Source: https://supreme.justia.com/cases/federal/us/513/265/
Timestamp: 2019-04-19 08:55:58+00:00

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ALLIED-BRUCE TERMINIX COS., INC., ET AL. v.
The termite prevention contract between petitioner exterminators and respondent Gwin, a homeowner, specified that any controversy thereunder would be settled exclusively by arbitration. Mter respondents Dobson, who had purchased Gwin's home, sued in state court following a termite infestation, petitioners asked for, but were denied, a stay to allow for arbitration under the contract and § 2 of the Federal Arbitration Act, which makes enforceable a written arbitration provision in "a contract evidencing a transaction involving commerce." The Alabama Supreme Court affirmed on the basis of a state statute invalidating predispute arbitration agreements, ruling that the federal Act applies only if, at the time the parties entered into the contract and accepted the arbitration clause, they "contemplated" substantial interstate activity. Despite some such activities, the court found that these parties "contemplated" a transaction that was primarily local and not "substantially" interstate.
Held: Section 2's interstate commerce language should be read broadly to extend the Act's reach to the limits of Congress' Commerce Clause power. The use of the words "evidencing" and "involving" does not restrict the Act's application and thereby allow a State to apply its antiarbitration law or policy. Pp. 270-282.
(a) The legal background demonstrates that the Act has the basic purpose of overcoming judicial hostility to arbitration agreements and applies in both federal diversity cases and state courts, where it pre-empts state statutes invalidating such agreements. See, e. g., Southland Corp. v. Keating, 465 U. S. 1, 15-16. It would be inappropriate to overrule Southland and permit Alabama to apply its antiarbitration statute, since the Court in that case considered the basic arguments now raised, and nothing significant changed subsequently; since, in the interim, private parties have likely written contracts relying on Southland; and since Congress, both before and after Southland, has enacted legislation extending, not retracting, the scope of arbitration. Pp. 270-273.
471 U. S. 858, 859. The linguistic permissibility of this interpretation is demonstrated by dictionary definitions in which "involve" and "affect" mean the same thing. Moreover, the Act's legislative history, to the extent that it is informative, indicates an expansive congressional intent, and this Court has described the Act's reach expansively as coinciding with that of the Commerce Clause, see, e. g., Southland, supra, at 14-15. Finally, a broad interpretation of this language is consistent with the Act's basic purpose, while a narrower interpretation would create a new, unfamiliar test that would unnecessarily complicate the law and breed litigation. For these reasons, the Act's scope can be said to have expanded along with the commerce power over the years, even though the Congress that passed the Act in 1925 might well have thought the Commerce Clause did not stretch as far as has turned out to be so. Mine Workers V. Coronado Coal Co., 259 U. S. 344, 410; Leather Workers V. Herkert & Meisel Trunk Co., 265 U. S. 457, 470; and Bernhardt V. Polygraphic Co. of America, Inc., 350 U. S. 198, 200-202, distinguished. pp. 273-277.
(c) Section 2's "evidencing a transaction" phrase means that the "transaction" (that the contract "evidences") must turn out, in fact, to have involved interstate commerce. For several reasons, this "commerce in fact" interpretation is more faithful to the statute than the "contemplation of the parties" test adopted below and in other courts. First, the latter interpretation, when viewed in terms of the statute's basic purpose, seems anomalous because it invites litigation about what was, or was not, "contemplated," because it too often would turn the validity of an arbitration clause upon the happenstance of whether the parties thought to insert a reference to interstate commerce in their document or to mention it in an initial conversation, and because it fits awkwardly with the rest of § 2. Second, the statute's language permits the "commerce in fact" interpretation. Although that interpretation concededly leaves little work for the word "evidencing," nothing in the Act's history suggests any other, more limiting, task for the language. Third, the force of the basic practical argument underlying the "contemplation of the parties" test, i. e., that encroaching on powers reserved to the States must be avoided, has diminished following this Court's holdings that the Act displaces contrary state law. Finally, despite an amicus' claim, it is unclear whether an "objective" version of that test would better protect consumers asked to sign form contracts by businesses. In any event, § 2 authorizes States to invalidate an arbitration clause "upon such grounds as exist at law or in equity for the revocation of any contract," and thereby gives them a method for protecting consumers against unwanted arbitration provisions. Pp. 277-281.
(d) The parties do not contest that the transaction in this case, in fact, involved interstate commerce. P. 282.
628 So. 2d 354, reversed and remanded.
BREYER, J., delivered the opinion of the Court, in which REHNQUIST, C. J., and STEVENS, O'CONNOR, KENNEDY, SOUTER, and GINSBURG, JJ., joined. O'CONNOR, J., filed a concurring opinion, post, p. 282. SCALIA, J., filed a dissenting opinion, post, p. 284. THOMAS, J., filed a dissenting opinion, in which SCALIA, J., joined, post, p. 285.
H. Bartow Farr III argued the cause for petitioners.
With him on the briefs were Richard G. Taranto, Joseph P. Jones, Jr., and T. Julian Motes.
