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US state-law barriers to enforcing online consumer arbitration clauses: FAA pre-emption and recent decisions from Pennsylvania, Massachusetts and New Jersey

Published on: 16 July 2025

Published by a Law360 reporter

Legal News

Article summary

Significant skirmishes have unfolded in state courts across the country, yet they rarely garner the publicity of the US Supreme Court’s regular rulings construing the Federal Arbitration Act (FAA). Ordinarily, state contract principles control how arbitration pacts are formed and whether they are valid. Accordingly, opponents of arbitration urge tighter state-law thresholds for enforcing the terms shown to consumers in online purchases, where arbitration provisions often appear. Moreover, even though the FAA generally pre-empts state rules that do not ‘place arbitration agreements on an equal footing with other contracts’—as the Court explained in its 2011 decision in AT&T Mobility LLC v Concepcion—certain state benches have embraced tougher tests for arbitration clauses, asserting those tests also reach other contracts sharing comparable characteristics. Such state-law rulings can dramatically shape whether arbitration agreements are enforced—which may decide whether a matter proceeds to bilateral arbitration or becomes a full-blown class action in court. Divergent outcomes across jurisdictions also pose challenges for many companies, particularly enterprises selling goods and services to consumers via the internet...

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