Relevant Facts: Customers of a securities brokerage firm sued under the Securities Act of 1933, a law designed to protect the rights of investors. The brokers who allegedly defrauded their customers tried to force arbitration under the terms of the consumer contract, which provided that “arbitration should be the method of all future controversies.”

Question Before The Court: Whether an adhesive contract broadly requiring parties to arbitrate “all future controversies” can legally require a customer acquiring securities to waive compliance with certain provisions of the Securities Act intended to protect investors.

The Opinion: After first establishing that the Federal Arbitration Act (FAA) applied to purchases of stocks and securities, the Court addressed whether the Securities Act carved out an exception to the FAA. To determine whether arbitration should be compelled, the Court looked to the primary purpose of both federal statutes, and found that the Securities Act was written to help equalize an inherently unequal bargaining position between buyers and sellers of securities by, inter alia, giving buyers a wider choice of courts and venues. The Court found that the pre-dispute arbitration clause at issue here required the buyer to “surrender on the advantages the Act gives him and surrenders it at a time when he is less able to judge the weight of the handicap the Securities Act places upon his adversary.”

The Court noticed three problems faced by plaintiffs if compelled to arbitrate. First, the matter at issue required not just the simple determination of the value of a commodity or the amount of money due under a contract, but a subjective finding by the arbitrator on the purpose and knowledge of an alleged violator of the law, without the benefit of judicial instruction on what the law requires. Second, the arbitrator’s decision could be rendered without explanation, without a complete record, and without any subsequent ability to review the legal standards applied. Finally, the power to vacate the award was severely limited under the Federal Arbitration Act (FAA), with no provision for judicial review for error in interpretation or determination of legal issues.

Although the Court recognized that the FAA provides parties “an opportunity to generally secure prompt, economical and adequate solution of controversies through arbitration if the parties are willing to accept less certainty of legally correct adjustment,” they ultimately held that the intentions of Congress in passing the Securities Act could only be carried out by holding the arbitration agreement invalid with respect to issues arising out of that law.

Unfortunately, the holding of this case was later hollowed out in Shearson/ American Express, Inc. v. McMahon, 482 U.S. 220 (1987), and then fully overturned in R. de Quijas v. Shearson/American Express, 490 U.S. 477 (1989).

Relevant Facts: An employee covered by a collective bargaining agreement alleged that he was fired because of racial discrimination. After filing a grievance under the terms of the collective bargaining agreement and losing in arbitration, he filed a complaint with the EEOC. The EEOC agreed with the arbitrator, ruling against the employee. The plaintiff persisted by filing a claim in federal district court under Title VII, a law specifically designed to root out discrimination in the workplace. The district court, and then the appellate court, held the plaintiff had no right to sue under Title VII because he was bound by the arbitrator’s finding.

Question Before The Court: Whether an employee has the right to pursue statutory claims in federal court irrespective of a requirement to arbitrate, and whether arbitration is an appropriate forum for resolving statutory claims.

The Opinion: The Supreme Court found for the worker, holding that the federal policy favoring arbitration does not establish that an arbitrator’s resolution of a contractual claim is dispositive of a statutory claim under Title VII. Thus, an employee’s statutory right to a new trial under Title VII of the Civil Rights Act of 1964 is not foreclosed by prior submission of his claim to final arbitration under the non-discrimination clause of a collective bargaining agreement (CBA). Identifying that “federal courts have been assigned plenary powers to secure compliance with Title VII,” and contrasting those judicial powers with the powers of the EEOC, the Court noted, “There is no suggestion in the statutory scheme that a prior arbitral decision either forecloses an individual’s right to sue or divests federal courts of jurisdiction.”

The Court explained, “Title VII’s purpose and procedures strongly suggest[s] that an individual does not forfeit his private cause of action if he first pursues his grievance to final arbitration . . . In submitting his grievance to arbitration, an employee seeks to vindicate his contractual right under a CBA. By contrast, in filing a lawsuit under Title VII, an employee asserts independent statutory rights accorded by Congress. The distinctly separate nature of these contractual and statutory rights is not vitiated merely because both were violated as a result of the same factual occurrence. . .. [W]e think it clear there can be no prospective waiver of an employee’s rights under Title VII. . .. The private right of action remains an essential means of obtaining judicial enforcement of Title VII. In such cases, the private litigant not only redresses his own injury but also vindicates the important congressional policy against discriminatory employment practices.”

