Buckeye Check Cashing, Inc. v. Cardegna - 04-1264 (2006)
OCTOBER TERM, 2005
BUCKEYE CHECK CASHING, INC. V. CARDEGNA
SUPREME COURT OF THE UNITED STATES
BUCKEYE CHECK CASHING, INC. v. CARDEGNA et al.
certiorari to the supreme court of florida
No. 04–1264. Argued November 29, 2005—Decided February 21, 2006
For each deferred-payment transaction respondents entered into with Buckeye Check Cashing, they signed an Agreement containing provisions that required binding arbitration to resolve disputes arising out of the Agreement. Respondents sued in Florida state court, alleging that Buckeye charged usurious interest rates and that the Agreement violated various Florida laws, rendering it criminal on its face. The trial court denied Buckeye’s motion to compel arbitration, holding that a court rather than an arbitrator should resolve a claim that a contract is illegal and void ab initio. A state appellate court reversed, but was in turn reversed by the Florida Supreme Court, which reasoned that enforcing an arbitration agreement in a contract challenged as unlawful would violate state public policy and contract law.
Held: Regardless of whether it is brought in federal or state court, a challenge to the validity of a contract as a whole, and not specifically to the arbitration clause within it, must go to the arbitrator, not the court. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U. S. 395, and Southland Corp. v. Keating, 465 U. S. 1, answer the question presented here by establishing three propositions. First, as a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract. See Prima Paint, 388 U. S., at 400, 402–404. Second, unless the challenge is to the arbitration clause itself, the issue of the contract’s validity is considered by the arbitrator in the first instance. See id., at 403–404. Third, this arbitration law applies in state as well as federal courts. See Southland, supra, at 12. The crux of respondents’ claim is that the Agreement as a whole (including its arbitration provision) is rendered invalid by the usurious finance charge. Because this challenges the Agreement, and not specifically its arbitration provisions, the latter are enforceable apart from the remainder of the contract, and the challenge should be considered by an arbitrator, not a court. The Florida Supreme Court erred in declining to apply Prima Paint’s severability rule, and respondents’ assertion that that rule does not apply in state court runs contrary to Prima Paint and Southland. Pp. 3–8.
894 So. 2d 860, reversed and remanded.
Scalia, J., delivered the opinion of the Court, in which Roberts, C. J., and Stevens, Kennedy, Souter, Ginsburg, and Breyer, JJ., joined. Thomas, J., filed a dissenting opinion. Alito, J., took no part in the consideration or decision of the case.