Amicus Curiae Brief — Winston & Strawn LLP, Petitioner v. Constance Ramos, et al.

No. 18-1437

In the

Supreme Court of the United States

__________________

WINSTON & STRAWN, LLP,

Petitioner,

v.

CONSTANCE RAMOS; THE SUPERIOR COURT OF

SAN FRANCISCO COUNTY,

Respondents.

__________________

On Petition for Writ of Certiorari to the

California Court of Appeal

First Appellate District

__________________

BRIEF OF AMICI CURIAE THE CIVIL

JUSTICE ASSOCIATION OF CALIFORNIA AND

THE ASSOCIATION OF SOUTHERN

CALIFORNIA DEFENSE COUNSEL IN

SUPPORT OF PETITIONER

__________________

Benjamin G. Shatz

Manatt, Phelps &

Phillips, LLP

11355 W. Olympic Blvd.

Los Angeles, CA 90064

(310) 312-4383

Fred J. Hiestand

Counsel of Record

3418 Third Avenue, Suite 1

Sacramento, CA 95817

(916) 448-5100

fred@fjh-law.com

Counsel for

Amicus Curiae ASCDC

Counsel for

Amicus Curiae CJAC

June 17, 2019

Becker Gallagher · Cincinnati, OH · Washington, D.C. · 800.890.5001

i

QUESTION PRESENTED

Does this decision, dictated by the California Supreme

Court’s Armendariz opinion mandating specific

conditions for the validity of employment arbitration

agreements, violate the FAA’s broad preemptive

proscription against treating arbitration contracts

differently from other contracts?

