Aramark Uniform & Career Apparel v. Hunan, Inc.

A rAmArk uNiform & cAreer A ppArel , iNc .,
AppellANt , v . huNAN, iNc ., doiNg busiNess
As huNAN restAurANt , Appellee .
757 N.W.2d 205
Filed October 31, 2008. 	No. S 07 881.
1. Arbitration and Award: Appeal and Error. In reviewing a district court’s
decision to vacate, modify, or confirm an arbitration award under Nebraska’s
Uniform arbitration act, an appellate court is obligated to reach a conclusion
independent of the trial court’s ruling regarding questions of law. However,
the trial court’s factual findings will not be set aside on appeal unless clearly
erroneous.
2. Arbitration and Award: Federal Acts: Contracts. arbitration in Nebraska is
governed by the Uniform arbitration act as enacted in Nebraska. but if arbitra
tion arises from a contract involving interstate commerce, it is governed by the
Federal arbitration act.
3. ____: ____: ____. State laws regarding the general validity, revocability, and
enforceability of contracts may be applied to invalidate an arbitration agree
ment governed by the Federal arbitration act without conflicting with federal
law. Courts may not invalidate arbitration agreements governed by the Federal
arbitration act under state laws applicable only to arbitration provisions.
4. Arbitration and Award: Federal Acts: Contracts: Notice. When a contract
is governed by the Federal arbitration act, the state notice requirement is pre
empted by the Federal arbitration act.
appeal from the District Court for Douglas County: J.
pAtrick 	mulleN, 	Judge. 	reversed 	and 	remanded 	with
directions.
Damien J. Wright, of Welch Law Firm, p.C., for appellant.
Mark porto and John a. Wolf, of Shamberg, Wolf, McDermott
& Depue, for appellee.
heAvicAN, 	c.J., 	W right , 	coNNolly , 	gerrArd , 	stephAN,
mccormAck , and miller -lermAN, JJ.
coNNolly , J.
I. SUMMarY
This appeal arises from a contract dispute between aramark
Uniform & Career apparel, Inc. (aramark), a Delaware corpo
ration, and Hunan, Inc., a Nebraska corporation doing business
as Hunan restaurant. aramark filed a demand for arbitration
700 	276 NebraSka repOrTS
Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
11/01/2026 04:53 AM CST

under 	the 	parties’ arbitration 	agreement. 	Hunan, 	however,
objected to arbitration, asserting that the parties’ arbitration
agreement was unenforceable because it did not comply with
a notice provision under Nebraska’s Uniform arbitration act
(Uaa).1 The arbitrator agreed with aramark’s position. He
determined that the Federal arbitration act (Faa) governed
the agreement and that compliance with the Uaa was irrele
vant because the Faa preempted the Uaa’s notice provision.2
The arbitration went forward, but Hunan refused to participate.
The arbitrator awarded aramark $13,144.54.
aramark petitioned the district court for Douglas County to
affirm the arbitration award. Hunan responded with a motion
to vacate the award under § 25 2613 of the Uaa. The district
court found that the contract did not involve interstate com
merce and vacated the arbitration award under § 25 2613(3)
and (4). We reverse because we conclude that the contract does
involve interstate commerce. Therefore, the Faa governs the
contract. because the Uaa’s notice provision directly conflicts
with the Faa, federal law preempts it.
II. baCkgrOUND
aramark contracted to rent Hunan aprons, tablecloths, nap
kins, bar mops, laundry bags, and other products. The contract
contained the following arbitration provision: “any controversy
or claim arising out of or relating to this agreement shall be
settled by binding arbitration administered by the american
arbitration association under its Commercial arbitration rules,
and judgment on the award rendered by the arbitrator(s) may
be entered in any court having jurisdiction thereof.”
In September 2006, aramark filed its demand for arbitra
tion with the american arbitration association, alleging that
Hunan had breached the contract. The arbitration associa
tion notified Hunan of the demand, and Hunan responded by
objecting to arbitration. In a letter to the arbitration associa
tion, Hunan asserted that the arbitration provision contained in
1 Neb. rev. Stat. §§ 25 2601 to 25 2622 (reissue 1995 & Cum. Supp.
2006).
2 Compare § 25 2602.02 and 9 U.S.C. § 2 (2006).
araMark UNIFOrM & Career appareL v. HUNaN, INC. 	701
Cite as 276 Neb. 700

