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Allied-Bruce Terminix Cos. v. Dobson

513 U.S. 265 (1995)

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Allied-Bruce Terminix Cos. v. Dobson

United States Supreme Court

513 U.S. 265 (1995)

Facts

Allied-Bruce Terminix Companies, Inc. (Allied-Bruce) (defendant) contractually agreed to provide lifetime termite protection for a house. The Dobsons (plaintiffs) bought that house and discovered that it was infested with termites. The Dobsons sued Allied-Bruce in Alabama state court for breaching the termite-protection agreement. However, the termite-protection agreement contained a clause requiring private arbitration of any disputes regarding the agreement. Citing this clause, Allied-Bruce moved to stay the lawsuit and to force the Dobsons to arbitrate the dispute instead. Alabama had a state law making predispute arbitration agreements unenforceable, but Allied-Bruce argued that the Federal Arbitration Act (FAA) pre-empted that state law and required enforcement of the arbitration clause. Allied-Bruce was a multistate entity and had imported some materials from other states for its termite-protection efforts, which meant that the termite-protection agreement had a slight effect on interstate commerce. However, the trial court found that the FAA did not apply to the arbitration clause because the termite-protection agreement involved a mostly local transaction and the parties had not contemplated substantial interstate activity when the agreement was made. Thus, the trial court applied the state law and refused to enforce the arbitration clause or stay the litigation. The case was appealed, and the Alabama Supreme Court affirmed the trial court’s ruling. The United States Supreme Court accepted review of the case to address the FAA’s reach.

Rule of Law

Issue

Holding and Reasoning (Breyer, J.)

Concurrence (O’Connor, J.)

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