In Maxim Marketing Corp. v. ConAgra Foods Inc., the court denied defendant Trader Joe's Company's motion to compel plaintiff Maxim Marketing Corp. to arbitrate Maxim's claims, despite the general, broad and valid arbitration clause in the parties' Master Vendor Agreement (MVA) (No. BC533822 (Cal. Super. Ct., Los Angeles Co. July 21, 2014), aff'd, No. B258308, (Cal. Ct. App. June 12, 2015)).

Maxim claims that Trader Joe's breached a commitment it made to Maxim that as long as Maxim was willing and able to supply Trader Joe's with peanut butter filled pocket pretzels and related products, Trader Joe's would purchase the products from Maxim and would not buy directly from Maxim's manufacturers. Maxim alleges that in 2011, defendant ConAgra Foods Inc. purchased the pretzel manufacturer that supplied the pretzel products to Maxim. In 2013, Trader Joe's informed Maxim that it would no longer purchase pretzel products from Maxim. Shortly thereafter, ConAgra began selling to Trader Joe's the same pretzel products that it had been manufacturing for Maxim.

Maxim filed its complaint against ConAgra and Trader Joe's on January 22, 2014, seeking injunctive relief and damages. Maxim alleged causes of action sounding in:

Trader Joe's moved to compel arbitration pursuant to a clause in the MVA submitting to American Arbitration Association arbitration "any controversy or claim arising out of or relating to MVA." Trader Joe's cited to the pro-arbitration policies of both the Federal Arbitration Act (FAA) (9 U.S.C. §§ 1 et seq.) and the California Arbitration Act (CAA) (Cal. Civ. Proc. Code §§ 1280-1294.2). Trader Joe's argued that Wolsey, Ltd. v. Foodmaker, Inc. holds that a general choice of law clause, without more, does not show that the parties intended to incorporate state procedural rules on arbitration (144 F.3d 1205, 1211 (9th Cir. 1998)). Because the MVA referred to California substantive law but made no mention of California's procedural rules on arbitration, Trader Joe's urged that the FAA, and not the CAA, applies, whether in state or federal court (see Southland Corp. v. Keating, 465 U.S. 1, 15 (1984)). Trader Joe's also established that ConAgra would agree to join the arbitration and therefore the arbitrators could hear all claims.

In response, Maxim argued:

Judge Mark V. Mooney rejected the unconscionability argument and held the arbitration clause was valid and enforceable. However, Judge Mooney agreed with Maxim's other arguments and applied the CAA, not the FAA, and denied Trader Joe's motion. In exercising its discretion to deny arbitration, the court noted, "I can't imagine how this case can proceed without really the discovery."

Despite pronouncements from the federal courts that the FAA applies except where the parties explicitly choose state arbitral rules, this decision provides an example of state and federal courts providing different outcomes on questions about whether a dispute should be heard by arbitrators or courts. For a more detailed explanation of the relationship between the FAA and state laws, see Practice Note, Understanding US Arbitration Law.