Federal Presumption of Arbitrability Limited to Disputes That Are Immediate, Foreseeable Results of Contractual Performance

After concluding that the most natural reading of an arbitration agreement did not cover the dispute in Calderon v. Sixt Rent a Car, LLC, 2021 U.S. App. LEXIS 20854 (11th Cir. July 14, 2021), the Eleventh Circuit held more broadly that the Federal Arbitration Act’s strong presumption of arbitrability applies only if “the dispute in question was an immediate, foreseeable result of the performance of contractual duties.”

Writing for a partly divided panel, Judge Kevin Newsom acknowledged the canon of construction that “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration,” quoting Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24–25 (1983). But that canon under the FAA applies only to “controvers[ies]” that “aris[e] out of” the “contract” containing the arbitration agreement or the ‘“transaction’ evidenced thereby. 9 U.S.C. § 2.” And Judge Newsom drew on a Ninth Circuit concurring opinion to conclude that the FAA’s arising-out-of language “confines [its] application to the arbitration of controversies with a sufficiently close ‘relationship’ to the underlying contract.”

Judge Jill Pryor concurred in the parts of the opinion concluding that the parties’ claims fell outside the scope of the specific arbitration agreement at issue. But she “f[ound] it unnecessary to decide whether the Moses H. Cone canon applies.”

Judge Newsom also took the unusual step of writing his own separate concurrence to voice “skepticism of the Moses H. Cone rule, which strikes [him] as among the most dubious of the so-called ‘substantive’ interpretive canons.” Judge Newsom described the rule as “just made up” and expressed concern about “reading [the FAA] to do much more than just place arbitration agreements on the ‘same footing’ as other contracts.” Urging the courts instead to “reconsider” Moses H. Cone, he invoked commentary from former law-professor (and now Supreme Court Justice) Amy Coney Barrett for the proposition that “substantive” canons require judges to depart from a text’s “most natural interpretation.” It remains to be seen whether the Supreme Court will take his suggestion.

Posted by Lee Peifer.

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