McConnell & Malek Enterprises v. Proof Mark, Inc

Background

McConnell & Malek Enterprises (MME) and Proof Mark, Inc. (PMI) signed a Professional Service Agreement on May 18, 2022. The agreement contained a provision addressing whether disputes could be arbitrated. MME challenged whether the agreement was binding and whether it required arbitration of this dispute.

PMI filed a demand for arbitration with the American Arbitration Association on January 9, 2023, starting arbitration in Houston, Texas. MME sought an emergency order stopping that arbitration. The American Arbitration Association stated that it would follow any court order concerning the arbitration’s timing.

Court’s Analysis

The court stated that, under the Federal Arbitration Act, it had authority to review whether an arbitration provision was enforceable. It explained that questions about whether a valid arbitration agreement exists and whether that agreement covers the dispute generally are for a court to decide, unless the parties clearly and unmistakably agreed otherwise. The court also noted that arbitration depends on the parties’ consent and that contract-formation disputes are generally decided by courts.

Because MME was disputing whether the dispute belonged in arbitration, the court concluded that the arbitration should be temporarily stopped while it resolved the validity and enforceability of the Professional Service Agreement’s arbitration provision.

Disposition

The court temporarily stayed and enjoined the arbitration before the American Arbitration Association pending its resolution of the arbitration provision’s validity and enforceability. The order did not decide whether the agreement was valid or whether the dispute ultimately must be arbitrated.