The Supreme Court of the United States announced its decision in one case this morning:
Nitro-Lift Technologies v. Howard, No. 11-1377: Respondents quit their employment with petitioner and began working for one of petitioner’s competitors. Claiming that respondents had breached their noncompetition agreements, petitioner served them with a demand for arbitration. Respondents then filed suit in state court, asking the court to declare the noncompetition agreements null and void and to enjoin their enforcement. The state trial court dismissed the complaint, finding that the contracts contained valid arbitration clauses under which an arbitrator, and not the court, must settle the parties’ disagreement. When respondents appealed, petitioner argued that any dispute as to the contracts’ enforceability was a question for the arbitrator. The state supreme court reversed the lower court, declaring that the arbitration clauses were void and unenforceable as against the state’s public policy limiting the enforceability of noncompetition agreements. Today, the Supreme Court vacated the state supreme court’s ruling. In a per curiam decision, the Court held that, under the Federal Arbitration Act, 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, and that, under the Supremacy Clause, the state courts must abide by the FAA. Accordingly, it vacated the state supreme court’s decision and remanded for further proceedings.
The Court’s opinion is available here.