October 23, 2019 Practice Points

Nevada Statute Preempted by FAA; Similar NJ Statute Survives For Time Being

The Nevada Supreme Court held that the Federal Arbitration Act preempts NRS 597.995 and that statute did not void the arbitration clause.

By D. C. Toedt III

In MMAWC, LLC v. Zion Wood Obi Wan Trust, No. 75596, slip op. at 2 (Nev. Sept. 5, 2019), the Nevada Supreme Court held that a recently-enacted Nevada statute was preempted by the Federal Arbitration Act (FAA). 

NRS 597.995 required agreements with an arbitration clause to include a specific provision showing that the parties affirmatively agreed to the arbitration clause. The parties entered into a settlement agreement that incorporated a licensing agreement that contained an arbitration clause. Plaintiffs sued to enforce the settlement agreement. In response, the defendants moved to compel arbitration. The lower court denied the defendant’s motion because the arbitration clause did not include the specific authorization required by NRS 597.995. The Nevada Supreme Court reversed:

We hold that the FAA preempts NRS 597.995, and accordingly, we conclude that statute does not void the arbitration clause at issue here. We further conclude that the claims in the underlying complaint are subject to arbitration, and therefore the complaint must be dismissed.

In reaching its decision, the court relied on the U.S. Supreme Court's holding in Doctor's Associates.

In contrast, the New Jersey Supreme Court held that an arbitration agreement was unenforceable because it did not expressly waive a jury trial. To the surprise of many observers, the U.S. Supreme Court denied certiorari (that is, declined to hear the losing side's appeal). See Atalese v. US Legal Serv. Group, L.P., 219 N.J. 430, 99 A.3d 306 (2014), cert. denied, 576 U.S. __(U.S. Jun. 8, 2015).

D. C. Toedt III is an attorney and arbitrator in Houston, Texas.

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