November 29, 2012

Supreme Court Decides Yet Another Arbitration Case

By Jill Gross

Earlier this week, the Supreme Court issued a per curiam opinion in Nitro-Lift Technologies, L.L.C. v. Howard, 2012 WL 5895686 (Nov. 26, 2012), ruling that the FAA preempted a decision by the Supreme Court of Oklahoma to rule on the validity of a covenant not to compete in the first instance, despite the existence of an arbitration clause.  The Court ruled that the Oklahoma high court blatantly and improperly ignored the Court’s FAA separability doctrine, which declares that arbitrators decide in the first instance the enforceability of contracts containing a pre-dispute arbitration clause.  See Buckeye Check Cashing and Prima Paint.  The decision offers no new law: it just reiterates and reaffirms fundamental principles of the Court’s FAA jurisprudence, including broad FAA preemption, separability, and the power of the arbitrators to decide the enforceability of contracts containing an arbitration clause.

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Comments

  • Katie Shaw says:

    Given how explicit the Supreme Court has been in holding states accountable to the FAA and the separability doctrine, you have to wonder why the Oklahoma Supreme Court would ignore these apparently well-settled rules.

    It’s certainly possible the Oklahoma court felt the nature of the non-compete statutory violation was so blatant in this instance that, for accuracy and efficiency sake, it ruled on the issue.

    Alternatively, perhaps the Oklahoma court is showing its discomfort with the separability doctrine and/or allowing arbitrators to decide issues of statutory interpretation, a role commonly held by courts.

    If so, it appears the Oklahoma court didn’t hear, or expect to hear, Justice Sotomayor’s prediction that the Supreme Court will remain firm in its FAA precedent, and legislation, not the courts, would be the best venue for a change in the law.

    Regardless, it’s plainly apparent that the arbitration agreement in this case certainly did not produce its expected results of efficient, binding, and cost-effective dispute resolution.

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