Doctor's Associates, Inc. v. Casarotto

In Doctor's Associates, Inc. v. Casarotto (1996) 517 U.S. 681, the United States Supreme Court held the FAA preempted a Montana statute declaring an arbitration clause unenforceable unless notice that the contract is subject to arbitration is typed on the first page of the contract in underlined capital letters. The Supreme Court 0 noted section 2 of the FAA provides that written provisions for arbitration " 'shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.' " (517 U.S. at p. 686 116 S. Ct. at p. 1656, , quoting 9 U.S.C. 2.) The high court reaffirmed its earlier rulings that 1 "the text of 2 declares that state law may be applied 'if that law arose to govern issues concerning the validity, revocability, and enforceability of contracts generally.' Thus, 2 generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening 2. . Courts may not, however, invalidate arbitration agreements under state laws applicable only to arbitration provisions . . . . Montana's arbitration notice statute directly conflicts with 2 of the FAA because the State's law conditions the enforceability of arbitration agreements on compliance with a special notice requirement not applicable to contracts generally. The FAA thus displaces the Montana statute with respect to arbitration agreements covered by the Act." (517 U.S. at pp. 686-687 116 S. Ct. at p. 1656.) The Montana Supreme Court's ruling that arbitration was not required under Montana law was reversed and arbitration was required where a franchisee alleged the franchisor had breached the franchise contract by licensing an additional franchisee in a location originally sought by the first franchisee. Doctor's Associates, 517 U.S. at 687. The Montana Supreme Court had ruled that the arbitration clause in the contract was unenforceable because it did not meet the notice requirements of the Montana Arbitration Act as it existed at that time. The United States Supreme Court struck the notice requirement because it was preempted by the FAA and ordered arbitration.