In 1925, Congress, to provide for the enforcement of certain arbitration agreements, enacted the Federal Arbitration Act (“FAA”) as a procedural law to be applicable only in federal courts. However, the United States Supreme Court, seemingly for the purpose of reducing federal courts’ caseloads, co-opted the FAA by disregarding Congress’s intent that the FAA be applicable only in federal courts. And in furtherance of its own Court-created “federal policy in favor of arbitration,” the Court created precedents that limit state regulation of arbitration agreements, including that states cannot exempt disputes from forced or mandatory arbitration agreements or otherwise regulate the enforcement of arbitration agreements in a manner that is inconsistent with the FAA. The Court’s precedents have left a regulatory gap where states cannot prevent some of the dangers that arbitration poses to litigants in many areas of the law, including in consumer and employment contracts. Recently, however, Congress has reentered the arbitration field to reassert its authority over arbitration. In 2022, it enacted the Ending Forced Arbitration of Sexual Abuse and Sexual Harassment Act to exclude these types of claims from forced or mandatory arbitration. This Article asserts that Congress, having reentered the field, should continue its reforms of the FAA to recalibrate the balance of power between the Court and Congress. This would include Congress clearly stating whether Section 2 of the FAA should be applicable only in federal courts; should not be applicable to adhesion arbitration agreements; and should not be applicable to federal statutory claims, as well as whether the lack of diversity in arbitrators should be one of the justifications for not enforcing predispute arbitration agreements. This Articles discusses these topics and offers suggestions on how Congress should resolve these issues.
Arbitration and Federal Reform: Recalibrating the Separation of Powers Between Congress and the Court
Larry J. Pittman
July 21, 2023