Amicus Curiae Brief — The Ritz-Carlton Development Company, Inc., et al., Petitioners v. Krishna Narayan, et al.

No. 17-694

In the

Supreme Court of the United States

THE RITZ-CARLTON DEVELOPMENT

COMPANY, INC., et al.,

Petitioners,

v.

KRISHNA NARAYAN, et al.,

Respondents.

On Petition for a Writ of Certiorari to

the Supreme Court of H awaii

BRIEF AMICI CURIAE OF THE CHAMBER OF

COMMERCE OF THE UNITED STATES OF AMERICA,

THE NATIONAL ASSOCIATION OF HOMEBUILDERS,

AND THE AMERICAN RESORT DEVELOPMENT

ASSOCIATION IN SUPPORT OF PETITIONERS

Steven P. Lehotsky

Warren Postman

U.S. Chamber Litigation

Center, Inc.

1615 H Street, NW

Washington, DC 20062

(202) 463-5337

James G. Rizzo

David S. Jaffe

National A ssociation

of Home Builders

1201 15th Street, NW

Washington, DC 20005

(202) 266-8200

Thomas R. McCarthy

Counsel of Record

J. Michael Connolly

Consovoy McCarthy Park PLLC

3033 Wilson Boulevard, Suite 700

Arlington, VA 22201

(703) 243-9423

tom@consovoymccarthy.com

Robert G. Clements

Justin J. Vermuth

A merican Resort Development

A ssociation

1201 15th Street, NW

Washington, DC 20005

(202) 371-6700

Counsel for Amici Curiae

December 11, 2017

277585

i

TABLE OF CONTENTS

Page

TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . i

TABLE OF CITED AUTHORITIES . . . . . . . . . . . . . . . ii

INTEREST OF AMICI CURIAE . . . . . . . . . . . . . . . . . . 1

I N T RODUC T ION A N D SU M M A RY OF

ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

I.

The Hawaii Supreme Court’s Decision

Patently Violates The FAA . . . . . . . . . . . . . . . . . . 8

A. The Decision Below Singles Out

Arbitration Agreements For Disfavored

Treatment In Contravention Of The

FAA’s Equal-Footing Principle . . . . . . . . . . 9

B. The Decision Below Runs A foul

Of The Liberal Federal Policies In

Favor Of Arbitration And Arbitration

Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 14

II. Because State-Court Fidelity To Federal

Arbitration Law Is Of Paramount Importance,

Summary Reversal Is Warranted . . . . . . . . . . . 16

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

ii

TABLE OF CITED AUTHORITIES

Page

CASES

Ai v. Frank Huff Agency,

607 P.2d 1304 (Haw. 1980) . . . . . . . . . . . . . . . . . . 11, 12

American Express Co. v.

Italian Colors Restaurant,

133 S. Ct. 2304 (2013) . . . . . . . . . . . . . . . . . . . . . . . . 1, 8

AT&T Mobility LLC v. Concepcion,

563 U.S. 333 (2011) . . . . . . . . . . . . . . . . . . . . . . . passim

Booker v. Robert Half Int’l, Inc.,

413 F.3d 77 (D.C. Cir. 2005) . . . . . . . . . . . . . . . . . . 7, 14

Buckeye Check Cashing, Inc. v. Cardegna,

546 U.S. 440 (2006) . . . . . . . . . . . . . . . . . . . . . . . . . 8, 16

Citizens Bank v. Alafabco, Inc.,

539 U.S. 52 (2003) . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 17

COMSAT Corp. v. National Science Found.,

190 F.3d 269 (4th Cir. 1999) . . . . . . . . . . . . . . . . . . . . 15

DIRECTV, Inc. v. Imburgia,

136 S. Ct. 463 (2015) . . . . . . . . . . . . . . . . . . . . . . . . . 4, 5

Doctor’s Assocs., Inc. v. Casarotto,

517 U.S. 681 (1996) . . . . . . . . . . . . . . . . . . . . . . . . . 4, 10

iii

Cited Authorities

Page

Gabriel v. Island Pac. Acad., Inc.,

140 Haw. 325 (2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Gilmer v. Interstate/Johnson Lane Corp.,

500 U.S. 20 (1991) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Horne v. USDA,

135 S. Ct. 2419 (2015) . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Iberia Credit Bureau, Inc. v.

Cingular Wireless LLC,

379 F.3d 159 (5th Cir. 2004) . . . . . . . . . . . . . . . . . . . . 10

Kindred Nursing Centers Ltd. P’ship v. Clark,

137 S. Ct. 1421 (2017) . . . . . . . . . . . . . . . . . . . 10, 12, 13

KPMG LLP v. Cocchi,

132 S. Ct. 23 (2011) . . . . . . . . . . . . . . . . . . . . . . . . . 8, 17

Marmet Health Care Ctr. Inc. v. Brown,

132 S. Ct. 1201 (2012) . . . . . . . . . . . . . . . . . . . . 8, 16, 17

McDonald v. City of West Branch, Mich.,

466 U.S. 284 (1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Mitsubishi Motors Corp. v.

Soler Chrysler-Plymouth, Inc.,

473 U.S. 614 (1985) . . . . . . . . . . . . . . . . . . . . . . . . . 14-15

Moses H. Cone Mem’l Hosp. v.

