Employment Law Blog

Unlike the Federal Arbitration Act (“FAA”), the California Arbitration Act (“CAA”) expressly permits courts to deny a petition to compel arbitration where related litigation or other proceedings create a risk of conflicting rulings. Cal. C.C.P. § 1281.2(c). “Where, as here, the parties have agreed to abide by state rules of arbitration, enforcing those rules according to the terms of the agreement is fully consistent with the goals of the FAA, even if the result is that arbitration is stayed where the Act would otherwise permit it to go forward.” Volt Info. Sciences v. Leland Stanford Jr. U., 489 U.S. 468, 470 (1989).

The Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 2-16, provides that arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” Under the Act, “arbitration agreements [are] on an equal footing with other contracts,” and courts must enforce arbitration agreements according to their terms. Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 66 (2010). “Like other contracts, however, they may be invalidated by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability.’ ”

The FAA provides, that a “written provision in any…contract evidencing a transaction involving commerce to settle by arbitration a controversy…shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of the contract.” 9 U.S.C. § 2. In order to opt out of the FAA, a controlling state arbitration law must be specified in the agreement. See, e.g. Wolsey, Ltd. v. Foodmaker, Inc., 144 F.3d 1205, 1209 (9th Cir. 1998) (“In other words, parties are free to contract around the FAA by incorporating state arbitration rules into their agreements.”).