## Facts

- Advanced Bodycare Solutions, LLC entered a licensing agreement with Thione International, Inc. for exclusive rights to market and distribute Thione’s nutritional supplements and a related testing kit.
- Advanced Bodycare ordered and paid for supplements and kits that Thione shipped in 2004.
- Advanced Bodycare alleged many testing kits were defective; Thione later acknowledged a manufacturing defect and sent some replacements, which Advanced Bodycare claimed were insufficient.
- The agreement included a stepped dispute process: (1) executive-level negotiation after a written request; then (2) “non-binding arbitration or mediation” administered by a mutually agreed independent third party “prior to initiating litigation.”
- Advanced Bodycare filed a federal breach-of-contract action without completing those ADR steps.
- Thione moved under the Federal Arbitration Act to stay the litigation and compel the contract’s nonbinding ADR process; the district court denied the motion.

## Issues

1. Whether the Federal Arbitration Act authorizes a federal court to stay litigation to enforce a contract clause requiring mediation or nonbinding arbitration as a prerequisite to filing suit.
2. Whether a clause that preserves the right to litigate and does not provide for a binding arbitral award is “arbitration” within FAA §§ 2 and 3.

## Decision

- The Eleventh Circuit affirmed the denial of a stay.
- The FAA does not permit enforcement, via §§ 2 and 3, of a clause requiring mediation or nonbinding arbitration before litigation when the process does not culminate in a binding award.
- The court limited its holding to the FAA and did not decide whether such a clause could be enforced through other doctrines (including state contract law or other case-management mechanisms).

## Legal Principles

- FAA enforceability under §§ 2 and 3 turns on whether the contract provides for “arbitration” that is intended to settle the dispute through a final, binding adjudicative award.
- A nonbinding ADR requirement that functions only as a precondition to litigation does not “settle by arbitration” and is not an issue “referable to arbitration” within the meaning of the FAA.
- The federal policy favoring arbitration applies only after a court finds a valid agreement to arbitrate within the scope of the FAA; it does not expand the statute to cover nonbinding ADR.

## Conclusion

The Eleventh Circuit held that the FAA’s stay mechanism cannot be used to compel a pre-suit mediation or nonbinding arbitration process that leaves the parties free to proceed to court and does not provide for binding arbitration, so the federal breach-of-contract case could continue.


Advanced Bodycare Solutions, LLC v. Thione Int'l, Inc., 524 F.3d 1235 (11th Cir. 2008)