Does the Federal Arbitration Act Supersede State Laws When Parties Agree to Arbitrate Any Dispute Arising Under a Contract ?
In Preston v. Ferrer, 552 U.S. 346, 169 L. Ed. 2d 917, 128 S. Ct. 978 (2008), the plaintiff sought to recover fees allegedly owed to him pursuant to a contract for services with the defendant.
The contract contained an arbitration clause, similar to the arbitration clause in the instant case, requiring the parties to arbitrate any disputes relating to the contract.
The plaintiff attempted to initiate arbitration proceedings but the defendant filed a complaint with the Labor Commissioner of the State of California.
The question of jurisdiction was brought before the California superior court, which denied the plaintiff's motion to compel arbitration and enjoined the plaintiff from proceeding before an arbitrator.
The California Court of Appeal affirmed the lower court's order, stating that California law vested the Commissioner with "exclusive original jurisdiction." Preston, 552 U.S. at 351, 169 L. Ed. 2d at 924, 128 S. Ct. at 982, quoting Ferrer v. Preston, 145 Cal. App. 4th 440, 447, 51 Cal. Rptr. 3d 628, 634 (2006).
The United States Supreme Court reversed, stating that national policy favoring arbitration of disputes "foreclose[s] state legislative attempts to undercut the enforceability of arbitration agreements." Preston, 552 U.S. at 353, 169 L. Ed. 2d at 925, 128 S. Ct. at 983, quoting Southland Corp. v. Keating, 465 U.S. 1, 16, 79 L. Ed. 2d 1, 15, 104 S. Ct. 852, 861 (1984).
The Supreme Court further held that when parties agree to arbitrate any dispute arising under a contract, the Federal Arbitration Act "supersedes state laws lodging primary jurisdiction in another forum, whether judicial or administrative." Preston, 552 U.S. at 360, 169 L. Ed. 2d at 929, 128 S. Ct. at 987.
California, in fact, had recognized this principle even prior to the holding in Preston.