Supreme Court Rebukes Oklahoma Supreme Court For Failing To Enforce Arbitration Agreement

In Nitro Lift-Technologies, L.L.C. v. Howard, 568 U.S. ____, 2012 WL 5895686 (Nov. 26, 2012), the Supreme Court recently took the unusual step of summarily vacating a state court decision that did not enforce an arbitration clause. In doing so, it confirmed in strong language its recent decisions favoring the enforcement of agreements to resolve disputes through arbitration. The Court's decision can be seen as an instruction to lower courts that arbitration agreements and awards should be enforced expeditiously according to their terms, without exceptions based on state law.

Background

A company called Nitro-Lift Technologies employed Eddie Lee Howard to work on oil and gas wells in the Southwest. His employment agreement included confidentiality and non-competition provisions, as well as an arbitration clause. Howard quit and began working for a competitor. Nitro-Lift claimed that Howard had breached the non-competition provision and demanded an arbitration. Howard filed suit in Oklahoma state court for declaratory and injunctive relief, arguing that the non-competition provision was unenforceable under Oklahoma statutes.

The Oklahoma state trial court dismissed the lawsuit, holding that the dispute must be resolved by arbitration under the arbitration clause. Howard appealed, and the Oklahoma Supreme Court reversed. It held that the non-competition clause was void and unenforceable under Oklahoma law. It further held that the arbitration clause did not prevent courts from reviewing the enforceability of the employment contract under state law. Although the Oklahoma Supreme Court discussed cases under the Federal Arbitration Act (the "FAA"), it also declared that its decision rested on independent Oklahoma state law, thus trying to avoid review by the Supreme Court of the United States. Nevertheless, Nitro-Lift petitioned for certiorari.

The Supreme Court's Decision

On November 26, 2012, in a unanimous per curiam decision, the Supreme Court took the unusual step of simultaneously granting certiorari and vacating the Oklahoma decision without further briefing or oral argument. It held that the Oklahoma Supreme Court had disregarded binding decisions of the Supreme Court of the United States under the FAA favoring arbitration. The Court said "it is a mainstay of the [Federal Arbitration] 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...