The classification of arbitration as "substantive" in Bernhardt v. Polygraphic Company jeopardized application of the federal Arbitration Act in diversity cases. However, in the recent case of Prima Paint Corporation v. Flood & Conklin Manufacturing Company, the Supreme Court found the Act to be a legitimate exercise of the federal commerce power and, hence, applicable in diversity cases involving arbitration agreements contained in interstate contracts. Furthermore, in interpreting the Act, the Court ruled that an arbitration provision is severable from other portions of an agreement for purposes of adjudicating contractual validity. However, by speaking only of federal court enforcement of the Act, the Court may have created severe forum-shopping problems. In order to avoid these problems, and vindicate the policy behind the Act, the coverage of the Act may subsequently be extended to the states.
Federal Arbitration Act and Application of the “Separability Doctrine” in Federal Courts,
1968 Duke Law Journal
Available at: http://scholarship.law.duke.edu/dlj/vol17/iss3/4