New York Federal Court Rules It Cannot Compel Arbitration In Georgia

A New York federal court recently was presented with a motion to compel arbitration in Georgia. The district court first concluded that the arbitration provision was enforceable and then proceeded to the question of whether it had the authority to compel arbitration in a district other than its own. The court described what it deemed an “internal conflict” within the Federal Arbitration Act because the Act provides both that (1) courts must enforce an arbitration agreement in accordance with its terms, and (2) arbitration must take place “within the district in which the petition for an order directing such arbitration is filed.” The court also noted an unresolved split in the Second Circuit on how a New York district court should proceed when a suit pending before it involves an arbitration agreement that specifies that arbitration should take place outside the court’s district. Ultimately, the court ruled that it had no authority to compel arbitration outside its district, but nevertheless wished to enforce the valid forum selection clause contained in the agreement. Accordingly, the district court elected to stay the action, pending arbitration of the plaintiff’s claims against the defendant in Georgia. This approach left the parties free to pursue their contractual rights and remedies in the appropriate venue without running afoul of the FAA. Klein v. ATP Flight School, No. 14-CV-1522 (USDC E.D. N.Y. July 3, 2014).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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