2. Declare that a contract containing an arbitration clause does not involve trade between States. In the Allied-Bruce case, the court ruled that Section 2 of the FAA expanded Congress` power to use the trade clause “in its entirety.” No. 96×96. Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 277 (1995). In Citizens Bank v. Alafabco, 97×97, 539 U.S. 52 (2003). The court reminded observers that this was indeed a “full” and concluded that a debt structuring business to be conducted in Alabama between an Alabama lender and an Alabama construction company concerned interstate trade.98×98. See id.
at 58. Of course, this position was consistent with Supreme Court jurisprudence, which interpreted Congress` commercial power as almost unlimited.99×99. See Wickard v. Filburn, 317 U.S. 111, 128–29 (1942). However, since these decisions, some state courts have ruled that arbitration agreements do not “affect” interstate trade.100×100. Bonaccorso, note 4 above, at 1159-60. In 2019, a New York court ruled that an agreement between a general contractor and a state resident to improve the resident`s ownership did not involve interstate commerce pursuant to § 2.101×101. Smith v Nobiletti Builders, Inc., 177 A.D.3d 807, 810 (N.Y. App. Div. 2019).
Congress unanimously passed the FAA in 1925.6×6. See Margaret L. Moses, Statutory Misconstruction: How the Supreme Court Created a Federal Arbitration Law Never Enacted by Congress, 34 Fla. St. U. L. Rev. 99, 110 (2006). The historical context suggests, and most scholars agree, that Congress intended the law to be a purely procedural law.7×7. See Christopher R. Drahozal, In Defense of Southland: Reexamining the Legislative History of the Federal Arbitration Act, 78 Notre Dame L. Rev.
101, 103 (2002). The law does not contain an explicit pre-emption clause, 8×8. Scis., Inc. v. Bd. von Trs. von Leland Stanford Junior Univ., 489 U.S. 468, 477 (1989). The court`s interpretation of § 2 has become a kind of customary federal law, detached from the text of the law. See Richard H.
Fallon, Jr., et al., Hart and Wechsler`s The Federal Courts and the Federal System 635 (7th ed. 2015) (federal common law definition). and it is unlikely that Congress relied on a modern understanding of its trade clause before the New Deal when passing the FAA.9×9. See Moses, note 6 above, pages 109-10. Despite these observations, the modern Supreme Court has interpreted section 2 of the Act as an essential commitment to a pro-arbitration federal policy that prejudges state laws that, prima facie or in their application, are contrary.10×10. See AT&T Mobility, LLC v. Concepción, 563 U.S. 333, 341–43 (2011). The Supreme Court ruled that § 2 preempts california rule.32×32. See id.
at 344. Judge Scalia wrote for the majority, stating that “the equivalence of the availability of class arbitration undermines the fundamental attributes of arbitration, thereby creating a system inconsistent with the FAA.” 33×33. This conclusion arose for two reasons, the Court held. First, the “main advantage” of arbitration is procedural informality, an advantage that would be lost if arbitrators were to rule on ancillary issues related to class actions.34×34. Id., p. 348. Second, the majority argued that the lack of recourse against an arbitral award “was a rbitration. poorly adapted to the higher stakes of class actions. 35×35. Id. at p.
350. The post-Southland model has generally followed a predictable cycle: state courts invent new ways to reduce the growing scope of the law, the court rejects these attempts to push back, and state courts restart the process. Repeating this pattern has significantly reduced the available opportunities to restrict or circumvent the FAA in good faith. Yet many state courts continue to ignore or circumvent the law. Today, such attempts produce little in terms of promoting the concrete interests of state laws or state judicial systems. The more state courts defy federal law, the more likely they are to be summarily 147×147. See e.B. CarMax Auto Superstores Cal., LLC v.
Fowler, 571 U.S. 1189, 1189 (2014) (mem.). or unanimous148×148. See e.B. Marmet Health Care Ctr., Inc.c. Brown, 565 U.S. 530, 534 (2012) (per curiam); Citizens Bank v Alafabco, Inc., 539 U.S. 52, 58 (2003) (per curiam). reverse. Even if an unfaithful decision of a state court avoids court intervention, the decision is likely to delay the federalization of the state rule rather than prevent it.149×149. There are many examples of this model.
Let`s look at a few: in Allied-Bruce, the court rejected the “consideration of the parties” test that many state courts had adopted to limit Southland`s scope. Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 278 (1995); see also id. at 269–70 (collective cases). And after several state courts applied the theory of “effective justification” in response to Concepcion, they were forced to back down after the Italian-colored court`s decision. See e.B. Machado v. System4 LLC, 993 N.E.2d 332, 333 (Mass. 2013). Meanwhile, opposition to the FAA thwarts the legitimate aspirations of the domestic legal system.
These normative obligations include uniformity and predictability, transparency and the promotion of the legitimacy of the legal system. It is important to get it right, but that is not the only goal of a mature and coherent legal system. For nearly forty years, Southland and his descendants suffered harsh scientific and legal criticism, but to no avail. Although a judicial withdrawal or a strictly constructivist approach to the interpretation of § 2 may have been plausibly justifiable at some point, they are no longer justifiable. A substantial AAF is now our law, and state courts remain primarily responsible for enforcing it. The only question that remains is whether state courts, without the involvement of Congress, will accept the deplorable but inevitable federalization of state contract law. 5. Narrow definition of “arbitration” under state law. Currently, the courts are divided as to whether the meaning of “arbitration” is defined in § 2 under customary federal law or state law.112×112.
Compare e.B. Bakoss v. Certain Underwriters at Lloyds of London Issuing Certificate No. 0510135, 707 F.3d 140, 143 (2d Cir. . . .