Nitro-Lift Technologies, LLC v. Howard
The facts of the case
Eddie Lee Howard and Shane D. Schneider worked for Nitro-Lift Technologies LLC. As a condition of their employment, they entered into non-disclosure agreements and non-compete agreements that included a clause requiring any dispute between Nitro-Lift and its employees to be resolved in arbitration. When Howard and Schneider left, they went to work for one of Nitro-Lift’s competitors. Nitro-Lift sought arbitration for breach of non-compete agreements. Howard and Schneider sued in the District Court of Johnson County, Oklahoma, asking the court to declare their non-compete agreements void. The court dismissed the case, stating that the contracts contained a valid arbitration clause, so any dispute between the parties had to be settled by an arbitrator.
On appeal, Nitro-Lift cited several US Supreme Court cases interpreting the Federal Arbitration Act (FAA), arguing that the statute favouring arbitration applied in both federal and state cases. Despite this, the Oklahoma Supreme Court reversed the decision, holding that the existence of an arbitration clause did not bar judicial review of the underlying agreement. The court further found the non-compete agreements “void and unenforceable against the public policy of Oklahoma.”
Question
Did the Oklahoma Supreme Court Err in Precluding Arbitration of a Non-Competition Agreement?
Conclusion
Yes. In a per curium opinion, the Supreme Court vacated the lower judgment and remanded it for further proceedings. The court ruled that the Oklahoma Supreme Court clearly erred in disregarding binding precedent. The FAA is the “supreme law of the land,” giving it precedence over any conflicting state law or policy. The FAA provides that a court may review the enforceability of the arbitration clause itself, but if the clause is valid, the validity of the remainder of the contract must be decided by an arbitrator.
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