*Briefs of amici curiae urging reversal were filed for the Alabama Water and Wastewater Institute et al. by Robert E. Sasser; for the American Arbitration Association by Michael F. Hoellering, Rosemary S. Page, Robert B. von Mehren, James H. Carter, Donald Francis Donovan, Andreas F. Lowenfeld, and David W Rivkin; for the American Bankers Association et al. by Theodore B. Olson, Theodore J. Boutrous, Jr., Robert H. Carpenter, and Theodore Fischkin; and for the American Council of Life Insurance by Patricia A. Dunn, Stephen J. Goodman, Richard E. Barnsback, and Phillip E. Stano.
Briefs of amici curiae urging affirmance were filed for the Attorney General of the State of Alabama et al. by James H. Evans, Attorney General of Alabama, pro se, and Carol Jean Smith, Assistant Attorney General, and by the Attorneys General, pro se, for their respective jurisdictions as follows: Bruce M. Botelho of Alaska, Gale A. Norton of Colorado, Robert A. Marks of Hawaii, Scott Harshbarger of Massachusetts, Jeremiah W Nixon of Missouri, Don Stenberg of Nebraska, Jeffrey R. Howard of New Hampshire, Winston Bryant of Arkansas, Robert A. Butterworth of Florida, Roland W Burris of Illinois, Mike Moore of Mississippi, Joseph P. Mazurek of Montana, Frankie Sue Del Papa of Nevada, Deborah T. Poritz of New Jersey, Heidi Heitkamp of North Dakota, T. Travis Medlock of South Carolina, Jeffrey L. Amestoy of Vermont, Ernest D. Preate, Jr., of Pennsylvania, and Jan Graham of Utah; and for the Southern Poverty Law Center by J. Richard Cohen, Morris S. Dees, Jr., and Edward Ashworth.
This case concerns the reach of § 2 of the Federal Arbitration Act. That section makes enforceable a written arbitration provision in "a contract evidencing a transaction involving commerce." 9 U. S. C. § 2 (emphasis added). Should we read this phrase broadly, extending the Act's reach to the limits of Congress' Commerce Clause power? Or, do the two italicized words-"involving" and "evidencing"-significantly restrict the Act's application? We conclude that the broader reading of the Act is the correct one, and we reverse a State Supreme Court judgment to the contrary.
"any controversy or claim ... arising out of or relating to the interpretation, performance or breach of any provision of this agreement shall be settled exclusively by arbitration." Id., at 70 (emphasis added).
and repair the house, but the Dobsons found Allied-Bruce's efforts inadequate. They therefore sued the Gwins, and (along with the Gwins, who cross-claimed) also sued AlliedBruce and Terminix in Alabama state court. Allied-Bruce and Terminix, pointing to the Plan's arbitration clause and § 2 of the Federal Arbitration Act, immediately asked the court for a stay, to allow arbitration to proceed. The court denied the stay. Allied- Bruce and Terminix appealed.
The Supreme Court of Alabama upheld the denial of the stay on the basis of a state statute, Ala. Code § 8-1-41(3) (1993), making written, predispute arbitration agreements invalid and "unenforceable." 628 So. 2d 354, 355 (1993). To reach this conclusion, the court had to find that the Federal Arbitration Act, which pre-empts conflicting state law, did not apply to the termite contract. It made just that finding. The court considered the federal Act inapplicable because the connection between the termite contract and interstate commerce was too slight. In the court's view, the Act applies to a contract only if "'at the time [the parties entered into the contract] and accepted the arbitration clause, they contemplated substantial interstate activity.'" Ibid. (emphasis in original) (quoting Metro Industrial Painting Corp. v. Terminal Constr. Co., 287 F.2d 382, 387 (CA2) (Lumbard, C. J., concurring), cert. denied, 368 U. S. 817 (1961)). Despite some interstate activities (e. g., Allied-Bruce, like Terminix, is a multistate firm and shipped treatment and repair material from out of state), the court found that the parties "contemplated" a transaction that was primarily local and not "substantially" interstate.
Several state courts and Federal District Courts, like the Supreme Court of Alabama, have interpreted the Act's language as requiring the parties to a contract to have "contemplated" an interstate commerce connection. See, e. g., Burke County Public Schools Bd. of Ed. v. Shaver Partnership, 303 N. C. 408, 417-420, 279 S. E. 2d 816, 822-823 (1981); R. J. Palmer Constr. Co. v. Wichita Band Instrument Co., 7 Kan.
App. 2d 363, 367, 642 P. 2d 127, 130 (1982); Lacheney v. Profitkey Int'l, Inc., 818 F. Supp. 922, 924 (ED Va. 1993). Several federal appellate courts, however, have interpreted the same language differently, as reaching to the limits of Congress' Commerce Clause power. See, e. g., Foster v. Turley, 808 F.2d 38, 40 (CAlO 1986); Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402,406-407 (CA2 1959), cert. dism'd, 364 U. S. 801 (1960); cf. Snyder v. Smith, 736 F. 2d 409, 417-418 (CA7), cert. denied, 469 U. S. 1037 (1984). We granted certiorari to resolve this conflict, 510 U. S. 1190 (1994); and, as we said, we conclude that the broader reading of the statute is the right one.
Before we can reach the main issues in this case, we must set forth three items of legal background.
... desire" to change this antiarbitration rule. Dean Witter Reynolds Inc. v. Byrd, 470 U. S. 213, 220 (1985). It intended courts to "enforce [arbitration] agreements into which parties had entered," ibid. (footnote omitted), and to "place such agreements 'upon the same footing as other contracts,'" Volt Information Sciences, Inc., supra, at 474 (quoting Scherk v. Alberto-Culver Co., 417 U. S. 506, 511 (1974)).
