US Supreme Court Rejects State Public Policy Grounds for Refusing to Enforce Arbitration Agreements Under the FAA

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In Marmet Health Care Center, Inc. v. Brown, the Supreme Court of the United States (SCOTUS) overruled the West Virginia Supreme Court’s refusal to enforce a predispute arbitration agreement governed by the Federal Arbitration Act (FAA) based upon a state public policy prohibiting arbitration of claims alleging personal injury or wrongful death against nursing homes. In a per curiam decision, the SCOTUS reaffirmed its decision in AT&T Mobility LLC v. Concepcion, and again made clear that “[w]hen the state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.”

The Federal Arbitration Act establishes a strong federal mandate in favor of enforcing and upholding arbitration agreements in employment and other types of disputes. The SCOTUS has interpreted the FAA on many occasions and has consistently reaffirmed that, in the FAA, Congress declared a national policy favoring arbitration and withdrawing the power of the states to require a judicial forum for the resolution of claims which contracting parties agreed to resolve by arbitration.

Despite the clarity of the FAA’s plain language and the consistent holdings in SCOTUS decisions, some states (through legislation or judicial decisions) refuse to enforce predispute arbitration agreements involving certain types of state law claims ostensibly based upon a public policy requiring resolution of such claims in a judicial or administrative, and not an arbitral, forum.

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