JPMorgan Chase Bank, N.A. v. Bluegrass Powerboats, 424 S.W.3d 902 (Ky. 2014) [click for opinion]

James Taylor sued Chase Bank for damages alleging that the bank had violated the Uniform Commercial Code when it failed to pay or return a not-sufficient-funds check by midnight of the day the check was deposited and the check was drawn on from the same bank. Chase claimed that the dispute was subject to an arbitration agreement and that, as a result, the Kentucky trial court should stay proceedings and order the case to arbitration.

Chase provided affidavits regarding its usual business practice of having new customers sign a signature card referring to a booklet that invoked the Federal Arbitration Act. However, Chase did not offer any documentation that Taylor had signed such a card or received such a booklet. Moreover, Taylor denied ever seeing the card or booklet. Nonetheless, the trial court concluded that there was an arbitration agreement. The trial court referred the case to arbitration.

Taylor moved the court to vacate the order to arbitrate or to make its order final and appealable. The court denied his motion. A few years later, Taylor initiated an arbitration proceeding. Chase moved the arbitrator to dismiss Taylor's claim for delay in filing the arbitration claim. The arbitrator granted the motion and dismissed his claim.

Shortly thereafter, the Supreme Court of Kentucky decided Ally Cat, LLC v. Chauvin. In Ally Cat, the court held that in order to be bound by an arbitration agreement, "[a]ssent to be bound by the terms of the agreement must be expressed, and simply acknowledging the receipt of the document does not constitute assent to be bound." Relying on this decision, Taylor moved the trial court to take the case out of abeyance and set aside its previous order compelling arbitration because there was never an agreement to arbitrate under Ally Cat.

The trial court reasoned that its previous order was in error and that the case was not final. Thus, the court set aside its earlier order finding that an arbitration agreement existed and its referral of the case to arbitration. The court also denied Chase's motion to confirm the arbitration award. Chase immediately filed an interlocutory appeal of this order, arguing that the trial court was bound to confirm the arbitrator's decision under 9 U.S.C. § 9 orKRS 417.150. The Court of Appeals disagreed and affirmed the trial court.

The Supreme Court of Kentucky accepted discretionary review of this case. The court reasoned that Chase incorrectly assumed that a finding of an arbitration agreement's existence is final upon issuance of an arbitration award; rather, the existence of an agreement is a separate and predicate question. Likewise, the applicability of the statutes Chase cited depended on the existence of a valid arbitration agreement. The court reasoned that Chase's argument could not be correct because it would mean that a trial court's finding that there is a valid agreement is unreviewable. This, the court added, is simply not the case when every adversely affected litigant is constitutionally entitled to at least one appeal of right.

Before final judgment in this case, Taylor had asked the trial court to set aside its prior ruling. The court reasoned that until a final judgment is entered, all rulings by a court are interlocutory and subject to revision. Moreover, efficient judicial process mandates that a trial court correct an erroneous ruling before finality whenever possible. Finding that the trial court had the authority to set aside the order since the judgment was not final, the Supreme Court turned to the question of whether the trial court had properly found that there was no valid arbitration agreement. Considering the Ally Cat standard and considering the ample evidence from which the trial court could conclude that Taylor had not signed the signature card, the Supreme Court concluded that the record supported the trial court's finding. Thus, the court held that because the matter was not final and because there was insufficient proof of the existence of a valid arbitration agreement, the trial court properly set aside its earlier order.