Earlier this month, the U.S. Court of Appeals for the Ninth Circuit held that the Federal Arbitration Act preempts a Montana rule of law that invalidated take-it-or-leave-it form contracts that deviated from the “reasonable expectations” of the parties. In Mortenson v. Bresnan Communications, LLC, the court reversed a district court decision refusing to enforce a predispute arbitration agreement found in an internet service provider’s form contact. Relying on the Supreme Court’s 2011 ruling in AT&T Mobility v. Concepcion, the 9th Circuit held:
“We interpret Concepcion’s holding to be broader than a restriction on the use of unconscionability to end-run FAA preemption. We take Concepcion to mean what its plain language says: Any general state-law contract defense, based in unconscionability or otherwise, that has a disproportionate effect on arbitration is displaced by the FAA.”
The court also drew support from the Supreme Court’s decision in Marmet Health Care v. Clayton Brown, another strong FAA preemption decision from the Supreme Court. There the Court stated:
“As this Court reaffirmed last Term, ‘[w]hen state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.” AT&T Mobility LLC v. Concepcion,563 U.S.,(2011) (slip op., at 6–7). That rule resolves these cases. West Virginia’s prohibition against predispute agreements to arbitrate personal-injury or wrongful-death claims against nursing homes is a categorical rule prohibiting arbitration of a particular type of claim, and that rule is contrary to the terms and coverage of the FAA.”
This case is interesting on a few levels. First, the previously anti-arbitration 9th Circuit seems to have gotten the FAA preemption memo from the Supreme Court. In fact, it has expanded the reach of Concepcion to preempt state laws — statutes or court decisions — that disproportionately impact arbitration agreements. Second, it appears that Montana — which gave us the 1996 Doctor’s Associates Supreme Court decision — seems still not to get it with regards to preemption. Perhaps the Mortenson decision will deliver the message: the FAA preemption of state laws war is over.
