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 policy reasons.
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., at 1747).