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Friday, December 14, 2012

Arbitration and the Federal Arbitration Act

Nitro-Lift Techs., L.L.C. v. Howard Opinion Summary: Nitro-Lift contracts with operators of oil and gas wells to provide services. Howard and Schneider entered a confidentiality-noncompetition agreement with Nitro-Lift that contained an arbitration clause” After working for Nitro-Lift on wells in Oklahoma, Texas, and Arkansas, they quit and began working for one of Nitro-Lift’s competitors. Nitro-Lift served them with a demand for arbitration. The former employees filed suit Oklahoma, asking the court to declare the agreements void and enjoin enforcement. The court dismissed. The Oklahoma Supreme Court ordered the parties to show cause why the matter should not be resolved by application of Okla. Stat., Tit. 15, 219A, which limits the enforceability of noncompetition agreements. Nitro-Lift argued that any dispute as to the contracts’ enforceability was a question for the arbitrator. The Oklahoma Supreme Court held that the existence of an arbitration agreement in an employment contract does not prohibit judicial review of the underlying agreement. The U.S. Supreme Court vacated, holding that the state court misconstrued the Federal Arbitration Act, 9 U.S.C. 1, which favors arbitration.

on petition for writ of certiorari to the supreme court of oklahoma
No. 11–1377. Decided November 26, 2012

Per Curiam.

State courts rather than federal courts are most frequently called upon to apply the Federal Arbitration Act (FAA), 9 U. S. C. §1 et seq., including the Act’s national policy favoring arbitration. It is a matter of great importance, therefore, that state supreme courts adhere to a correct interpretation of the legislation. Here, the Oklahoma Supreme Court failed to do so. By declaring the noncompetition agreements in two employment contracts null and void, rather than leaving that determination to the arbitrator in the first instance, the state court ignored a basic tenet of the Act’s substantive arbitration law. The decision must be vacated.

*  *  *

This dispute arises from a contract between petitioner Nitro-Lift Technologies, L. L. C., and two of its former employees. Nitro-Lift contracts with operators of oil and gas wells to provide services that enhance production. Respondents Eddie Lee Howard and Shane D. Schneider entered a confidentiality and noncompetition agreement with Nitro-Lift that contained the following arbitration clause:

“ ‘Any dispute, difference or unresolved question between Nitro-Lift and the Employee (collectively the “Disputing Parties”) shall be settled by arbitration by a single arbitrator mutually agreeable to the Disputing Parties in an arbitration proceeding conducted in Houston, Texas in accordance with the rules existing at the date hereof of the American Arbitration Association.’ ” Pet. for Cert. 5.

After working for Nitro-Lift on wells in Oklahoma, Texas, and Arkansas, respondents quit and began working for one of Nitro-Lift’s competitors. Claiming that respondents had breached their noncompetition agreements, Nitro-Lift served them with a demand for arbitration. Respondents then filed suit in the District Court of Johnston County, Oklahoma, asking the court to declare the noncompetition agreements null and void and to enjoin their enforcement. The court dismissed the complaint, finding that the contracts contained valid arbitration clauses under which an arbitrator, and not the court, must settle the parties’ disagreement.

The Oklahoma Supreme Court retained respondents’ appeal and ordered the parties to show cause why the matter should not be resolved by application of Okla. Stat., Tit. 15, §219A (West 2011), which limits the enforceability of noncompetition agreements. Nitro-Lift argued that any dispute as to the contracts’ enforceability was a question for the arbitrator. It relied for support— as it had done before the trial court—upon several of this Court’s cases interpreting the FAA, and noted that under Buckeye Check Cashing, Inc. v. Cardegna, 546 U. S. 440, 446 (2006) , “this arbitration law applies in both state and federal courts.” Record in No. 109,003 (Okla.), p. 273.

The Oklahoma Supreme Court was not persuaded. It held that despite the “[U. S.] Supreme Court cases on which the employers rely,” the “existence of an arbitration agreement in an employment contract does not prohibit judicial review of the underlying agreement.” 2011 OK 98, ¶15, n. 20, ¶16, 273 P. 3d 20, 26, n. 20, 27. For that proposition, the court relied on the “exhaustive overview of the United States Supreme Court decisions construing the Federal Arbitration Act” in Bruner v. Timberlane Manor Ltd. Partnership, 2006 OK 90, 155 P. 3d 16, which found Supreme Court jurisprudence “not to inhibit our review of the underlying contract’s validity.” 273 P. 3d, at 26. Finding the arbitration clauses no obstacle to its review, the court held that the noncompetition agreements were “void and unenforceable as against Oklahoma’s public policy,” expressed in Okla. Stat., Tit. 15, §219A. 273 P. 3d, at 27.

