USA Trends and Developments Contributed by: Matthew H. Kirtland, Timothy Tyler, Katie Connolly and Taylor LeMay, Norton Rose Fulbright
The Impact of Supreme Court Decisions The last decade or so of cases from the United States Supreme Court has reaffirmed some bedrock propo - sitions of US arbitration law. But it has also affected how international arbitration practitioners in the Unit - ed States and around the world advise and represent their clients. The decisions’ effect on international cases is some - times difficult to tease out because there is not a par - ticular statute dedicated exclusively and comprehen - sively to international arbitration (like the UNCITRAL Model Law). In addition, the federal statute that gov - erns both domestic and international arbitration – the Federal Arbitration Act (FAA) – is over 100 years old and relatively short, so concepts that are express in the Model Law are implicit in the FAA. Finally, most of the cases arise in the US domestic context, which entails that their applicability to the international con - text must be worked out in the lower federal courts and take years to percolate up to the Supreme Court, which takes very few cases each year. With this caveat, the following discussion is in three parts. After a brief introduction to cases that concern the scope of the FAA, it proceeds to review cases that especially affect drafting or structuring arbitra - tion agreements. From there, a review of the Court’s decisions roughly follows the procedural stages of an arbitration. Scope of the Federal Arbitration Act: the principle of equal footing of arbitration and other contracts The Supreme Court has decided several cases over the last decade that clarified the FAA’s scope and cen - tral policy aims. In particular, the Supreme Court has reiterated that arbitration agreements should be on “equal footing” with other contracts. Morgan v Sundance, Inc. (2022) concerns waiver of arbitration by litigating in court. There, the Supreme Court unanimously held that the FAA’s policy favouring arbitration prohibits courts from conditioning a waiver of the right to arbitrate on a showing of prejudice to the opposing party. In Morgan , a party participated in litigation for eight months and then moved to enforce an arbitration
agreement. The counterparty argued that the movant had waived its right to arbitrate. Moreover, the coun - terparty argued, they would be prejudiced by enforce - ment of the agreement given the stage of litigation. The Supreme Court reversed the court of appeal’s decision, which was based on a finding of preju - dice. The Court found no showing of prejudice was required: a party’s intentional relinquishment of a right to arbitration is determined by their own actions, not by any effect on the opposing party. The Court fur - ther clarified that “[t]he federal policy is about treating arbitration contracts like all others, not about fostering arbitration”. In Morgan , the Court echoed its earlier decision, in Kindred Nursing Centers LP v Clark (2017). In Kindred , the Court held that the FAA pre-empted a Kentucky state doctrine that required a power of attorney to contain a clear statement allowing an agent to commit its principal to an arbitration agreement. This require - ment could not stand because it put arbitration agree - ments on a different footing from other contracts. Similarly, in Epic Systems Corp. v Lewis (2018), the Court relied on the basic “equal footing” concept to resolve a trio of domestic US cases. In Epic Systems , employees sought to litigate labour law, Fair Labor Standards Act, claims through class actions in court. But the employees’ employment contracts required individualised arbitration. The employees based their argument on Section 2 of the FAA, which makes an arbitration agreement enforceable “save upon such grounds as exist at law or in equity for the revoca - tion of any contract”. The employees’ argument pro - ceeded in two parts: first, Section 2 requires courts to invalidate an arbitration agreement if it violates another federal law; second, interpreting the arbitra - tion agreements as requiring individual actions vio - lates the National Labor Relations Act (NLRA), which empowers employees to take collective action against employers. The Court rejected this argument: the FAA requires enforcement of the arbitration agreements’ terms. Given that the NLRA did not explicitly mention class action lawsuits, it could not be read as displacing the FAA. As it had emphasised in other recent FAA cases, the Court focused on harmonising the FAA with other
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