Prima Paint Corp. V. Flood & Conklin Mfg. Co.
Prima Paint Corp. v. Flood & Conklin Mfg. Co. (388 U.S. 395 (1967)), is a United States Supreme Court decision that established what has become known as the "separability principle" in contracts with arbitration clauses. Following an appellate court ruling a decade earlier, it reads the 1925 Federal Arbitration Act (FAA) to require that any challenges to the enforceability of such a contract first be heard by an arbitrator, not a court, unless the claim is that the clause itself is unenforceable.
The case arose from a claim by a New Jersey manufacturer that a Maryland firm had misrepresented itself in a transaction and thus the contract between the two was unenforceable, precluding the arbitration agreed upon in the event of a dispute. Abe Fortas wrote for a 6-3 majority that the FAA was broad enough to require arbitration of all issues save the arbitration clause itself. Hugo Black's dissent called the majority's interpretation overbroad and at odds with Congressional intent in passing the law. He feared it would put legal matters in the hands of arbitrators with little or no legal understanding of it nor duty to follow the law.
In subsequent cases concerning the FAA, the Court has reaffirmed the separability principle and held that the FAA and this reading of it apply to arbitrable contracts under state law, even in cases where the contract is alleged to be illegal or state law provides for administrative dispute resolution. This has been seen as expanding the use of arbitration in contracts in the later 20th century, not only those between businesses but between businesses and consumers as well.
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