In MAPP, L.L.C. v. Floor and Decor Outlets of America, Inc., the United States Court of Appeals for the Fifth Circuit affirmed the denial of a motion to compel arbitration, holding that an arbitration provision giving the project owner sole discretion to elect arbitration was adhesionary and unenforceable under Louisiana law.

Floor and Decor Outlets of America, Inc. (“F&D”), a national flooring retailer, contracted with MAPP, L.L.C. (“MAPP”), a Louisiana construction management company, to construct a retail store in Metairie, Louisiana. F&D later terminated the agreement because of project schedule delays. MAPP disputed that it had breached the agreement and demanded more than $3 million for work performed through the termination date. MAPP subsequently sued F&D under the Louisiana Private Works Act. F&D moved to compel arbitration and the Eastern District of Louisiana denied the Motion because F&D had not complied with the agreement’s pre-arbitration dispute-resolution procedures.

The Fifth Circuit affirmed on different grounds. The agreement provided that disputed claims not resolved through confidential negotiation or mediation could, “in the sole discretion of Owner,” be decided by arbitration. Applying Louisiana law, the Fifth Circuit considered four factors for determining whether such an arbitration provision is adhesionary: the clause’s physical characteristics, its distinguishing features, its mutuality, and the parties’ relative bargaining strength. The first two factors did not support adhesion because the provision was legible, demarcated, and located within the agreement’s dispute-resolution section. The court emphasized, however, that Louisiana law requires consideration of the overall contract and surrounding circumstances.

The remaining two factors supported adhesion. The agreement lacked mutuality because only F&D could compel arbitration. Further, although the agreement permitted recovery of attorneys’ fees incurred in enforcing the arbitration provision, only F&D could invoke the provision, effectively making the fee provision one-sided. The parties’ relative bargaining positions also favored adhesion. F&D selected MAPP through a competitive bidding process and provided MAPP with a standard-form contract that MAPP had no role in drafting. The Court concluded that MAPP, a local contractor seeking the business of a national retail chain, occupied an inferior bargaining position.

Considering all four factors, the Fifth Circuit concluded that the lack of mutuality and unequal bargaining position were sufficient to establish adhesion. Accordingly, the arbitration provision was unenforceable under Louisiana law, and the court affirmed the denial of F&D’s motion to compel arbitration.