Given the high cost of litigation, many contracts will call for mediation or arbitration as a way to avoid a traditional lawsuit. For the sake of clarity, an arbitration is where parties agree to resolve a dispute in front of a neutral third-party and agree to be bound by the third-party’s decision. This is very common in non-competition, non-solicitation, and/or confidentiality agreements. Nevertheless, individuals will still sometimes ignore this contractual provision and file a lawsuit. The typical response is that the other side will file a motion to compel arbitration and request a dismissal or stay of the litigation. A court will enforce an arbitration clause if it determines that there is a (1) valid arbitration provision and the dispute falls within the (2) scope of the arbitration agreement.
When deciding whether an arbitration provision is valid, traditional contract interpretation rules apply. Statutorily this principle is codified in section 435.350, RSMO, which states that an arbitration agreement is valid, enforceable and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract. Therefore, contract defenses such as unconscionability, fraud, lack of consideration, vagueness, ambiguity, duress, accord and satisfaction, first breaching party, etc. are applicable.
As with step one, a Court will similarly rely on contract interpretation principles in deciding whether the dispute falls within the scope of the arbitration agreement. Certain policy rules are also in play here. For example, “[a]bsent a clear, explicit statement in the contract directing an arbitrator to hear and determine the validity of tort damage claims by one party against another, it must be assumed that the parties did not intend to withdraw such disputes from judicial authority.” Greenwood v. Sherfield, 895 S.W.2d 169, 174 (Mo. Ct. App. 1995). Rules such as this exist because courts are reluctant to take a dispute out of a traditional judicial forum, and thereby erode traditional due process protections, without a clear intention to do so.