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New York Judge Rules that the Federal Arbitration Action Preempts State Law

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Court’s decision questions New York’s ban on mandatory arbitration agreements for sexual harassment

When many states, including New York, banned mandatory arbitration agreements for sexual harassment claims, Southern District Judge Denise Cote ruled that the Federal Arbitration Act (FAA) preempts New York state law. In the case of Latif v. Morgan Stanley, the preemption doctrine was front and center. Upon hire, the plaintiff signed a mandatory arbitration agreement covering a wide arrow of claims arising from his employment, including sexual harassment claims. After his employment ended, Latif filed a lawsuit which included allegations of sexual harassment. In response to the defendants’ motion to compel arbitration, the plaintiff opposed the motion, claiming that the New York’s prohibition against mandatory arbitration agreements for sexual harassment allowed him to pursue his legal action.

Congress enacted the FAA to promote the enforceability of arbitration agreements and according to the FAA courts are “duty-bound to enforce arbitration agreements except for reasons that exist at law or in equity for the revocation of any contract, such as fraud, duress, or unconscionability.”
In Judge Cote’s decision she explained that voiding the parties’ agreement “would be inconsistent with the FAA.” She granted the defendants’ motion and demanded the parties to arbitrate.

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