Buckeye Check Cashing, Inc. v. Cardegna

Buckeye Check Cashing, Inc. v. Cardegna

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Buckeye Check Cashing, Inc. v. Cardegna

 

Buckeye Check Cashing, Inc. v. Cardegna: The Background

The case of Buckeye Check Cashing, Inc. v. Cardegna began when John Cardegna signed a loan contract from the Buckeye Check Cashing Company. The contract contained a provision that stated Cardegna must resolve any conflict associated with the loan via arbitration. Cardegna eventually sued the Buckeye Check Cashing Company, claiming that the conditions for the loan were illegal. In response, the Buckeye Check Cashing Company filed a motion in the Florida district court to have the case resolved through arbitration, as required by the terms of the contract. Cardegna countered this claim by stating that the contract as a whole was illegal and that the attached arbitration clause was therefore not enforceable. The courts agreed and initially ruled with Cardegna.

On appeal, the state court reversed the decision, holding that the Federal Arbitration Act, as interpreted by the Supreme Court of the United States, allows arbitration clauses to be enforced even if they are attached to otherwise invalid contracts. The appellate court relied on the Supreme Court’s decision in the previous Prima Paint Corporations vs. the Flood & Conklin Manufacturing Company. The state Supreme Court disagreed with the appellant’s use of this previous case; however, because the contract in the precedent case was voidable, the contract in the Cardegna case was actually illegal. As a result of this, the state Supreme Court reversed the decision and ruled back in favor of Cardegna. The case was again appealed and tried in the United States Supreme Court.

Buckeye Check Cashing, Inc. v. Cardegna: The Question

The question in Buckeye Check Cashing, Inc. v. Cardegna revolved around whether or not it was legal for a party to avoid arbitration by arguing that the contract which holds the arbitration is deemed illegal under the Federal Arbitration Act.

Buckeye Check Cashing, Inc. v. Cardegna: The Decision

The United States Supreme Court in Buckeye Check Cashing, Inc. v. Cardegna ruled in a 7 to 1 vote in favor of the Buckeye Check Cashing Company. The court in Buckeye Check Cashing, Inc. v. Cardegna ruled that challenges to the legality of the contract must be argued before the arbitrator rather than the court system. The opinion offered in Buckeye Check Cashing, Inc. v. Cardegna was presented by Chief Justice Antonin Scalia. Mr. Scalia, in the ruling, explained that unless the challenge is presented on the clause itself, the issue of the contract’s legality must be considered by the arbitrator in the first instance.

The Court in Buckeye Check Cashing, Inc. v. Cardegna held that the state Supreme Court had been incorrect to rely on a distinction between merely voidable and void contracts, because the term “contract” according to the Federal Arbitration Act includes contracts that are later found to be void. The one dissenting viewpoint offered in Buckeye Check Cashing, Inc. v. Cardegna was presented by Chief Justice Clarence Thomas. Mr. Thomas argued that the Federal Arbitration Act does not apply in the state court system. 

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