Interaction of Federal and State Law - Chapter 03 - AAA Yearbook on Arbitration and the Law - 27th Edition
Stephen K. Huber
Ben H. Sheppard Jr.
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Originally from AAA Yearbook on Arbitration and the Law - 27th Edition
3.01 Commerce Clause Preemption of State Law by the FAA
Nitro-Lift Technologies, L.L.C. v. Howard, 133 S. Ct. 500, 184 L.
Ed. 2d 328 (2012)
When state law prohibits the arbitration of a particular type of claim
the FAA displaces the conflicting law.
Employee brought action against Employer seeking declaration that
noncompetition agreement was null and void. The district court found
the arbitration agreement to be valid, while the Oklahoma Supreme
Court found that the noncompetition agreement was void for public
The validity of an arbitration agreement is subject to initial court
determination; but the validity of the remainder of the contract (if the
arbitration provision is valid) is for the arbitrator to decide. The
Oklahoma Supreme Court did not disagree with the district court in
finding the arbitration agreement valid. Rather than turn the dispute over
to the arbitrator, as the FAA instructs, the Oklahoma Supreme Court
made a decision in interpreting the remainder of the contract. The
Supreme Court of the United States held that state courts must follow the
FAA. Therefore, determination of whether the noncompetition
agreement is valid as matter of Oklahoma law was for arbitrator to
decide in first instance.
Citations and References:
a. Marmet Health Care Center, Inc. v. Brown, 132 S.Ct. 1201,
1203 (2012) (per curiam) (stating that “[W]hen state law
prohibits outright the arbitration of a particular type of claim, the
analysis is straightforward: The conflicting rule is displaced by
the FAA.”) (quoting AT & T Mobility LLC, supra, at 131 S.Ct.,
b. Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445-6,
(2006), (showing that it is for the arbitrator to decide in the first
instance whether the covenants not to compete are valid as a
matter of applicable state law).
c. Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445
(2006) (“[The FAA] applies in both state and federal courts.”).
d. Preston v. Ferrer, 552 U.S. 346, 349 (2008) (instructing that
when parties commit to arbitrate contractual disputes, it is a
mainstay of the Act’s substantive law that attacks on the validity
of the contract, as distinct from attacks on the validity of the
arbitration clause itself, are to be resolved “by the arbitrator in
the first instance, not by a federal or state court; see also Prima
Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct.
1801, 18 L.Ed.2d 1270 (1967).
AT&T Mobility LLC v. Concepcion, 131 S.Ct 1740 (2011)
The FAA preempts California’s judicial rule prohibiting as
unconscionable waivers of class arbitration in consumer cases.
Citations and References:
See § 2.06, supra for full discussion of the decision.
Preston v. Ferrer, 128 S. Ct. 978 (2008)
When parties agree to arbitrate all questions arising under a
contract, the FAA supersedes state laws granting primary
jurisdiction in another forum, whether judicial or administrative.
Ferrer, who appears on television as “Judge Alex” contracted with
Preston, an entertainment industry attorney, for personal management
services. The parties’ contract mandated arbitration for “any dispute . . .
relating to the [contract’s] terms . . . in accordance with the [AAA]
rules.” Preston invoked the arbitration clause in order to recover fees
allegedly owed under the contract.
Ferrer then petitioned the California Labor Commissioner for a
determination that Preston had illegally acted as an unlicensed talent
agent in violation of California’s Talent Agencies Act (TAA), thereby
invalidating the parties’ contract. After a hearing, the Labor