State Arbitration Law in a FAA Preemption World: The Interaction Between Federal and State Arbitration Law

Abstract

The Federal Arbitration Act is a nearly century-old law governing domestic commercial arbitration in the United States. The U.S. Supreme Court regards the FAA as a “federal policy favoring arbitration” and as a source of federal substantive law that applies in both federal and state courts, unless parties provide otherwise. The scope of the FAA extends to the vast reach of interstate commerce and maritime, with few exceptions. The FAA’s hallmark provision, section 2, mandates that agreements to arbitrate, involving the broadly construed matters of interstate commerce, “[s]hall be enforced, save upon grounds that exist at law or in equity for the revocation of any contract.” Largely since the 1991 decision in Gilmer v. Interstate Johnson, arbitration provisions in commercial, employment, and consumer contracts have become ubiquitous.

In 1955, the Uniform Law Commission (ULC) (also known as the National Conference Commission on Uniform Laws), proposed the Uniform Arbitration Act to provide similar recognition and enforcement of arbitration agreements at the state level as the FAA. Since then, state efforts to otherwise regulate aspects of arbitration in the interests of protecting consumers, employees, or the public interest, have encountered preemption hurdles, as the Court has also held that, under the Supremacy Clause of the U.S. Constitution, the FAA preempts contrary state law. A project convened by the ULC sought to address many of the issues and controversies involved in arbitration law and practice that the FAA and its state counterpart, the UAA, did not. The resulting model state legislation, the Revised Uniform Arbitration Act (RUAA), proposed in 2000, forged a more comprehensive model arbitration statute to address a range of issues the FAA left untouched.

As this Book’s collection of writings contemplate the FAA at 100 and potential arbitration law reforms, this Chapter also considers the RUAA at 25 and specifically the role and power of states in regulating arbitration, as to both procedure and substance. In what respects could state arbitration efforts inform an amended FAA for the twenty-first century? Part II reviews the basic structure of the FAA and then key provisions of RUAA. Part III highlights key differences in the legislation of states that have adopted the RUAA, as well as select state statutes. Part IV examines how select state legislation operates in conjunction with the FAA, in addressing stakeholder concerns for arbitration procedure and substance, and considers whether an amended FAA should incorporate core changes set forth in the RUAA, and recommends where the FAA could benefit from state arbitration efforts.

Keywords: arbitration, FAA, Federal Arbitration Act, Revised Uniform Arbitration Act, RUAA, Gilmer v. Interstate Johnson, state law