ii

TABLE OF CONTENTS

QUESTION PRESENTED . . . . . . . . . . . . . . . . . . . . i

TABLE OF AUTHORITIES. . . . . . . . . . . . . . . . . . . iii

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

INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

SUMMARY OF ARGUMENT . . . . . . . . . . . . . . . . . . 5

REASONS TO GRANT THE WRIT . . . . . . . . . . . . . 7

I. THE DECISION OF THE CALIFORNIA

APPELLATE COURT CONFLICTS WITH THE

FAA AS LIMNED BY CONCEPCION AND ITS

PROGENY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

A. The Decision’s Reliance on Armendariz

Treats Arbitration Agreements More Harshly

than Contracts Generally in Violation of the

FAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

1. Federal Courts Finding Armendariz in

Conflict with the FAA and Concepcion . . . 9

2. California Courts Finding Armendariz in

Conflict with the FAA and Concepcion . . 12

3. Law Reviews Finding Armendariz in

Conflict with the FAA and Concepcion . . 13

B. The Decision Improperly Incorporates and

Misapplies this Court’s “Effective

Vindication” Principle to Void the Arbitration

Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

iii

TABLE OF AUTHORITIES

CASES

American Exp. Co. v. Italian Colors Restaurant,

570 U.S. 228 (2013). . . . . . . . . . . . . . . . . . 8, 15, 16

Armendariz v. Foundation Health Psychcare

Services, Inc., 6 P.3d 669 (Cal. 2000) . . . . . passim

AT&T Mobility LLC v. Concepcion,

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

Doctor’s Associates, Inc. v. Casarotto,

517 U.S. 681 (1996). . . . . . . . . . . . . . . . . . . . . . . . 9

Elijahjuan v. Superior Court,

210 Cal.App.4th 15 (2012) . . . . . . . . . . . . . . . . . 13

Flannery v. Law Offices of Burch &

Couldston, LLP,

2016 WL 7494876 (Cal. Ct. of Appeal) . . . . . . . . 13

Green Tree Financial Corp.-Alabama v. Randolph,

531 U.S. 79 (2000). . . . . . . . . . . . . . . . . . . . . . . . 17

Hudson v. Louisiana,

450 U.S. 40 (1981). . . . . . . . . . . . . . . . . . . . . . . . . 7

James v. Conceptus, Inc.,

851 F.Supp.2d 1020 (S.D. Tex. 2012) . . . . . . 10, 11

Kindred Nursing Centers Ltd. Partnership v. Clark,

137 S. Ct. 1421 (2017). . . . . . . . . . . . . . . . . . . . . . 7

Kolovrat v. Oregon,

366 U.S. 187 (1961). . . . . . . . . . . . . . . . . . . . . . . . 7

iv

Lucas v. Hertz Corp.,

875 F.Supp.2d 991 (N.D. Cal. 2012). . . . . . . . 9, 10

MHN Government Services, Inc v. Zaborowski,

136 S. Ct. 1539 (2016). . . . . . . . . . . . . . . . . . . . . 12

Mastrobuono v. Shearson Lehman Hutton, Inc.,

514 U.S. 52 (1995). . . . . . . . . . . . . . . . . . . . . . . . 16

Mercado v. Doctors Medical Center of

Modesto, Inc., 2013 WL 3892990

(Cal. Ct. App. July 26, 2013) . . . . . . . . . . . . . . . 12

Mitsubishi Motors Corp. v. Soler ChryslerPlymouth, 473 U.S. 614 (1985). . . . . . . . . . . . . . 14

Ramos v. Superior Court,

28 Cal.App.5th 1042 (2018) . . . . . . . . . . . . passim

Ruhe v. Masimo Corp.,

2011 WL 4442790 (C.D. Cal. Sept.16, 2011) . . . 10

Southland Corp. v. Keating,

465 U.S. 1 (1984). . . . . . . . . . . . . . . . . . . . . . . . 8, 9

Zaborowski v. MHN Government Services, Inc.,

601 Fed.Appx. 461 (9th Cir. 2014) . . . . . . . . . . . 11

STATUTES

9 U.S.C. § 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

v

OTHER AUTHORITIES

Stephen A. Broome, An Unconscionable Applicable

of the Unconscionability Doctrine: How the

California Courts Are Circumventing the Federal

Arbitration Act, 3 HASTINGS BUS. L.J. 39

(2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Alexander J.S. Colvin, Economic Policy Institute

(Sept. 27, 2017), available at https://www.epi.org

/publication/the-growing-use-of-mandatory-arb

itration/ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

E. Gary Spitko, Federal Arbitration Act Preemption

of State Public-policy-based Employment

Arbitration Doctrine: an Autopsy and an

Argument for Federal Agency Oversight, 20

HARV. NEGOT. L. REV. 1 (2015) . . . . . . . . . . . . . . 14

Arpan A. Sura &, Robert A. DeRise,

Conceptualizing Concepcion: the Continuing

Viability of Arbitration Regulations, 62 U. KAN.

L. REV. 403 (2013) . . . . . . . . . . . . . . . . . . . . . . . . 14

Imre Stephen Szalai, More than Class Action

Killers: the Impact of Concepcion and American

Express on Employment Arbitration, 35

BERKELEY J. EMP. & LAB. L. 31 (2014) . . . . . 13, 15

1

INTEREST OF AMICI1

The Civil Justice Association of California (“CJAC”)

is a 40-year-old nonprofit organization whose members

are businesses, professional associations and financial

institutions. CJAC’s principal purpose is to educate the

public and its governing bodies on ways to make laws

for determining who gets paid, how much, and by

whom when the conduct of some occasions harm to

others more fair, certain, and economical. Toward this

end, CJAC regularly participates in the courts and the

legislature to promote and protect voluntary

arbitration as an alternative to judicial mechanisms for

resolving liability disputes.

CJAC’s members collectively employ many

thousands of people in California and hundreds of

thousands nationally to produce various products and

services. Most of CJAC’s members have elected, as

have many employers throughout the country,2 to

resolve disputes with their employees over employment

matters through binding arbitration.

1

Counsel of record for the parties received timely notice of the

intent to file this brief and have consented to the filing. No counsel

for any party in this case authored this brief in whole or in part.

