Determination of Valid Arbitration Agreement May Be Dependent on “Outward Manifestations and Circumstances Surrounding the Transaction”

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The Ninth Circuit vacated the denial of a motion to compel arbitration and remanded for determination of whether a valid arbitration agreement exists in a recent lawsuit governed by Washington state law. According to the Ninth Circuit, the district court’s “sparse analysis” left it unclear whether the court had “properly considered all the relevant facts and circumstances” necessary to determine whether there was sufficient “mutual assent required for the formation of a valid contract.” Such a determination requires an “inquiry into [the plaintiff’s] intent – based on the reasonable meaning of his words and acts to assent to the terms of the Agreement.”

The district court “bypassed” that analysis, and instead deemed the facts and circumstances to be “identical in all material facts and circumstances” to those of another plaintiff that the court had previously determined to have assented to the agreement. However, the Ninth Circuit noted that one of the plaintiffs received the agreement beforehand while the other did not, and that the plaintiff relevant to this appeal did not submit a declaration to the court, which would have enabled the court to better determine whether mutual assent existed based on the “outward manifestations and circumstances surrounding the transaction.” As such, the court vacated and remanded for determination as to whether the factual record supported the establishment of a valid and enforceable arbitration agreement.

Reichert v. Rapid Investments, Inc., No. 19-35989 (9th Cir. Oct. 21, 2020).

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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