An earlier-filed state court action determined the enforceability of an arbitration agreement, before a federal district court could rule on a motion to compel arbitration. The federal district court thereafter abstained from ruling on the motion to compel, finding that the state court decision controlled. The Sixth Circuit upheld the abstention, finding it satisfied five of the six factors for abstention under Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. (1983).
A Kentucky state court determined that the power of attorney did not give anyone sufficient authority to sign an arbitration agreement waiving the constitutional right to a jury trial under Ping v. Beverly Enterprises, Inc., 376 S.W.3d 581 (KY 2012), and Extendicare Homes, Inc. v. Belinda Whisman, 2013-SC-000426-I. Prior to that ruling, the defendant had separately filed a petition in federal court seeking to compel arbitration. Deferring to the state court’s ruling, the federal court thereafter abstained from acting on the petition to compel arbitration. The petitioner appealed.
The Sixth Circuit went through the Moses H. Cone factors. Notably, the fifth factor – the source of governing law – was found not clearly to favor or disfavor abstention. The Court noted that “when determining the enforceability of an arbitration agreement – the question primarily at issue here and in the state courts – this court is bound to apply the state law of contract formation… placing state law at least as much at issue as federal law.” Thus, it was not improper for the federal court to defer to the state court’s ruling in a prior-filed action. Preferred Care of Delaware, Inc., dba Preferred Care, Inc., et al. v. Simm VanArsdale, as Administrator of Estate of, Judith VanArsdale, No. 16-5209 (6th Cir. Jan. 13, 2017)
This post written by Nora A. Valenza-Frost.
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