Issue link: https://read.dmtmag.com/i/100911
COMMUNITY LAW You Too Can Enforce Arbitration Agreements Under the Federal Arbitration Act! BY Rob Coldren One topic that is almost always the subject of FAA, conflicting state laws are preempted. court cases is the enforceability of arbitration Importantly, the FAA does not allow for a state agreements. There is a certain irony to that law to place discretion with a state court to defact, when you consider the whole point of termine whether or not to enforce an arbitrahaving an arbitration agreement is to avoid tion provision. Not all state courts and court. If you are a manufactured housing com- legislatures are enthralled with the impact of the munity professional, particularly one who con- FAA, so they have sought ways to avoid its imtracts with the public, you should seriously pact. Fortunately, the U.S. Supreme Court consider including arbitration provisions in your has recently and repeatedly stepped in to supagreements (not just your residency docu- port the reach of the FAA. ments���vendor conThe U.S. tracts, partnership Supreme Court has If you are a manufactured affirmed in two reagreements, etc.). There are several reacent cases that housing community pro- where the FAA is sons to include arbitration provisions, but fessional, particularly one invoked, state law the most important is rules which stand as that an arbitration who contracts with the an obstacle to enagreement keeps you forcement of arbiout of the judicial ���lotpublic, you should seriously tration agreements tery system���: Jury Triare preempted. als. In addition, a consider including arbitra- First, in 2011, solid arbitration agreethere was AT&T ment can discourage tion provisions in your Mobility LLC v. litigation of any kind Concepcion. In agreements... because the threat of a Concepcion, the U.S. jury trial is ���off the Supreme Court retable.��� versed a decision by the California Supreme Many ���consumer oriented��� states have Court, which had invalidated an arbitration adopted laws (either by legislation or court de- clause in a consumer agreement because the arcision) making arbitration agreements difficult bitration clause did not permit the consumer to to enforce. However, these limitations have bring a class arbitration. The Court found that been ���preempted��� (trumped) in many respects California state law was inconsistent with the with the adoption of the Federal Arbitration Act goals of the FAA and preempted by it. (���FAA���). The FAA was enacted to encourage Apparently, Concepcion did not have its de���alternative dispute resolution outside the sired impact on state courts, as just a year later courtroom.��� To assure consistency among the the U.S. Supreme Court took up the issue of states as to whether disputes are subject to the arbitration again in the November 26, 2012 deJANUARY 2013 22 THE JOURNAL cision Nitro-Lift Technologies, L.L.C. v. Howard. In rather strong terms, the Supreme Court ruled that the FAA preempted an effort by the Supreme Court of Oklahoma to rule on the validity of a covenant not to compete where the agreement had an arbitration clause. The Court ruled that the Oklahoma high courts improperly ignored the Court���s FAA ���separability doctrine,��� which requires that arbitrators decide the enforceability of contracts containing an arbitration clause. The Court explained, rather bluntly: State courts rather than federal courts are most frequently called upon to apply the Federal Arbitration Act (FAA), 9 U.S.C. ��1 et seq., including the Act���s national policy favoring arbitration. It is a matter of great importance, therefore, that state supreme courts adhere to a correct interpretation of the legislation. Here, the Oklahoma Supreme Court failed to do so. By declaring the noncompetition agreements in two employment contracts null and void, rather than leaving that determination to the arbitrator in the first instance, the state court ignored a basic tenet of the Act���s substantive arbitration law. The Supreme Court sent the unmistakable message to the state legislatures and courts that they should not attempt to undercut the purpose and scope of the FAA. There are some limitations to the reach of the FAA. The FAA governs contractual arbitration in written agreements contracts involving interstate commerce. Of course, this means you must have a written arbitration agreement