No person or entity aside from Amici, their members, or their

respective counsel made a monetary contribution to the

preparation or submission of this brief.

2

According to one study, approximately 55 percent of the

workforce, or 60 million employees, are covered by employment

arbitration agreements. Alexander J.S. Colvin, Economic Policy

Institute (Sept. 27, 2017), available at https://www.epi.org/publication

/the-growing-use-of-mandatory-arbitration/.

2

The Association of Southern California Defense

Counsel (“ASCDC”) is the nation’s largest regional

organization of lawyers who specialize in defending

civil actions. ASCDC counts as members over 1,000

attorneys in Southern and Central California, and is

actively involved in assisting courts on issues of

interest to its members. It has appeared as amicus

curiae in numerous cases, including those that concern

the scope and application of the FAA. ASDC and CJAC

independently urged the California Supreme Court to

review the decision in this case.

CJAC and ASCDC welcomed AT&T Mobility LLC v.

Concepcion, 563 U.S. 333 (2011) (“Concepcion”) and

kindred Court opinions believing they would at long

last assure that agreements to decide disputes by

arbitration would be placed on an “equal footing” with

other contracts and enforced accordingly. But our

initial enthusiasm has been dampened by hostile

judicial end-runs around the FAA by Armendariz v.

Foundation Health Psychcare Services, Inc., 6 P.3d 669

(Cal. 2000) (“Armendariz”) and similar decisions

extrapolating the “unconscionability” doctrine to place

endless obstacles in the way of contractual arbitration.3

The decision in this case is a major roadblock to

arbitration that deserves Court review.

3

“California’s courts have been more likely to hold contracts to

arbitrate unconscionable than other contracts.” Concepcion, 563

U.S. at 342 (citing Stephen A. Broome, An Unconscionable

Applicable of the Unconscionability Doctrine: How the California

Courts Are Circumventing the Federal Arbitration Act, 3 HASTINGS

BUS. L.J. 39, 54, 66 (2006)).

3

INTRODUCTION

The California Supreme Court held in Armendariz

that an agreement to resolve future disputes between

an employer and employee by arbitration must satisfy

five specific requirements. These requirements, which

supposedly stem from the employee’s right to “vindicate

his or her statutory rights” 6 P.3d at 674, include the

following “minimum fairness” factors an arbitration

agreement must provide for: (1) neutral arbitrators,

(2) more than minimal discovery, (3) a written award,

(4) all relief available in court, and (5) costs, fees, or

expenses for arbitration that are reasonable for

employees. Id. at 682. Moreover, if more than one such

requirement is absent from the arbitration agreement,

it may be deemed unsalvageable under a unique

arbitration specific anti-severability rule.

But a decade after Armendariz, Concepcion

substantially undercut its authority by holding that the

Federal Arbitration Act (“FAA”) requires state courts

to place arbitration agreements on an “equal footing”

with other contracts and enforce them according to

their terms. Id. at 339. Although Concepcion involved

the validity of a class action waiver, the Court

interpreted the FAA as casting a broad preemptive

sweep that trumped a state statute providing for a

nonwaivable remedy. According to the Court, the FAA

preempts “state-law rules that stand as an obstacle to

the accomplishment of the FAA’s objectives” or that

“interfere[] with fundamental attributes of arbitration.”

Id. at 343.

4

The decision in this case, which involves an

arbitration clause in a law firm partnership agreement,

is the latest example of California flouting the FAA and

this Court’s opinions applying it by resort to

Armendariz’s formulaic “fairness factors.” Rather than

comply with Concepcion and other pertinent opinions

of this Court, the state court decision downplayed these

authorities, trumpeting instead that “[s]ince

Concepcion was decided, the California Supreme Court

has reaffirmed the validity of Armendariz multiple

times,” an observation it sought to buttress by several

accompanying citations. Ramos v. Superior Court, 28

Cal.App.5th 1042, 1055 (2018).