the parties’ agreement was invalid because it did not comply
with a notice requirement of the Uaa. Specifically, Hunan
claimed that the arbitration provision was invalid because it
failed to contain language required by § 25 2602.02, which
provides: “The following statement shall appear in capitalized,
underlined type adjoining the signature block of any standard
ized agreement in which binding arbitration is the sole remedy
for dispute resolution: THIS CONTraCT CONTaINS aN
arbITraTION prOVISION WHICH MaY be eNFOrCeD
bY THe parTIeS.”
aramark responded that the arbitration provision was valid
and enforceable. aramark asserted that the Faa preempted
the Uaa because the parties’ contract involved interstate com
merce. The arbitrator determined that aramark’s position was
correct and that the arbitration should proceed. The arbitra
tor held a hearing on aramark’s claim in Omaha, Nebraska.
aramark appeared and adduced testimony and evidence, but
Hunan did not appear. Neither party sought a court order to
stay or compel the arbitration proceedings.3 The arbitrator
awarded aramark $13,144.54. The award included $11,044.54
as damages and $2,100 as expenses.
after the arbitration, aramark filed both a motion and a
petition to confirm the arbitration award in the Douglas County
District Court. In response, Hunan requested that the court
vacate the arbitration award. Hunan claimed that no valid
arbitration agreement existed between the parties because the
agreement failed to comply with § 25 2602.02. It also claimed
the arbitrator exceeded his power by conducting the hearing in
an improper venue under § 25 2606(c). Hunan also moved to
transfer the case to the Hall County District Court.
The Douglas County District Court held a telephonic hear
ing regarding the motion to transfer. The parties briefly dis
cussed Hunan’s claim that the arbitration agreement was non
binding because it failed to comply with § 25 2602.02. The
parties did not discuss whether their contract implicated inter
state commerce.
3 See § 25 2603.
702 	276 NebraSka repOrTS

after the hearing, the district court entered an order vacat
ing the arbitration award. The court determined that the Faa
did not preempt the Uaa because “there [was] nothing to sug
gest that the agreement in question was in interstate commerce
or affected by interstate commerce.” because Nebraska law
applied, the court declared the agreement was invalid because
it did not contain the language required by § 25 2602.02. The
court granted Hunan’s motion to vacate the arbitration award
under § 25 2613(a)(3) and (4).
III. aSSIgNMeNTS OF errOr
aramark assigns, consolidated and restated, that the district
court erred in concluding that (1) the contract was not one
within or affecting interstate commerce and (2) the Uaa gov
erned the agreement.
IV. STaNDarD OF reVIeW
[1] In reviewing a district court’s decision to vacate, modify,
or confirm an arbitration award under Nebraska’s Uaa, an
appellate court is obligated to reach a conclusion independent
of the trial court’s ruling regarding questions of law.4 However,
the trial court’s factual findings will not be set aside on appeal
unless clearly erroneous.5
V. aNaLYSIS
1. preemptioN uNder fAA
[2] arbitration in Nebraska is governed by the Uaa as
enacted in Nebraska. but if arbitration arises from a con
tract involving interstate commerce, it is governed by the
Faa. Under the Faa, written provisions for arbitration are
“valid, irrevocable, and enforceable, save upon such grounds
as exist at law or in equity for the revocation of any con
tract.”6 Nebraska law, in contrast, requires that when arbitra
tion is the sole remedy for dispute resolution of a contract,
4 See, Hartman v. City of Grand Island, 265 Neb. 433, 657 N.W.2d 641
(2003); Jones v. Summit Ltd. Partnership Five, 262 Neb. 793, 635 N.W.2d
267 (2001).
5 Id.
6 9 U.S.C. § 2.
araMark UNIFOrM & Career appareL v. HUNaN, INC. 	703
Cite as 276 Neb. 700

the following statement “shall appear in capitalized, under
lined type adjoining the signature block[:] THIS CONTraCT
CONTaINS aN arbITraTION prOVISION WHICH MaY
be eNFOrCeD bY THe parTIeS.”7 The failure to include
this statement renders the arbitration agreement unenforceable
under Nebraska law.8
Nebraska law is not unique in requiring a contract with an
arbitration clause to contain a special notice of the clause.9 but
the U.S. Supreme Court has held that if a contract containing
an arbitration clause involves interstate commerce, the Faa
governs the contract. In that circumstance, the Faa preempts
state law requirements that apply solely to arbitration agree
ments.10 The Court has stated that if a state law notice require
ment governs “not [just] ‘any contract,’ but specifically and
solely contracts ‘subject to arbitration,’” such requirement
“conflicts with the Faa and is therefore displaced by the fed
eral measure.”11
Under this analytical framework, the initial question is
whether the parties’ contract “evidenc[es] a transaction involv
ing commerce” as defined by the Faa.12 If the contract does
involve interstate commerce, thereby invoking the Faa, then
the Faa preempts the Nebraska notice requirement. Thus, if
the notice requirement is preempted, the lack of the statuto
rily required notice does not render the arbitration agreement
unenforceable.13
(a) The Scope of the Faa
The U.S. Supreme Court has held that the Faa is substan
tive law under Congress’ Commerce Clause authority and that it
7 § 25 2602.02.
8 See Kramer v. Eagle Eye Home Inspections, 14 Neb. app. 691, 716
N.W.2d 749 (2006).
9 See Doctor’s Associates, Inc. v. Casarotto, 517 U.S. 681, 116 S. Ct. 1652,
134 L. ed. 2d 902 (1996).
10 Id.
11 See id., 517 U.S. at 683.
12 9 U.S.C. § 2.
13 See Doctor’s Associates, Inc., supra note 9.
704 	276 NebraSka repOrTS

