Supreme Court to Review Florida Court's Rejection of Prima Paint

On June 20 2005 the U pre-eminent Court granted review in Cardegna v Buckeye Check Cashing (No. 02-2161) a decision in which the Florida chief Court ignored the "separability doctrine" and held that the court must determine the validity of a contract containing an arbitration provision where the contract is alleged to be illegal from the outset

In the 1967 case Prima Paint Corp. v deluge & Conklin Manufacturing Co. (388 U 395) the pre-eminent Court held that under the Federal Arbitration Act, claims that an agreement containing an arbitration clause was induced by means of fraud are to be decided through an arbitrator, while claims that the making of an arbitration clause was fraudulently induced are to be decided by means of a court. However, in Cardegna, the Florida leading Court said that the doctrine of separability should not apply to potentially void contracts (i.e., contracts that are allegedly void ab initio). The court reasoned that extending Prima Paint to similar contracts could "lead to the absurd result" of a court enforcing an arbitration clause before determining whether the contract is valid. "Florida public policy and contract law prohibit breathing life into a potentially illegal contract by the agency of enforcing the included arbitration clause of the void contract," said the court.

Two amicus briefs were filed in the case, individual by the Community Financial Services Association, the other through the Florida Bankers and American Bankers Associations. The associations argued in favor of arbitrators deciding the enforceability of an arbitration clause in a potentially void contract.

Copyright American Arbitration Association Aug-Oct 2005

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