Third Circuit Dodges Pre-emption Issue in Arbitration Dispute

A U.S. district judge’s refusal to compel arbitration in a putative class action over a debt adjustment scheme has been reversed a second time by the U.S. Court of Appeals for the Third Circuit, which said the lower court needlessly waded into a potential pre-emption issue without first determining whether an arbitration agreement existed in the first place.

The appeals court reversed a U.S. District Court for the District of New Jersey ruling finding an arbitration agreement that plaintiff Dawn Guidotti allegedly executed with Global Client Solutions and Rocky Mountain Bank and Trust unenforceable as a matter of state law. The Third Circuit said the question of whether the agreement was viable under state law—and whether state law is pre-empted by the Federal Arbitration Act—need not be resolved if it is determined that Guidotti never received an arbitration agreement from the defendants, or otherwise failed to assent to arbitration of her claims. The appeals court vacated the ruling below and remanded with an instruction to resolve the factual dispute.