applies in state and federal court.14 Section 2 of the act extends
Faa jurisdiction over arbitration agreements contained within
“contract[s] evidencing a transaction involving commerce.”15
The Supreme Court has given this jurisdictional phrase a broad
interpretation to give expansive scope to the Faa.16 giving the
Faa an expansive scope allows the Court “to give effect to the
Faa’s basic purpose, which is to put arbitration provisions on
the same footing as a contract’s other terms.”17 The Court has
further stated that Congress’ use of “the word ‘involving,’ like
[its use of the word] ‘affecting,’ signals an intent to exercise
Congress’ commerce power to the full.”18 Thus, the enact
ment of the Faa signals intent by Congress to “foreclose state
legislative attempts to undercut the enforceability of arbitra
tion agreements.”19
Under the Commerce Clause, Congress has power “to regu
late those activities having a substantial relation to interstate
commerce, . . . i. e., those activities that substantially affect
interstate commerce.”20 Thus, Congress’ Commerce Clause
authority is the prism through which we view the scope of the
Faa. “Commerce” is defined in the Faa to include “com
merce among the several States.”21
The Court has generally interpreted Congress’ Commerce
Clause power broadly22:
14 Southland Corp. v. Keating, 465 U.S. 1, 104 S. Ct. 852, 79 L. ed. 2d 1
(1984), citing Moses H. Cone Hospital v. Mercury Constr. Corp., 460 U.S.
1, 103 S. Ct. 927, 74 L. ed. 2d 765 (1983).
15 9 U.S.C. § 2. See Southland Corp., supra note 14.
16 Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 115 S. Ct. 834, 130
L. ed. 2d 753 (1995).
17 Good Samaritan Coffee Co. v. LaRue Distributing, 275 Neb. 674, 678, 748
N.W.2d 367, 371 (2008), citing Allied-Bruce Terminix Cos., supra note
16.
18 See Allied-Bruce Terminix Cos., supra note 16, 513 U.S. at 277.
19 See Southland Corp., supra note 14, 465 U.S. at 16.
20 United States v. Lopez, 514 U.S. 549, 558 59, 115 S. Ct. 1624, 131 L. ed.
2d 626 (1995).
21 9 U.S.C. § 1 (2006).
22 See, United States v. Morrison, 529 U.S. 598, 120 S. Ct. 1740, 146 L. ed.
3d 658 (2000); Lopez, supra note 20.
araMark UNIFOrM & Career appareL v. HUNaN, INC. 	705
Cite as 276 Neb. 700

[It has] upheld a wide variety of congressional acts
regulating intrastate economic activity where [it has] con
cluded that the activity substantially affected interstate
commerce. examples include the regulation of intrastate
coal mining[,] intrastate extortionate credit transactions,
. . . restaurants utilizing substantial interstate supplies,
. . . inns and hotels catering to interstate guests, . . . and
production and consumption of homegrown wheat.23
In sum, “[w]here economic activity substantially affects inter
state commerce, legislation regulating that activity will be
sustained.”24 Consistently with this broad power, the Court
has concluded that the Faa’s reach is as broad as Congress’
Commerce Clause authority.25
(b) The parties’ arbitration agreement
affects Interstate Commerce
as we know, courts have given Congress an expansive power
over economic and commercial activities. So, it is difficult to
imagine an economic or commercial activity that would be
outside the scope of the Commerce Clause and, by extension,
the Faa.26
We have previously determined that transactions involving
commerce include contracts for services between parties of
different states.27 Similarly, the transaction underlying the con
tract between aramark and Hunan, a contract for renting goods,
is a contract for services that is unquestionably commercial.
also, both parties to the contract are incorporated in different
states. aramark is a Delaware corporation engaged nationwide
in renting linen supplies. Hunan, a Nebraska corporation, has
engaged aramark’s services by renting linen supplies for use
23 Lopez, supra note 20, 514 U.S. at 559 60 (citations omitted).
24 Id., 514 U.S. at 560.
25 Allied-Bruce Terminix Cos., supra note 16.
26 See Service Corp. Intern. v. Fulmer, 883 So. 2d 621 (2003).
27 See, Webb v. American Employers Group, 268 Neb. 473, 684 N.W.2d 33
(2004); Smith Barney, Inc. v. Painters Local Union No. 109, 254 Neb. 758,
579 N.W.2d 518 (1998). See, also, Comanche Indian Tribe of Oklahoma v.
49, L.L.C., 391 F.3d 1129 (10th Cir. 2004).
706 	276 NebraSka repOrTS

