Craft & Sheppard's Supreme Court Review

Arbitration

A contract between a TV judge and an entertainment lawyer-agent contained an arbitration provision.  In a fee dispute, the lawyer demanded arbitration.  Under state law, a state agency was charged with hearing the dispute.  Under the Federal Arbitration Act (FAA), 9 U.S.C. § 1, when parties agree to arbitrate disputes, questions about the validity of the entire contract are first resolved by the arbitrator, not a court.  In Preston v. Ferrer, the Court ruled that the FAA overrode state statutes both that refer state-law disputes to courts and vest authority to resolve them with state agencies.  The Court rejected an exhaustion of administrative remedy requirement prior to arbitration. By granting a state agency sole jurisdiction to decide issues that parties agreed to arbitrate and by imposing requirements prior to enforcing arbitration not applicable to contracts generally, state law conflicted with the FAA, and its primary objective: streamline proceedings.  Requiring a dispute’s initial reference to an agency would hinder its speedy resolution.   Here, state law empowered the agency to act as impartial arbiter, the precise role the FAA assigned to an arbitrator. Since the question concerned the forum to decide the dispute and no substantive state law right was waived, the parties must arbitrate.  In Hall St. Assocs. v. Mattel, Inc., the Court found that the FAA set the exclusive grounds for judicial review, 9 U.S.C. §§ 10-11, and parties cannot supplement those grounds by contract.  If parties agree to arbitrate, they must adhere to the arbitration process.