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Ninth Circuit Says Even Generally Applicable Contract Defenses are Displaced by the FAA if they have a Disproportionate Effect on Arbitration

By Bryan C. Graff

As a matter of federal and Washington state law, agreements to arbitrate are deemed valid, enforceable, and irrevocable except upon grounds justifying the revocation of any contract. While generally-applicable contract defenses such as fraud, duress, or unconscionability have traditionally applied equally to arbitration agreements, courts cannot refuse to enforce arbitration agreements under state laws or policies that apply only to arbitration or that “rely on the uniqueness of an agreement to arbitrate.”

On Monday, July 15, 2013, the Ninth Circuit weakened even those generally applicable contract defenses, as applied to agreements to arbitrate. In Mortensen v. Bresnan Commn’cs, LLC, the court broadly interpreted the U.S. Supreme Court’s holding in Concepcion to mean that “[a]ny general state-law contract defense, based in unconscionability or otherwise, that has a disproportionate effect on arbitration is displaced by the [Federal Arbitration Act (“FAA”)].” Under Mortensen, even generally applicable state-law rules are preempted by the FAA if, in practice, they have a “disproportionate impact” on arbitration.

The court acknowledged its interpretation of Concepcion arguably goes beyond the initial purpose of the FAA, “which was to eliminate judicial hostility toward arbitration and place arbitration provisions on the ‘same footing’ as all other contractual provisions.” The court said that, in its view, however, “Concepcion crystalized the directive … that the FAA’s purpose is to give preference (instead of mere equality) to arbitration provisions.”

 

Bryan C. Graff is an attorney in Ryan, Swanson & Cleveland, PLLC’s Litigation Group. Bryan can be reached at 206.654.2278 or graff@ryanlaw.com.

This message has been released by the Litigation Group at Ryan, Swanson & Cleveland, PLLC to advise of recent developments in the law. Because each situation is different, this information is intended for general information purposes only and is not intended to provide legal advice on any specific facts and circumstances. Ryan, Swanson & Cleveland, PLLC is a full-service law firm located in Seattle, Washington.


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