The Court’s opinion also spoke directly to whether a claim is actually “arbitrable” in the sense that the arbitrator is capable of fairly rendering a decision based on the law, when it provided, “The factfinding process in arbitration usually is not equivalent to judicial factfinding. The record of arbitral proceedings is not as complete; the usual rules of evidence do not apply; and rights and procedures common to civil trial, such as discovery . . . and compulsory testimony under oath, are often severely limited or unavailable. . .. It is the informality of arbitral procedure that enables it to function as an efficient, inexpensive, and expeditious means for dispute resolution. This same characteristic, however, makes arbitration a less appropriate forum for final resolution of Title VII issues than the federal courts.”

Unfortunately, this holding was diluted by a massive shift in the Court’s application of the FAA over the next decade. The Court later used its 1980’s jurisprudence to overturn it completely in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991).

Relevant Facts: A group of unionized truck drivers sued a trucking company for wage theft under the Fair Labor Standards Act (FLSA). The truckers began by filing a grievance per their collective bargaining agreement, which was rejected without explanation. The truckers then filed a claim in federal district court under the FLSA, which the court rejected. The Court of Appeals affirmed, concluding that the petitioners’ submission to arbitration barred them from asserting an FLSA claim in court.

Question Before The Court: Whether an employee may pursue both contractual and statutory rights claims through arbitral or judicial proceedings.

The Opinion: The Court held that FLSA claims are not barred by prior submission to contractual dispute resolution procedures like arbitration. Noting that FLSA rights arise out of a statute to be considered separate from contractual rights, the Court provided, “Not all disputes between an employee and his employer are suited for binding resolution in accordance with the procedures established by [contract]. While courts should defer to an arbitral decision where the employee’s claim is based on rights arising out of [an arbitration] agreement, different considerations apply where the employee’s claim is based on rights arising out of a statute designed to provide minimum substantive guarantees to individual workers. . .. Even though a particular arbitrator may be competent to interpret and apply statutory law, he may not have the contractual authority to do so…. Because an arbitrator is required to effectuate the intent of the parties, rather to enforce the statute [here, FLSA], he may issue a ruling that is inimical to the public policies underlying the FLSA, thus depriving an employee of protected statutory rights.”

Relevant Facts: A group of franchisees came together as a class and sued Southland Corp., a franchisor of 7-Eleven convenience stores, in state court alleging fraud, misrepresentation, breach of contract, and violations of state franchise disclosure laws. Southland sought to compel arbitration based on an arbitration clause embedded in its franchise agreement, and was successful on all but the state franchise law claims. The state appellate court reversed in part, holding that disallowing the claims to proceed in arbitration would be in direct conflict with the FAA. The state supreme court disagreed with the appeals court and reversed, holding that the state laws at issue specifically required judicial enforcement and refusal to compel arbitration on those claims did not conflict with the FAA.

Question Before The Court: Whether a state franchise statute conflicted with the FAA to the extent that it was preempted under the Supremacy Clause of the United States Constitution, and whether state courts have the requisite subject matter jurisdiction to grant motions to compel arbitration.

The Opinion: The Court reviewed this case, in part, to resolve a divide between enforcement of the arbitration clauses in state versus federal courts. The Court held that “[i]n enacting Section 2 of the FAA, Congress declared a national federal policy favoring arbitration and withdrew the power of states to require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration. . . . the purpose of the Act was to assure those who desired arbitration and whose contract related to interstate commerce that their expectations would not be undermined by federal judges.” The Court’s views here were based on the supposition that parties to a contract were sophisticated businessmen that had thoughtfully negotiated all the terms of their contract. It was on that premise that the Court determined Congress’ intent in passing the FAA was to “place arbitration agreements upon the same footing as other contracts.”

The Court declared that “Congress has mandated the enforcement of arbitration agreements,” and there are “only two limitations on the enforceability of arbitration provisions governed by the FAA: they must be part of a written maritime contract or contract ‘evidencing a transaction in commerce,’ and such clauses may be revoked [under the Section 2 “savings clause”] upon ‘such grounds as exist at law or in equity for the revocation of any contract.’” The majority found that the savings clause did not apply in this case because that clause is limited in its application only to “any general contract defense” that would serve to revoke all contracts anywhere (like fraud or undue influence). The savings clause does not include contract defenses that are only available under a particular state’s law. The Court expressed concern that upholding the state supreme court’s interpretation of the law would encourage and reward forum-shopping, and held that the state’s franchise disclosure law was preempted by the FAA under the Supremacy Clause.

