In the case of Nitro-Lift Technologies, LLC v. Eddie Lee Howard, involving the Federal Arbitration Act, the Supreme Court of the United States indicated that courts are not allowed to address the validity of covenants not to compete before an arbitrator does so. By declaring non-competition agreements and employee contracts null and void, rather than leaving that determination to the arbitrator, the state court ignored the basic tenet of the acts arbitration law.
The case involved a contract between an employer and an employee. They entered into a non-competition agreement which had an arbitration clause indicating that any dispute would be resolved by a single arbitrator, mutually agreeable to the disputing parties, in an arbitration proceeding conducted in accordance with the rules of the American Arbitration Association. The employees filed suit after serving the demand for arbitration. They asked the court to declare the non-competition agreements null and void. The trial court found that the contract contained valid arbitration clauses, which the arbitrator, not the court, court should settle.
The case made its way up to the Oklahoma Supreme Court. Oklahoma law limits the enforceability of non-competition agreements. In other words, a court should decide whether the arbitration clause was valid. The employer claimed that the question as to the enforceability of the contract was a question that the arbitrator should decide, not the Supreme Court. The Oklahoma Supreme Court disagreed, contending that existence of an arbitration agreement and an unemployment contract does not prohibit traditional review of the underlying agreement.
The U.S. Supreme Court decided that the Oklahoma Supreme Court decision disregarded prior U.S. Supreme Court case-law concerning the Federal Arbitration Act. The act, said the Supreme Court, declares a national policy favoring arbitration. Accordingly, the arbitrator makes the decision about the enforce-ability of the provision. The arbitrator has to make the decision before any courts can do so. Accordingly, the United States Supreme Court remanded this matter back down to the arbitrator in Oklahoma to make a decision as to the enforce-ability of the covenants.
This case is a per curium decision, meaning it is signed by the court as a whole, without a published vote. The Supreme Court is telling the Oklahoma state court that arbitrators are supposed to make these decisions before they can be reviewed. This is now pretty clearly the law under the Federal Arbitration Act.
This will affect consumer cases in many ways. There are many arbitration provisions in insurance policy including ones regarding injury claimants.
Ackerman Law Office is available to help people who have arbitration issues, especially when they concern personal injury claims. These often come up in uninsured/underinsured claims, and can arise in other contexts as well. If you have an arbitration issue, especially involving personal injury, Please contact us. We like to help people repair their financial life following an injury. Please feel free to call 217-789-1977 or check out our website.