How to Challenge an Arbitration Clause in Minnesota

Which law decides whether a Minnesota arbitration clause can be challenged?

Two statutes can apply, and both let you attack the clause on ordinary contract grounds. The Minnesota act reaches “An agreement contained in a record,” and the FAA reaches a written provision in “a contract evidencing a transaction involving commerce.”

Under Minn. Stat. § 572B.06(a), “An agreement contained in a record to submit to arbitration any existing or subsequent controversy arising between the parties to the agreement is valid, enforceable, and irrevocable except upon a ground that exists at law or in equity for the revocation of contract.” The Minnesota Supreme Court read that text in Minnesota Department of Corrections v. Knutson, 976 N.W.2d 711 (Minn. 2022), a dispute over a state manager’s statutory grievance. The court said the parties “must be parties to a contractually enforceable agreement to arbitrate that is recorded in writing or similar electronic form” for the act to apply.

The FAA’s version, 9 U.S.C. § 2, makes a written arbitration provision in a contract involving commerce “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract or as otherwise provided in chapter 4.” In Glacier Park Iron Ore Properties, LLC v. United States Steel Corp., 961 N.W.2d 766 (Minn. 2021), where both sides agreed the FAA controlled, the Minnesota Supreme Court described its earlier holding “that in cases involving interstate commerce, Minnesota courts must analyze the case under the FAA and federal cases interpreting that act.” When the FAA controls, the federal cases below decide the challenge even in a Minnesota court.

Who decides your challenge: the court or the arbitrator?

A court decides whether you agreed to arbitrate and whether the dispute is covered. Under the FAA, a contract can delegate those questions to the arbitrator only by clear and unmistakable evidence. How you frame the challenge decides which one hears it.

Under Minn. Stat. § 572B.06(b), “The court shall decide whether an agreement to arbitrate exists or a controversy is subject to an agreement to arbitrate,” except for a grievance under a collective bargaining agreement. Under § 572B.06(c), “An arbitrator shall decide whether a condition precedent to arbitrability has been fulfilled and whether a contract containing a valid agreement to arbitrate is enforceable.” Under that text, an argument that a contract containing a valid agreement to arbitrate is unenforceable goes to the arbitrator, while an argument that no agreement to arbitrate exists goes to the judge, except for a collective bargaining grievance.

Under the FAA, the parties may hand the arbitrability question to the arbitrator, but only clearly. Glacier Park holds: “Unless clear and unmistakable evidence shows that the parties intended to delegate the issue to an arbitrator, the court, not the arbitrator, decides whether a dispute governed by the Federal Arbitration Act is arbitrable.” A clause that is silent on the point, or merely broad, did not meet that standard. Once a valid delegation exists, the U.S. Supreme Court held in Henry Schein, Inc. v. Archer & White Sales, Inc., 586 U.S. 63 (2019): “When the parties’ contract delegates the arbitrability question to an arbitrator, a court may not override the contract.” And in Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (2010), an employment case under Nevada law, the Court said it requires “the basis of challenge to be directed specifically to the agreement to arbitrate before the court will intervene.” If your clause contains a delegation sentence, your court papers should attack that sentence by name.

What grounds can defeat an arbitration clause?

The grounds are the ones that defeat any contract: no agreement, no consideration, fraud in the inducement, or a public-policy bar. You can also argue that this dispute falls outside the clause. Under the FAA, a challenge to validity, such as fraud in the inducement, must be aimed at the arbitration clause itself, because Rent-A-Center holds that a challenge to another provision or to the contract as a whole “does not prevent a court from enforcing a specific agreement to arbitrate.” The Court said the issue of validity “is different from the issue whether any agreement between the parties” was ever concluded, and that it addressed “only the former.”

Knutson quoted the court’s earlier description of grounds for attacking an arbitration agreement, “fraud in the inducement, lack of consideration or contravention of public policy.” In Knutson itself, the court found no agreement to arbitrate for lack of consideration. The manager relied on the state’s Managerial Plan, a handbook the law required for state managers, but its dispute section only repeated his statutory right to appeal a discharge, and the court held that this “bare recitation of a preexisting statutory right” was not supported by consideration. The court also restated its rule that an employee handbook could form a unilateral offer “of employment on particular terms” provided it is “definite in form” and “communicated to the offeree,” and that “by continuing to stay on the job, although free to leave, the employee supplies the necessary consideration for the offer.” Formation problems are common in practice. They include a clause in terms the other side never accepted, an unsigned arbitration agreement, or click-through terms between businesses with a weak acceptance record.

Scope is a separate ground. Glacier Park states: “A party cannot be required to arbitrate claims that they have not agreed, by contract, to arbitrate.” There, a mineral lease listed four categories of arbitrable disputes, and a claim attacking how the lease was formed was not among them. The same opinion repeats that any doubt about the scope of arbitration “should be resolved in favor of arbitration,” so a scope argument works best against a clause that lists specific disputes rather than one covering everything “arising under” the contract.

