Litigating Conflicting Procedures in Separate but Related Agreements


Transactions often consist of multiple separate but related agreements. For example, the sale of an interest in real property may require the execution of a purchase agreement, guaranty, financing agreement, security agreements, and other agreements. The related agreements may contain conflicting provisions relating to arbitration of claims, forum selection, or choice of law.

Under such circumstances, initiating litigation or arbitration may require navigation of a procedural minefield before getting to the merits of the client's case. For example, claims arising under one agreement may be subject to arbitration, but claims arising under another agreement may be subject to litigation in a particular forum. Maybe the agreements all provide for arbitration but the procedures for selecting arbitrators or initiating arbitration conflict. Construction of one agreement may require application of Texas law, but construction of a related agreement requires application of different law. When these provisions clash, the resolution of gateway issues, including arbitrability, may result in expensive piecemeal litigation in separate forums that increases the risk of conflicting rulings or judgments.

Excerpted from the American Bar Association Section of Litigation, December 20, 2010. To read the full article, click here. (member login required)

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