Introduction: Carter and the Federal Policy in Favor of Arbitration
United States Circuit Judge Judge Frank H. Easterbrook’s opinion in Carter v. SP Plus Corp., No. 25-2127, slip op. at 1-5 (7th Cir. Apr. 15, 2026), is important for two related reasons. First, it carefully distinguishes an immediately appealable denial of a motion to compel arbitration from a non-appealable order refusing to lift a Section 3 stay of litigation pending the district court’s decision on whether an arbitration agreement was formed. Second, and more significantly, it rejects an employer’s attempt to invoke the federal policy favoring arbitration as a reason to relax ordinary procedural and evidentiary rules and resolve doubts in favor of arbitration. The opinion instead applies Morgan v. Sundance, Inc., 596 U.S. 411, 418 (2022), according to its terms: arbitration agreements are to be enforced like other contracts, not a favored class of “super contracts” entitled to special treatment. (For a discussion of Morgan, see here.)
We have discussed how, even before Morgan, courts have recognized that the federal policy in favor of arbitration is of limited scope. (See here.) Essentially, the principle that doubts should be resolved in favor of arbitration is not at all a generally applicable rule of decision in arbitration law but rather allows, in a limited context, a pro-arbitration resolution of ambiguities concerning the scope of the arbitration agreement itself. See Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287, 301-303 (2010); Lamps Plus v. Varela, 139 S. Ct. 1407, 1418-19 (2019).
Nevertheless, arbitration proponents sometimes still contend that the the federal policy in favor of arbitration requires courts to select a pro-arbitration outcome whenever some doubt exists about an arbitration-law-related question.
Carter reminds us that is not so. The Federal Arbitration Act (the “FAA”) does not authorize arbitration-agreement exceptionalism. If ordinary litigation principles cut against agreement enforcement, then the result should be the same as obtains in any other ordinary contract action. See Carter, slip op. at 4-5; Morgan, 596 U.S. at 418. Outside of its limited role in requiring the summary resolution of contract ambiguities in the scope of the arbitration agreement itself—something that spares arbitration-law litigants (and courts) from having to conduct lengthy trials to resolve contract ambiguities about scope—the federal policy in favor of arbitration plays no meaningful role, apart from ensuring that arbitration agreements are on an equal footing with other contracts.
Carter is of interest because it concerns FAA Section 16 interlocutory appeals, FAA Section 4 formation disputes, and Morgan‘s continuing role in curbing overbroad invocations of pro-arbitration policy.
Background
Carter, an employee, sued SP Plus Corporation, the employer, under state and federal minimum-wage statutes. Shortly thereafter, the district judge stayed the litigation in favor of Continue Reading »
What if your adversary obtains a default award against your business but your business never agreed to arbitrate the dispute?