Under the FAA, the defense must be one that applies to contracts generally. In AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), the Court said the § 2 saving clause “preserves generally applicable contract defenses” but not state rules that stand as an obstacle to the FAA’s purposes. A rule that disfavors arbitration as such will not carry the challenge.

How does an unconscionability challenge work against an arbitration clause?

Unconscionability is a contract defense, so it can defeat an arbitration clause. Under the FAA, Rent-A-Center notes that “many elements of alleged unconscionability applicable to the entire contract (outrageously low wages, for example) would not affect the agreement to arbitrate alone.” For a contract for the sale of goods, Minnesota’s commercial code gives the parties “a reasonable opportunity to present evidence,” has the court decide “as a matter of law,” and sets out the remedies.

Under Minn. Stat. § 336.2-302(2), “When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.” That means building a record about the arbitration clause itself: the negotiation history, the drafts, who proposed the clause, and how it operates against you in practice, such as fees you must advance or a distant hearing location.

If the court “as a matter of law” finds the clause unconscionable “at the time it was made,” § 336.2-302(1) says it “may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.” Striking the clause is one of three outcomes, and the court chooses. Outside goods contracts, the standard comes from common law; how unconscionability challenges work in other contracts is covered separately.

Which arbitration terms can a Minnesota clause not take away?

The Minnesota act lists rights that a clause cannot waive before a dispute arises, and procedures that a clause can never change. A clause that tries to take one of them away gives you a specific argument.

Under Minn. Stat. § 572B.04(b), “Before a controversy arises that is subject to an agreement to arbitrate, the parties to the agreement may not” do several things. They may not “waive the right under section 572B.16 of a party to an agreement to arbitrate to be represented by a lawyer at any proceeding or hearing,” except that an employer and a labor organization may waive it in a labor arbitration. They may not “unreasonably restrict the right under section 572B.09 to notice of the initiation of an arbitration proceeding,” or “unreasonably restrict the right under section 572B.12 to disclosure of any facts by a neutral arbitrator.” They also may not waive or vary several listed sections, including the validity rule in § 572B.06(a) and the provisional-remedies section, § 572B.08.

Under § 572B.04(c), the parties may never waive or vary a second list, which includes § 572B.07 (the court’s procedure on a motion to compel or stay) and § 572B.23 (vacating an award). A clause term that changes the court’s procedure on your challenge, or the grounds for vacating an award, conflicts with that list.

When do federal exemptions take a dispute out of arbitration?

Two federal rules can take a dispute out of a predispute arbitration clause: the law ending forced arbitration of sexual harassment and sexual assault claims, and the FAA’s exemption for transportation workers. Both matter most to employers.

Under 9 U.S.C. § 402(a), at the election of the person alleging a sexual harassment or sexual assault dispute, “no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.” Under § 402(b), whether that rule applies “shall be determined by a court, rather than an arbitrator,” even if the agreement says otherwise. The law applies to disputes arising or accruing on or after March 3, 2022. In Famuyide v. Chipotle Mexican Grill, Inc., 111 F.4th 895 (8th Cir. 2024), an appeal from the District of Minnesota involving claims under Minnesota law, the court held that letters from the employee’s lawyers before that date did not start the dispute: “This sort of exploratory letter from counsel does not establish a dispute or inevitably lead to one.” The court affirmed the denial of the employer’s motion to compel.

9 U.S.C. § 1 says the FAA does not apply “to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” The U.S. Supreme Court held that a cargo-loading supervisor at an airline falls within that exemption in Southwest Airlines Co. v. Saxon, 596 U.S. 450 (2022), and in Bissonnette v. LePage Bakeries Park St., LLC, 601 U.S. 246 (2024) it held that the worker need not work in the transportation industry, because the exempt classes are “connected by what they do, not for whom they do it.” The exemption removes the FAA only. The Minnesota act’s validity rule in § 572B.06(a) still reaches an agreement contained in a record. For the employer’s wider exposure, see mandatory arbitration of employee claims.

I suggest reading an employment agreement’s governing-law section and dispute section together. One agreement I analyzed was written for Minnesota employees, yet it chose another state’s law and sent disputes to arbitration in that state, which changes which rules a challenge must satisfy.

How does the other side lose its right to arbitrate by litigating?

A party that litigates the dispute in court instead of promptly demanding arbitration can lose the right to arbitrate. Minnesota state courts and federal courts get there by slightly different rules.

In The Brothers Jurewicz, Inc. v. Atari, Inc., 296 N.W.2d 422 (Minn. 1980), decided under Minnesota’s former arbitration act, the Minnesota Supreme Court said a party “will be deemed to have waived any right to arbitration if judicial proceedings based on that contract have been initiated and have not been expeditiously challenged on the grounds that disputes under the contract are to be arbitrated.” Atari had answered on the merits and litigated for nearly a year before finding the agreement. The court rejected its excuse that it had lost its copy, because “absent fraud or concealment, a party should be deemed to have knowledge of the terms of agreements that he has executed.” The court also held that the trial judge, not an arbitrator, could decide a waiver defense based only on conduct in the lawsuit before it.