Mercury Constr. Corp.,

460 U.S. 1 (1983) . . . . . . . . . . . . . . . . . . . . . . . . . passim

iv

Cited Authorities

Page

Murr v. State of Wisconsin,

137 S. Ct. 1933 (2017) . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Nitro-Lift Techs., LLC v. Howard,

133 S. Ct. 500 (2012) . . . . . . . . . . . . . . . . . . . . . . passim

Oblix, Inc. v. Winiecki,

374 F.3d 488 (7th Cir. 2004) . . . . . . . . . . . . . . . . . . . . 10

Oxford Health Plans LLC v. Sutter,

133 S. Ct. 2064 (2013) . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Perry v. Thomas,

482 U.S. 483 (1987) . . . . . . . . . . . . . . . . . . . . 6, 9, 10, 14

Preston v. Ferrer,

552 U.S. 346 (2008) . . . . . . . . . . . . . . . . . . . . . . 9, 15, 18

Sackett v. EPA,

132 S. Ct. 1367 (2012) . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Scherk v. Alberto-Culver Co.,

417 U.S. 506 (1974) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Schweiker v. Hansen,

450 U.S. 785 (1981) . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Secs. Indus. Ass’n v. Connolly,

883 F.2d 1114, 1119-20 (1st Cir. 1989) . . . . . . . . . 10, 18

v

Cited Authorities

Page

U.S. Army Corps of Eng’rs v. Hawkes Co., Inc.,

136 S. Ct. 1807 (2016) . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Vaden v. Discover Bank,

556 U.S. 49 (2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Volt Info. Sciences, Inc. v. Bd. of Trustees of

Leland Stanford Junior Univ.,

489 U.S. 468 (1989) . . . . . . . . . . . . . . . . . . . . . . . 7, 9, 15

STATUTES AND OTHER AUTHORITIES

U.S. Const., Art. VI, cl. 2 . . . . . . . . . . . . . . . . . . . . . . . . . 16

9 U.S.C. § 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 10

1 Thomas H. Oehmke & Joan M. Brovins,

Commercial Arbitration § 10:55 (Supp. 2015) . . . . . 15

3 Ian R. MacNeil et al., Federal Arbitration

Law § 34.1 (1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

4 Hon. Paul A. Crotty & Robert E. Crotty,

Business and Commercial Litigation in Federal

Courts § 48:32 (3d ed. Supp. 2014) . . . . . . . . . . . . 15-16

D ir ecT V, In c . v. Im b ur g i a , No. 14 - 4 6 2 ,

Tr. of Oral Arg. (Oct. 6, 2015) . . . . . . . . . . . . . . . . . . 17

Eugene Gressman et al., Supreme Cou r t

Practice 350 (9th ed. 2007) . . . . . . . . . . . . . . . . . . . . . 17

Sup. Ct. R. 37.6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1

INTEREST OF AMICI CURIAE1

The Chamber of Commerce of the United States of

America is the world’s largest federation of businesses

and associations. The Chamber represents three hundred

thousand direct members and indirectly represents an

underlying membership of more than three million U.S.

businesses and professional organizations of every size

and in every economic sector and geographic region of

the country. An important function of the Chamber is to

represent the interests of its members in matters before

the courts, Congress, and the Executive Branch.

To that end, the Chamber regularly files amicus

curiae briefs in cases that raise issues of concern to the

Nation’s business community, including cases involving

the enforceability of arbitration agreements. See, e.g.,

American Express Co. v. Italian Colors Restaurant, 133

S. Ct. 2304 (2013); Oxford Health Plans LLC v. Sutter,

133 S. Ct. 2064 (2013); AT&T Mobility LLC v. Concepcion,

563 U.S. 333 (2011). Indeed, the Chamber filed an amicus

curiae brief in this case when it was previously before the

Court. See The Ritz-Carlton Development Company v.

Narayan, No. 15-406.

Many of the Chamber’s members regularly employ

arbitration agreements in their contracts. Arbitration

1. Pursuant to this Court’s Rule 37.6, counsel for amici

curiae certifies that this brief was not authored in whole or in

part by counsel for any party and that no person or entity other

than amici curiae, their members, or their counsel has made

a monetary contribution intended to fund the preparation or

submission of this brief. All parties have received timely notice of

amici curiae’s intent to file and consented to the filing of this brief.

