Recent Development by Rebecca L. Olson
Auction Management Corporation and Gilmore Auction & Realty Company held a public auction for real property located in Sulphur, Louisiana. Before the auction, they circulated a sales brochure to prospective buyers, which described the residential dwelling to be auctioned, as well as the rules governing the auction. Prior to receiving a bid number to participate in the auction, all potential bidders were required to sign a document entitled “Auction Terms & Conditions,” which contained an arbitration clause. The two-page document was printed in nine-point font and the one-sentence arbitration clause appeared in the section entitled “ANNOUNCEMENTS.” The arbitration clause stated that “[a]ny controversy or claim arising from or relating to this agreement . . . shall be settled by arbitration.”
Dave Aguillard received the brochure and rules, and he attended the public, onsite auction. On the day of the auction, March 25, 2003, Aguillard signed the Auction Terms & Conditions. By signing, Aguillard acknowledged that he read, understood, and agreed to be bound by the terms and conditions of the auction. Aguillard tendered the highest bid at the auction, $42,900. He signed the required “Auction Real Estate Sales Agreement” and submitted a deposit in accordance with the Auction Terms & Conditions. The seller, Bank of New York, rejected Aguillard's bid stating that the auction was not absolute and submitted a counteroffer of $53,000. Aguillard rejected their counter-offer and filed suit in Louisiana state court against the bank and its agents to enforce the sales agreement.
The defendants immediately filed a joint motion to stay the proceedings pending arbitration, arguing that the arbitration clause governed the dispute. The district court denied the motion to stay and in a two-to-one decision, the Louisiana Court of Appeal for the Third Circuit affirmed the district court's ruling. The court of appeal found that the contract, including the arbitration agreement, was a contract of adhesion and lacked mutuality because of the superior bargaining position of the auction companies. The court further noted that the entire contract was written in small print and the arbitration clause was not conspicuous. The Louisiana Supreme Court subsequently granted the writ applications to address this issue of first impression. The Louisiana Supreme Court held that the arbitration clause in the standard form contract was not a contract of adhesion and adopted a presumption favoring the enforceability of arbitration agreements. Aguillard v. Auction Management Corp., 2004-2804, 2004-2857, p. 24 (La. 6/29/05); 908 So. 2d 1, 18.
About the Author
Rebecca L. Olson. J.D. candidate 2007, Tulane University School of Law; B.A. 2000, University of Washington.
Citation
80 Tul. L. Rev. 1479 (2006)