Principle of Separability of the Arbitration Clause Reaffirmed

Adhering to well-settled principles concerning the separability of the arbitration clause, the U.S. Sixth Circuit Court of Appeals reversed an order that had denied a motion to compel arbitration, and held that the lower court improperly relied upon allegations of fraud in the inducement of the entire contract and that there were no sufficient allegations of fraud pertaining specifically to the agreement to arbitrate. The Court also rejected Appellee’s attempt to characterize the dispute as one involving the existence, rather than the validity, of the entire contract, and held that where the position taken is that the signatory to the contract breached fiduciary duties by entering into it, the challenge was to the validity of the contract and thus it was for the arbitrator to resolve in the first instance. (Moran v. Svete, 2010 U.S. App. LEXIS 3812 (6th Cir. Feb. 24, 2010).