2

allows them to resolve disputes promptly and efficiently

while avoiding the costs associated with traditional

litigation. Arbitration is speedy, fair, inexpensive, and

less adversarial than litigation in court. Based on the

legislative policies reflected in the Federal Arbitration

Act (“FAA”) and this Court’s consistent endorsement

of arbitration, the Chamber’s members have structured

millions of contractual relationships around arbitration

agreements.

The National Association of Home Builders (NAHB)

is a Washington, DC-based trade association whose

mission is to enhance the climate for housing and the

building industry. Chief among NAHB’s missions is to

provide and expand opportunities for all people to have

safe, decent, and affordable housing. Founded in 1942,

NAHB is a federation of more than 700 state and local

associations. About one-third of NAHB’s 140,000 members

are home builders or remodelers and its builder members

construct about 80 percent of the new homes each year in

the United States. NAHB and its members work for the

American dream of home ownership, as well as for the

development of housing that creates vibrant and affordable

communities. NAHB is a vigilant advocate in the Nation’s

courts and frequently participates as a party or amicus

curiae to safeguard the rights of its members. See, e.g.,

Murr v. State of Wisconsin, 137 S. Ct. 1933 (2017); U.S.

Army Corps of Eng’rs v. Hawkes Co., Inc., 136 S. Ct. 1807

(2016); Horne v. USDA, 135 S. Ct. 2419 (2015); Sackett v.

EPA, 132 S. Ct. 1367 (2012).

The ability to operate effectively in the home building

industry and to price a home competitively depends on the

degree to which the builder’s overall costs are certain and

3

predictable. Predictability is of paramount importance as

it allows builders to accurately estimate and account for

costs in building homes. Further, the more confidence a

builder has in pre- and post-construction costs, the more

cost-effective the home building process as well as the

builder’s ability to pass those corresponding savings

through to homeowners. Litigation, and its attendant

costs in time and money, is anathema to predictability.

Employing arbitration agreements allows builders and

homebuyers to avoid litigation and conserve resources,

which is beneficial to both sides. Uniform, consistent

application of the FAA is essential to securing these

benefits.

The American Resort Development Association

(“ARDA”) is the non-profit trade association representing

the interests of the time-share and vacation ownership

industries. Founded in 1969, ARDA represents more

than 1,000 time-share development and related service

corporations. It is the mission of ARDA to foster and

promote the growth of the time-share and vacation

ownership industry and to serve its members through

education, public relations and communications,

legislative advocacy, membership development, and ethics

enforcement. Many ARDA members regularly employ

arbitration agreements in their contracts.

Amici thus have a strong interest in the faithful and

consistent application of this Court’s FAA jurisprudence, in

particular, the “liberal federal policy favoring arbitration

agreements.” Moses H. Cone Memorial Hosp. v. Mercury

Const. Corp., 460 U.S. 1, 24 (1983). And because “[s]tate

courts rather than federal courts are most frequently

called upon to apply the [FAA],” Nitro-Lift Techs., LLC

4

v. Howard, 133 S. Ct. 500, 501 (2012), amici have a strong

interest in ensuring the state courts’ uniform, consistent,

and accurate application of the FAA as interpreted by

this Court.

INTRODUCTION AND SUMMARY

OF ARGUMENT

This is the second time Petitioners have needed this

Court to intervene in this matter because of the Hawaii

Supreme Court’s failure to adhere to binding and directly

applicable FAA precedent.

The first time, the Hawaii Supreme Court refused to

enforce the parties’ contracted-for arbitration agreement

by applying a special rule applicable only to arbitration—

one that makes ambiguous arbitration agreements per se

unenforceable. App. 57a-58a. Petitioners challenged that

rule as violating two fundamental tenets of the FAA: (1)

it “singl[es] out arbitration provisions for suspect status,”

Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687

(1996); and (2) it runs contrary to the “liberal federal policy

favoring arbitration agreements,” Moses H. Cone, 460 U.S.

at 24, by construing ambiguity against, rather than “in

favor of arbitration,” id. By singling out arbitration for

disfavored treatment and imposing a presumption against

arbitrability, the Hawaii Supreme Court had exhibited the

very “judicial hostility to arbitration” that the FAA was

intended to defeat. AT&T Mobility LLC v. Concepcion,

563 U.S. 333, 339 (2011).

This Court vacated that decision and remanded

the case for reconsideration in light of DIRECTV, Inc.

v. Imburgia, 136 S. Ct. 463 (2015). That case similarly

5

overturned the refusal of the California Court of Appeal

to enforce an agreement to arbitrate, holding that the

ruling, in violation of the FAA, did not “place arbitration

contracts on equal footing with all other contracts” and

failed to “give due regard … to the federal policy favoring

arbitration.” Id. at 471 (internal quotations omitted).

