The Supreme Court Of The United States Decided that the FAA preempts California State Law.
Preston v. Ferrer - 552 U.S. 346, 128 S. Ct. 978 (2008)
The Supreme Court of the U.S. ruled that if the parties agree to arbitrate all the questions under a contract, then the Federal Arbitration Act ("FAA") supersedes state statutes that direct certain state-law disputes to a judicial or administrative body. This case took rise from a contract dispute between judge Alex and his attorney regarding the sum payment of specific fees. Because the contract contained an arbitration provision, the Court determined that the FAA superseded California state law, relocating jurisdiction elsewhere. The Supreme Court overturned that ruling. “The dispositive issue... is not whether the FAA violates the TAA wholesale,” the Court stated. The FAA does not have such a harmful intent or impact. Instead, the question is who will decide whether Preston [infringed on the TAA].”
Rule of the case:-
In the Federal Arbitration Act (FAA), if any of the party contracts for the dispute resolution process, then not only a simple procedure is provided in the federal courts, but also they are being called for the application in state and the federal court as well of substantive federal law which is related to arbitration. When both the parties agree to arbitrate the disputes relating to their contract, the arbitrator can then resolve all the disputes at first and not by the federal or State Court.
Facts of the case:-
The former judge of the trial court is the respondent Alex E. Ferrer who currently was there or on the television as " Judge Alex, "and the petitioner Arnold Preston an attorney from California providing services to the persons belonging to the entertainment industry. According to the American Arbitration Association rules, they both entered into a contract regarding arbitration of any dispute related to contract terms for breach validity or legality.
Preston used the parties’ agreement to arbitrate to recover fees that were due under the contract. The respondent Ferrer filed suit in the court seeking an injunction against Arbitration meanwhile Preston filed a motion to compel arbitration. The court rejected Preston's application, and he was barred from advancing before the arbitrator until the labor commissioner found that she had jurisdiction over the case.
California's Court of Appeal ruled that the state's labor agency had the soldier restriction over the case. Preston filed an appeal.
Issue of the case:-
Regardless of an arbitration provision in the parties' contract, did the state labor agency have exclusive jurisdiction over the parties' dispute?
The supreme court of the US ruled that the parties are ready and agreed that all the disputes in the contract should be arbitrated. Because the application of the FAA precludes state legislative measures to undermine the validity of the arbitration agreement, it was up to an arbitrator, not the agency, to decide whether the attorney violated the TAA by acting as an unlicensed talent agent. Furthermore, the TAA did not simply require the exhaustion of administrative remedies before proceeding to arbitration because the TAA gave the agency exclusive jurisdiction over issues that the parties agreed to arbitrate, and pursuing such remedies would cause the required arbitration to be delayed unduly.
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