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Arbitration

Arbitration

Generally a written agreement to submit an existing controversy to arbitration is valid.  M.C.A. §27-5-114(1). Similarly, a written arbitration agreement entered into before the controversy arose will be considered valid and enforceable.  M.C.A. §27-5-114(2). Contracts requiring arbitration of personal injury claims, however, are not valid under Montana law.  M.C.A. § 27-5-114(2)(a).

Caution: Montana’s prohibition against personal injury arbitration clauses may be pre-empted by federal law. In Lombardi v. Casarotto, 517 U.S. 681, 1996 U.S. Lexis 3244 (1996), the United States Supreme Court recognized that the Federal Arbitration Act (“FAA”) requires states to place arbitration agreements on the same footing as other contracts.  As a result, arbitration clauses are subject to traditional contract defenses such as duress, fraud and lack of consideration.  States cannot however, give parties additional defenses that are applicable only to arbitration clauses.  Casorotto did not address whether state statutes governing personal injury arbitration are pre-empted although arguments can be made that Montana’s prohibition places personal injury arbitration clauses on unequal footing and is therefore pre-empted.

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