On remand, the Hawaii Supreme Court yet again

refused to enforce the parties’ arbitration agreement.

Undoubtedly aware that Imburgia barred it from

imposing a rule making arbitration agreements uniquely

unenforceable if they are ambiguous, the Hawaii court

simply came up with a new reason to strike down the

contract.

As relevant here, the Hawaii Supreme Court found

a way to rule that three provisions of the arbitration

agreement were unconscionable: its prohibition on punitive

damages, discovery limitations, and confidentiality

requirement. App. 20a-27a. Further, the Hawaii court

invalidated the entire arbitration agreement, despite

a severability clause expressly requiring that any part

of the arbitration agreement held to be unenforceable

“shall be severed and shall not affect either the duties

to mediate and arbitrate hereunder or any other part of

this Article.” App. 9a. These shifting rationales should not

save the Hawaii Supreme Court’s hostility to arbitration

from invalidation.

First, the court once again singled out arbitration for

disfavored treatment—this time by refusing to enforce the

severability clause. The court recognized that Hawaii’s

“‘general rule is that severance of an illegal provision

of a contract is warranted and the lawful portion of the

6

agreement is enforceable when the illegal provision is

not central to the parties’ agreement.” App. 28a. Here,

though, it disregarded the “general rule.” Instead,

“without further explanation, and without citing any

Hawaii decisions that disregarded a severance clause

in such circumstances,” Pet. 13, the court conclusorily

asserted that unconscionability “pervade[d]” the entirety

of the parties’ arbitration agreement and held that this

was sufficient reason to refuse to enforce an arbitration

agreement, App. 29a, notwithstanding that the agreement

could be sensibly applied without the three purportedly

unconscionable provisions. When a state-law rule singles

out arbitration agreements this way, “the analysis is

straightforward: The conflicting rule is displaced by the

FAA.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333,

341 (2011).

The lower court’s unconscionability holdings singled

out arbitration for disfavored treatment by other means

as well. Specifically, the court held the agreement’s

limits on discovery and requirement of confidentiality

unconscionable because they would give respondents

comparatively less access to information about their

claims than would full-blown discovery through litigation

in court. App. 23a, 25a. To be sure, “the inquiry becomes

more complex when a doctrine normally thought to be

generally applicable, such as duress or, as relevant here,

unconscionability, is alleged to have been applied in a

fashion that disfavors arbitration.” Concepcion, 563 U.S.

at 341. But “a court may not ‘rely on the uniqueness of an

agreement to arbitrate as a basis for a state-law holding

that enforcement would be unconscionable.’” Id. (quoting

Perry v. Thomas, 482 U.S. 483, 493 n.9 (1987)). That is

precisely what the Hawaii Supreme Court did here.

7

Second, the Hawaii ruling continues to frustrate the

“liberal federal policy favoring arbitration agreements.”

Id. at 346 (quotation omitted). By refusing to enforce the

arbitration agreement’s severance clause, the court ran

afoul of the FAA’s “principal purpose”—to “‘ensure that

private arbitration agreements are enforced according to

their terms.’” Id. at 344 (quoting Volt, 489 U.S., at 478);

see Booker v. Robert Half Int’l, Inc., 413 F.3d 77, 85 (D.C.

Cir. 2005) (enforcing arbitral severance clause is “faithful

to the federal policy which requires that we rigorously

enforce agreements to arbitrate”) (quotation omitted).

And, the court exhibited hostility to arbitration itself by

refusing to enforce the agreement’s procedural limitations

on discovery and confidentiality requirement—rules that

are hallmarks of arbitration.

As Petitioners aptly put it, “[t]he decision below, like

the Hawaii Supreme Court’s initial decision in this case,

manifests the persistent and longstanding judicial hostility

to arbitration agreements that the FAA was meant to

reverse and that this Court has long condemned.” Pet. 4

(internal quotation and citation omitted). In other words,

rather than correct its errors on remand, the Hawaii

Supreme Court instead doubled down on its hostility to

arbitration.

As this Court has recognized, “state supreme courts[’]

adhere[nce] to a correct interpretation of the [FAA]” is

“a matter of great importance,” Nitro-Lift Techs., LLC

v. Howard, 133 S. Ct. 500, 501 (2012). That is because

state courts’ refusal to enforce arbitration agreements

undermines the FAA’s purpose of providing efficient

and effective dispute resolution according to the parties’

negotiated terms. This Court thus regularly intervenes

8

when state courts fail to faithfully apply the FAA and

this Court’s precedents; indeed, the Court has summarily

reversed state court decisions running afoul of the FAA

several times in recent years. See, e.g., id. at 501, 503;

Marmet Health Care Ctr. Inc. v. Brown, 132 S. Ct. 1201,

1202 (2012) (per curiam); KPMG LLP v. Cocchi, 132 S.

