Nitro-Lift Technologies, L. L. C. v. Howard
133 S. Ct. 500
| SCOTUS | 2012Background
- Nitro-Lift and two former employees Howard and Schneider entered confidentiality and noncompetition agreements containing an arbitration clause.
- Respondents quit Nitro-Lift and joined a competitor; Nitro-Lift demanded arbitration for the noncompete breaches.
- Oklahoma district court dismissed Nitro-Lift’s complaint; the court treated the arbitration clause as valid and the arbitrator as decision-maker on contract issues.
- Oklahoma Supreme Court held that the underlying contract’s validity could be reviewed by state courts under Oklahoma law, effectively bypassing arbitration for that issue.
- Nitro-Lift urged that FAA governs and that disputes about contract validity should be resolved by the arbitrator first; Buckeye and Prima Paint support arbitrator-first review.
- Supreme Court granted certiorari, vacated the Oklahoma court’s judgment, and remanded for proceedings in line with FAA principles, holding that arbitration decisions on contract validity should proceed first with arbitrator and that state law cannot override FAA limitations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether contract-validity must be decided by arbitrator first | Nitro-Lift: arbitrator decides validity per FAA. | Howard/Okla. Supreme Court: state-law review of contract validity allowed. | Yes; arbitrator first decides contract validity; state court review is foreclosed. |
| Whether FAA preempts Oklahoma’s noncompete review framework | FAA creates national arbitration policy; underlying contract issues go to arbitrator. | Oklahoma law can independently limit noncompete enforceability. | FAA preempts state review of underlying contract; arbitrator decides validity. |
| Whether the arbitration clause is severable from the contract and governs arbitrability | Arbitration clause severable; validity of remainder decided by arbitrator. | State court may review underlying contract. | Arbitration clause severable; arbitrator decides remainder validity. |
Key Cases Cited
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) (arbitrability determined by arbitrator absent defenses to contract itself)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967) (validity of arbitration clause vs contract; arbitrator decides contract validity if clause valid)
- Southland Corp. v. Keating, 465 U.S. 1 (1984) (FAA policy favoring arbitration applies in state and federal courts)
- Preston v. Ferrer, 552 U.S. 346 (2008) (arbitration provision severable; arbitrator decides contract validity first)
- Bruner v. Timberlane Manor Ltd. Partnership, 155 P.3d 16 (Okla. 2006) (state court review of underlying contract despite FAA context)
- AT&T Mobility LLC v. Concepcion, 563 U.S. _ (2011) (FAA preempts state-law hostility to arbitration; promotes arbitration)
- Marmet Health Care Center, Inc. v. Brown, 565 U.S. _ (2012) (conflicts between state laws and FAA resolved in favor of FAA)
- Howell v. Mississippi, 543 U.S. 440 (2005) (per curiam; confirm federal issue can be raised in state court)