Preston v. Ferrer, No. 06-1463, 552 U.S. ____ (2008)
Decided February 20, 2008 | See opinion here
The
Supreme Court held that when parties agree to arbitrate all questions arising
under a contract, the Federal Arbitration Act (FAA) supersedes state laws establishing
primary jurisdiction in another forum, whether judicial or administrative. Preston, a California entertainment lawyer, initiated
an arbitration proceeding against television performer Ferrer, seeking to
recover fees allegedly due under their contract. Ferrer subsequently filed a petition to the
California Labor Commissioner, charging that Preston
had acted as a talent agent without the requisite license and that the contract
was therefore invalid and unenforceable under the California Talent Agencies
Act (TAA).
The
Labor Commissioner denied Ferrer’s motion to stay the arbitration on the ground
that she lacked authority to order such relief.
Ferrer then filed suit in the Los Angeles Superior Court, which enjoined
Preston from proceeding before the arbitrator
unless and until the Labor Commissioner determined that she lacks jurisdiction. While appeal of the superior court decision
was pending, Buckeye Check Cashing, Inc. v. Cardegna (2006) reaffirmed
that challenges to the validity of a contract providing for arbitration
ordinarily should be considered by an arbitrator, rather than by a court. The California Court of Appeal affirmed the
superior court’s judgment, finding Buckeye to be inapposite because it
did not involve an administrative agency with exclusive jurisdiction over a
disputed issue. The California Supreme
Court denied Preston's petition for
review. The Supreme Court granted certiorari.
In
an opinion by Justice Ginsburg, the Court reversed and remanded. The Court clarified that the dispositive
issue is not whether the FAA preempts the TAA wholesale, but is instead who decides
whether Preston acted as an unlicensed talent
agent in violation of the TAA. Noting
that the contract falls within the purview of § 2 of the FAA and that there had
been no discrete challenge to the validity of the arbitration clause, the Court
concluded that Buckeye requires that the arbitrator resolve the
dispute. Rejecting the argument that the
TAA merely requires exhaustion of administrative remedies before the parties
proceed to arbitration, the Court asserted that the TAA's procedural
proscriptions conflict with the FAA's dispute resolution regime and that postponing
arbitration would contravene the FAA's objective of achieving expeditious
results. The Court dismissed Ferrer’s
reliance on Volt Information Sciences, Inc. v. Board of Trustees of Leland
Stanford Junior University (1989), explaining that the arbitration clause
speaks to the matter in controversy and that, in accordance with Matrobuono
v. Shearson Lehman Hutton, Inc. (1995), the selection of California law
should be read to encompass prescriptions governing the parties' substantive
rights and obligations but not the State's rules limiting the authority of arbitrators.
Justice
Thomas wrote a short dissent emphasizing that the FAA does not apply to state
court proceedings.
