- Court: United States Supreme Court
- Area(s) of Law: Arbitration
- Date Filed: November 26, 2012
- Case #: 11-1377
- Judge(s)/Court Below: Per Curiam
- Full Text Opinion
Respondents are two former employees who signed confidential non-compete agreements with Petitioner that required all disputes to be settled by arbitration.
After Respondents quit and began working for a competitor, Petitioner sought to enforce its non-compete agreement through arbitration. Respondents claimed that the non-compete clause was unenforceable by virtue of an Oklahoma statute that prohibits the use of non-compete clauses in employment contracts, and filed suit in Oklahoma state court seeking declaratory relief. The trial court held that the arbitration provision of the non-compete clause was valid, and dismissed the complaint, holding that, by virtue of the Federal Arbitration Act, the validity of the non-compete clause was for the arbitrator, not the court, to decide.
The Oklahoma Supreme Court reversed, and held that Oklahoma’s statute regarding non-compete clauses was enforceable and amounted to “adequate and independent state grounds” that would preclude federal review.
The Supreme Court of the United States, in a per curiam opinion, reversed and held that the Federal Arbitration Act is the supreme law of the land that declares a national policy favoring arbitration. The court further held that the Act’s substantive law is applicable in state and federal courts. As a result, so long as a mandatory arbitration clause is valid, any attack on a contract’s terms must be resolved by the arbitrator in the first instance, not by a federal or state court. Finally, with respect to the Oklahoma Supreme Court’s assertion that Oklahoma statute provides a sufficient basis for precluding federal review, the court held “when state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the [Federal Arbitration Act].”