New Fourth Circuit Opinion on Arbitration -- Appeal of Arbitrability Decision Divests Trial Court of Jurisdiction

I have addressed arbitration issues many times before on this Business Law Blog. They are important because so many agreements now contain mandatory arbitration clauses. On February 10, 2011, the United States Court of Appeals for the Fourth Circuit issued an opinion in the case of Levin v. Alms and Associates, Inc. A copy of the decision can be found here. In this case, the appellate court held that when a trial court order regarding arbitrability of a dispute was appealed, the trial court is divested of jurisdiction and cannot continue on to handle the case until the appeal is resolved. The appellate court reversed the trial court which had allowed what it believed was the “non-arbitrable” portion of the case to go forward while the appeal was pending.

The appellate court also went on to decide that the trial court was wrong on the merits. That is, the appellate court held that the trial court was wrong to decide that certain claims were not subject to arbitration.

Before including an arbitration provision in your business agreements, you should be sure to consult with counsel to determine whether such a provision is in your interest and to discuss the scope and effect of such a provision.