Chapter 32 - § 32.2 • STATUTORY OVERVIEW

• Jurisdiction: Colorado

§ 32.2 • STATUTORY OVERVIEW

§ 32.2.1—Federal Arbitration Act

The Federal Arbitration Act (FAA), 9 U.S.C. §§ 1, et seq., generally provides for the enforceability of agreements to arbitrate disputes arising out of contracts or transactions involving interstate commerce. The FAA was first enacted in 1925, and was reenacted and codified in 1947 as Title 9 of the United States Code. The purpose of the FAA was to reverse a "longstanding judicial hostility to arbitration agreements" and to "place arbitration agreements upon the same footing as other contracts." Gilmer, 500 U.S. at 24; see also DIRECTTV, Inc. v. Imburgia, 136 S. Ct. 463, 471 (2015) (reversing judgment of California Court of Appeal, which interpreted contractual language in a manner that "does not place arbitration contracts 'on equal footing with all other contracts'" and "does not give 'due regard . . . to the federal policy favoring arbitration'" (internal citations omitted)).

The primary substantive provision of the FAA is found at § 2 and provides:

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

The U.S. Supreme Court has read this section broadly, extending it to reach to the limits of Congress's Commerce Clause power. Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265 (1995).

Section 3 of the FAA permits a party to stay proceedings in federal district court when it can refer an issue in dispute to arbitration. The stay is required only for "any issue referable to arbitration under an agreement in writing." Section 4 of the FAA enables a party to secure an order "compelling arbitration when one party has failed, neglected, or refused to comply with an arbitration agreement." Gilmer, 500 U.S. at 24-25. These provisions of the FAA, when taken together, demonstrate a strong federal preference in favor of enforcing arbitration agreements. See Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983). A U.S. district court may compel arbitration pursuant to the FAA only when the court would have had jurisdiction over the suit on the underlying dispute. Accordingly, "there must be diversity of citizenship or some other independent basis for federal jurisdiction before the order can issue." Moses, 460 U.S. at 25 n.32.

In addition, a court may compel arbitration under the FAA only where: "(1) a valid agreement to arbitrate exists between the parties; and (2) the specific dispute at issue falls within the scope of that agreement." Cornell v. Harmony Homes, Inc., 2007 U.S. Dist. LEXIS 564, at *7 (D. Colo. Jan. 4, 2007) (citing AT&T Techs., Inc. v. Commc'n Workers of Am., 475 U.S. 643, 651 (1986)); see also Pinkard v. Lozano, 2007 U.S. Dist. LEXIS 86331 (D. Colo. Nov. 16, 2007). Motions to compel arbitration under the FAA are governed by a standard "similar to that governing summary judgment." Cornell, at *1. The moving party must present evidence showing the existence of an enforceable agreement to arbitrate. If the respondent successfully establishes a genuine issue of material fact as to the formation of an agreement to arbitrate, then "a trial on the existence of the arbitration agreement is proper." Id. at *8 (citing 9 U.S.C. § 4 (2006); Avedon Eng'g, Inc. v. Seatex, 126 F.3d 1279, 1283 (10th Cir. 1997)). Under the FAA, state contract law governs the determination of whether an arbitration agreement exists, and ambiguities in the agreement must be construed in favor of arbitration.

With respect to the arbitrability of employment matters, an exception in the FAA for certain employment contracts has been frequently litigated. Specifically, § 1 provides: "[N]othing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce."

The U.S. Supreme Court has limited the scope of the § 1 exception to employment contracts of transportation workers engaged in interstate commerce. 5 Circuit City Stores, Inc. v. Adams, 32 U.S. 105 (2001). The plaintiff in Adams, who had been employed as a sales counselor at a California electronics store, asserted claims for employment discrimination based on the California Fair Employment and Housing Act. The employer sought to compel binding arbitration under § 4 of the FAA based on the dispute resolution provisions set forth in the employee's job application, which required final and binding arbitration for, among other things, all claims "under federal, state and local statutory or common law, such as the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, as amended, including the amendments to the Civil Rights Act of 1991, the Americans With Disabilities Act, the law of contract and the law of tort." 532 U.S. at 111-12. The Ninth Circuit held that the exclusionary language of § 1 of the FAA applied to all contracts of employment, not just those involving employees engaged in interstate commerce or maritime occupations, and therefore the FAA could not be invoked to compel arbitration of the plaintiff's claims. Circuit City Stores, Inc. v. Adams, 194 F.3d 1070, 1071-72 (9th...