The Oklahoma Supreme Court declared that its decision rests on adequate and independent state grounds. Id., at 23–24, n. 5. If that were so, we would have no jurisdiction over this case. See Michigan v. Long, 463 U. S. 1032 –1044 (1983). It is not so, however, because the court’s reliance on Oklahoma law was not “independent”—it necessarily depended upon a rejection of the federal claim, which was both “ ‘properly presented to’ ” and “ ‘addressed by’ ” the state court. Howell v. Mississippi, 543 U. S. 440, 443 (2005) (per curiam) (quoting Adams v. Robertson, 520 U. S. 83, 86 (1997) (per curiam)). Nitro-Lift claimed that the arbitrator should decide the contract’s validity, and raised a federal-law basis for that claim by relying on Supreme Court cases construing the FAA. “ ‘[A] litigant wishing to raise a federal issue can easily indicate the federal law basis for his claim in a state-court petition or brief . . . by citing in conjunction with the claim the federal source of law on which he relies or a case deciding such a claim on federal grounds . . . .’ ” Howell, supra, at 444 (quoting Baldwin v. Reese, 541 U. S. 27, 32 (2004) ; emphasis added). The Oklahoma Supreme Court acknowledged the cases on which Nitro-Lift relied, as well as their relevant holdings, but chose to discount these controlling decisions. Its conclusion that, despite this Court’s jurisprudence, the underlying contract’s validity is purely a matter of state law for state-court deter-mination is all the more reason for this Court to assert jurisdiction.

The Oklahoma Supreme Court’s decision disregards this Court’s precedents on the FAA. That Act, which “declare[s] a national policy favoring arbitration,” Southland Corp. v. Keating, 465 U. S. 1, 10 (1984) , provides that a “written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U. S. C. §2. It is well settled that “the substantive law the Act created [is] applicable in state and federal courts.” Southland Corp., supra, at 12; see also Buckeye, supra, at 446. And when parties commit to arbitrate contractual disputes, it is a mainstay of the Act’s substantive law that attacks on the validity of the contract, as distinct from attacks on the validity of the arbitration clause itself, are to be resolved “by the arbitrator in the first instance, not by a federal or state court.” Preston v. Ferrer, 552 U. S. 346, 349 (2008) ; see also Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U. S. 395 (1967) . For these purposes, an “arbitration provision is severable from the remainder of the contract,” Buckeye, supra, at 445, and its validity is subject to initial court determination; but the validity of the remainder of the contract (if the arbitration provision is valid) is for the arbitrator to decide.

This principle requires that the decision below be va-cated. The trial court found that the contract contained a valid arbitration clause, and the Oklahoma Supreme Court did not hold otherwise. It nonetheless assumed the arbitrator’s role by declaring the noncompetition agreements null and void. The state court insisted that its “[own] jurisprudence controls this issue” and permits review of a “contract submitted to arbitration where one party assert[s] that the underlying agreement [is] void and unenforceable.” 273 P. 3d, at 26. But the Oklahoma Supreme Court must abide by the FAA, which is “the supreme Law of the Land,” U. S. Const., Art. VI, cl. 2, and by the opinions of this Court interpreting that law. “It is this Court’s responsibility to say what a statute means, and once the Court has spoken, it is the duty of other courts to respect that understanding of the governing rule of law.” Rivers v. Roadway Express, Inc., 511 U. S. 298, 312 (1994) . Our cases hold that the FAA forecloses precisely this type of “judicial hostility towards arbitration.” AT&T Mobility LLC v. Concepcion, 563 U. S. ___, ___ (2011) (slip op., at 8).

The state court reasoned that Oklahoma’s statute “addressing the validity of covenants not to compete, must govern over the more general statute favoring arbitration.” 273 P. 3d, at 26, n. 21. But the ancient interpretive principle that the specific governs the general (generalia specialibus non derogant) applies only to conflict between laws of equivalent dignity. Where a specific statute, for example, conflicts with a general constitutional provision, the latter governs. And the same is true where a specific state statute conflicts with a general federal statute. There is no general-specific exception to the Supremacy Clause, U. S. Const. Art. VI, cl. 2. “ ‘[W]hen state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.’ ” Marmet Health Care Center, Inc. v. Brown, 565 U. S. ___, ___–___ (2012) (per curiam) (slip op., at 3–4) (quoting AT&T Mobility LLC, supra, at ___–___ (slip op., at 6–7)). Hence, it is for the arbitrator to decide in the first instance whether the covenants not to compete are valid as a matter of applicable state law. See Buckeye, 546 U. S., at 445–446.