"Congress may prescribe how federal courts are to conduct themselves with respect to subject matter over which Congress plainly has power to legislate." Prima Paint, supra, at 405.
ing state antiarbitration law, or could state courts apply their antiarbitration rules in cases before them, thereby reaching results different from those reached in otherwise similar federal diversity cases? In Southland Corp. v. Keating, supra, this Court decided that Congress would not have wanted state and federal courts to reach different outcomes about the validity of arbitration in similar cases. The Court concluded that the Federal Arbitration Act pre-empts state law; and it held that state courts cannot apply state statutes that invalidate arbitration agreements. Id., at 15-16.
We have set forth this background because respondents, supported by 20 state attorneys general, now ask us to overrule Southland and thereby to permit Alabama to apply its antiarbitration statute in this case irrespective of the proper interpretation of § 2. The Southland Court, however, recognized that the pre-emption issue was a difficult one, and it considered the basic arguments that respondents and amici now raise (even though those issues were not thoroughly briefed at the time). Nothing significant has changed in the 10 years subsequent to Southland; no later cases have eroded Southland's authority; and no unforeseen practical problems have arisen. Moreover, in the interim, private parties have likely written contracts relying upon Southland as authority. Further, Congress, both before and after Southland, has enacted legislation extending, not retracting, the scope of arbitration. See, e. g., 9 U. S. C. § 15 (eliminating the Act of State doctrine as a bar to arbitration); 9 U. S. C. §§ 201-208 (international arbitration). For these reasons, we find it inappropriate to reconsider what is by now well-established law.
thereby carving out an important statutory niche in which a State remains free to apply its antiarbitration law or policy. We conclude that it does not.
"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." 9 U. S. C. § 2 (emphasis added).
The initial interpretive question focuses upon the words "involving commerce." These words are broader than the often-found words of art "in commerce." They therefore cover more than "'only persons or activities within the flow of interstate commerce.'" United States v. American Building Maintenance Industries, 422 U. S. 271, 276 (1975) (quoting Gulf Oil Corp. v. Copp Paving Co., 419 U. S. 186, 195 (1974)) (defining "in commerce" as related to the "flow" and defining the "flow" to include "the generation of goods and services for interstate markets and their transport and distribution to the consumer"); see also FTC v. Bunte Brothers, Inc., 312 U. S. 349, 351 (1941). But how far beyond the flow of commerce does the word "involving" reach? Is "involving" the functional equivalent of the word "affecting"? That phrase-"affecting commerce"-normally signals Congress' intent to exercise its Commerce Clause powers to the full. See Russell v. United States, 471 U. S. 858, 859 (1985). We cannot look to other statutes for guidance for the parties tell us that this is the only federal statute that uses the word "involving" to describe an interstate commerce relation.
and is indeed the functional equivalent of "affecting." For one thing, such an interpretation, linguistically speaking, is permissible. The dictionary finds instances in which "involve" and "affect" sometimes can mean about the same thing. V Oxford English Dictionary 466 (1st ed. 1933) (providing examples dating back to the mid-19th century, where "involve" means to "include or affect in ... operation"). For another, the Act's legislative history, to the extent that it is informative, indicates an expansive congressional intent. See, e. g., H. R. Rep. No. 96, supra, at 1 (the Act's "control over interstate commerce reaches not only the actual physical interstate shipment of goods but also contracts relating to interstate commerce"); 65 Congo Rec. 1931 (1924) (the Act "affects contracts relating to interstate subjects and contracts in admiralty") (remarks of Rep. Graham); Joint Hearings on S. 1005 and H. R. 646 before the Subcommittees of the Committees on the Judiciary, 68th Cong., 1st Sess., 7 (1924) (hereinafter Joint Hearings) (testimony of Charles L. Bernheimer, chairman of the Committee on Arbitration of the Chamber of Commerce of the State of New York, agreeing that the proposed bill "relates to contracts arising in interstate commerce"); id., at 16 (testimony of Julius H. Cohen, drafter for the American Bar Association of much of the proposed bill's language, that the Act reflects part of a strategy to rid the law of an "anachronism" by "get[ting] a Federal law to cover interstate and foreign commerce and admiralty"); see also 9 U. S. C. § 1 (defining the word "commerce" in the language of the Commerce Clause itself).
marking its permissible outer limit); see also Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U. S., at 407 (Harlan, J., concurring) (endorsing Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402, 407 (CA2 1959) (Congress, in enacting the FAA, "took pains to utilize as much of its power as it could")).
Finally, a broad interpretation of this language is consistent with the Act's basic purpose, to put arbitration provisions on "'the same footing'" as a contract's other terms. Scherk v. Alberto-Culver Co., 417 U. S., at 511. Conversely, a narrower interpretation is not consistent with the Act's purpose, for (unless unreasonably narrowed to the flow of commerce) such an interpretation would create a new, unfamiliar test lying somewhere in a no man's land between "in commerce" and "affecting commerce," thereby unnecessarily complicating the law and breeding litigation from a statute that seeks to avoid it.