On this basis the state court reversed the trial court

and ruled the arbitration agreement unconscionable

because it violated Armendariz’s “statutory

vindication” rule and ensuing “minimal fairness”

factors in three ways: it (1) impermissibly waived

plaintiff’s assertion of statutory employment rights and

remedies under the state’s Fair Employment and

Housing Act (FEHA); (2) required each party to pay its

own attorneys’ fees while the FEHA entitles the

prevailing party to an award of attorneys’ fees; and

(3) required the parties to share costs equally while

Armendariz requires the employer to pay all costs

unique to arbitration. In essence, the arbitration

agreement was deemed void by that appellate decision

because it “unconscionably” prevented the “effective

vindication” of state law, undermining “unwaivable

[state statutory] rights” and was thus unenforceable.

This decision presents a clear conflict between the

supremacy of the FAA and a state law – Armendariz –

5

that imposes special requirements for arbitration

agreements other than those that “exist at law or in

equity for the revocation of any contract.” 9 U.S.C. § 2.

Review by the Court is warranted to provide clarity

and certainty about an issue of paramount importance

to the public interest, namely — Can states, consistent

with the FAA, require that employment arbitration

contracts comply with specific requirements that do

not apply to contracts generally and are contrary to the

defining features of arbitration?

SUMMARY OF ARGUMENT

Ramos significantly interferes with and disfavors

private contractual arbitration. Ramos is based on

Armendariz, but conflicts with Concepcion and its

progeny. The decision violates the FAA and this Court’s

opinions emphasizing that law’s broad preemptive

sweep to prevent states from impeding the enforcement

of arbitration agreements according to their terms,

from treating arbitration contracts differently from, or

more hostilely than, contracts generally.

Ramos holds the employment arbitration contract

here void because it runs afoul of Armendariz’s

“statutory vindication” rule by not providing plaintiff

all relief that would be available in court, requires her

to pay half the costs of arbitration and to pay her own

attorney fees. According to Ramos, these three

provisions cannot be severed, rendering the entire

agreement “unconscionable” and unenforceable, beyond

the FAA’s preemptive safety net.

6

But Ramos is mistaken and in conflict with this

Court’s teachings on the scope and application of the

FAA. A number of federal and California courts, as well

as legal scholars, have commented that Armendariz,

the bedrock decision dictating Ramos, is “doomed,”

“condemned” and “preempted” by Concepcion. That

opinion and others of the Court make clear arbitration

permits parties to waive remedies that might otherwise

be available to them in court. Indeed, the “fundamental

attributes” of arbitration – speed, informality,

efficiency and reduced costs – are achieved by agreeing

to arbitrate according to specific rules that waive

conventional litigation remedies and procedures or

provide for alternate ones. Parties to arbitration can

stipulate, for instance, to restrict or waive class action

remedies, the amount or kind of recoverable damages,

and define the scope of discovery, equitable relief and

reasonable allocation of attorney fees and costs.

There cannot be, contrary to Ramos and

Armendariz, an “effective vindication” rule entitling a

party to all state statutory remedies available in court

absent consent of the parties to the arbitration

contract, express or implied. The FAA is only concerned

with the “effective vindication” of federal, not state law;

and it is state law that Ramos, following Armendariz,

elevates over the FAA to impede the enforcement of

arbitration agreements on their terms. This is an

upside-down decision damaging to contractual

arbitration and deserving of the Court’s corrective

guidance.

7

REASONS TO GRANT THE WRIT

I. THE DECISION OF THE CALIFORNIA

APPELLATE COURT CONFLICTS WITH THE

FAA AS LIMNED BY CONCEPCION AND ITS

PROGENY.

A conflict between a decision of the highest state

court and that of this Court on a matter of federal law

is a strong reason to grant certiorari. See, e.g., Hudson

v. Louisiana, 450 U.S. 40, 42 (1981). State court

decisions involving the construction and application of

federal statutes may also be reviewed on certiorari

when the question presented is sufficiently important.

E.g., Kolovrat v. Oregon, 366 U.S. 187, 191 (1961). Both

criteria are met by this case.

