The U.S. Supreme Court case Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University in 1988 revolved around a dispute over an arbitration clause in a contract between the two parties. The issue was whether California law or federal law should govern the interpretation and enforcement of this clause under the Federal Arbitration Act (FAA). The court ruled that when parties agree to arbitrate any disputes arising from their contract under state rules, they essentially incorporate those rules into their agreement; thus, state laws are not preempted by FAA unless they undermine its goals and objectives. In this case, it meant that California's rule requiring arbitration to be stayed while related litigation is resolved could apply because it did not conflict with FAA's goal of ensuring enforceability of private agreements to arbitrate.

In the dissenting opinion for Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University, Justice Brennan disagreed with the majority's decision to allow parties in a contract dispute to choose arbitration rules from another state that limit their rights under California law. He argued that this interpretation undermines the Federal Arbitration Act (FAA), which was designed to ensure judicial enforcement of private agreements to arbitrate and place them on equal footing with other contracts without favoring one set of rules over another. In his view, allowing parties to opt out of certain state laws contradicts FAA’s purpose and could lead states or parties themselves choosing more favorable laws at others' expense. Furthermore, he contended that it is not clear whether both parties truly agreed upon using American Arbitration Association rules instead of those provided by California law.