Perry v. Thomas

482 U. S. 483

June 15, 1987

Kenneth Morgan Thomas wanted to sue his boss Barclay Perry, but he had already signed an agreement to arbitrate. Undeterred, Thomas claimed that this agreement was invalid under a California law that held such agreements in employment contracts void. Perry responded that this California law conflicted with the Federal Arbitration Act (FAA), which generally mandated that arbitration agreements be honored. Thus, the California law had to give way under the Supremacy Clause.

The Court ruled 7-2 that the FAA did trump the California law. Putting to the side some questions about Perry’s standing, Marshall wrote that the two laws were in plain and fatal conflict. The only strong counterargument was a 1973 case known as Merrill Lynch v. Ware, which had enforced the very same California anti-arbitration statute. Ware, Marshall said, did not consider the effect of the FAA, and only looked at whether the Securities Exchange Act had provided for preemption of state laws on the subject.

Stevens dissented on the basis of his belief that the FAA had not been intended to preempt state laws, and that the Court’s many recent decisions to that effect were erroneous. In a separate dissent, O’Connor agreed with Stevens on this point. She further noted that Congress admittedly had the power to pass laws which created exceptions to the FAA’s general rule. If Congress could do this, then O’Connor felt that states could too.

Much as I dislike anti-arbitration provisions, I am forced to admit that O’Connor and Stevens may be right. Looking at the sparse language of the FAA, it’s anything but clear and unequivocal that states were meant to be barred from all legislation in the arena. Regardless, I can’t help but note the irony of Thomas breaking the arbitration promise he made in a contract in order to hold Perry accountable for allegedly breaking promises made in a contract. “When a man… swears an oath to put himself under an obligation, he must not break his word; he must do whatever he has promised” – Numbers 30:2

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