The current judicial treatment of the Federal Arbitration Act is an embarrassment to a Supreme Court whose majority is supposed to be leading a federalism revival, if not a federalism revolution. In 1984, in Southland Corp. v. Keating, the Court held that the FAA is substantive federal law that preempts state laws regulating arbitration agreements. The Court thereby transformed a quaint, 60-year-old procedural statute into "a permanent, unauthorized eviction of state-court power to adjudicate a potentially large class of disputes," as well as an eviction of state lawmaking power over the traditional state domain of contract law. Even worse, Southland preempts this area of traditional state regulation without the justification of any strong federal interest.
David S. Schwartz,
Correcting Federalism Mistakes in Statutory Interpretation: The Supreme Court and the Federal Arbitration Act,
67 Law and Contemporary Problems
Available at: http://scholarship.law.duke.edu/lcp/vol67/iss1/2