EddieHowardand Shane D. Schneider worked as employees of Nitro-Lift Technologies, L.L.C.Howardand Schneider entered into a noncompetition agreement with Nitro-Lift whereby they agreed that they would not work for a competitor of Nitro-Lift's for a stated period of time after they left Nitro-Lift's employment. The agreement contained an arbitration clause wherein the parties agreed to submit any contract dispute to arbitration.

WhenHowardand Schneider quit and began working for Nitro-Lift's competitors, Nitro-Lift served the two men with a demand for arbitration to enforce the noncompetition agreement.Howardand Schneider filed a lawsuit in Oklahoma state court asking the court to declare the noncompetition agreement null and void. The supreme court of Oklahoma held that the state court, and not an arbitrator, should hear and decide the dispute. Defendant Nitro-Lift appealed to the U.S. Supreme Court.

Issue

Is the contract dispute between the parties subject to arbitration?

Language of the U.S. Supreme Court

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 Oklahoma Supreme Court must abide by the FAA, which is "the Supreme Law of the Land."

Decision

The U.S. Supreme Court held that the contract dispute in the case was to be heard by the arbitrator and not by the Oklahoma state court.

Ethics Questions

1. Why do companies place arbitration clauses in their employment contracts? Why did the plaintiffs want their case heard in state court?