Ky Arbitration Agreements

The Kentucky Supreme Court
continues to increase the difficulty of enforcement of arbitration
agreements.  On March 20, 2014 it decided JP Morgan Chase Bank v.
Bluegrass Powerboats, —S.W.3d—, 2014 WL 1101473 (Ky.) (to be
published).  This case essentially allows plaintiffs to appeal the
validity of an arbitration agreement AFTER a trial court has enforced it and
the arbitration has concluded.
Chase Bank moved the trial court to compel arbitration against the plaintiff,
and the trial court initially agreed.  The arbitrated portion of the case
was held in abeyance and referred to arbitration.  An unrelated claim
remained in front of the trial court. For the next “few years” both sides
proceeded on the claim in the trial court but did not proceed on the claims
referred to arbitration. After the claims in the trial court were settled and
dismissed, Plaintiff initiated the arbitration proceedings. Once an arbitrator
was selected, Chase Bank moved the arbitrator to dismiss the claim due to the
delay in beginning the proceedings.  The arbitrator agreed and dismissed
the claim. Plaintiff then moved the trial court to set aside its initial order
compelling arbitration. The trial court agreed with plaintiff and set aside its
previous order compelling arbitration. Chase appealed that order.
Chase Bank argued to the Court of Appeals, and then to the Kentucky Supreme
Court, that under both the Federal Arbitration Act and the Kentucky
Uniform Arbitration Act, the trial court was bound to confirm the arbitrator’s
award and did not have the authority to set aside its initial decision
referring the case to arbitration.  The Kentucky Supreme Court found that
the validity of an arbitration agreement is a “separate and predicate” question
which can be addressed on appeal post arbitration.
There is extremely limited opportunity under the Federal Arbitration Act and
none under the Kentucky Uniform Arbitration Act for an interlocutory appeal
from a trial court’s order compelling arbitration.  However, relying on
the Kentucky Constitution, which provides “[i]n all cases, civil or criminal,
there shall be allowed as a matter of right at least one appeal to another
court. . . .”, the Kentucky Supreme Court stated that since there is no
procedure for plaintiffs to pursue an interlocutory appeal from an order
compelling arbitration, that appeal must necessarily come after a final
decision by the trial court following arbitration. At that point, once
arbitration is complete and a decision rendered by the arbitrator, the
aggrieved party can appeal the decision of whether a valid arbitration
agreement existed in the first instance.
In the matter that was before the Kentucky Supreme Court, the appeal was not
directly from the arbitrator’s award, but rather from the trial court’s order
setting aside its initial ruling ordering the case to arbitration. The Court
found the trial court has absolute authority to revisit its previous rulings
prior to finality.  Regardless of the posture of the case, the end result
is the same. Even if the trial court had simply affirmed the arbitrator’s
dismissal of the claim, the Plaintiff still has the right to appeal the trial
court’s decision regarding the validity of the arbitration agreement. Call with

Download the Chase
Bank v. Bluegrass Powerboats opinion.

Donald L. Miller, II

Attorneys At Law
Managing Partner – Kentucky
9300 Shelbyville Road, Suite 400
Louisville, KY 40222
Telephone: (502) 423-6390
Facsimile: (502) 423-6391
Cellular: (502) 905-7479


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