The Third Circuit recently affirmed a lower court's decision refusing car dealership defendants' motion to compel arbitration pursuant to an arbitration agreement the plaintiffs were allegedly induced to sign. First, the court rejected the dealerships' argument that the plaintiffs agreed to arbitrate because they signed the arbitration agreement. It noted that a signed arbitration agreement does not necessarily demonstrate intent to be bound in all circumstances, nor did it negate plaintiffs' argument they were induced to sign the agreement. More importantly, the court held plaintiffs responded to the motion to compel with sufficient additional facts and evidence to place the arbitration agreement into dispute so as to warrant discovery whether the plaintiffs intended to be bound to arbitration. Second, the court dismissed the dealerships' claim that plaintiffs failed to specifically allege fraudulent inducement in signing the arbitration agreement rather than the contracts in whole, therefore requiring arbitration of the issue of arbitrability. The court found plaintiffs specifically alleged the defense of fraud-in-the-inducement regarding the arbitration agreement, which, if proven, would be grounds to invalidate the arbitration agreement. Therefore, the court affirmed and declined to compel arbitration.
Corchado v. Foulke Mgmt. Corp., No. 17-1433 (3d Cir. Dec. 21, 2017).
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