For the foregoing reasons, the petition for certiorari is granted. The judgment of the Supreme Court of Oklahoma is vacated, and the case is remanded for proceedings not inconsistent with this opinion.

It is so ordered.

MORE Tries To Get A Vote For Democracy At The Delegate Assembly

Unity Votes Against Democracy

by morecaucusnyc of the 12/12/12 Delegate Assembly was dedicated to teacher evaluations. This isn't surprising, as the Unity crew knew that MORE caucus was showing up with petitions and a resolution in hand. For the better part of an hour, delegates were told how UFT President Michael Mulgrew is fighting this evaluation battle for us and how Unity is giving its all to protect teachers from the evil machinations of Mayor Bloomberg. You'd never know from all this that it was the UFT leadership, headed by Mulgrew, who agreed to the new teacher evaluations in the first place--without input from the members.
MORE showed up with a single purpose and a single request: that the membership be allowed to vote on any new evaluation agreement made outside of a contract agreement. It seemed a pretty reasonable request; teachers -- NOT union leaders -- are the ones who will be most severely affected by any new evaluation scheme. We are the ones who will be evaluated on what Randi Weingarten herself recently called "junk science", or value-added scores. We are the ones who will lose our jobs if this junk science determines that we are ineffective based on a mathematical formula that attempts to reduce our students to a set of variables. It only makes sense that we--the teachers--should get a say in any new evaluation method.
So that, of course, is not what happened.
MORE's resolution merely called for a democratic referendum:
“That the UFT conduct a broad and democratic discussion about the new evaluation system which would include that: our union immediately poll the membership with regard to the new measures and host forums at chapter, borough and city-wide levels where members can discuss this new system”
“That if a new evaluation system is negotiated with the city outside of a new contract, the UFT hold a membership-wide referendum on whether to accept the system, conducted in the same manner as contract approval votes."
Kit Wainer, one of MORE's High School Executive Board candidates, spoke passionately on behalf of teachers. He pointed out that we are constantly having policies imposed on us by the DOE, that we are demoralized, and that we must have a voice in matters that so deeply and personally concern us. Wainer also said nearly one thousand educators signed the petition calling for a rank and file member vote on any new agreement and over a dozen school chapters endorsed it.
It was an elegant plea, but Unity was prepared. They presented UFT Staff Director and Executive Board member Leroy Barr to speak against a democratic vote among the members. He said the Delegate Assembly is a duly elected body that represents the wishes of its members. Barr claimed that the DA holds the authority to make decisions for its members, and that anyone who questions that authority (presumably MORE and its supporters) ought to be questioned themselves.
The vote was 70% to 30% against the MORE resolution. Against a democratic vote. Against the right of teachers to have a say in a matter that fundamentally threatens our professional lives.
Overall, this was a loss for union democracy. Nevertheless, there are some bright spots. In a delegate assembly overwhelmingly dominated by Unity, MORE gathered a significant percentage of the votes on this resolution. Many delegates spoke to MORE members following the meeting. Momentum may be swinging in favor of a more democratic union. Perhaps most significantly, the UFT is feeling the heat and knows it is in a fight for the hearts of its members.
You can help. Let your chapter leader, delegate, and Mulgrew himself know that you demand a say in your professional future. Tell them that you don't want fundamental changes to our current contract and evaluation system without a referendum. Tell your colleagues and ask them to spread the word.
And join MORE--for a more democratic union.
From Betsy Combier to Leroy Barr: Hi Leroy!!! So glad to see you are still against individual/members' rights and voices opposing UNITY....
 to the reading public: now you can see why I do not work at the UFT

Testing = School To Prison Pipeline?

FairTest Senate testimony connects testing with school to prison pipeline.


FairTest submitted  written testimony on how high-stakes connects testing with punitive discipline and the school-to-prison pipeline, to the subcommittee on the Constitution, Civil Rights, and Human Rights of the Senate Committee on the Judiciary hearing on ending the school-to-prison pipeline. Read it here.
PipelineSenateTestimonyDec2012.pdf267.87 KB