Douglas Dees v. Helmuth Billy

MEMORANDUM

Douglas Dees appeals the district court’s order compelling arbitration and its denial of his motion to vacate an arbitration award. We review the district court’s decision to compel arbitration de novo. Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir.2000). We reverse the order compelling arbitration, vacate the arbitration award, and remand the matter for further proceedings in district court.

I

The magistrate judge erred to the extent he used the choice-of-law provisions within the arbitration agreement to determine the foundational question of whether the arbitration agreement itself was enforceable, and by misapplying the Nevada substantive relationship test to the question of enforceability. A federal court sitting in diversity must apply the substantive law of the state in which it sits, including that state’s choice-of-law rules. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 , 61 S.Ct. 1020 , 85 L.Ed. 1477 (1941). Nevada has adopted the substantial relationship test for resolving contract conflict-of-laws issues. See Williams v. United Servs. Auto. Ass’n, 109 Nev. 333 , 849 P.2d 265, 266 (1993). Whether a substantial…