The Court reasoned that “[s]ince the overwhelming proportion of civil litigation in this country is in the state courts, Congress could not have intended to limit the [FAA] to disputes subject only to federal court jurisdiction.” The Court also held that state courts, in order to give the FAA its full effect, do have the requisite jurisdiction to grant Motions to Compel Arbitration under Section 4 of the FAA, and must do so unless the savings clause in Section 2 applies. This unprecedented ruling opened the door to all kinds of statutory claims being forced into arbitration. As Justice Stevens observed in his dissent, “the FAA was never meant to encroach upon individual states.” Yet, because the majority was “unwilling to attribute to Congress the intent . . . to create a right to enforce an arbitration contract and yet make the right dependent for its enforcement on the particular forum in which it is asserted” the effect of this ruling was to require state court judges to enforce arbitration clauses under the FAA at the expense their own state’s employee and consumer protections.

Relevant Facts: A retired dentist invested his life savings in the stock market, only to lose the majority of his money. He subsequently sued the investment company in federal court, alleging violations of the Securities Exchange Act (SEA) and various state statutes. The investment company responded by moving to compel arbitration of the state law claims based on an arbitration clause in the preprinted ‘Customer’s Agreement’. They also moved to stay that arbitration pending the resolution of the non-arbitrable SEA allegations. The district court denied the motion, and the Court of Appeals affirmed.

Question Before The Court: Whether, when a complaint raises both federal and state claims, a federal district court may deny a motion to compel arbitration of the state law claims despite the parties’ agreement to arbitrate their disputes; and whether district courts should decide arbitrable pendant claims when a non-arbitrable federal claim is before them due to the possible collateral estoppel effect that may arise in a subsequent federal proceeding were an arbitration of the pendant claims to occur.

The Opinion: In deciding this case, the Court resolved a circuit split on the issue of how to apply the process of compelling arbitration as described in Sections 3 and 4 of the Federal Arbitration Act (FAA). Prior to this case, when faced with the question, some circuits applied the doctrine of intertwining, which provided that where “arbitrable and non-arbitrable claims arise out of the same transaction, and are sufficiently intertwined factually and legally, the District [court] may deny arbitration.” Other circuits held that “the FAA divests the District courts of any discretion regarding arbitration in cases containing both arbitrable and non-arbitrable claims, and instead requires that the court compel arbitration of arbitrable claims when asked to do so.”

In this case, the Supreme Court chose the latter interpretation holding that “even where the result would be the possible inefficient maintenance of separate proceedings in different forums . . . [b]y its terms, the [FAA] leaves no place for the exercise of discretion by a District court, but instead mandates that District courts shall direct the parties to proceed to arbitrate on issues as to which an arbitration agreement has been signed.” The Court reiterated “the preeminent concern of Congress in passing the Act was to enforce private agreements unto which parties had entered, and that concern requires that we rigorously enforce agreements to arbitrate, even if the result is piecemeal litigation, at least absent a countervailing policy manifested in another federal statute. By compelling arbitration of state law claims, a district court successfully protects the contracts of the parties and their rights under the FAA.”

Despite ruling that courts must order arbitration of pendant state claims bound to non-arbitrable federal actions, Justice Thurgood Marshall, writing for the majority, made a point of observing that “arbitration cannot provide an adequate substitute for a judicial proceeding in protecting the federal statutory and constitutional rights that Section 1983 [of the Civil Rights Act] is designed to safeguard.”

Prior to this case, the Supreme Court had never ruled that state law claims were arbitrable under the FAA. With this decision, federal district courts have no discretion to refuse to compel arbitration of state statutory claims if they are deemed to fall within the scope of actions covered within a broadly-written arbitration clause, even if it is presented in a consumer contract of adhesion between an individual and large corporation. By forcing arbitration “on issues as to which an arbitration agreement has been signed,” the Court opened the door for all types of statutory claims to be deemed de facto arbitrable – a move they fully committed to in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614 (1985), a case they heard oral arguments for just two weeks after issuing the opinion in this case.

Relevant Facts: An auto dealership sued Mitsubishi Motors under the Sherman Act, a federal anti-trust law. Mitsubishi moved to compel arbitration under an arbitration clause in the contract. Neither party disputed that the arbitration agreement was valid, but the question of arbitrability arose as the contract also contained a choice-of-law clause, providing that the arbitration would occur in Japan. The dealership argued, among other things, that because the Sherman Act is designed to protect businesses like theirs, the federal anti-trust act required a court, not an arbitrator, to enforce it. As such, the dealership argued that Sherman Act claims were non-arbitrable.

Question Before The Court: Whether claims alleging violations of federal statutes are “arbitrable” under the Federal Arbitration Act.

