USA Trends and Developments Contributed by: Matthew Kirtland, Denton Nichols and Courtney Hikawa, Norton Rose Fulbright US LLP
In furthering the declared federal policy to favour and promote arbitration, the Court over time created arbi - tration-specific rules that arguably went beyond what the FAA’s text strictly required. • Epic Sys . Corp . v Lewis , 584 U.S. 497, 525 (2018): “Congress has instructed that arbitration agree - ments like those before us must be enforced as written.” • Kindred Nursing Centers Ltd . P ’ ship v Clark , 581 U.S. 246, 247 (2017): “The Act thus preempts any state rule that discriminates on its face against arbitration or that covertly accomplishes the same objective by disfavoring contracts that have the defining features of arbitration agreements.” • Stolt - Nielsen S . A . v AnimalFeeds Int ’ l Corp ., 559 U.S. 662, 685 (2010): “An implicit agreement to authorise class-action arbitration, however, is not a term that the arbitrator may infer solely from the fact of the parties’ agreement to arbitrate.” • Buckeye Check Cashing , Inc . v Cardegna , 546 U.S. 440, 445–46 (2006): “[A]s a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract... [U]nless the challenge is to the arbitration clause itself, the issue of the contract’s validity is consid - ered by the arbitrator in the first instance.” Critics, however, labelled this approach “arbitration exceptionalism”, arguing that it upset the balance between federal and state power, weakened protec - tions for workers and consumers, and tilted the play - ing field unfairly. Certain Supreme Court cases decided in the 2020s, however, seem to signal a partial re-assessment of arbitration’s privileged place in the US legal land - scape. • In a 2022 decision ( Morgan v Sundance ), the Court pulled back from its longstanding view of the FAA’s aims as including the promotion of arbitration, now holding that the “federal policy is about treat - ing arbitration contracts like all others, not about fostering arbitration” (596 U.S. 411, 412 (2022)). Consistent with this revised view, it overturned a rule adopted by some lower courts that had made it harder to prove a party’s waiver of its contractual
right to arbitration than a waiver of other types of contractual rights. • In another 2022 decision ( Badgerow v Walters ), the Court ruled that a party seeking to enforce a domestic arbitration award does not automatically have the right to do so in federal court, even if the underlying dispute involved federal law (596 U.S. 1, 18-19 (2022)). The Court reasoned that because an arbitration award is “no more than a contractual resolution of the parties’ dispute”, disagreements about the award’s enforcement are fundamentally about contract rights – and those kinds of disputes typically belong in state courts. • In a 2024 decision ( Coinbase v Suski ), the Court qualified a rule called the “severability principle” that it had adopted almost six decades earlier. Under the old rule, a party trying to avoid arbitra - tion had to challenge the arbitration clause “spe - cifically” – it was not enough to argue that the entire contract was unenforceable – see Prima Paint Corp . v Flood & Conklin Mfg . Co ., 388 U.S. 395, 402 (1967); Buckeye Check Cashing , Inc . v Cardegna , 546 U. S. 440, 445-46 (2006); and Rent - A - Center v Jackson , 561 U.S. 63, 701-71 (2010). Under the revised rule, however, the Court holds that when a legal challenge applies “equally” to the whole contract and its arbitration clause, a court must resolve that challenge before sending the parties to arbitration ( Coinbase , Inc . v Suski , 602 U.S. 143 (2024): “where a challenge applies ‘equally’ to the whole contract and to an arbitra - tion or delegation provision, a court must address that challenge”). The Court contended that “basic principles of contract” require this result. A throughline in these recent decisions – with two of them having been decided unanimously and the third by a vote of eight to one – is a more pronounced emphasis on the basic contractual nature of arbitra - tion. Following this contract-centric approach, today’s Supreme Court seems less inclined than in the past to adopt judicial rules favouring arbitration, which possibly heralds an end to the so-called “arbitration exceptionalism” era. Even so, the US Supreme Court does not appear to have become hostile to arbitration. Its decisions have supported the enforcement of arbitration agreements
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