While the decision challenged here is by an

intermediate state appellate court, it is predicated

upon Armendariz. Accordingly, certiorari is appropriate

to resolve conflicts between the decision, dictated by

Armendariz,4 and the FAA as interpreted and applied

by Concepcion and related opinions of the Court.

“The FAA preempts any state rule discriminating

on its face against arbitration . . . , and also displaces

any rule that covertly accomplishes the same objective

by disfavoring contracts that (oh so coincidentally) have

the defining features of arbitration agreements.”

Kindred Nursing Centers Ltd. Partnership v. Clark, 137

S. Ct. 1421, 1427 (2017) (per curiam).

4

“Because Armendariz remains controlling law, we are bound by

it. . . Armendariz governs our analysis.” Ramos, supra, 28

Cal.App.5th at 1055.

8

The “defining features” or “fundamental attributes”

of arbitration include “informality, efficiency, reduced

costs and speed,” (American Exp. Co. v. Italian Colors

Restaurant, 570 U.S. 228, 238 (2013) (“Amex”)) all of

which can be achieved by contractual stipulations

“limiting . . . issues subject to arbitration,” agreeing to

“arbitrate according to specific rules and to limit with

whom a party will arbitrate its disputes.” Concepcion,

563 U.S. at 343.

After Concepcion, lower courts cannot “rely on the

uniqueness of an agreement to arbitrate” as a ground

to invalidate it for “unconscionability;” and the FAA

can preempt a state rule of general applicability that

has a “disproportionate impact” on arbitration or

“disfavors” it. Id. at 341.

A. The Decision’s Reliance on Armendariz

Treats Arbitration Agreements More

Harshly than Contracts Generally in

Violation of the FAA.

Concepcion holds that states may not enforce rules

that place burdens on arbitration agreements different

from or more hostile to those imposed on other types of

contracts. 563 U.S. at 352. The decision here, however,

does just that — it endorses a rule requiring private

employment arbitration agreements to meet a higher

standard for enforceability than that applicable to

other private contracts, in direct contravention of the

FAA. This Court has held that such a state law,

whether statutorily or judicially created, is

incompatible with, and therefore preempted by, the

FAA. See, e.g., Southland Corp. v. Keating, 465 U.S. 1

9

(1984); Doctor’s Associates, Inc. v. Casarotto, 517 U.S.

681 (1996).

1. Federal Courts Finding Armendariz in

Conflict with the FAA and Concepcion.

A federal court explained the basic conflict between

Armendariz and the FAA soon after Concepcion was

decided. Lucas v. Hertz Corp., 875 F.Supp.2d 991 (N.D.

Cal. 2012) describes how, before Concepcion, courts “at

both the state and federal level” invalidated arbitration

agreements because they contained “limited discovery”

provisions. After presenting several examples of

appellate opinions invalidating arbitration agreements

because they did not provide for minimal discovery,

Lucas opined that “Concepcion . . . suggests that

limitations on arbitral discovery no longer support a

finding of substantive unconscionability.” Id. at 1007.

Lucas quoted extensively from Concepcion in

support of the proposition that a doctrine such as

“unconscionability” cannot be “applied in a fashion that

disfavors arbitration”:

In Perry v. Thomas, 482 U.S. 483 (1987) [holding

FAA preempts state law requirement that

litigants be provided a judicial forum for wage

disputes] . . . we noted that the FAA’s

preemptive effect might extend even to grounds

traditionally thought to exist “at law or in equity

for the revocation of any contract.” Id. at 492, n.

9 . . . We said that 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, for this would enable

10

the court to effect what . . . the state legislature

cannot.”

Lucas, 875 F. Supp.2d at 1007.

Moreover, Lucas listed examples Concepcion gave

for various “ <devices and formulas’ declaring

arbitration against public policy” contrary to the FAA.