The Opinion: In a monumental decision, the Court held for the first time that federal statutory claims may be compelled into arbitration, despite the fact that arbitrators hold only the power to enforce contracts, not the law at large. The Court asserted, “The ‘liberal federal policy favoring arbitration agreements’ manifested by [the FAA] is at bottom a policy guaranteeing the enforcement of private contractual arrangements. . . We find no warrant in the Arbitration Act for implying in every contract within its ken a presumption against statutory claims. . . There is no reason to depart from these guidelines where a party bound by an arbitration agreement raises claims founded on statutory claims.” The Court declared that the FAA establishes and regulates a duty to honor an arbitration provision, and requires courts to rigorously enforce them.

“By agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits their resolution in an arbitral, rather than a judicial forum. It trades the procedures and opportunity for review of the courtroom for the simplicity, informality, and expedition of arbitration,” the Court continued. “We must assume that if Congress intended the substantive protection afforded by a given statute to include protection against waiver of the right to a judicial forum, that intention will be deducible from a text or legislative history.” The Court showed little concern for the potential obstacles to civil law enforcement an arbitral forum might present. “[This Court has] established a strong presumption in favor of enforcement of freely negotiated contractual choice-of-forum provisions…. that presumption is reinforced by the emphatic federal policy in favor of arbitral dispute resolution.”

The Court ruled, “Potential complexity should not suffice to ward off arbitration. . . so long as the prospective litigant effectively may vindicate its statutory cause of action in the arbitral forum, the statute will continue to serve both its remedial and deterrent function.” The Court allowed that a “party resisting arbitration may attack directly the validity of the agreement to arbitrate . . . the party may attempt to make a showing that would warrant setting aside the forum-selection clause – that the agreement was affected by fraud, undue influence, or overweening bargaining power, that enforcement would be unreasonable and unjust, or that proceedings in the contractual forum will be so gravely difficult and inconvenient that the resisting party will for all practical purposes be deprived of his day in court. But, absent such a showing . . . there is no basis for assuming the forum inadequate or its selection unfair.”

Finally, according to the Court, parties need not specify by name which statutory claims are covered by the arbitration clause. In the Court’s view, nonspecific broadly-written forced arbitration clauses can be read to capture all federal statutory claims, unless otherwise specified by the parties or the legislature. To appropriately determine the arbitrability of a federal statutory claim requires a two-step inquiry: first, ascertain whether the parties’ agreement to arbitrate reached the statutory issue; then, upon finding it did, consider whether legal constraints external to the parties’ agreement foreclosed arbitration of those claims. However, in applying this two-step analysis when an arbitration clause potentially conflicts with a federal statute, “it is the Congressional intention expressed in some other statute [and not the FAA] on which courts must rely to identify any category of claims as to which agreements to arbitrate will be held unenforceable.”

With this decision, all statutory claims – federal and state – are now presumed arbitrable, with a high bar established for challenging arbitration of any statutory claims. Practically speaking, once this decision came down, big, powerful companies started drafting contracts of adhesion that included extremely broad language requiring “all claims” against them to be resolved solely in binding arbitration—a move that allows them to avoid airing nearly all consumer and employee grievances in a public forum.

Expressing strong disagreement, Justice Stevens penned a full-throated dissent, warning against requiring people to trade important judicial elements in exchange for “informality.” Finding that the majority’s holding was “premised on the assumption that arbitral processes are commensurate with judicial processes and that Congress impliedly intended federal courts to defer to arbitral decision on Title VII issues,” the dissent, “deem[ed] this supposition unlikely.” Cautioning that forced arbitration could lead to the inconsistent application of important public rights, Justice Stevens explained the important distinctions between the informal procedures in arbitration and the need, in certain cases, to develop a formal record and provide essential judicial review. He expressed particular concern regarding arbitration’s lax approach to building the record, fact-finding, discovery, admission of testimony, and cross-examination—all essential adjudicatory functions that are only guaranteed to those seeking justice by a public court. Regrettably, these arguments fell on deaf ears, and the destruction to our judicial system foreseen by the dissent has since largely come to pass.

Relevant Facts: In order to open retirement accounts with a brokerage firm, a couple signed preprinted customer agreements that contained arbitration clauses among the fine print. The customers subsequently filed RICO, securities fraud, and federal anti-trust claims in federal district court against the firm. The company moved to compel arbitration and succeeded in all but the RICO claims. Relying on the Supreme Court’s precedent in Wilko, the appeals court ruled that in addition to the RICO claim, the fraud claims based on the Securities Act were “not subject to compulsory arbitration.”