Ct. 23, 26 (2011) (per curiam); Citizens Bank v. Alafabco,

Inc., 539 U.S. 52, 56-58 (2003) (per curiam). Summary

reversal is warranted here too.

ARGUMENT

I.

The Hawaii Supreme Court’s Decision Patently

Violates The FAA.

In 1925, Congress responded to “centuries of judicial

hostility to arbitration agreements,” Scherk v. AlbertoCulver Co., 417 U.S. 506, 510-11 (1974), by enacting the

FA A, thereby codifying a “national policy favoring

arbitration” and “plac[ing] arbitration agreements on an

equal footing with all other contracts,” Buckeye Check

Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006); see

also American Express Co. v. Italian Colors Restaurant,

133 S. Ct. 2304, 2308-09 (2013) (“Congress enacted the

FAA in response to widespread judicial hostility to

arbitration”) (citing Concepcion, 563 U.S. at 339); Gilmer

v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991)

(“[The FAA’s] purpose was to reverse the longstanding

judicial hostility to arbitration agreements that had

existed at English common law and had been adopted by

American courts, and to place arbitration agreements

upon the same footing as other contracts.”).

9

Section 2 is the FAA’s centerpiece. See Moses H. Cone

Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24

(1983). It makes written arbitration agreements “valid,

irrevocable, and enforceable” as a matter of federal law,

“save upon such grounds as exist at law or in equity for

the revocation of any contract,” 9 U.S.C. § 2; see also

Perry, 482 U.S. at 489. Section 2 thus “create[s] a body

of federal substantive law of arbitrability,” id., the central

mandate of which requires arbitration agreements to be

“enforced according to their terms,” Volt Info. Sciences,

Inc. v. Bd. of Trustees of Leland Stanford Junior Univ.,

489 U.S. 468, 479 (1989).

In particular, this substantive body of federal

arbitration law includes: (1) an “equal footing” principle

that prohibits courts from imposing rules that single out

arbitration for disfavored treatment, Concepcion, 563

U.S. at 339; and (2) a “declaration of a liberal federal

policy favoring arbitration agreements, notwithstanding

any state substantive or procedural policies to the

contrary,” Moses H. Cone, 460 U.S. at 24; see also

Concepcion, 563 U.S. at 345-46 (“[O]ur cases place it

beyond dispute that the FAA was designed to promote

arbitration.”). The Hawaii Supreme Court’s ruling

patently violates both of these rules.

A.

The Decision Below Singles Out Arbitration

Agreements For Disfavored Treatment In

Contravention Of The FAA’s Equal-Footing

Principle.

Section 2 of the FAA preempts contrary state law,

see Preston v. Ferrer, 552 U.S. 346, 353 (2008), except to

the extent preserved by its savings clause. The savings

10

clause preserves state law only if it serves as a ground

“for the revocation of any contract.” 9 U.S.C. § 2 (emphasis

added). The “any contract” limitation is a reference to

state laws of general applicability. Accordingly, the FAA

preempts any state-law rule that “singl[es] out arbitration

provisions for suspect status.” Doctor’s Assocs., Inc. v.

Casarotto, 517 U.S. 681, 687 (1996). For good reason, this

rule is sometimes called the “equal-footing principle.”

Kindred Nursing Centers Ltd. P’ship v. Clark, 137 S. Ct.

1421, 1428 (2017).

It operates in two ways. First, the rule prevents

states from adopting novel laws or rules that apply

only to arbitration. “A state-law principle that takes

its meaning precisely from the fact that a contract to

arbitrate is at issue does not comport with [the text

of Section 2].” Perry, 482 U.S. at 492 n.9; see Doctor’s

Assocs., 517 U.S. at 687 (“Courts may not … invalidate

arbitration agreements under state laws applicable only to

arbitration provisions.”) (emphasis in original); Oblix, Inc.

v. Winiecki, 374 F.3d 488, 492 (7th Cir. 2004) (“[N]o state

can apply to arbitration (when governed by the Federal

Arbitration Act) any novel rule.”).

Second, it bars the manipulation of generally

applicable contract defenses in a “fashion that disfavors

arbitration.” Concepcion, 563 U.S. at 341; see also Iberia

Credit Bureau, Inc. v. Cingular Wireless LLC, 379 F.3d

159, 167 (5th Cir. 2004) (“[S]tate courts are not permitted

to employ those general doctrines in ways that subject

arbitration clauses to special scrutiny.”). Section 2 thus

embodies a “principle of rigorous equality”—“antagonism

toward arbitration … howsoever manifested in state law,

is preempted.” Secs. Indus. Ass’n v. Connolly, 883 F.2d

1114, 1119-20 (1st Cir. 1989).

