Capital Briefs: Arbitration Pact Upheld by Supreme Court

WASHINGTON - In another victory for banks that use mandatory arbitration, the Supreme Court ordered the Montana Supreme Court to review its decision in a Subways sandwich shop case.

In that dispute, the Montana court voided an arbitration agreement between the Connecticut-based company and a franchisee, saying it didn't conform to state law.

But the federal high court vacated the decision and ordered the Montana court to reconsider the dispute in light of the high court's ruling this year in Allied-Bruce Terminex. In that case, the justices found that the Federal Arbitration Act prevents state courts from voiding agreements between in- and out-of-state companies.

"Some of our banks include mandatory arbitration contracts, and we of course want to see them enforced," said Michael Crotty, deputy general counsel at the American Bankers Association. "Allied-Bruce says they are enforceable, and this confirms that."

A number of banks, including Bank of America, have added clauses to loan and deposit contracts binding each side to resolve any dispute through arbitration, a quasi-judicial proceeding that often costs much less than court proceedings.