Question Before The Court: Whether arbitration clauses in consumer contracts of adhesion are enforceable when the underlying claim is based on a federal statute, and what burden must be met by the party challenging the arbitrability of the federal statutory claim.

The Opinion: The Court ruled that RICO and anti-trust claims could be forced into arbitration, regardless of the fact that the arbitration clause was presented in a pre-printed form by the party with superior bargaining power. In so doing, the Court hollowed out its Wilko decision. The Wilko court, in finding claims under the Securities and Exchange Act (SEA) were non-arbitrable, expressed concerns about the ability for appropriate fact-finding in such complex cases, or in those requiring “subjective findings on the purpose and knowledge of the alleged violator.” Moreover, the Wilko court acknowledged that an arbitrator is tasked with enforcing the terms of a contract, not enforcing the law, and that arbitrators must make legal determinations “without judicial instruction of the law.” The Wilko Court expressed reservations about the risk of harm that could arise due to the fact that arbitrators could make grave errors in applying the law, but their decisions “are not subject, in the federal courts, to judicial review.” In a stunning display of hubris, the Shearson Court swatted down those concerns by citing its own extremely recent rulings in Mitsubishi Motors, Dean Witter Reynolds, and Moses Cone, providing, “It is difficult to reconcile Wilko’s mistrust of the arbitral process with this Court’s subsequent decisions involving the Arbitration Act. . .. Most of the reasons given in Wilko have been rejected by the Court as a basis for holding claims to be non-arbitrable.”

The Court went on to provide, “Th[e] duty to enforce arbitration agreements is not diminished when a party bound by an agreement raises a claim founded on statutory rights. . . . The [FAA], standing alone, therefore mandates enforcement of agreements to arbitrate statutory claims. Like any statutory directive, the [FAA’s] mandate may be overridden by contrary congressional command. The burden is on the party opposing arbitration, however, to show that Congress intended to preclude waiver of judicial remedies for the statutory rights at issue. If Congress did intend to limit or prohibit waiver of a judicial forum for a particular claim, such an intent will be deducible from the statute’s text or legislative history, or from inherent conflict between arbitration and the statute’s underlying purposes.”

The Court showed its bar for satisfying this threshold would be quite high. The text of the SEA expressly provides, “The district courts of the United States. . . shall have exclusive jurisdiction of violations of this title or the rules and regulations thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by this title or the rules and regulations thereunder.” Despite that, the Court decided arbitration was an adequate substitute for a judicial forum and upheld the forced arbitration clause in the consumer contract.

When considering the Court’s “contrary congressional command” standard to statutes passed prior to the 1980’s, it is worth noting how highly unlikely it is that Congress would have documented their thoughts on arbitration in the legislative record. At that time the very notion that substantive statutory rights enacted by the legislature to protect consumers and employees could be shuffled out of a judicial forum because of some corporate fine print would likely have been unimaginable to them. Still, the Court’s decision here requires individuals seeking to enforce their statutory rights in a public court provide non-existent evidence of the congressional intent—a requirement that has undoubtedly stymied the enforcement of civil rights, consumer, and workplace protections. To make matters worse, the standard for overriding the FAA with another federal statute articulated here was further narrowed in CompuCredit Corp. v. Greenwood, 132 S. Ct. 665 (2012). In CompuCredit, the Court required parties demonstrate the legislative intent to exclude arbitration. Proof of this intent must be “explicit and particularized,” not merely “discernable from the text, history, or purposes of the statute,” as required here.

Relevant Facts: Customers of an investor firm sued for fraud under the Securities Act, inter alia, but were compelled into arbitration under an adhesive pre-printed “customer agreement” that contained an arbitration clause. Relying on Wilko, the district court ordered all but the Securities Act claim into arbitration. The appeals court reversed, in part, concluding that the Supreme Court’s subsequent rulings on the FAA had rendered its holding in Wilko obsolete.

Question Before The Court: Whether complex federal statutory claims may be compelled into arbitration, and what burden a party opposing arbitration must meet to successfully overcome a motion to compel arbitration when they are arguing a competing federal statute renders that claim nonarbitrable.

The Opinion: The Court agreed with the appellate court and fully overturned Wilko, holding that pre-dispute agreements to arbitrate claims under the Securities Act of 1933 are enforceable, and such claims are not required to be resolved exclusively in a judicial forum. In Wilko, the Court rejected the argument that “arbitration is merely a form of trial to be used in lieu of a trial at law.” Here, the Court provided that “to the extent that Wilko rested on suspicion of arbitration as a method of weakening the protections afforded in the substantive law to would-be complainants, it has fallen far out of step with our current strong endorsement of the federal statutes favoring this method of resolving disputes.

