Special Pennsylvania Professional Liability Case Law Alert

The U.S. Supreme Court Holds That The Enforceability Of A Contract Containing An Arbitration Clause Is A Matter For Arbitration, Not Litigation

By John J. Hare, Esquire
Philadelphia, PA
jjhare@mdwcg.com or 215-575-2609

In Preston v. Ferrer, 552 U.S. __, 2008 U.S. LEXIS 2011 (2008), the U.S. Supreme Court held that, in a case arising under the Federal Arbitration Act ("FAA"), a challenge to the enforceability of a contract containing an arbitration clause must be resolved in arbitration, not litigation. State laws vesting jurisdiction over such challenges to another forum, whether judicial or administrative, are pre-empted by the FAA. If only the enforceability of the arbitration provision (as opposed to enforceability of the contract as a whole) is challenged, state law governs. As a practical matter, this ruling limits a party's ability to challenge in court the enforceability of a contract containing an arbitration agreement. As a result, the party should not be able to assert contract defenses in response to an opponent's effort to compel binding arbitration.