Bernhardt v. Polygraphic Co. of America, Inc.

Bernhardt (plaintiff) was employed by the Polygraphic Company of America, Inc. (company) (defendant). Bernhardt's employment contract contained an arbitration clause stipulating that the parties would submit any contract dispute for binding arbitration in accordance with New York law. A contract dispute arose, and Bernhardt sued the company. The United States District Court for the District of Vermont exercised diversity jurisdiction over the case pursuant to Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), because Bernhardt was a Vermont resident and the company was a New York corporation. Erie held that, in diversity cases, procedural matters are governed by federal law while substantive matters are governed by state law. The company moved to stay the case pending the outcome of arbitration. The district court ruled that the arbitration clause affected Bernhardt's substantive rights. The court applied Vermont’s law, under which arbitration clauses were unenforceable, and denied the company's motion. The company appealed to the United States Court of Appeals for the Second Circuit, which reversed the district court. The appellate court reasoned that whether the case was tried in court or submitted to arbitration was a procedural matter governed by federal law and that federal law required enforcement of the arbitration clause. Bernhardt appealed to the United States Supreme Court, which granted certiorari.