11

This decision violates the equal-footing principle in

both respects. In refusing to enforce the agreement’s

severance clause, the Hawaii Supreme Court adopted a

novel approach that applies only to arbitration. Pet. 31

(“Simply put, this is not an approach the Hawaii Supreme

Court applies outside of the arbitration context.”). Under

longstanding Hawaii law, when deciding whether to sever

unlawful provisions from an otherwise lawful contract, a

Hawaii court asks whether the unlawful provisions “may

be excised from the [contract] without doing violence to the

[contract’s] essential objects.” Ai v. Frank Huff Agency,

607 P.2d 1304, 1313 (Haw. 1980). Naturally, then, that

inquiry calls for a determination of whether the contract

could still be enforced in a manner consistent with its

“essential object.” Id.

Here, that inquiry should have been easy. The

essential object of the arbitration agreement is to resolve

covered disputes via mediation and arbitration. The three

provisions held unenforceable by the Hawaii Supreme

Court are merely rules to be applied once the arbitration

has commenced. The agreement remains effective and

enforceable even without them. As Petitioners explain, this

point “is proved by petitioners’ offer, on the initial remand

from this Court, to proceed to arbitration without invoking

those provisions of the contract that were challenged as

unconscionable—an offer that the court below failed to

mention in its decision.” Pet. 29.

The Hawaii Supreme Court’s inclusion of the entire

arbitration agreement in its opinion helps illustrate that

it could be enforced consistent with its essential object

without the three purportedly unconscionable provisions.

They comprise a few scattered sentences of an agreement

that covers three-and-a-half pages. App. 6a-9a. Viewing

12

the agreement as a whole, it is easy to see that removing

those three provisions would leave an agreement that

could still function in the same basic manner. It would

have fewer procedural rules. But there is no doubt that it

could be sensibly interpreted and applied “without doing

violence to the [agreement’s] essential object[].” Ai, 607

P.2d at 1313. Compare Gabriel v. Island Pac. Acad., Inc.,

140 Haw. 325, 342 (2017) (holding arbitration agreement

unenforceable where three sentences of a four-sentence

arbitration agreement were unlawful and the remaining

sentence did not even mention arbitration).

Instead of engaging in the normal severance analysis

called for by Hawaii law, the Hawaii Supreme Court

simply concluded—without explanation or citation—that

unconscionability “pervades” the entire arbitration

agreement. App. 29a; Pet. 31 (“[T]he court below pointed

to no Hawaii decisions in support of its severance ruling.”).

But this is not how Hawaii treats severance clauses outside

the context of arbitration. There does not appear to be

“any Hawaii case other than this one in which the court

invalidated an entire agreement or contract in the face

of a severance clause where the remaining contractual

language was easily enforced.” Id. This “makes clear

the arbitration-specific character” of the court’s novel

approach to severance. Kindred Nursing Ctrs. v. Clark,

137 S. Ct. 1421, 1428 (2017); id. at 1427 (“No Kentucky

court, so far as we know, has ever before demanded that

a power of attorney explicitly confer authority to enter

into contracts implicating constitutional guarantees.”).

The court’s refusal to enforce the severance clause

is sufficient grounds for summary reversal. But the

unconscionability holdings that preceded that decision

violated the “equal footing” principle too. The Hawaii

13

Supreme Court claimed to apply generally applicable state

unconscionability principles in holding that the arbitration

agreement’s limitations on discovery and confidentiality

requirement were unenforceable. But a closer look reveals

that the court impermissibly “rel[ied] on the uniqueness of

an agreement to arbitrate as a basis for a state-law holding

that enforcement would be unconscionable.’” Concepcion,

563 U.S. at 341.

Specifically, the Hawaii Supreme Court held that

these provisions were oppressive and thus substantively

unconscionable because, as compared with litigants in

court, Respondents would be “hindered in their ability

from discovering potentially relevant information for

their claims against the Defendants.” App. 23a; id. (“This

restriction runs in direct contravention to Hawaii’s

‘basic philosophy’ that a party is entitled to all relevant,

unprivileged information pertaining to the subject matter

of the action.”); id. at 25a (“[W]here an agreement contains

severe limitations on discovery alongside a confidentiality

provision, the plaintiff may be deprived of the ability to

adequately discover material information about his or her

claim.”). This may be a slightly subtler means of singling

out arbitration agreements in that there is no special rule

targeting arbitration, but it violates the “equal footing”

doctrine just the same “by disfavoring contracts that (oh

so coincidentally) have the defining features of arbitration

agreements.” Kindred Nursing, 137 S. Ct. at 1426.

Indeed, in Concepcion, the Court pointed to a state law

invalidating arbitration agreements that do not provide

for “full discovery” as an “obvious” example of one that

is barred by the FAA. 563 U.S. at 341-42. 2

2. In declaring the agreement’s discovery limitations

unconscionable, the Hawaii Supreme Court added that its

conclusion was supported by the Hawaii A rbitration Act,

14

B. The Decision Below Runs Afoul Of The Liberal

Federal Policies In Favor Of Arbitration And

Arbitration Agreements.