We recognize arguments to the contrary: The pre-New Deal Congress that passed the Act in 1925 might well have thought the Commerce Clause did not stretch as far as has turned out to be the case. But, it is not unusual for this Court in similar circumstances to ask whether the scope of a statute should expand along with the expansion of the Commerce Clause power itself, and to answer the question affirmatively-as, for the reasons set forth above, we do here. See, e. g., McLain v. Real Estate Bd. of New Orleans, Inc., 444 U. S. 232, 241 (1980); Hospital Building Co. v. Trustees of Rex Hospital, 425 U. S. 738, 743, n. 2 (1976).
as to be within the federal regulatory power." Mine Workers, supra, at 410 (emphasis added); Leather Workers, supra, at 470 (same). One could read these cases as driving a wedge between "involve" and "affecting." Yet, in these cases, the Court was not construing a statute containing the words "involving commerce." Furthermore, nothing suggests the drafters of the Act looked to these cases as a source. And, these cases themselves use the phrase "involve ... intrinsically," not the word "involving" alone. In sum, these cases do not support respondents' position.
The Gwins and Dobsons, with far better reason, point to a different case, Bernhardt v. Polygraphic Co. of America, Inc., 350 U. S. 198 (1956). In that case, Bernhardt, a New York resident, had entered into an employment contract (containing an arbitration clause) in New York with Polygraphic, a New York corporation. But, Bernhardt "was to perform" that contract after he "later became a resident of Vermont." Id., at 199. This Court was faced with the question whether, in light of Erie, a federal court should apply the Federal Arbitration Act in a diversity case when faced with state law hostile to arbitration. 350 U. S., at 200. The Court did not reach that question, however, for it decided that the contract itself did not "involv[eJ" interstate commerce and therefore fell outside the Act. Id., at 200-202. Since Congress, constitutionally speaking, could have applied the Act to Bernhardt's contract, say the parties, how then can we say that the Act's word "involving" reaches as far as the Commerce Clause itself?
meaning of our decisions." Id., at 200-201 (emphasis added) (footnote omitted).
Thus, the Court interpreted the words "involving commerce" as broadly as the words "affecting commerce"; and, as we have said, these latter words normally mean a full exercise of constitutional power. At the same time, the Court's opinion does not discuss the implications of the "interstate" facts to which the respondents now point. For these reasons, Bernhardt does not require us to narrow the scope of the word "involving." And, we conclude that the word "involving," like "affecting," signals an intent to exercise Congress' commerce power to the full.
Section 2 applies where there is "a contract evidencing a transaction involving commerce." 9 U. S. C. § 2 (emphasis added). The second interpretive question focuses on the italicized words. Does "evidencing a transaction" mean only that the transaction (that the contract "evidences") must turn out, infact, to have involved interstate commerce? Or, does it mean more?
"The significant question ... is not whether, in carrying out the terms of the contract, the parties did cross state lines, but whether, at the time they entered into it and accepted the arbitration clause, they contemplated substantial interstate activity. Cogent evidence regarding their state of mind at the time would be the terms of the contract, and if it, on its face, evidences interstate traffic ... , the contract should come within § 2. In addition, evidence as to how the parties expected the contract to be performed and how it was performed is relevant to whether substantial interstate activity was contemplated." Metro Industrial Painting Corp.
v. Terminal Constr. Co., 287 F.2d 382, 387 (1961) (concurring opinion) (second emphasis added).
The Supreme Court of Alabama and several other courts have followed this view, known as the "contemplation of the parties" test. See supra, at 269-270.
We find the interpretive choice difficult, but for several reasons we conclude that the first interpretation ("commerce in fact") is more faithful to the statute than the second ("contemplation of the parties"). First, the "contemplation of the parties" interpretation, when viewed in terms of the statute's basic purpose, seems anomalous. That interpretation invites litigation about what was, or was not, "contemplated." Why would Congress intend a test that risks the very kind of costs and delay through litigation (about the circumstances of contract formation) that Congress wrote the Act to help the parties avoid? See Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U. S. 1, 29 (1983) (the Act "calls for a summary and speedy disposition of motions or petitions to enforce arbitration clauses").
Moreover, that interpretation too often would turn the validity of an arbitration clause on what, from the perspective of the statute's basic purpose, seems happenstance, namely, whether the parties happened to think to insert a reference to interstate commerce in the document or happened to mention it in an initial conversation. After all, parties to a sales contract with an arbitration clause might naturally think about the goods sold, or about arbitration, but why should they naturally think about an interstate commerce connection?
about) the interstate aspects of the earlier contract? The first interpretation, requiring only that the "transaction" in fact involve interstate commerce, avoids this anomaly, as it avoids the other anomalous effects growing out of the "contemplation of the parties" test.
