“The Ninth Circuit’s decision correctly holds that the FAA covers all disputes, even those where Congress has given parties the right to sue in federal court.”
—John Masslon, WLF Senior Litigation Counsel
WASHINGTON, DC—The U.S. Court of Appeals for the Ninth Circuit today rejected arguments advanced for avoiding application of the Federal Arbitration Act. The unanimous ruling was a victory for Washington Legal Foundation, which filed an amicus curiae brief urging the court to affirm the lower court’s order compelling arbitration.
After breaching their contract and suing Caremark in federal court, a group of pharmacies argued that a court—not the arbitrator—must decide whether the arbitration clause was valid. The panel rejected that argument. As WLF’s brief showed, per the Supreme Court, a delegation clause is severable from an arbitration provision. When a party challenges the entire arbitration provision in a contract with a delegation clause, the arbitrator must decide whether the arbitration provision is valid. Otherwise, delegation clauses are virtually unenforceable.
The panel also rejected appellants’ argument that anytime a federal statute gives parties the right to file a federal lawsuit, that statute displaces the FAA. As explained in WLF’s brief, the Supreme Court has rejected that very argument many times. Such a rule would essentially be the death knell for the FAA because at least dozens of statutes allow parties to sue in federal court. Normal tools of statutory interpretation also show why such general laws do not displace the FAA. The panel’s decision is a victory for the rule of law and requires the pharmacies to comply with the contracts’ terms.
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