Correcting Federalism Mistakes in Statutory Interpretation: The Supreme Court and the Federal Arbitration Act

The current judicial treatment of the Federal Arbitration Act1 (FAA) is an embarrassment to a Court whose majority is supposed to be leading a federalism revival. The Court's 1984 decision in Southland Corp. v. Keating, held that the FAA is substantive federal law that preempts state laws regulating arbitration agreements. The Court thereby transformed a quaint, sixty-year-old procedural statute into "a permanent, unauthorized eviction of state-court power to adjudicate a potentially large class of disputes," as well as an eviction of state lawmaking power over the traditional state domain of contract law. Ignoring contrary congressional intent, the Southland decision is wrong as a matter of black-letter preemption doctrine, and it imposes a very high cost to the federalism values espoused by the Court in its recent federalism jurisprudence. Moreover, there is no significant federal interest at stake in a state's policy choice between opening its courts to litigants or compelling them to arbitrate pursuant to private contracts. The article argues that Southland cannot be justified on alternative theories, such as "dynamic statutory interpretation" or statutory stare decisis, and should be overruled.