These disapproved contrivances for what arbitration

agreements must include to achieve “fairness” ranged

from “judicially monitored discovery,” to compliance

with the “Federal Rules of Evidence,” and “disposition

by a jury.” All of these illustrative features were not

“fanciful” and could be rationalized, Concepcion

explains, by the “exculpatory” nature of the

agreements, i.e., the fact that their absence is “of

greater benefit to the company than the consumer,” or

the employer than the employee. 875 F. Supp.2d at

1008. Lucas followed Concepcion and upheld the

validity of the challenged arbitration agreement even

though it barred any pre-arbitration discovery, stating

that to do otherwise and comply with the Armendariz

rule for “minimal discovery” “would have a

disproportionate impact on arbitration agreements.” Id.

See also Ruhe v. Masimo Corp., 2011 WL 4442790, at

*2 (C.D. Cal. Sept. 16, 2011) (“Although the Northern

District of California has indicated that some portion of

Armendariz has been abrogated by Concepcion, it did

not clarify what portion of Armendariz was

abrogated.”).

James v. Conceptus, Inc., 851 F.Supp.2d 1020 (S.D.

Tex. 2012), a whistleblower-retaliation lawsuit under

the federal False Claims Act against a former

employer, agreed with Lucas that the Armendariz

11

fairness factor approach was “in serious doubt

following Concepcion.” Id. at 1033. According to

Conceptus,

Armendariz sets categorical, per se requirements

specific to arbitration clauses. The[se] . . .

requirements, though couched in terms of

unconscionability, cannot be described as

grounds that “exist at law or in equity for the

revocation of any contract,” 9 U.S.C. § 2, because

they “apply only to arbitration [and] derive their

meaning from the fact that an agreement to

arbitrate is at issue.” Concepcion, 131 S.Ct. at

1746; see also Kilgore, 673 F.3d at 963-64. “[T]he

policy arguments justifying the [Armendariz]

rule, however worthy they may be, can no longer

invalidate an otherwise enforceable arbitration

agreement.”

Id. at 1023.

Conceptus holds that Concepcion bars courts from

applying Armendariz to “categorically” strike down

cost-splitting fee provisions in arbitration agreements.

And though it found the forum selection clause in the

agreement to not be “unconsicionable,” clarified that

“[t]o the extent . . . California law on such provisions

treats them differently in contracts calling for

arbitration than in other contracts and is applied to

‘disfavor’ arbitration, that law is preempted under § 2

of the FAA.” Id. at 1038. See also the dissenting

opinion in Zaborowski v. MHN Government Services,

Inc., 601 Fed.Appx. 461, 464 (9th Cir. 2014) stating

“[t]he reasoning in Armendariz that multiple

unconscionable provisions will render an arbitration

12

agreement’s purpose unlawful has ‘a disproportionate

impact on arbitration agreements’ and should have

been preempted by the FAA.” This Court granted

certiorari in that case on this very issue but it settled

and was dismissed. MHN Government Services, Inc v.

Zaborowski, 136 S. Ct. 1539 (2016).

2. California Courts Finding Armendariz in

Conflict with the FAA and Concepcion.

California appellate courts have also found that the

Armendariz fairness requirements for arbitration

agreements do not square with the FAA and

Concepcion, though their views about the abrogation of

Armendariz unsurprisingly resulted in these opinions

being depublished. For instance, Mercado v. Doctors

Medical Center of Modesto, Inc., 2013 WL 3892990

(Cal. Ct. App. July 26, 2013) reversed the challenge to

an employment arbitration agreement the trial court

ruled was unconscionable and unenforceable under

Armendariz because, similar to the agreement here, it

“provided the employee was entitled to legal

representation at her own expense, contrary to the

statutory provision for an award of attorney fees to a

successful employee under the FEHA.” Id. at *6.

Mercado recognized that Concepcion and other

opinions of this Court “cast doubt on the continued

validity of Armendariz.” Id. at *7. Mercado explained

that, under Concepcion, a court cannot “rely on the

uniqueness of an agreement to arbitrate” to invalidate

an agreement as unconscionable, describing

Armendariz’s special minimum requirements for

arbitration agreements “to be the type of state rule

Concepcion condemned.” Id.

