Oklahoma Supreme Court Finds Arbitrator, Not Court, to Determine Fraudulent Inducement Attack on Contract Containing Arbitration Clause

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The plaintiff-appellant filed suit in Oklahoma state court seeking to rescind a contract it entered into with the defendants, claiming the contract was procured by fraud. Citing an arbitration clause in the contract, the defendants moved to dismiss the suit and to compel arbitration. The question thus became whether the court or an arbitrator should determine a challenge of fraudulent inducement to the entirety of a contract containing an otherwise valid arbitration clause. The Supreme Court of Oklahoma held that state and federal law were aligned on the issue and required that the question be decided by the arbitrator. Specifically, the court concluded that Oklahoma law and the Federal Arbitration Act both adhere to the “separability doctrine.” The doctrine states that when parties agree to arbitrate, attacks on the validity of the contract – as distinct from the validity of the arbitration clause itself – are to be resolved by the arbitrator in the first instance. Because the allegations of fraud here were directed to the contract as a whole, not specifically to the arbitration clause, the court agreed with the lower court that the fraud issue must be referred to arbitration. As such, the court vacated an appellate court order and affirmed the lower court order granting the defendants’ motions to dismiss and to compel.

Signature Leasing LLC v. Buyer’s Group LLC, No. 115100 (Okla. June 9, 2020).

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