Keystone, Inc. v. Triad Systems Corp.

Keystone, Inc. (plaintiff) contracted with Triad Systems Corporation (Triad) (defendant) for the purchase of a computer system. Keystone was incorporated in Montana, and Triad in California. The parties’ contract included an arbitration provision requiring that disputes be settled in California before the American Arbitration Association. The computer system was defective, and Triad failed to refund the purchase price to Keystone. Keystone brought suit for breach of contract, breach of warranty, negligence, and negligent misrepresentation. Triad asserted that arbitration in California was the proper forum to resolve the dispute. Keystone agreed to arbitrate, but only in Montana. Keystone filed a motion to compel arbitration in Montana under Montana Code Annotated (MCA) § 28-2-708, arguing that the statute applied to contract law in general and therefore was not in conflict with, or preempted by, the Federal Arbitration Act (FAA). Triad filed a cross-motion to compel arbitration in California pursuant to the contract. Triad argued that § 28-2-708 applied to prohibit litigation, not arbitration, outside California and that regardless of the state statute’s provisions, the state statute was preempted by the FAA. The district court granted Triad’s motion, compelling arbitration in California, reasoning that the FAA preempted § 28-2-708. Keystone appealed.