13

Other California appellate courts have

acknowledged the uncertainty and confusion posited by

Armendariz when measured against Concepcion’s

holding and reasoning. See also dissenting opinion in

Elijahjuan v. Superior Court, 210 Cal.App.4th 15, 33

(2012) (“There have been inconsistent appellate

opinions in California about the scope of Concepcion as

it may affect the unconscionability defense to

enforcement of arbitration . . ..”); and Flannery v. Law

Offices of Burch & Couldston, LLP, 2016 WL 7494876

(Cal. Ct. of Appeal) *7 (after observing that “one of the

primary advantages of arbitration . . . is that it can

resolve disputes faster and cheaper than judicial

proceedings,” cites Armendariz followed by “overruled

on other grounds by” Concepcion.).

3. Law Reviews Finding Armendariz in Conflict

with the FAA and Concepcion.

Scholarly legal commentaries concur with federal

and state court opinions underscoring the fundamental

contradiction between the Armendariz “fairness

factors” essential for the validity of arbitration

agreements and Concepcion’s broad preemptive sweep

favoring arbitration: “State-specific standards

developed specifically for arbitration agreements – like

the Discover Bank rule in Concepcion and the

Armendariz fairness factors for employment arbitration

– seem doomed under Concepcion’s broad preemption

analysis.” Imre Stephen Szalai, More than Class Action

Killers: the Impact of Concepcion and American Express

on Employment Arbitration, 35 BERKELEY J. EMP. &

LAB. L. 31, 48 (2014).

14

“Armendariz increases the costs of employment

arbitration by requiring a certain level of discovery and

a reasoned opinion by the arbitrator. Armendariz then

mandates that the employer bear any of these costs

and any other costs that an employee incurs in

arbitration that she would not have incurred had she

litigated her claim against the employer in court. Thus,

together and separately, each of these Armendariz

requirements disadvantages arbitration.” E. Gary

Spitko, Federal Arbitration Act Preemption of State

Public-policy-based Employment Arbitration Doctrine:

an Autopsy and an Argument for Federal Agency

Oversight, 20 HARV. NEGOT. L. REV. 1, 24 (2015).

“[A]spects of the per se rule in Armendariz likely do

not stand up to Concepcion’s underlying reasoning . . ..”

Arpan A. Sura &, Robert A. DeRise, Conceptualizing

Concepcion: the Continuing Viability of Arbitration

Regulations, 62 U. KAN. L. REV. 403, 450 (2013).

B. The Decision Improperly Incorporates and

Misapplies this Court’s “Effective

Vindication” Principle to Void the

Arbitration Agreement.

According to Armendariz, for an arbitration clause

to be valid it must permit “an employee to vindicate his

or her statutory rights.” 24 Cal.4th at 90, 98-103; italics

added. Armendariz borrowed and applied to the

assertion of California’s FEHA claim the “effective

vindication” rationale from dicta in Mitsubishi Motors

Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614, 637

n.19 (1985) concerning the arbitrability of a federal

Sherman Act claim. The appellate opinion here held

that because “effective vindication” of plaintiff’s state

15

FEHA could not, due to Armendariz, occur under the

arbitration agreement, it was void for

unconscionability. But Amex teaches that a class-action

waiver is enforceable even though it violates an

“unconscionability” rule based on a “vindication

rationale” originating in state policy. 570 U.S. at 235239. “Amex . . . explained that the effective vindication

doctrine was mere dictum, and the Armendariz

fairness factors arose out of this effective vindication

doctrine. Thus, Amex undermines the foundation of

Armendariz.” Szalai, supra, 35 BERKELEY J. EMP. &

LAB. L at 47.

Moreover, as the dissent in Amex clarifies, the

effective vindication doctrine is confined to federal, not

state law, claims. The dissent stated that an

arbitration agreement “may not thwart federal law,

irrespective of exactly how it does so,” and highlighted

the importance of reconciling the effective vindication

principle with the FAA and “all the rest of federal law.”

