Arbitration Pacts Get Supreme Boost Over State Contract Law

The Supreme Court’s ruling in Lamps Plus v. Varela specifically calls out California’s rule for ambiguous contracts. Nevertheless, the decision also said that a state’s public policy concerns aren’t elevated above the FAA’s command to enforce arbitration agreements, said Robert Friedman, the co-chair of Littler Mendelson’s alternative dispute resolution group.

The state contract law doctrine of unconscionability, for example, blocks the enforcement of contracts that are so unfair that they “shock the conscience,” said Richard Alfred, head of Seyfarth Shaw’s national wage and hour practice. Judges will have to examine that doctrine more closely to make sure it doesn’t have an adverse impact on arbitration, Alfred said.

The Lamps Plus decision could also fuel a legal challenge to the California Supreme Court’s 2000 decision in Armendariz v. Foundation Health, which set certain fairness requirements for employment arbitration agreements to remain valid, said Scott Witlin of Barnes & Thornburg. Most of the requirements under Armendariz are based on public policy concerns, so they’re now vulnerable, Witlin said.
— Read on news.bloomberglaw.com/us-law-week/high-court-weakens-state-contract-law-obstacles-to-arbitration


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