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    Buckeye Check Cashing and the Separability Doctrine

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    Full-text available at SSRN. See link in this record. (19.28Kb)
    Issue Date
    2009
    Author
    Drahozal, Christopher R.
    Publisher
    Penn State Dickinson School of Law
    Type
    Article
    Version
    http://ssrn.com/abstract=1888576
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    Abstract
    In Buckeye Check Cashing, Inc. v. Cardegna, the Supreme Court held that arbitrators, not courts, are to decide whether a contract that includes an arbitration clause is illegal as usurious; and that the separability doctrine applies in state court as well as federal court. This article examines various implications of Buckeye, which can be summarized as follows: (1) Buckeye was one of a series of class actions filed in Florida challenging as usurious the fees charged on payday loans. Despite the fact that most payday loan contracts included arbitration clauses and most arbitration clauses included class arbitration waivers, the plaintiffs were able to obtain a court adjudication of the usury issue and class relief for most individuals (albeit for many in arbitration instead of in court). (2) After Buckeye, the question of whether a court can resolve a challenge to the main contract (which includes an arbitration clause) likely depends on whether the challenge is one that undercuts a party's assent to the main contract. If so, the defense - such as lack of assent or fraud in the execution - is one that courts can decide. If not, the defense - such as fraudulent inducement or illegality - is for the arbitrator. The defenses of lack of capacity and duress sometimes, but not always, undercut a party's assent to the main contract. (3) Buckeye’s holding that the FAA’s separability doctrine applies in state court not surprisingly has triggered responses from state courts seeking to avoid the decision and by Congress seeking to overrule it. The Supreme Court has already resolved one post-Buckeye case and may well face others. Congress’s attempt in the Arbitration Fairness Act to overrule the separability doctrine should be rejected. (4) Other contract clauses - in particular, forum-selection clauses, choice of-law clauses, and jury-trial waivers - raise separability issues similar to those raised by arbitration clauses. Courts have regularly applied the separability doctrine to those types of contract clauses, supporting the suggestion by some commentators that separability can be derived from the expectations of the parties to the contracts, rather than just from the text of the Federal Arbitration Act.
    Description
    Full-text available at SSRN. See link in this record.
    URI
    http://hdl.handle.net/1808/11276
    Collections
    • Distinguished Professors Scholarly Works [918]
    • Law School Scholarly Works [621]
    Citation
    Christopher R. Drahozal, Buckeye Check Cashing and the Separability Doctrine, 1 Y.B. ON ARB. & MEDIATION 55 (2009).

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    Contact KU ScholarWorks
    785-864-8983
    KU Libraries
    1425 Jayhawk Blvd
    Lawrence, KS 66045
    785-864-8983

    KU Libraries
    1425 Jayhawk Blvd
    Lawrence, KS 66045
    Image Credits
     

     

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