After winning a public contest, Rebecca C. Revels was designated "Miss North Carolina 2002" by the Miss North Carolina Pageant Organization, Inc. After her victory, Ms. Revels signed "The Miss America Organization Application and Contract" setting forth her duties and obligations in connection with the Miss America National Finals. The Application and Contract contained an arbitration clause requiring any controversy or claim to be submitted to arbitration in Atlantic City, New Jersey in accordance with the rules of the American Arbitration Association. Ms. Revels signed the Application and Contract, but the Miss America Organization did not sign the contract.

Subsequently, the Miss America Organization received an anonymous e-mail implying Ms. Revels had formerly co-habitated with a "male non-relative", and nude photographs of Ms. Revels existed. When Ms. Revels confirmed the existence of nude photographs, the Board of the Miss America Organization voted to ask Ms. Revels to resign as Miss North Carolina, and Ms. Revels tendered her resignation. After resigning her title, Ms. Revels filed suit in Robeson County against the Miss America Organization and the Miss North Carolina Pageant Organization, Inc.

The Miss America Organization answered the Complaint and denied the Application and Contract represented a binding agreement between the parties. The Miss America Organization also filed a Motion to Compel Arbitration, relying upon the mandatory arbitration provision in the Application and Contract. After the trial court denied the Motion to Compel Arbitration, the Miss America Organization appealed to the North Carolina Court of Appeals.

The Court of Appeals affirmed prior North Carolina decisions holding disputes are subject to arbitration only if a valid, written arbitration agreement exists between the parties to a dispute. The Court of Appeals also confirmed it was the trial court’s duty to determine whether the parties had agreed to resolve their dispute through arbitration. The trial court’s determination of whether a matter is subject to arbitration involves a two-step analysis requiring the court to "ascertain both (1) whether the parties had a valid agreement to arbitrate, and also (2) whether the specific dispute falls within the substantive scope of that agreement."

The Court of Appeals ruled competent evidence supported a finding that the Application and Contract was not accepted by the Miss America Organization. The Court noted the Miss America Organization denied a contract existed between the parties when it filed its defensive pleadings. The appellate court pointed to the fact the Application and Contract was never signed by the Miss America Organization. The Court held North Carolina law put the burden on the Miss America Organization to prove the existence of a valid, written agreement to arbitrate. Since the Miss America Organization had denied the existence of a valid contract, it necessarily denied the existence of a valid agreement to arbitrate. The Court of Appeals affirmed the trial court’s denial of the Motion to Compel Arbitration.

The Court of Appeals’ decision in the Revels case illustrates the risk of initially denying the existence of a written contract while seeking at the same time to compel the other side to arbitration. The court’s decision also demonstrates the importance of having contract documents that are completely and properly executed in order to invoke mandatory arbitration clauses within the contracts. Our courts will not enforce arbitration clauses within written agreements that are subject to attack based on a lack of proper execution.

If you have any questions regarding this alert, please contact Tom Davis at 919.783.2816 or thdavis@poynerspruill.com.