The Court found that Wilko was “incorrectly decided and inconsistent with the prevailing uniform construction of other federal statutes governing arbitration agreements in the setting of business transactions.” According to the Court, the FAA places the burden of proving congressional intent to waive judicial remedies on the party opposing arbitration; the party opposing arbitration carries the burden of showing that Congress intended in a separate statute to preclude a waiver of judicial remedies, or that such a waiver of judicial remedies inherently conflicts with the underlying purposes of that other statute. That burden was not met in this case. The Court brushed off the petitioners’ argument that the contracts in question were adhesive in nature, simply providing that “no factual showing” supported the suggestion.

In holding that a pre-dispute agreement to arbitrate federal securities disputes is enforceable, and that resolution of the complex claims in a judicial forum is not required, the Court established a new principle of law which it asserted “furthers the purpose and effect of the Arbitration Act without undermining those” of other federal statutes, and which “does not produce substantial inequitable results.” To support its position, the Court declared that “resort to arbitration does not inherently undermine any of petitioner’s substantive rights under [a statute].”

This case demonstrates the Court’s new willingness to sequester almost any type of federal statutory claim, regardless of its complexity, into arbitration, as well as their intolerance of objections by individuals roped into these agreements through contracts of adhesion.

Relevant Facts: A stockbroker brought suit in federal court alleging his employer had discriminated against him in violation of the Age Discrimination in Employment Act (ADEA). The NYSE representative application he was legally required to sign in order to work as a broker included an arbitration clause covering employment disputes. The employer moved to compel arbitration under the FAA, and was denied. The district court, relying on Alexander v. Gardner-Denver, concluded Congress intended to protect ADEA claimants from waiver of the judicial forum. The Court of Appeals reversed.

Question Before The Court: Whether forced arbitration clauses in employment contracts that prevent workers from bringing statutory claims against an employer in a judicial forum are enforceable.

The Opinion: The Court placed the burden on the worker alleging discrimination to show that Congress intended to protect his right to go to court against his more-powerful employer. The employee raised many arguments against the appropriateness of arbitration procedures in ADEA cases. The plaintiff began by arguing that compulsory arbitration is improper as it deprives claimants of the judicial forum provided for by the ADEA. Further, the plaintiff argued, the ADEA is not just about individual claims, but also furthers important social policies. The Court was unconvinced, providing, “Congress did not explicitly preclude arbitration or other non-judicial resolution of claims. . . . We do not perceive any inherent inconsistency between [the ADEA’s important social] policies, however, and enforcing agreements to arbitrate age discrimination claims.”

While the plaintiff’s expressed concerns that the arbitrator could be biased in favor of the employer, the Court explained, “We don’t presume parties and the arbitral body will be unable to retain competent and impartial arbitrators.” The Court argued that because the arbitration clause in this particular case provided the employee one preemptory challenge and specified that the NYSE arbitration rules would be utilized, the employee retained adequate protections against bias. The employee also argued that because discovery is more limited in arbitration than federal court, it may become too difficult to prove an ADEA claim in arbitration. The Court observed that age discrimination claims likely require no more discovery than complex RICO or anti-trust claims, which the Court had recently held to be arbitrable. The plaintiff highlighted that the lack of written opinions and public scrutiny of arbitrators’ decisions would stifle important developments in ADEA case law, to which the Court responded that other ADEA cases will come along and those future cases will be public and contribute to that body of law.

Lastly, the worker objected to the enforceability of this forced arbitration clause on the grounds that the contract was a product of unequal bargaining power between an employee and employer. The Court was unmoved, providing that “mere inequity in bargaining power . . . is not sufficient reason to hold arbitration agreements are never enforceable in the employment context.”

The Court ignored that its own jurisprudence, and not any action of Congress, expanded the jurisdictional reach of the FAA to the states. The majority contended that “concurrent state and federal jurisdiction . . . indicates Congress’ desire to ‘allow claimants a broader right to select the forum for resolving disputes.” The Court ruled that employees could be compelled to arbitrate ADEA claims, asserting, “It is by now clear that statutory claims may be the subject of an arbitration agreement, enforceable pursuant to the FAA. . .. Although all statutory claims may not be appropriate for arbitration, having made the bargain to arbitrate, the party should be held to it unless Congress itself has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue.”

