The relationship between the Federal Arbitration Act (FAA) and state public policy has long been unsettled. According to some judges, scholars, and litigants, the FAA precludes courts from invalidating arbitration clauses under the contract defense of violation of public policy. However, in a practice that is impossible to square with that understanding of FAA preemption, courts have traditionally nullified arbitration clauses to advance a range of state interests, including preserving substantive rights under state law. Nevertheless, in AT&T Mobility LLC v. Concepcion, the U.S. Supreme Court held that the FAA eclipses a rule that deemed class-arbitration waivers to be unconscionable when they prevented plaintiffs from pursuing numerous, low-value state law claims. Both Justice Scalia’s majority opinion and Justice Thomas’s decisive concurrence strongly implied that state public policy is not a permissible basis for striking down an arbitration clause. As a result, lower courts are now compelling arbitration—often through gritted teeth—of lawsuits that are destined to fail.
Counterintuitively, I argue that Concepcion holds the seeds of an approach to FAA preemption that gives judges greater freedom to strike down arbitration provisions to further state interests. FAA preemption stems from its centerpiece, section 2, which makes agreements to arbitrate specifically enforceable “save upon such grounds as exist at law or in equity for the revocation of any contract.” According to the conventional wisdom, the plain language of this “savings clause” immunizes arbitration clauses from state public policy: few state regulations apply across-the-board to “any contract.” Yet the courts and commentators who embrace this view have not explained why its rigid textualism is appropriate in the context of the FAA, which displaces state law through the purposivist mechanism of obstacle preemption. Concepcion implicitly recognizes this disconnect and breaks new ground by relying not on the statute’s text, but on its “purposes and objectives.”
I show that the purposivism that animates Concepcion is superior to textualist approaches to FAA preemption. The incoherence of the any-contract test and the centrality of context and legislative history to obstacle preemption suggest that purposivism should be the primary technique for mapping the FAA’s dominion over state law. However, this path leads to a starkly different endpoint than the one Concepcion reached. A faithful, full-bore examination of Congress’s goals reveals that the phrase “grounds . . . for the revocation of any contract” encompasses all traditional contract doctrines, including the venerable doctrine of violation of public policy. Thus, the public policy defense should only be preempted when it thwarts the FAA’s “purposes and objectives.” I propose a test to determine when this has occurred and apply it to controversial issues now pending in courts, including class arbitration, the unconscionability doctrine, and judicial or legislative rules that prohibit that arbitration of particular claims.