We usually don’t report on Supreme Court cases that don’t involve class action issues. That said, regular readers of the blog know that the enforceability of arbitration agreements has become a critical issue in class action defense. For that reason, we wanted to apprise you of the Supreme Court’s latest arbitration decision in Nitro-Lift Technologies, L.L.C. v. Howard.
In Nitro-Lift, the Supreme Court summarily reversed a decision of the Oklahoma Supreme Court that had invalidated non-compete clauses contained in a pair of employment contracts that contained an arbitration provision. As the Supreme Court explained, the Oklahoma Supreme Court “acknowledged” the relevant U.S. Supreme Court cases holding that the FAA requires attacks on provisions other than the arbitration clause itself to be submitted to arbitration, “but chose to discount these controlling decisions.” (Please see our longer summary of Nitro-Lift here (pdf).)
Nitro-Lift is the third time that the Supreme Court has summarily reversed a state court’s decision in the past two Terms for a failure to follow the Supreme Court’s controlling precedents. (The first was KPMG LLP v. Cocchi, and the second was Marmet Health Care Center, Inc. v. Brown, in which my colleagues and I represented one of the petitioners.) Once again, the Court was emphatic in explaining that state courts “must abide by the FAA, which is ‘the supreme Law of the Land,’ U. S. Const., Art. VI, cl. 2, and by the opinions of this Court interpreting that law.”
The lesson for state courts is clear: Follow the Supreme Court’s decisions interpreting the FAA. The decision also highlights a key point for defendants: It is critical to raise and preserve arguments under the FAA. Hopefully, state courts will honor the Supreme Court’s precedents, but if they fail to do so, the U.S. Supreme Court has shown a willingness to push back when state courts engage in blatant disregard of federal law.