Louisiana courts typically enforce, and broadly construe, contract provisions mandating arbitration to resolve disputes. However, two recent Louisiana appellate court decisions show that arbitration agreements can be avoided.
In Aguillard v. Auction Management Corp., 884 So.2d 1257 (La. App. 3d Cir. 2004), a bidder who purchased a residence at an auction sued the auctioneer and others to enforce an auction real estate sales agreement. A request to stay the proceedings, pending arbitration, was denied by the court. Viewing the situation as one involving a business enterprise and an individual consumer, the court focused on the issue of consent to the clause in dispute and concluded that the parties’ agreement was a contract of adhesion. Typically, a contract of adhesion involves an agreement prepared by a party of superior bargaining power for adherence or rejection of the weaker party, and are usually contained in standard forms that are typically justified by the volume of business transacted. Finding that the bidder was not in a position to bargain concerning the agreement terms, the court concluded the arbitration clause was adhesionary, lacked mutuality, and was unenforceable.
Likewise, in Vishal Hospitality, LLC v. Choice Hotels Intern., Inc., 2005 WL 675651 (La. App. 1 Cir. Mar. 24, 2005), writ pending, a hotel franchisee filed suit against the franchiser to prevent arbitration proceedings under the franchise agreement. Although the contract provided for Maryland law to control, Louisiana law was applied because the franchiser’s reservation for itself to litigate various matters, coupled with the franchisee’s obligation to arbitrate in all instances, created a contract of adhesion. Louisiana has a strong public policy in ensuring that arbitration clauses that are adhesionary are not enforced. Consequently, the choice of law rules in the contract were not followed because allowing arbitration under Maryland law would contravene Louisiana public policy.