| Southland Corp. v. Keating | |
|---|---|
 | |
| Argued October 4, 1983 Decided January 23, 1984 | |
| Full case name | Southland Corp. v. Keating |
| Citations | 465 U.S. 1 (more) 104 S. Ct. 852; 79 L. Ed. 2d 1 |
| Case history | |
| Prior | 167 Cal.Rptr. 481, trial court reversed; 31 Cal.3d 584, 645 P.2d 1192, appeals court reversed and remanded |
| Holding | |
| Intent of Congress in passing Federal Arbitration Act was to encourage use of arbitration as widely as possible, therefore it applies to contracts executed under state law. California Supreme Court reversed and remanded | |
| Court membership | |
| |
| Case opinions | |
| Majority | Burger, joined by Brennan, White, Marshall, Blackmun, Powell |
| Concur/dissent | Stevens |
| Dissent | O'Connor, joined by Rehnquist |
| Laws applied | |
| Federal Arbitration Act, § 2 | |
Southland Corp. v. Keating, 465 U.S. 1 (1984), is a United States Supreme Court decision concerning arbitration. It was originally brought by 7-Eleven franchisees in California state courts, alleging breach of contract by the chain's then parent corporation. Southland pointed to the arbitration clauses in their franchise agreements and said it required disputes to be resolved that way; the franchisees cited state franchising law voiding any clause in an agreement that required franchisees to waive their rights under that law. A 7-2 majority held that the Federal Arbitration Act (FAA) applied to contracts executed under state law.
Chief Justice Warren Burger wrote for the majority that it was clearly the intent of Congress in passing the FAA to encourage the use of arbitration as widely as possible, that it enacted "a national policy favoring arbitration." Justice Sandra Day O'Connor dissented, along with William Rehnquist, arguing that the legislative history of the FAA strongly suggested it was intended to apply only to contracts executed under federal law. In later years, Clarence Thomas would make those arguments the foundation of a series of dissents from cases concerning the application of the FAA to state law, even in cases for which O'Connor decided with the majority, citing stare decisis.
The decision was a turning point in the use of arbitration in American contract law, as it was followed with other decisions limiting the authority of states to regulate arbitration. It has been described as "perhaps the most controversial case in the Supreme Court's history of arbitration jurisprudence."[1] Its legal foundation has been examined and disputed, and some critics have found the FAA's legislative history directly contradicts the court's holding. One scholar has even found the decision an unconstitutional infringement of states' power over their own courts. Mandatory prebinding arbitration clauses became widespread, particularly in credit card agreements and other consumer services. Proponents of arbitration pointed to its success in reducing crowded court dockets, but consumer advocates charged that the arbitration process was biased in favor of large corporations and against consumers, many of whom were far poorer and legally unsophisticated. They would be joined in calling unsuccessfully for it to be overturned in a later case by 20 state attorneys general.
- ^ Burch, Thomas; "Necessity Never Made a Good Bargain: When Consumer Arbitration Agreements Prohibit Class Relief" (PDF). Archived from the original (PDF) on March 2, 2012., 31 Fla State Univ Law Rev 1005, 1014 (2004).