Yousef and Betty, American law students, were taking a fascinating course in International Civil Litigation in Curacao when they rented a car from Prudential Rentals, a worldwide Dutch owned car rental company. 

Being top students, Yousef and Betty signed the lease agreement without reading it.  The agreement contained an arbitration provision that states in its entirety:

Any and all disputes regarding any damage to the car which occurs during the rental period due to any collision, fire or explosion, will be resolved by an arbitrator at the American Arbitration Association's ("AAA") office in El Paso, Texas.  The arbitrator shall apply the laws of Curacao to these claims. 

The rules of AAA do not address whether the validity of an arbitration agreement shall be determined by a governmental court or an arbitrator. 

When Yousef and Betty returned the car, they were hit with what they felt were excessive mileage charges and unwarranted costs for minor dents and scratches which admittedly occurred in a parking lot while they were leasing the vehicle. They refused to pay any of these charges, called their credit card companies and cancelled all payments to Prudential, even those they did not contest.  Upon returning home to Baltimore, they were properly served with a demand for arbitration by Prudential to be held in El Paso, Texas pursuant to the arbitration clause quoted above.  The method of service was proper.

In an unrelated case, the United States Supreme Court has determined that another company's form contract which it uses for all car rentals, is invalid and unenforceable.  That contract is to identical Prudential's except it did not contain an arbitration clause

You have been retained to represent Yousef and Betty.  They forbid you to discuss settlement or any compromise with Progressive's attorney.

1. Whether any motion to dismiss based on the invalidity of the arbitration clause should be heard by a judge or an arbitrator and the likely outcome of such a motion 

Answer rating: 100% (QA)

In this scenario Yousef and Betty could argue that the arbitration clause is invalid citing the unr... View the full answer