Eighth Circuit Finds Contract Formation Challenges to Be Decided by the Court, Affirms Order Denying Motion to Compel Arbitration

Defendant Litong Capital LLC appealed from an order of the U.S. District Court for the Western District of Missouri. The district court denied Litong’s motion to compel arbitration of claims asserted by GP3 II LLC, having determined there was never a valid contract between them. The Eighth Circuit affirmed.

Litong argued initially that disputes involving the entirety of a contract containing an arbitration clause are to be decided by the arbitrator, not the court, in the first instance, citing Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006). As the Eighth Circuit explained, however, the Supreme Court in Buckeye distinguished “validity of the contract as a whole” disputes from those involving contract formation. In Buckeye, the Supreme Court noted that its ruling “does not speak to the issue … [of] whether the signor lacked authority to commit the alleged principal.” In a later decision, the Supreme Court reaffirmed that disputes involving contract formation, such as the GP3/Litong dispute, are “generally for courts to decide.”

The Eighth Circuit also agreed with the district court that Litong failed to establish, under Missouri law, that the person who purportedly signed the contract for GP3 had apparent authority to do so. Because Litong already conceded that the purported signor did not have actual authority to bind GP3, the court affirmed the district court order denying Litong’s motion to compel.

GP3 II, LLC v. Litong Capital, LLC, No. 21-1443 (8th Cir. June 3, 2022).