in the operation of its restaurant. Thus, a commercial service
contract exists between two corporations incorporated in dif
ferent states for the renting of linen supplies. The contract
between aramark and Hunan clearly involves “commerce,”
which is defined in the Faa to include “commerce among the
several states.”28
2. NebrAskA’ s uAA’ s Notice provisioN is preempted
[3] Section 2 of the Faa provides that written arbitration
agreements “shall be valid, irrevocable, and enforceable, save
upon such grounds as exist at law or in equity for the revoca
tion of any contract.”29 Under this section, the Supreme Court
has declared that state contract law applies to contracts with
arbitration agreements governed by the Faa. State contract law
can determine “‘the validity, revocability, and enforceability of
contracts generally.’ . . . Thus, generally applicable contract
defenses, such as fraud, duress, or unconscionability, may be
applied to invalidate arbitration agreements” governed by fed
eral law without conflicting with § 2.30
The Court has made clear, however, that courts may not
invalidate arbitration agreements governed by the Faa under
state laws applicable only to arbitration provisions.31 “Congress
[has] precluded States from singling out arbitration provisions
for suspect status, requiring instead that such provisions be
placed ‘upon the same footing as other contracts.’”32
[4] The Court has considered a similar notice requirement in
a Montana statute. That statute required any contract contain
ing an arbitration provision to provide special notice in capital
ized, underlined letters on the front page of the contract.33 The
Court held that the notice provision was unenforceable because
28 9 U.S.C. § 1.
29 9 U.S.C. § 2 (emphasis supplied).
30 Doctor’s Associates, Inc., supra note 9, 517 U.S. at 687, citing Perry v.
Thomas, 482 U.S. 483, 107 S. Ct. 2520, 96 L. ed. 2d 426 (1987).
31 Doctor’s Associates, Inc., supra note 9.
32 Id., 517 U.S. at 687. accord Scherk v. Alberto-Culver Co., 417 U.S. 506,
94 S. Ct. 2449, 41 L. ed. 2d 270 (1974).
33 Mont. Code ann. § 27 5 114(4) (1995).
araMark UNIFOrM & Career appareL v. HUNaN, INC. 	707
Cite as 276 Neb. 700

the Faa governed the contract. The Court concluded that the
notice statute directly conflicted with § 2 of the Faa. The stat
ute “condition[ed] the enforceability of arbitration agreements
on compliance with a special notice requirement not applicable
to contracts generally.”34 because the Faa is substantive law,
it preempted the Montana statute regarding arbitration agree
ments governed by the Faa.35 Thus, when a contract is gov
erned by the Faa, the state notice requirements are preempted
by the Faa.
The Montana statute analyzed in Doctor’s Associates, Inc. v.
Casarotto36 is similar to the Nebraska statute. Like the Montana
statute, Nebraska’s notice requirement in § 25 2602.02 applies
only to arbitration provisions and renders the arbitration clause
unenforceable upon failure to provide the notice requirement.
Just like the Montana statute in Doctor’s Associates, Inc.,
§ 25 2602.02 places arbitration agreements “in a class apart
from ‘any contract,’ and singularly limits their validity.”37
because the Faa governs the service contract, we must yield to
the precedent set by the Court’s holding in Doctor’s Associates,
Inc. We hold that the Faa preempts § 25 2602.02 for the con
tract. We reverse the district court’s judgment and remand the
cause with directions to confirm the arbitration award.
reversed ANd remANded With directioNs .
34 Doctor’s Associates, Inc., supra note 9, 517 U.S. at 687.
35 Id.
36 Id.
37 Id., 517 U.S. at 688.
iNtrAlot , iNc ., AppellANt , v . NebrAskA
depArtmeNt of reveNue , Appellee .
757 N.W.2d 182
Filed October 31, 2008. 	No. S 07 933.
1. Administrative Law: Final Orders: Appeal and Error. Under the administrative
procedure act, Neb. rev. Stat. §§ 84 901 to 84 920 (reissue 1999 & Cum. Supp.
2006), an appellate court may reverse, vacate, or modify a district court’s judg
ment or final order for errors appearing on the record.
708 	276 NebraSka repOrTS