Arbitration Clause Needs Deference, Justices Say

WASHINGTON (CN) - The U.S. Supreme Court on Monday rebuked Oklahoma's highest judicial authority for trampling arbitration rights memorialized in federal law.

Nitro-Lift Technologies, which contracts with operators of oil and gas wells to provide services that enhance production, had demanded arbitration after two of its workers quit and began working for a competing well company.

Eddie Lee Howard and Shane Schneider responded by suing the Nitro-Lift in Johnston County to nullify their noncompetition agreements.

The trial court judge dismissed the complaint in light of the arbitration agreement, but the Oklahoma Supreme Court revived the lawsuit and voided Nitro-Lift's noncompetition agreements under state law.

The U.S. Supreme Court had little patience for this maneuver and vacated it in a terse five-page opinion Monday.

"State courts rather than federal courts are most frequently called upon to apply the Federal Arbitration Act (FAA), including the act's national policy favoring arbitration," the unsigned decision states. "It is a matter of great importance, therefore, that state supreme courts adhere to a correct interpretation of the legislation. Here, the Oklahoma Supreme Court failed to do so. By declaring the noncompetition agreements in two employment contracts null and void, rather than leaving that determination to the arbitrator in the first instance, the state court ignored a basic tenet of the act's substantive arbitration law."

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