Arbitration Overcorrection? Interpreting Arbitration Clauses After Morgan v. Sundance

Authors

• Peter Constable Alter

Abstract

In 2022’s Morgan v. Sundance, Inc., the Supreme Court ruled that the Federal Arbitration Act (FAA) does not allow courts to “devise novel rules to favor arbitration over litigation.” Applying that principle, the Court held that the Eighth Circuit erred by grafting an arbitration-specific prejudice requirement onto the generally applicable waiver standard when deciding whether a defendant waived its right to arbitrate by proceeding in court. The Supreme Court traced this error to a misunderstanding of the FAA’s core purpose. While courts, including the Supreme Court itself, routinely interpreted the FAA as establishing a liberal “policy favoring arbitration,” the Court explained that this policy was “merely an acknowledgement” that the FAA was meant to place arbitration agreements “upon the same footing as other contracts.” Thus, that purpose could not justify a rule favoring arbitration relative to other forums.

Against the backdrop of decades of arbitration-friendly decisions from the Supreme Court, Morgan—a unanimous decision striking down a rule making it easier to arbitrate—is a landmark. The waiver-prejudice rule it invalidated had been applied for decades and was precedent in all but two circuits. And the broader “policy favoring arbitration” was even more widely accepted, a mantra oft-recited in arbitration decisions addressing myriad issues under the FAA. But as explained in Morgan, arbitration is only “favored” relative to historic judicial hostility to arbitration, which the FAA sought to correct by ensuring equal treatment of arbitration agreements and other contracts. So, arbitration-favoring rules are just as suspect as arbitration-disfavoring rules, and represent an overcorrection out of step with the FAA.

In this Article, I argue that Morgan requires courts to reconsider another widely accepted doctrine: the “pro-arbitration canon,” which directs courts to construe ambiguous arbitration agreements in favor of arbitration. The canon has been applied in every circuit and recited repeatedly by the Supreme Court (albeit usually in dicta). But it is rooted in the same misunderstanding of the “policy favoring arbitration” that led courts to the waiver-prejudice rule at issue in Morgan and lacks any basis in the text or legislative history of the FAA. Thus, it is precisely the sort of “novel rule[]” favoring arbitration that Morgan forbade, and must be abandoned. Instead, consistent with the FAA’s equal-treatment purpose, courts faced with an ambiguous arbitration agreement should rely on the generally applicable tools courts use to resolve ambiguity in other contracts.

Recommended Citation

Peter C. Alter, Arbitration Overcorrection? Interpreting Arbitration Clauses After Morgan v. Sundance, 29 Chap. L. Rev. 235 (2026).
Available at: https://digitalcommons.chapman.edu/chapman-law-review/vol29/iss2/1