Relevant Facts: After completing a form job application, a man was hired to work the grill at his local Waffle House. Weeks into his new job, the man suffered a seizure at work, and was fired shortly thereafter. The man filed a charge of discrimination with the Equal Employment Opportunity Commission (EEOC) alleging the discharge violated the Americans with Disabilities Act (ADA). The EEOC then filed an enforcement action in federal district court seeking injunctive relief, damages to make the employee whole, and punitive damages. Waffle House sought to compel arbitration based on a forced arbitration provision in the job application. The district court denied the motion, finding that despite the presence of the provision in the application, there was no agreement to arbitrate in the actual employment contract. The appeals court reversed in part, finding a valid arbitration agreement did exist that precluded victim-specific relief, but since the EEOC was not a party to that agreement it was not precluded from bringing the enforcement action.

Question Before The Court: Whether an arbitration clause between an employer and employee bars the EEOC from pursuing victim-specific relief in an enforcement action.

The Opinion: In addressing the question presented, the Court reviewed the legislative history of Title VII, noting that when Congress originally passed the statute it limited the EEOC’s power to that of an investigative body. However, in 1972, Congress specifically amended the Act to authorize the EEOC to bring its own enforcement actions. It also authorized courts to order victim-specific relief, such as back pay, and to enjoin employers from engaging in unlawful employment practices. While the amendments specified the judicial districts where such actions could be brought, they made no mention of arbitration proceedings. In 1991, the legislature again amended Title VII, allowing courts to award punitive damages. Based on these facts, the Court concluded that “these statutes unambiguously authorize the EEOC to obtain the relief that it seeks in its complaint if it can prove its case against respondent.”

The Court held that, although the employee could be compelled to arbitrate claims he brought on his own behalf, there is no mechanism to preclude the EEOC’s power to investigate the employees’ charges of discrimination, or to obtain the remedies it sought. By law, the “EEOC holds its own independent statutory responsibility to investigate and conciliate claims.” In a prior case, General Telephone Co. of Northwest v. EEOC, 446 U.S. 318 (1980), the Court provided that “the EEOC is not merely a proxy for the victims of discrimination and that its enforcement suits should not be considered representative actions.” The Court noted that under Title VII, once a charge is filed, the EEOC has exclusive jurisdiction over the claim for 180 days: “The statute clearly makes the EEOC the master of its own case and confers on the agency the authority to evaluate the strength of the public interest at stake.”

Although this nation does have a “liberal federal policy favoring arbitration,” the Court explained, “nothing in the [FAA] authorizes a court to compel arbitration of any issues, or by any parties, that are not already covered in the agreement. The FAA does not mention enforcement by public agencies; it ensures the enforceability of private agreements to arbitrate, but otherwise does not purport to place any restriction on a nonparty’s choice of judicial forum.” Certainly, the Court asserted, “a court [is not permitted] to announce a categorical rule precluding an expressly authorized form of relief as inappropriate in all cases in which the employee has signed an arbitration agreement.”

Finding that “the compromise solution reached by the Court of Appeals turns what is effectively a forum selection clause into [an impermissible] waiver of a nonparty’s statutory remedies,” the Court reversed. The court emphasized that “a contract cannot bind a nonparty. Accordingly, the pro-arbitration goals of the FAA do not require the agency to relinquish its statutory authority if it has not agreed to do so.” When a party is not bound, a court must proceed without regard to the federal policy favoring arbitration.

Relevant Facts: A credit card company marketed their credit cards as a way to repair damaged credit, but then charged consumers $257 in fees on a $300 borrowing limit. A group of consumers applied for and received the card without realizing they would be receiving a nearly maxed out card. They sued the credit card issuer and a related bank in federal court under the federal Credit Repair Organizations Act (CROA). The companies moved to compel arbitration under the arbitration clause that they had inserted into the fine print of their form credit card application. A federal district court denied the motion, determining that the CROA claims were designed by Congress to be nonarbitrable. The appellate court affirmed.

Question Before The Court: Whether federal statutory claims are arbitrable when the federal statutes on which the claims are based may present a conflict with the FAA.

The Opinion: Citing Shearson/American Express v. McMahon, the Court ruled that the FAA requires courts to enforce arbitration agreements according to their terms, even when federal statutory claims are at issue, unless the FAA’s mandate has been overridden by a “contrary congressional command.” Adding to the McMahon rule, the Court determined that such a command must be explicit, not implied.

The Court examined the federal legislation to determine if it conflicted with the FAA. Although the law at issue here specifically required lenders to notify consumers that they had a right to sue, the Court held that was not sufficient evidence to find that Congress intended a judicial forum to be available to all consumers seeking to enforce their rights under that law. According to the Court, the CROA created the right for consumers to receive the notice, but Congress meant that requirement to serve as “a colloquial method of communicating to consumers that they have the legal right, enforceable in court, to recover damages from credit repair organizations that violate the CROA,” and that “most consumers would understand it this way, without regard to whether the suit in court has to be preceded by an arbitration proceeding.”