Second, the statute's language permits the "commerce in fact" interpretation. That interpretation, we concede, leaves little work for the word "evidencing" (in the phrase "a contract evidencing a transaction") to perform, for every contract evidences some transaction. But, perhaps Congress did not want that word to perform much work. The Act's history, to the extent informative, indicates that the Act's supporters saw the Act as part of an effort to make arbitration agreements universally enforceable. They wanted to "get a Federal law" that would "cover" areas where the Constitution authorized Congress to legislate, namely, "interstate and foreign commerce and admiralty." Joint Hearings 16 (testimony of Julius H. Cohen). They urged Congress to model the Act after a New York statute that made enforceable a written arbitration provision "in a written contract," Act of Apr. 19, 1920, ch. 275, § 2, 1920 N. Y. Laws 803, 804. Hearing on S. 4213 and S. 4214 before the Subcommittee of the Senate Committee on the Judiciary, 67th Cong., 4th Sess., 2 (1923) (testimony of Charles L. Bernheimer). Early drafts made enforceable a written arbitration provision "in any contract or maritime transaction or transaction involving commerce." S. 4214, 67th Cong., 4th Sess., § 2 (1922) (emphasis added); S. 1005, 68th Cong., 1st Sess. (1923); H. R. 646, 68th Cong., 1st Sess. (1924). Members of Congress, looking at that phrase, might have thought the words "any contract" standing alone went beyond Congress' constitutional authority. And, if so, they might have simply connected those words with the later words "transaction involving commerce," thereby creating the phrase that became law. Nothing in the Act's history suggests any other, more limiting, task for the language.
Third, the basic practical argument underlying the "contemplation of the parties" test was, in Chief Judge Lumbard's words, the need to "be cautious in construing the act lest we excessively encroach on the powers which Congressional policy, if not the Constitution, would reserve to the states." Metro Industrial Painting Corp., supra, at 386 (concurring opinion). The practical force of this argument has diminished in light of this Court's later holdings that the Act does displace state law to the contrary. See Southland Corp. v. Keating, 465 U. S., at 10-16; Perry v. Thomas, 482 U. S., at 489-492.
months). App. to Brief for American Arbitration Association as Amicus Curiae 26-27.
We are uncertain, however, just how the "objective" version of the "contemplation" test would help consumers. Sometimes, of course, it would permit, say, a consumer with potentially large damages claims to disavow a contract's arbitration provision and proceed in court. But, if so, it would equally permit, say, local business entities to disavow a contract's arbitration provisions, thereby leaving the typical consumer who has only a small damages claim (who seeks, say, the value of only a defective refrigerator or television set) without any remedy but a court remedy, the costs and delays of which could eat up the value of an eventual small recovery.
In any event, § 2 gives States a method for protecting consumers against unfair pressure to agree to a contract with an unwanted arbitration provision. States may regulate contracts, including arbitration clauses, under general contract law principles and they may invalidate an arbitration clause "upon such grounds as exist at law or in equity for the revocation of any contract." 9 U. S. C. § 2 (emphasis added). What States may not do is decide that a contract is fair enough to enforce all its basic terms (price, service, credit), but not fair enough to enforce its arbitration clause. The Act makes any such state policy unlawful, for that kind of policy would place arbitration clauses on an unequal "footing," directly contrary to the Act's language and Congress' intent. See Volt Information Sciences, Inc., 489 U. S., at 474.
For these reasons, we accept the "commerce in fact" interpretation, reading the Act's language as insisting that the "transaction" in fact "involv[eJ" interstate commerce, even if the parties did not contemplate an interstate commerce connection.
The parties do not contest that the transaction in this case, in fact, involved interstate commerce. In addition to the multistate nature of Terminix and Allied-Bruce, the termite-treating and house-repairing material used by Allied-Bruce in its (allegedly inadequate) efforts to carry out the terms of the Plan, came from outside Alabama.
Consequently, the judgment of the Supreme Court of Alabama is reversed, and the case is remanded for further proceedings not inconsistent with this opinion.
I agree with the Court's construction of § 2 of the Federal Arbitration Act. As applied in federal courts, the Court's interpretation comports fully with my understanding of congressional intent. A more restrictive definition of "evidencing" and "involving" would doubtless foster pre arbitration litigation that would frustrate the very purpose of the statute. As applied in state courts, however, the effect of a broad formulation of § 2 is more troublesome. The reading of § 2 adopted today will displace many state statutes carefully calibrated to protect consumers, see, e. g., Mont. Code Ann. § 27-5-114(2)(b) (1993) (refusing to enforce arbitration clauses in consumer contracts where the consideration is $5,000 or less), and state procedural requirements aimed at ensuring knowing and voluntary consent, see, e. g., S. C. Code Ann. § 15-48-10(a) (Supp. 1993) (requiring that notice of arbitration provision be prominently placed on first page of contract). I have long adhered to the view, discussed below, that Congress designed the Federal Arbitration Act to apply only in federal courts. But if we are to apply the Act in state courts, it makes little sense to read § 2 differently in that context. In the end, my agreement with the Court's construction of § 2 rests largely on the wisdom of maintaining a uniform standard.
