]here an ambiguity exists as to the scope of coverage in an arbitration agreement subject to the FAA, it must be resolved in favor of binding arbitration.”

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