As explained above, the Hawaii Supreme Court

violated the equal footing doctrine by refusing to enforce

the arbitral severance clause and by concluding that certain

contracted-for arbitral procedures were unconscionable.

Those same rulings run afoul of the broad federal policies

in favor of arbitration and arbitration agreements, see

Moses H. Cone, 460 U.S. at 24, which apply the same in

Hawaii courts as they do in any federal court.

By refusing to enforce the arbitration agreement’s

severance clause, the Hawaii Supreme Court ran

afoul of the “liberal federal policy favoring arbitration

agreements.” Id. That policy is reflected in the “principal

purpose” of the FAA—to “‘ensure that private arbitration

agreements are enforced according to their terms.’”

Concepcion, 563 U.S. at 344 (citation omitted). As thenJudge Roberts explained in Booker v. Robert Half Int’l,

Inc., 413 F.3d 77 (D.C. Cir. 2005), applying a severance

clause in a contract to enforce the contract’s arbitration

clause honors both “the intent of the parties reflected in

the [contract]” and “the federal policy which ‘requires

that we rigorously enforce agreements to arbitrate.’”

Id. at 85-86 (quoting Mitsubishi Motors Corp. v. Soler

which makes nonwaivable a statutory provision that authorizes

arbitrators to subpoena witnesses and other evidence and order

the depositions of witnesses. App. 23a-25a. But the presence of a

statute setting out the same rule makes no difference. Whether

accomplished by a court or a legislature, a state-law rule conflicting

with the FAA “must give way.” Perry, 482 U.S. at 491.

15

Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985)). This

is particularly so where the severance clause is part of the

arbitration agreement itself, App. 9a, as the FAA requires

arbitration agreements to be “enforced according to their

terms,” Volt Info. Sciences, 489 U.S. at 479.

Similarly, the Hawaii Supreme Court ran afoul of

the federal policy in favor of arbitration in holding the

discovery limitations and the confidentiality requirement

unconscionable. Attacking arbitration for being less

formal than litigation is nonsensical given that the “prime

objective” of arbitration is to “achieve ‘streamlined

proceedings and expeditious results.’” Preston v. Ferrer,

552 U.S. 346, 357 (2008) (quoting Mitsubishi Motors, 473

U.S. at 633). Indeed, limited discovery and confidentiality

are hallmarks of arbitration. See, e.g., McDonald v.

City of West Branch, Mich., 466 U.S. 284, 291 (1984)

(“[A]rbitral factfinding is generally not equivalent to

judicial factfinding …. [T]he usual rules of evidence do

not apply; and rights and procedures common to civil

trials, such as discovery … are often severely limited

or unavailable.”); COMSAT Corp. v. National Science

Found., 190 F.3d 269, 276 (4th Cir. 1999) (“A hallmark of

arbitration—and a necessary precursor to its efficient

operation—is a limited discovery process.”); 3 Ian R.

MacNeil et al., Federal Arbitration Law § 34.1 at 34:2

(1997) (“Limitations on discovery, particularly judicially

initiated discovery, remain one of the hallmarks of

American commercial arbitration, including arbitration

under the FAA.”); 1 Thomas H. Oehmke & Joan M.

Brovins, Commercial Arbitration § 10:55 (Supp. 2015)

(“One hallmark of arbitration is the confidentiality of

the process and the award, unless all parties stipulate

other w ise.”); 4 Hon. Paul A. Crotty & Robert E.

16

Crotty, Business and Commercial Litigation in Federal

Courts § 48:32 (3d ed. Supp. 2014) (“Arbitration is

generally considered to be confidential.”). An attack on

the agreement’s limited discovery and confidentiality

provisions is thus an attack on arbitration itself. The

decision below therefore contravenes the FAA and its

“federal policy favoring arbitration.” Buckeye Check

Cashing, 546 U.S. at 443.

II. Because State-Court Fidelity To Federal Arbitration

Law Is Of Paramount Importance, Summary

Reversal Is Warranted.

When state courts fail to apply this Court’s precedents,

the Court has not hesitated to intervene. See, e.g., Marmet

Health, 132 S. Ct. at 1202 (“When this Court has fulfilled

its duty to interpret federal law, a state court may not

contradict or fail to implement the rule so established.”