The Court determined that “if a cause-of-action provision mentioning judicial enforcement does not create a right to initial judicial enforcement, the waiver of initial judicial enforcement is not the waiver of a ‘right of the [consumer].’” In other words, providing that a person has a right to sue is not enough in the Court’s view to ensure a judicial forum is available as the right to sue doesn’t really mean the right to sue in court; it just means the right to adjudicate in some forum.

It cannot be repeated enough—practically speaking, it is implausible and impracticable to expect Congress, in passing every piece of legislation, to think to include a line about arbitration. Yet, under the Court’s ruling here, if the legislative text does not either affirmatively express the judicial forum as the exclusive forum or specifically exclude the arbitral forum, where possible, courts will interpret the language as merely “the guarantee of the legal power to impose liability” in some forum, which can include arbitration.

Relevant Facts: A group of small business owners banded together in a federal class action to allege anti-trust violations in the excessive fees American Express charged for business credit cards. However, since the consumer contracts each contained a forced arbitration clause including a class action ban, American Express moved to compel individual arbitration. In response, the consumers argued that the arbitration clause was unenforceable because the cost of the expert analysis required to prove their antitrust claims would greatly exceed the maximum recovery for an individual plaintiff, leaving them with no way to effectively vindicate their rights. The federal district court ruled in favor of American Express and ordered individual arbitration, effectively breaking up the class. The appeals court reversed, holding that the prohibitive costs the plaintiffs would face if they had to arbitrate individually would leave them with no realistic way to move forward with their claims, and the class action waiver was unenforceable.

Question Before The Court: Whether class action bans in forced arbitration clauses are enforceable when proceeding in individual arbitration would be cost-prohibitive.

The Opinion: The Court held that the FAA does not permit courts to invalidate a contractual waiver of class arbitration on the ground that the plaintiff’s cost of individual arbitration of a federal statutory claim may exceed the potential recovery. Although the business owners’ argument centered on their inability to hold American Express accountable for widespread lawbreaking if their class was broken, the law enforcement elements of the case were largely ignored by the Court. The majority paid lip service to its “contrary congressional command” test but failed to analyze under the steps of that rule. Instead of looking to the purpose of the competing federal statutes and trying to reconcile any identifiable conflicts, the Court briefly looked to the permissiveness of class arbitration before refocusing on and basing its holding on the economic argument.

Justice Antonin Scalia, writing for the majority, upheld the class bans, asserting that parties need only have a path to enforce their rights under a statute, but that plaintiffs are “not guarantee[d] an affordable procedural path to the vindication of every claim.” The Court explained, “the FAA’s command to enforce arbitration agreements trumps any interest in ensuring the prosecution of low-value claims. The latter interest . . . is unrelated to the FAA. Accordingly, the FAA [favors] the absence of litigation when that is the consequence of a class-action waiver, since its principle purpose is the enforcement of arbitration agreements according to their terms.” It is hard for an objective reader to interpret this assertion as anything other than an invitation for widespread claim suppression.

In addressing the consequence of their holding on the plaintiff’s ability to obtain relief, the Court surmised that “[t]he ‘effective vindication doctrine’ comes from a desire to prevent ‘prospective waiver of a party’s right to pursue statutory remedies’, but the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy.”

The Court seems to take painstaking effort to frame this as merely about a number of small-dollar claims, rather than about a large group of people trying to come together to hold a major corporation accountable for widespread fraud under federal antitrust law. Thanks to the Court’s contortionist exercise here, corporations now routinely suppress all consumer claims for willful violations of the law by inserting arbitration clauses containing class action bans into their legal boilerplate. This de facto corporate immunity springs from the fact that no sane person is going to spend thousands of dollars to pursue a claim in individual arbitration to recover an award worth substantially less than the legal fees required to do so.

Justice Kagan spoke directly to this problem in her dissent: “The monopolist gets to use its monopoly power to insist on a contract effectively depriving its victims of all legal recourse. . . Throughout, the majority disregards our decisions’ central tenant: An arbitration clause may not thwart federal law, irrespective of exactly how it does so.” Many companies, seeing the writing on the wall, took the power to grant themselves legal impunity through their own fine print a step further and started including class bans in their employment contracts. Doing so allowed employers to silence, en masse, any workers who experienced employer wrongdoing on the job or who sought to band together to improve working conditions—a tactic the Court legitimized four years later in Epic Systems v. Lewis.