In a case that went all the way to the Supreme Court, TV's Judge Alex sued his "talent agent" to determine whether an arbitration clause under the Federal Arbitration Act ("FAA") preempted state statutes that created primary jurisdiction in a state administrative agency. The U.S. Supreme Court, not surprisingly, recently held that the FAA preempts state statutes that create primary jurisdiction in a state administrative agency for a dispute arising among parties who have a private arbitration agreement.
The Judge Alex case questioned whether the FAA preempts a requirement under the California Talent Agencies Act which requires that a case be first presented to the California Labor Commissioner. The Supreme Court held that allowing the California Labor Commissioner to address the question impermissibly interferes with the parties' ability to enforce their arbitration agreement under the FAA. The Supreme Court further stated that the delay resulting from a state administrative proceeding is inconsistent with Congress's goal of expeditious dispute resolution through arbitration.
The Court's decision is consistent with its longstanding view that the FAA preempts state statutes that interfere with the FAA's underlying goals of ensuring efficient enforcement of private arbitration agreements.
This ruling may allow healthcare providers or plaintiffs, subject to arbitration provisions, to avoid state mandated screening or expert advisory panel requirements in medical malpractice cases. In addition, the ruling may also allow other entities to avoid state administrative procedures. For example, third party payers may be able, in some cases, to avoid Department of Insurance hearing requirements, if a provider's managed care agreement contained an arbitration provision.