Buckeye Check Cashing v. Cardegna
Issues
Whether a court or an arbitrator should resolve an allegation that a contract is void for illegality when that contract contains an arbitration clause.
Buckeye Check Cashing, a service provider in the payday loan industry, agreed to loan money to John Cardegna. The loan agreement contained an arbitration clause that compelled the parties to use arbitration, and not the courts, in case of dispute. Cardegna brought a class action lawsuit against Buckeye for allegedly charging interest rates higher than Florida usury law allows. Buckeye responded by filing a motion to compel arbitration pursuant to the arbitration clause. Cardegna resisted arbitration, maintaining that the arbitration clause was part of an illegal contract and therefore void ab initio—the clause had never come into existence as a matter of law. The issue before the Court is thus whether a court or an arbitrator should determine whether the underlying contract is void for illegality before enforcing the arbitration clause. The outcome will depend on whether the Supreme Court believes the separability doctrine applies to such contracts. If the Court affirms and holds that Cardegna's claims should be decided by the courts, the payday industry and its consumers, businesses that use arbitration clauses, and the policies behind the Federal Arbitration Act may suffer. If the Court instead decides that the claims should be sent to arbitration, low-income consumers, consumer protection regulation, and the integrity of the judicial system as a whole may be negatively affected.
Questions as Framed for the Court by the Parties
Whether the Florida Supreme Court erred by holding, consistent with the Alabama Supreme Court but in direct conflict with six federal courts of appeals, that the Federal Arbitration Act allows a party to avoid arbitration by claiming that the underlying contract containing an arbitration clause (but not the arbitration clause itself) is void for illegality.
John Cardegna needed money. Cardegna v. Buckeye Check Cashing, 894 So.2d 860, 861 (Fla. 2005), cert. granted, 125 S.Ct. 2937 (2005).
Additional Resources
- General Information:
- Basics of Federal Arbitration Act
- Poverty Law Library
- LII's Law about... Commercial law, Banking,
- Amicus Briefs:
- Amicus brief (pdf) of the National Association of Consumer Advocates, the U.S. Public Interest Research Group, and the Center For Responsible Lending in Support of Respondents
- Amicus brief (pdf) of the Chamber of Commerce in Support of Petitioner