I continue to believe that Congress never intended the Federal Arbitration Act to apply in state courts, and that this Court has strayed far afield in giving the Act so broad a compass. See Southland Corp. v. Keating, 465 U. S. 1,21-36 (1984) (O'CONNOR, J., dissenting); see also Perry v. Thomas, 482 U. S. 483, 494-495 (1987) (O'CONNOR, J., dissenting); York International v. Alabama Oxygen Co., 465 U. S. 1016 (1984) (O'CONNOR, J., dissenting from remand). We have often said that the pre-emptive effect of a federal statute is fundamentally a question of congressional intent. See, e. g., Cipollone v. Liggett Group, Inc., 505 U. S. 504, 516 (1992); English v. General Elec. Co., 496 U. S. 72, 78-79 (1990); Schneidewind v. ANR Pipeline Co., 485 U. S. 293, 299 (1988); Rice v. Santa Fe Elevator Corp., 331 U. S. 218, 230 (1947). Indeed, we have held that" '[w]here ... the field which Congress is said to have pre-empted' includes areas that have 'been traditionally occupied by the States,' congressional intent to supersede state laws must be 'clear and manifest.'" English, supra, at 79, quoting Jones v. Rath Packing Co., 430 U. S. 519, 525 (1977). Yet, over the past decade, the Court has abandoned all pretense of ascertaining congressional intent with respect to the Federal Arbitration Act, building instead, case by case, an edifice of its own creation. See Perry v. Thomas, supra, at 493 (STEVENS, J., dissenting) ("It is only in the last few years that the Court has effectively rewritten the statute to give it a pre-emptive scope that Congress certainly did not intend"). I have no doubt that Congress could enact, in the first instance, a federal arbitration statute that displaces most state arbitration laws. But I also have no doubt that, in 1925, Congress enacted no such statute.
ance on the Court's interpretation of the Act in the interim. After reflection, I am persuaded by considerations of stare decisis, which we have said "have special force in the area of statutory interpretation," Patterson v. McLean Credit Union, 491 U. S. 164, 172-173 (1989), to acquiesce in today's judgment. Though wrong, Southland has not proved unworkable, and, as always, "Congress remains free to alter what we have done." Ibid.
Today's decision caps this Court's effort to expand the Federal Arbitration Act. Although each decision has built logically upon the decisions preceding it, the initial building block in Southland laid a faulty foundation. I acquiesce in today's judgment because there is no "special justification" to overrule Southland. Arizona v. Rumsey, 467 U. S. 203, 212 (1984). It remains now for Congress to correct this interpretation if it wishes to preserve state autonomy in state courts.
I have previously joined two judgments of this Court that rested upon the holding of Southland Corp. v. Keating, 465 U. S. 1 (1984). See Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U. S. 468 (1989); Perry v. Thomas, 482 U. S. 483 (1987). In neither of those cases, however, did any party ask that Southland be overruled, and it was therefore not necessary to consider the question. In the present case, by contrast, one of respondents' central arguments is that Southland was wrongly decided, and their request for its overruling has been supported by an amicus brief signed by the attorneys general of 20 States. For the reasons set forth in JUSTICE THOMAS' opinion, which I join, I agree with the respondents (and belatedly with JUSTICE O'CONNOR) that Southland clearly misconstrued the Federal Arbitration Act.
entails a permanent, unauthorized eviction of state-court power to adjudicate a potentially large class of disputes. Abandoning it does not impair reliance interests to a degree that justifies this evil. Primary behavior is not affected: No rule of conduct is retroactively changed, but only (perhaps) the forum in which violation is to be determined and remedied. I doubt that many contracts with arbitration clauses would have been forgone, or entered into only for significantly higher remuneration, absent the Southland guarantee. Where, moreover, reliance on Southland did make a significant difference, rescission of the contract for mistake of law would often be available. See 3 A. Corbin, Corbin on Contracts § 616 (1960 ed. and Supp. 1992); Restatement (Second) of Contracts § 152 (1979).
I shall not in the future dissent from judgments that rest on Southland. I will, however, stand ready to join four other Justices in overruling it, since Southland will not become more correct over time, the course of future lawmaking seems unlikely to be affected by its existence, cf. Pennsylvania v. Union Gas Co., 491 U. S. 1, 34-35 (1989) (SCALIA, J., concurring in part and dissenting in part), and the accumulated private reliance will not likely increase beyond the level it has already achieved (few contracts not terminable at will have more than a 5-year term).
For these reasons, I respectfully dissent from the judgment of the Court.
I disagree with the majority at the threshold of this case, and so I do not reach the question that it decides. In my view, the Federal Arbitration Act (FAA) does not apply in state courts. I respectfully dissent.
well as federal courts," id., at 12, and "withdr[aws] the power of the states to require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration," id., at 10. In my view, both aspects of Southland are wrong.
Section 2 of the FAA declares that an arbitration clause contained in "a contract evidencing a transaction involving commerce" shall be "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U. S. C. § 2; see also § 1 (defining "commerce," as relevant here, to mean "commerce among the several States or with foreign nations"). On its face, and considered out of context, § 2 draws no apparent distinction between federal courts and state courts. But not until 1959-nearly 35 years after Congress enacted the FAA-did any court suggest that § 2 applied in state courts. See Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402, 407 (CA2 1959), cert. dism'd, 364 U. S. 801 (1960). No state court agreed until the 1960's. See, e. g., REA Express v. Missouri Pacific R. Co., 447 S. W. 2d 721, 726 (Tex. Civ. App. 1969) (stating that the FAA applies but noting that it had been waived in the case at hand); cf. Rubewa Products Co. v. Watson's Quality Turkey Products, Inc., 242 A. 2d 609, 613 (D. C. 1968) (same). This Court waited until 1984 to conclude, over a strong dissent by JUSTICE O'CONNOR, that § 2 extends to the States. See Southland, supra, at 10-16.
