Arbitration case law in the United States

Arbitration in the United States is governed by the Federal Arbitration Act of 1925 (FAA, codified at 9 U.S.C. 1 et seq.), which requires courts to compel parties who agree to arbitration to participate in binding arbitration, the decision from which is binding upon the parties. Since the passage of the FAA, both state and federal courts have examined arbitration clauses, as well as other statutes involving arbitration clauses, for validity and enforceability.

Federal courts

• Wilko v. Swan, 347 U.S. 427 (1953): Reach of FAA does not extend to claims under Securities Act of 1933 due to anti-waiver provision in latter. Later overturned.
• Prima Paint Corp. v. Flood & Conklin Mfg. Co. 388 U.S. 395 (1967): An arbitrator must decide the validity of a contract containing an arbitration provision unless the arbitration clause itself is being challenged, even in cases such as when the contract was allegedly fraudulently induced.
• Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (1983) Federal Arbitration Act (FAA) enacted a strong national policy favoring arbitration, therefore doubts about its applicability are to be resolved in favor of arbitration.
• Southland Corp. v. Keating 465 U.S. 1 (1984): FAA preempts state law.
• Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213 (1985). FAA requires that parallel state and federal claims be bifurcated when federal claims are non-arbitrable but state claims are.
• Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985). Sherman Act claims are arbitrable, even when contract calls for arbitration before a foreign panel.
• Shearson/American Express Inc. v. McMahon, 482 U.S. 220 (1987). Securities fraud claims under the Securities and Exchange Act of 1934 are arbitrable.
• Rodriguez de Quijas v. Shearson/American Express Inc., 490 U.S. 477 (1989) Securities fraud claims under the Securities Act of 1933 also arbitrable; Wilko v. Swan overturned.
• Gilmer v. Interstate/Johnson Lane Corp. 500 U.S. 20 (1991): Statutory claims, such as under the Age Discrimination in Employment Act, are subject to arbitration.
• Graham Oil v. ARCO Products Co. 43 F. 3d 1244 (9th Cir. 1994): Agreement to arbitrate statutory claims is not valid when clause prohibits awards of exemplary damages and attorney's fees provided for by statute.
• Allied-Bruce Terminix Cos. v. Dobson 513 U.S. 265 (1995): FAA requirement that contract involve interstate commerce is to be broadly construed.
• First Options of Chicago, Inc. v. Kaplan 514 U.S. 938 (1995): Judicial review of arbitrability of contract is properly permitted when parties have not clearly agreed that arbitrator will decide question.
• Doctor's Associates, Inc. v. Casarotto 517 U.S. 681 (1996): Montana law requiring disclosure of arbitration clauses to be "typed in underlined capital letters on the first page of the contract" preempted by FAA;^[1] however, upheld authority of courts to refuse to enforce arbitration clauses on grounds of "generally applicable contract defenses, such as fraud, duress, or unconscionability"^[2]
• Cole v. Burns International Security Services 105 F. 3d 1465 (D.C. 1997): Employees forced to sign arbitration clause as condition of employment cannot be forced to pay any type of fees that a court does not require, such as arbitrator's fees.
• Green Tree Financial Corp. - Alabama v. Randolph 531 U.S. 79 (2000): Mere speculation that the party resisting arbitration "will be saddled with prohibitive costs is too speculative to justify the invalidation of an arbitration agreement."^[3]
• C & L Enterprises, Inc. v. Citizen Band, Potawatomi Indian Tribe of Oklahoma 532 U.S. 411 (2001): Consenting to arbitration constitutes a waiver of sovereign immunity.
• Buckeye Check Cashing, Inc. v. Cardegna 546 U.S. 440 (2006): Companion case to Prima Paint; an arbitrator must decide if a contractual provision other than the arbitration clause renders the entire contract invalid.
• Preston v. Ferrer 552 U.S. 346 (2008): The Federal Arbitration Act preempts state laws declaring that certain disputes must be resolved by a state administrative agency.
• Hall Street Associates, L. L. C. v. Mattel, Inc. 552 U.S. 576 (2008): 9 U.S.C. §§ 10 and 11 are absolutely exclusive as grounds for fighting the confirmation of an arbitration award and cannot be expanded by court rulings or contracting parties.
• Rent-A-Center, West, Inc. v. Jackson, 561 U.S. ___ (2010): A court must decide whether or not an arbitration clause is unconscionable, even if the contract unequivocally states that the arbitrator must make that decision.
• AT&T Mobility v. Concepcion: Arbitration agreements that forbid class action arbitration are enforceable, notwithstanding California's "Discover Bank Rule."

State courts

• Discover Bank v. Superior Court (113 P. 3d 1100 (Cal. 2005)): Held a class action waiver in an arbitration clause unconscionable when disputes will involve small amounts of damages and are part of a scheme by a company with superior bargaining power to deliberately cheat many consumers (the "Discover Bank test").^[4]

References