U.S. Supreme Court Reinforces Federal Preference for Arbitration
The U.S. Supreme Court’s most recent word on arbitration is an emphatic assertion of the supremacy of federal pro-arbitration law. On Monday, November 26, 2012, the Court issued a terse per curiam opinion in Nitro-Lift Technologies, L.L.C. v. Howard, No. 11-1377, reversing an Oklahoma Supreme Court decision that voided a noncompete agreement containing an arbitration provision. The Supreme Court held that while the validity of an arbitration provision is subject to initial court determination, the validity of the remainder of the contract is not. Rather, assuming arbitration is proper, it is an arbitrator’s duty to decide whether the remainder of the contract and its provisions are valid. This holding complied with established U.S. Supreme Court precedent as well as the strong federal preference for arbitration buttressed by the Federal Arbitration Act (FAA), and, the Supreme Court declared, “[i]t is a matter of great importance . . . that state supreme courts adhere to a correct interpretation of the legislation.”
In Howard, the dispute centered on Nitro-Lift’s confidentiality and noncompete agreements with two former employees who began working for one of its competitors. After Nitro-Lift prevailed at the trial court level, the Oklahoma Supreme Court reversed that decision, concluding that the agreements were not enforceable under an Oklahoma state law limiting the enforceability of noncompetition agreements. This action, according to the high court, was simply wrong – as well as a clear infringement of the Supremacy Clause of the U.S. Constitution.
The Howard decision marks yet another solid victory for enforcement of arbitration agreements. It follows up a series of pro-arbitration Supreme Court decisions, such as AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740 (2011), by sending a strong and clear message to the state courts that the Supreme Court demands that they fall in line and apply that pro-arbitration federal law.
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