Doctor's Associates, Inc. v. Casarotto
Facts
Doctor's Associates entered a standard form franchise agreement with Paul Casarotto to operate a Subway shop in Montana. The agreement contained an arbitration clause on page nine in ordinary type stating that controversies or claims arising out of the contract would be settled by arbitration. Casarotto later sued Doctor's Associates and its Montana development agent on state-law contract and tort claims related to the agreement. Montana law provided that a contract could not be subject to arbitration unless notice of arbitration appeared on the first page in underlined capital letters, and the franchise agreement did not comply with that requirement.
Issue
Whether the Federal Arbitration Act preempts a Montana statute that makes arbitration clauses unenforceable unless notice of arbitration appears in underlined capital letters on the first page of the contract. More specifically, the question is whether a state may impose a special notice requirement that applies only to contracts subject to arbitration.
Rule
Under § 2 of the Federal Arbitration Act, arbitration agreements must be placed on the same footing as other contracts. States may apply generally applicable contract defenses, such as fraud, duress, or unconscionability, to invalidate arbitration agreements, but they may not impose special validity, enforceability, or notice requirements that apply only to arbitration provisions.
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If the contract is otherwise covered by the Federal Arbitration Act, is the arbitration clause enforceable?