Sharon Taylor v. Douglas Butler and City Auto Sales

We granted permission to appeal in this case to determine whether a claim for fraudulent inducement to a contract must be submitted to arbitration when the contract’s arbitration clause covers “all claims, demands, disputes or controversies” and states that it is governed by the Federal Arbitration Act (“FAA”). We hold that parties may agree to arbitrate claims of fraudulent inducement despite prohibition of arbitration of such claims under Tennessee law, and because the parties in this case specifically agreed that the FAA governs the arbitration clause, they agreed to arbitrate the claim for fraudulent inducement of the contract. However, we also find that the arbitration clause in this case is unconscionable and therefore void because it reserves the right to a judicial forum for the defendants while requiring the plaintiff to submit all claims to arbitration. For these reasons, the trial court’s dismissal of the complaint is overruled, and the decision of the Court of Appeals is affirmed.