(citing U.S. Const., Art. VI, cl. 2.)). Unlike other areas of

federal law, the FAA is unique in its reliance on state-court

enforcement. Because of the FAA’s “nonjurisdictional

cast,” Vaden v. Discover Bank, 556 U.S. 49, 59 (2009),

“[s]tate courts rather than federal courts are most

frequently called upon to apply the [FAA], including the

Act’s national policy favoring arbitration,” Nitro-Lift, 133

S. Ct. at 501. Because state supreme court decisions often

represent the final say in the enforcement of arbitration

agreements, this Court’s superintendence of the state

courts is of utmost importance in the context of this

Court’s FAA jurisprudence. See id. (“State courts rather

than federal courts are most frequently called upon to

apply the [FAA]. It is a matter of great importance,

therefore, that state supreme courts adhere to a correct

interpretation of the legislation.”).

17

Indeed, the Court has ordered summary reversal of

several recent state court decisions that failed to heed

its FAA precedents. See, e.g., id. at 501, 503 (reversing

Oklahoma Supreme Court’s decision that “disregard[ed]

this Court’s precedents on the FAA” and severability);

Marmet Health Care, 132 S. Ct. at 1202 (reversing a

decision of the West Virginia Supreme Court of Appeals

for “misreading and disregarding the precedents of this

Court interpreting the FAA”); KPMG, 132 S. Ct. at 26

(reversing Florida appellate court ruling that “failed to

give effect to the plain meaning of the [FAA] and to [this

Court’s] holding in” Dean Witter Reynolds); Citizens

Bank, 539 U.S. at 56-58 (reversing Alabama Supreme

Court’s “misguided” approach to FA A’s “involving

commerce” requirement in light of this Court’s decision

in Allied-Bruce); see also DirecTV, Inc. v. Imburgia, No.

14-462, Tr. of Oral Arg. at 50:8-17 (Oct. 6, 2015) (Breyer,

J.) (discussing risk of state court noncompliance with this

Court’s decisions).

This is one of those cases in which the Court’s

intervention is needed. The relevant law “is well settled

and stable, the facts are not in dispute, and the decision

below is clearly in error.” Eugene Gressman et al.,

Supreme Court Practice 350 (9th ed. 2007) (quoting

Schweiker v. Hansen, 450 U.S. 785, 791 (1981) (Marshall,

J., dissenting)); see also id. at 352 (“[T]he Court has shown

no reluctance to reverse summarily a state court decision

found to be clearly erroneous.”).

Moreover, summary reversal is especially warranted

given the judicial hostility to arbitration exhibited by the

court below. As explained above, the Hawaii Supreme

Court singled out arbitration agreements for disfavored

18

treatment, thus contravening the FAA’s “principle of

rigorous equality,” Secs. Indus. Ass’n, 883 F.2d at 1119-20,

and ran afoul of the national policy in favor of arbitration

agreements. On top of that, the lower court did this after

the Court afforded it the opportunity to correct its original

errors on remand. The lower court’s hostility to arbitration

thus is not an isolated incident.

This judicial hostility to arbitration directly

undermines the goals of the FAA. Because a “prime

objective [of arbitration] is to achieve ‘streamlined

proceedings and expeditious results,’” Preston v. Ferrer,

552 U.S. 346, 357 (2008), Congress instructed the courts

“to move the parties to an arbitrable dispute out of court

and into arbitration as quickly and easily as possible,”

Moses H. Cone Mem’l Hosp., 460 U.S. at 22. Yet despite

a binding arbitration agreement in this case, the parties’

dispute has stalled in the courts for more than five years,

with no end in sight.

Moreover, if left uncorrected, the decision below

would threaten to undermine the enforcement of

arbitration agreements throughout the State of Hawaii.

Indeed, the Hawaii Supreme Court’s recalcitrance may

send a message to the lower courts in the State that the

State’s highest court is unlikely to enforce arbitration

agreements; this would put every arbitration agreement

in a Hawaii contract at risk of nonenforcement.

Worse still, decisions like the one below, if left

unchecked, allow judicial hostility to arbitration to persist

elsewhere and may green-light other state courts to

engage in similar hostility against the FAA. This would

upset the uniform, faithful application of the FAA that is

critical to amici and their members.

19

CONCLUSION

Amici curiae respectfully request that the Court

grant the petition for certiorari and summarily reverse

the judgment of the Supreme Court of Hawaii.

Respectfully submitted,

Steven P. Lehotsky

Warren Postman

U.S. Chamber Litigation

Center, Inc.

1615 H Street, NW

Washington, DC 20062

(202) 463-5337

James G. Rizzo

David S. Jaffe

National A ssociation

of Home Builders

1201 15th Street, NW

Washington, DC 20005

(202) 266-8200

Thomas R. McCarthy

Counsel of Record

J. Michael Connolly

Consovoy McCarthy Park PLLC

3033 Wilson Boulevard, Suite 700

Arlington, VA 22201

(703) 243-9423

tom@consovoymccarthy.com

Robert G. Clements

Justin J. Vermuth

A merican Resort Development

A ssociation

1201 15th Street, NW

Washington, DC 20005

(202) 371-6700

Counsel for Amici Curiae

December 11, 2017