In federal court under the FAA, the U.S. Supreme Court held in Morgan v. Sundance, Inc., 596 U.S. 411 (2022) that “prejudice is not a condition of finding that a party, by litigating too long, waived its right” to stay litigation or compel arbitration. The Court explained that “a court must hold a party to its arbitration contract just as the court would to any other kind. But a court may not devise novel rules to favor arbitration over litigation.” The Court did not decide what role state law plays. 9 U.S.C. § 3 also conditions a federal stay on the applicant “not in default in proceeding with such arbitration.”

Under the Minnesota act, one step does not waive arbitration. Under Minn. Stat. § 572B.08(c), “A motion to a court for a provisional remedy under subsection (a) or (b) does not waive any right of arbitration.” Subsection (a) reaches a motion “of a party to an arbitration proceeding and for good cause shown,” and once an arbitrator can act, subsection (b) allows the motion “only if the matter is urgent and the arbitrator is not able to act in a timely manner or if the arbitrator cannot provide an adequate remedy.” If you want court rather than arbitration, keep a record of every filing, answer, and discovery request the other side makes before it raises the clause.

How do you raise the challenge in a Minnesota court?

You raise the challenge by opposing the other side’s motion to compel arbitration, or by filing your own motion to stop an arbitration that has started or been threatened. The judge decides it quickly, on whether an enforceable agreement exists.

When the other side moves to compel, Minn. Stat. § 572B.07(a) provides: “If the refusing party opposes the motion, the court shall proceed summarily to decide the issue. Unless the court finds that there is no enforceable agreement to arbitrate, it shall order the parties to arbitrate. If the court finds that there is no enforceable agreement, it may not order the parties to arbitrate.” Silence loses: the court must order arbitration “if the refusing party does not appear or does not oppose the motion.” If you are the one served with an arbitration demand, § 572B.07(b) lets you move the court, “alleging that an arbitration proceeding has been initiated or threatened but that there is no agreement to arbitrate,” and the court again decides summarily. The moving side’s procedure is covered in the motion to compel arbitration.

Two limits shape the papers. Under § 572B.07(c), “The court may not refuse to order arbitration because the claim subject to arbitration lacks merit or grounds for the claim have not been established.” And under § 572B.07(e), once a motion to compel is filed, the court “shall on just terms stay any judicial proceeding that involves a claim alleged to be subject to the arbitration” until it decides the motion. Meanwhile, under § 572B.06(d), the arbitration itself “may continue pending final resolution of the issue by the court, unless the court otherwise orders,” so ask the court for that order if you want the arbitration paused.

In federal court, 9 U.S.C. § 4 adds a choice Minnesota’s act does not list: when “the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue,” a party facing a petition to compel arbitration under a written agreement can ask for a jury: “the party alleged to be in default may, except in cases of admiralty, on or before the return day of the notice of application, demand a jury trial of such issue.”

The right forum depends on who the other party is. Court and arbitration carry different consequences for a company with a large workforce under one form agreement than for two business counterparties, so the decision to fight a clause should start with what the company gains in court.

What happens after the court rules?

If the court refuses to compel arbitration, the other side can appeal. An order compelling arbitration is not on the Minnesota act’s list of appealable orders, though the list includes a final judgment entered under the act.

Minn. Stat. § 572B.28(a) allows an appeal from, among other orders, “an order denying a motion to compel arbitration,” “an order granting a motion to stay arbitration,” and “a final judgment entered pursuant to sections 572B.01 to 572B.31.” The list does not include an order compelling arbitration. Federal law is similar: 9 U.S.C. § 16(a) lists orders refusing a stay and denying a petition to compel.

If the court orders arbitration, § 572B.07(f) requires it to stay “any judicial proceeding that involves a claim subject to the arbitration,” and “If a claim subject to the arbitration is severable, the court may sever it and limit the stay to that claim.” Claims outside the clause can keep moving in court.

Inside the arbitration, state the objection early. § 572B.23(a) lets a court vacate an award where “there was no agreement to arbitrate, unless the person participated in the arbitration proceeding without raising the objection under section 572B.15, subsection (c), not later than the commencement of the arbitration hearing.” The filing deadlines and other grounds for vacating an award are covered separately; read the current statute for the exact period.

Challenging an Arbitration Clause in Brief

An arbitration clause is a contract term, and Minnesota courts test it with contract law: was there an agreement in a record, does it cover this dispute, and does a defense such as fraud, lack of consideration, or unconscionability apply to the clause itself. Who hears those questions depends on the act that governs and, under the FAA, on whether clear and unmistakable evidence shows the parties delegated them. Litigation conduct can end the right to arbitrate, and a person who participates in the arbitration must raise a no-agreement objection not later than the commencement of the arbitration hearing to keep it as a ground for vacating the award. More on the contract terms that shape a dispute is collected on the contracts practice page. If you would like a second set of eyes on an arbitration clause you are facing, email aaron@aaronhall.com with a short description of the dispute.