Reported / Citable
Background
Floor and Decor Outlets of America, Inc. contracted with Louisiana construction management company MAPP, L.L.C. to build a retail store in Metairie, Louisiana. Floor and Decor terminated the master agreement in November 2022, citing schedule delays. MAPP disputed that it had breached the agreement and later demanded more than $3 million for work performed through the termination date.
MAPP sued under the Louisiana Private Works Act. Floor and Decor moved to compel arbitration under a provision stating that unresolved claims could, in the owner’s sole discretion, be arbitrated. The district court denied the motion because Floor and Decor had not completed the agreement’s required pre-arbitration procedures, including a written project-manager decision, confidential negotiation, and mediation. Floor and Decor appealed.
The Court’s Holding
The Fifth Circuit affirmed, but the majority relied on different grounds. Applying Louisiana’s generally applicable contract defense of adhesion, the court held that the arbitration provision was invalid and unenforceable. It therefore did not decide whether MAPP’s claim fell within the provision’s scope or whether the contractual prerequisites to arbitration had been satisfied.
Under Louisiana’s four-factor adhesion analysis, the clause’s physical presentation and distinguishing features favored enforcement because it was legible, demarcated, and located within the agreement’s dispute-resolution section. But the other factors favored adhesion. Floor and Decor alone could select claims for arbitration, and a fee provision effectively allowed only Floor and Decor to recover the cost of compelling arbitration. The agreement also unduly burdened MAPP, a local contractor that received Floor and Decor’s standard form after prevailing in a competitive bidding process, while favoring the national retailer that drafted it. Taken together, the lack of mutuality and inferior bargaining position demonstrated that MAPP had little choice but to accept the unequal terms.
Judge Cory T. Wilson concurred only in the judgment. He would have affirmed on the district court’s ground that Floor and Decor never completed the contractual procedures required before arbitration could be invoked, and he would not have reached the adhesion question.
Key Takeaways
- The FAA permits courts to invalidate arbitration provisions under generally applicable state-law contract defenses, including Louisiana’s doctrine of adhesion.
- A non-mutual arbitration clause is not automatically invalid under Louisiana law, but one-sided election and fee rights can weigh heavily toward adhesion when combined with unequal bargaining power.
- The majority affirmed because no valid arbitration agreement existed; the concurrence instead concluded that the contractual duty to arbitrate was never triggered.
Why It Matters
The decision shows that a clearly displayed arbitration clause can still be unenforceable when its substantive terms and the parties’ bargaining positions indicate an absence of meaningful consent. Businesses using Louisiana contracts should scrutinize provisions that reserve the arbitration election and related fee recovery exclusively to the drafting party.
The separate concurrence also highlights the importance of following every contractual step preceding arbitration. A party that fails to issue a required decision or participate in prescribed negotiation and mediation may be unable to compel arbitration even apart from questions about the clause’s validity.