1 See also, e. g., Atlantic Fruit Co. v. Red Cross Line, 276 F.3d 9, 323 (SDNY 1921) ("Arbitration statutes or judicial recognition of the enforceability of such provisions do not confer a substantive right, but a remedy for the enforcement of the right which is created by the agreement of the parties"), aff'd, 5 F.2d 218 (CA2 1924); Cohen & Dayton, The New Federal Arbitration Law, 12 Va. L. Rev. 265, 276 (1926) ("[W]hether or not an arbitration agreement is to be enforced is a question of the law of procedure and is determined by the law of the jurisdiction wherein the remedy is sought. That the enforcement of arbitration contracts is within the law of procedure as distinguished from substantive law is well settled by the decisions of our courts" (footnote omitted)); Baum & Pressman, The Enforcement of Commercial Arbitration Agreements in the Federal Courts, 8 N. Y. U. L. Q. Rev. 428, 430 (1931) (referring uncritically to "the prevalent notions that arbitration legislation affects merely the remedy or procedural aspects and not substance"); 2 J. Beale, Conflict of Laws 1245-1246 (1935) ("American courts, without exception, hold that arbitration agreements pertain to remedy or procedure. Consequently, the law of the for[u]m determines their enforceability ... " (footnote omitted)); cf. Alexandria Canal Co. v. Swann, 5 How. 83, 87-88 (1847) (whether a court should grant the parties' motion to refer a lawsuit to a panel of arbitrators, and then should enter judgment on the arbitrators' award, was "not [a question] upon the rights of the respective parties, but upon the mode of proceeding by which they were determined," and hence was governed by the law of the forum).
The prevalent view that arbitration statutes were purely procedural does conflict with this Court's reasoning in Red Cross Line v. Atlantic Fruit Co., 264 U. S. 109 (1924), a case that in other respects undermines Southland's position. See infra, Part I-B. Without analyzing the question, our opinion in Red Cross Line assumed that the threshold validity of an arbitration agreement (like the validity of other sorts of contracts) is a matter of "substantive" law. See 264 U. S., at 122-123. But our actual holding-that the remedies available to enforce a valid arbitration agreement do not involve "substantive" law, see id., at 124-125-was perfectly consistent with the customary view. As discussed below, moreover, the FAA's text clearly reflects Congress' view that the statute it enacted was purely procedural.
attempt to prescribe procedural rules for state courts. See, e. g., Ex parte Gounis, 304 Mo. 428, 437, 263 S. W. 988, 990 (1924) (describing the rule that Congress cannot "regulate or control [state courts'] modes of procedure" as one of the "general principles which have come to be accepted as settled constitutional law"). And because the FAA was enacted against this general background, no one read it as such an attempt. See, e. g., Baum & Pressman, The Enforcement of Commercial Arbitration Agreements in the Federal Courts, 8 N. Y. U. L. Q. Rev. 428, 459 (1931) (noting that the FAA "does not purport to extend its teeth to state proceedings," though arguing that it constitutionally could have done so); 6 S. Williston & G. Thompson, Law of Contracts 5368 (rev. ed. 1938) ("Inasmuch as arbitration acts are deemed procedural, the [FAA] applies only to the federal courts ... " (footnote omitted)); cf. Southland, 465 U. S., at 25-29 (O'CONNOR, J., dissenting) (describing "unambiguous" legislative history to this effect).
stantive or general right"). In short, state arbitration statutes prescribed rules for the state courts, and the FAA prescribed rules for the federal courts.
It is easy to understand why lawyers in 1925 classified arbitration statutes as procedural. An arbitration agreement is a species of forum-selection clause: Without laying down any rules of decision, it identifies the adjudicator of disputes. A strong argument can be made that such forumselection clauses concern procedure rather than substance. Cf. Fed. Rules Civ. Proc. 73 (district court, with consent of the parties, may refer case to magistrate for resolution), 53 (district court may refer issues to special master). And if a contractual provision deals purely with matters of judicial procedure, one might well conclude that questions about whether and how it will be enforced also relate to procedure.
"If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration." 9 U. S. C. § 3 (emphasis added).
"upon petition the United States district court for the district in which such arbitrators ... are sitting may compel the attendance of such person ... or punish said person ... for contempt in the same manner provided by law for securing the attendance of witnesses or their punishment for neglect or refusal to attend in the courts of the United States."
generally it will simply enter a confirmatory judgment, § 9, which is then docketed and given the same effect as a judgment in an ordinary civil case, § 13.
Despite the FAA's general focus on the federal courts, of course, § 2 itself contains no such explicit limitation. But the text of the statute nonetheless makes clear that § 2 was not meant as a statement of substantive law binding on the States. After all, if § 2 really was understood to "creat[e] federal substantive law requiring the parties to honor arbitration agreements," Southland, supra, at 15, n. 9, then the breach of an arbitration agreement covered by § 2 would give rise to a federal question within the subject-matter jurisdiction of the federal district courts. See 28 U. S. C. § 1331. Yet the ensuing provisions of the Act, without expressly taking away this jurisdiction, clearly rest on the assumption that federal courts have jurisdiction to enforce arbitration agreements only when they would have had jurisdiction over the underlying dispute. See 9 U. S. C. §§ 3, 4, 8. In other words, the FAA treats arbitration simply as one means of resolving disputes that lie within the jurisdiction of the federal courts; it makes clear that the breach of a covered arbitration agreement does not itself provide any independent basis for such jurisdiction. Even the Southland majority was forced to acknowledge this point, conceding that § 2 "does not create any independent federal-question jurisdiction under 28 U. S. C. § 1331 or otherwise." 465 U. S., at 15, n. 9. But the reason that § 2 does not give rise to federalquestion jurisdiction is that it was enacted as a purely procedural provision. For the same reason, it applies only in the federal courts.
u. S. 198, 203-204. But this later development could not change the original meaning of the statute that Congress enacted in 1925. Although Bernhardt classified portions of the FAA as "substantive" rather than "procedural," it does not mean that they were so understood in 1925 or that Congress extended the FAA's reach beyond the federal courts.