570 U.S. at 240. “Our effective-vindication rule comes

into play only when the FAA is alleged to conflict with

another federal law. . ..” Id. at 252; italics added. “We

have no earthly interest (quite the contrary) in

vindicating [a state] law” that is inconsistent with the

FAA, so the state law must “automatically bow” to

federal law; any effective-vindication exception that

might possibly exist would “come[] into play only when

the FAA is alleged to conflict with another federal law.”

Ibid.

Nor does the “effective vindication” of a state

asserted claim under arbitration require that claimant

must be able to obtain all the relief available through

16

court litigation. The decision here finds “effective

vindication” lacking because the arbitration agreement

precludes “the arbitrators from providing remedies that

would otherwise be available in a court of law,”

including “punitive damages.” Ramos, 28 Cal.App.5th

at 1060. But a “fundamental attribute” of arbitration

can and does include stipulations by the parties to

waive certain remedies; it’s just that states may not

prohibit arbitrators from imposing remedies like

injunctive relief and punitive damages if the parties

agree arbitrators may do so. See Mastrobuono v.

Shearson Lehman Hutton, Inc., 514 U.S. 52, 58 (1995)

(New York rule prohibiting arbitrators from awarding

punitive damages was preempted under the FAA “in

the absence of an agreement that incorporated it.”).

Further, Amex’s rejection of the specific assertion

made by plaintiffs challenging the arbitration

agreement there gives no comfort to the decision’s

claim here that the arbitration clause violates

Armendariz because it does not require the law

firm/employer to pay all costs of arbitration. Amex

arose when merchants sued a credit card issuer on a

class action basis for antitrust violations. The claim

was brought as a class action because the maximum

recovery for each individual case was $38,549, while

the cost of proving the case would be hundreds of

thousands or more. 570 U.S. at 231-32. Nevertheless,

Amex enforced the class action waiver, reasoning that

“the antitrust laws do not guarantee an affordable

procedural path to the vindication of every claim.” Id.

at 233. Absent clear language in the statute to that

effect, class actions are not critical to the “vindication

of statutory rights.” Id. at 234. “[T]he fact that it is not

17

worth the expense involved in proving a statutory

remedy does not constitute the elimination of the right

to pursue that remedy.” Id. at 236.

Splitting the costs of arbitration between the

parties, as the arbitration agreement at issue in the

decision here provides, does not eliminate the right to

pursue the FEHA remedy, and the plaintiff below and

the decision made no showing that it did. See also

Green Tree Financial Corp.-Alabama v. Randolph, 531

U.S. 79 (2000), holding that “the party seeking to avoid

arbitration on the ground that arbitration would be

prohibitively expensive . . . bears the burden of showing

the likelihood of incurring such costs.” Id. at 92.

The Court’s resolution of conflicts between the

Ramos decision’s reliance on Armendariz as opposed to

the foregoing authorities from this Court, lower federal

and state courts, and legal scholars, is sorely needed.

Without it, lower courts and the public will continue to

be confused and confounded over what is permitted in

arbitration agreements given the FAA and state

unconscionability law.

18

CONCLUSION

“States cannot require a procedure that is

inconsistent with the FAA, even if it is desirable for

unrelated reasons.” Concepcion, 563 U.S. 351. For this

and the aforementioned reasons, amici urge the Court

to grant the petition for a writ of certiorari.

Respectfully submitted,

Benjamin G. Shatz

Manatt, Phelps & Phillips, LLP

11355 W. Olympic Blvd.

Los Angeles, CA 90064

(310) 312-4383

Counsel for

Amicus Curiae ASCDC

Fred J. Hiestand

Counsel of Record

3418 Third Avenue

Suite 1

Sacramento, CA 95817

(916) 448-5100

fred@fjh-law.com

Counsel for

Amicus Curiae CJAC