In the case of Buckeye Check Cashing, Inc. v. John Cardegna et al., 2005, the U.S Supreme Court ruled that challenges to a contract's validity should be decided by an arbitrator rather than a court when there is an arbitration clause in place. The dispute arose from allegations made by Cardegna and others that Buckeye Check Cashing was charging usurious interest rates disguised as fees for cashing post-dated checks, which they claimed violated Florida lending laws and rendered their contracts void ab initio (from inception). However, these contracts contained an arbitration clause requiring all disputes to be resolved through arbitration instead of courts. The Supreme Court held that since the challenge was against the contract as a whole and not specifically against the arbitration clause itself, it must go before an arbitrator first.

In the dissenting opinion for Buckeye Check Cashing, Inc. v. John Cardegna et al., Justice Thomas argued that the Federal Arbitration Act (FAA) does not apply to proceedings in state courts and therefore, it was incorrect for the majority to rely on this act as a basis for their decision. He contended that when Congress enacted FAA, its intention was only to make arbitration agreements enforceable in federal courts and did not intend to interfere with states' rights or jurisdiction over contract disputes. According to him, by applying FAA's provisions about separability of arbitration clauses from contracts at large into state court proceedings without clear congressional mandate is an unwarranted expansion of federal law into areas traditionally regulated by states - contract law being one such area.