When JUSTICE O'CONNOR pointed out the FAA's original meaning in her Southland dissent, see 465 U. S., at 25-30, the majority offered only one real response. If § 2 had been considered a purely procedural provision, the majority reasoned, Congress would have extended it to all contracts rather than simply to maritime transactions and "contract[s] evidencing a transaction involving [interstate or foreign] commerce." See id., at 14. Yet Congress might well have thought that even if it could have called upon federal courts to enforce arbitration agreements in every single case that came before them, there was no federal interest in doing so unless interstate commerce or maritime transactions were involved. This conclusion is far more plausible than Southland's idea that Congress both viewed § 2 as a statement of substantive law and believed that it created no federalquestion jurisdiction.
along the lines envisioned by Southland would have displaced an enormous body of state law: Outside of a few States, predispute arbitration agreements either were wholly unenforceable or at least were not subject to specific performance. See generally Note to Williams v. Branning Mfg. Co., 47 L. R. A. (n.s.) 337 (1914) (detailed listing of state cases). Far from being "absolutely certain" that Congress swept aside these state rules, I am quite sure that it did not.
2 At the time, indeed, federal courts would award only nominal damages for the breach of such agreements. See Aktieselskabet Korn-Og Foderstof Kompagniet v. Rederiaktiebolaget Atlanten, 250 F.9d 5, 937 (CA2 1918), aff'd on other grounds sub nom. The Atlanten, 252 U. S. 313 (1920); Munson v. Straits of Dover S. S. Co., 99 F.7d 7, 790-791 (SDNY), aff'd, 102 F.9d 6 (CA2 1900).
the plaintiffs to their promise not to take their claims straight to court, while § 4 holds the defendants to their promise to submit to arbitration rather than making the other party sue them. Had this case arisen in one of the "courts of the United States," it is § 3 that would have been relevant. Upon proper motion, the court would have been obliged to grant a stay pending arbitration, unless the contract between the parties did not "evidenc[e] a transaction involving [interstate] commerce." See Bernhardt, supra, at 202 (holding that § 3 is limited to the arbitration agreements that § 2 declares valid). Because this case arose in the courts of Alabama, however, petitioners are forced to contend that § 2 imposes precisely the same obligation on all courts (both federal and state) that § 3 imposes solely on federal courts. Though Southland supports this argument, it simply cannot be correct, or § 3 would be superfluous.
Alabama law brings these issues into sharp focus. Citing "public policy" grounds that reach back to Bozeman v. Gilbert, 1 Ala. 90 (1840), Alabama courts have declared that predispute arbitration agreements are "void." See, e. g., Wells v. Mobile County Bd. of Realtors, 387 So. 2d 140, 144 (Ala. 1980). But a separate state statute also includes "[a]n agreement to submit a controversy to arbitration" among the obligations that "cannot be specifically enforced" in Alabama. Ala. Code § 8-1-41 (1975). Especially in light of the Gregory v. Ashcroft presumption, § 2-even if applicable to the States-is most naturally read to pre-empt only Alabama's common-law rule and not the state statute; the statute does not itself make executory arbitration agreements invalid, revocable, or unenforceable, any more than the inclusion of "[a]n obligation to render personal service" in the same statutory provision means that employment contracts are invalid in Alabama. In the case at hand, the specific-enforcement statute appears to provide an adequate ground for the denial of petitioners' motion for a stay.
Rather than attempting to defend Southland on its merits, petitioners rely chiefly on the doctrine of stare decisis in urging us to adhere to our mistaken interpretation of the FAA. See Reply Brief for Petitioners 3-6. In my view, that doctrine is insufficient to save Southland.
Quoting Arizona v. Rumsey, 467 U. S. 203, 212 (1984), JusTICE O'CONNOR nonetheless acquiesces in the majority's judgment "because there is no 'special justification' to overrule Southland." Ante, at 284. Even under this approach, the necessity of "preserv[ing] state autonomy in state courts," ibid., seems sufficient to me.
u. S. 468, 477 (1989). Cf. McDermott Int'l, Inc. v. Lloyds Underwriters of London, 944 F.2d 1199, 1210 (CA5 1991) ("We conclude from the Supreme Court's opinions that state courts do not necessarily have to grant stays of conflicting litigation or compel arbitration in compliance with the FAA's sections 3 and 4"). In short, we have never actually held, as opposed to stating or implying in dicta, that the FAA requires a state court to stay lawsuits brought in violation of an arbitration agreement covered by § 2.
Because I believe that the FAA imposes no such obligation on state courts, and indeed that the statute is wholly inapplicable in those courts, I would affirm the Alabama Supreme Court's judgment.

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