FAA Preemption, Separability, and Buckeye Check Cashing - WAMR 2006 Vol. 17, No. 1

Author(s):

Christopher R. Drahozal

Page Count:

10 pages

Media Description:

PDF from World Arbitration and Mediation Report (WAMR) 2006 Vol. 17, No. 1

Published:

January, 2006

Jurisdictions:

International

Practice Areas:

Authority of the Arbitral Tribunal,

Separability,

Arbitral Decisions,

FAA

Author Detail:

Christopher Drahozal, U.S. Arbitration Law, University of Kansas School of Law

PDF175.27 KB

$40.00

Description:

Originally from: World Arbitration and Mediation Report (WAMR)

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FAA Preemption, Separability, and Buckeye Check Cashing

by Christopher R. Drahozal*

WAMR Editor, U.S. Arbitration Law

For the second time in recent years, the U.S. Supreme Court has

granted certiorari in a case presenting an important issue of arbitration

law but with a complicating twist—that the case under review was decided

by a state court. In 2003, the Court granted certiorari in Green Tree

Financial Corp. v. Bazzle to resolve the following question: “Whether the

Federal Arbitration Act, 9 U.S.C. §§ 1-16, prohibits class-action

procedures from being superimposed onto an arbitration agreement that

does not provide for class-action arbitration.” Because the case came from

the South Carolina state Supreme Court, however, the issue actually was

more complex: to what extent, if at all, does the Federal Arbitration Act

(FAA) regulate when state courts can order arbitration on a classwide

basis? In the end, the Court in Bazzle issued four separate opinions with

no clear majority, and with Justice Thomas in dissent reiterating his view

that the FAA does not apply in state court at all.

So too this term—the Court has granted certiorari in Buckeye

Check Cashing, Inc. v. Cardegna, in which the question presented is

whether the arbitrator or a court decides a claim that the underlying

contract (the contract containing the arbitration clause) is void for

illegality. Or, stated otherwise, how does the separability doctrine

recognized in Prima Paint Corp. v. Flood & Conklin Mfg. Co. apply to

claims that the underlying contract is illegal? Like Bazzle, Buckeye comes

from a state court (the Florida state Supreme Court), so that the same

complication is present: to what extent does the FAA preempt the state

rule on separability in state court. Thus, if Justice Thomas continues to

adhere to the view that the FAA does not apply in state court, he may not

reach the central issue of the case. Other Justices may answer the question

differently for state courts than for federal courts. As a result, the Court

either may not reach the issue on which certiorari was granted, or else

may resolve it in a way that answers the question only for state courts and

not federal courts.

This comment focuses on the preemption issue in Buckeye, rather

than the more general issue of who decides the claim of illegality. The

petitioner (Buckeye) largely assumes that the same rule on separability

applies in state court as in federal court, although it takes on the issue

squarely in its reply brief. By comparison, respondents (Cardegna), as