[1] This case arose out of disputes over a "workout" agreement, embodied in four documents, which governed the "working out" of debts to First Options of Chicago, Inc. incurred as a result of the October 1987 stock market crash (and later losses) by Manuel Kaplan, his wife, and his wholly owned investment company, MK Investments, Inc. (MKI).

When First Options' demands for payment went unsatisfied, it sought arbitration by a stock exchange panel.

The Third Circuit said that courts should independently decide whether an arbitration panel has jurisdiction over a dispute, and that it would apply ordinary standards of review when considering the District Court's denial of the Kaplan's' motion to vacate the arbitration award.

These answers flow inexorably from the fact that arbitration is simply a matter of contract between the parties.

Courts generally should apply ordinary state law principles governing contract formation in deciding whether such an agreement exists.