Amicus Curiae Brief — Marcus & Millichap Real Estate Investment Services, Inc., et al., Petitioners v. Rae Weiler

No. 18-929

In the

Supreme Court of the United States

MARCUS & MILLICHAP REAL ESTATE

INVESTMENT SERVICES, INC. AND MARCUS

& MILLICHAP CAPITAL CORPORATION,

Petitioners,

v.

RAE WEILER,

Respondent.

On Petition for a Writ of Certiorari to the California

Court of A ppeal, Fourth A ppellate District

MOTION FOR LEAVE TO FILE AND BRIEF

AMICI CURIAE OF THE CALIFORNIA BUILDING

INDUSTRY ASSOCIATION, THE CALIFORNIA

BUSINESS PROPERTIES ASSOCIATION, THE

CALIFORNIA MANUFACTURERS & TECHNOLOGY

ASSOCIATION, CITIZENS AGAINST LAWSUIT

ABUSE, AND LION REAL ESTATE GROUP LLC

IN SUPPORT OF PETITIONERS

Thomas R. McCarthy

Counsel of Record

J. Michael Connolly

Consovoy McCarthy Park PLLC

A ntonin Scalia Law School

Supreme Court Clinic

3033 Wilson Boulevard, Suite 700

Arlington, VA 22201

(703) 243-9423

tom@consovoymccarthy.com

Attorneys for Amici Curiae

February 19, 2019

286714

The California Building Industry Association

(“CBIA”), the California Business Properties Association

(“CBPA”), the California Manufacturers & Technology

Association (“CMTA”), Citizens Against Lawsuit Abuse

(“CALA”), and Lion Real Estate Group LLC (“Lion”)

hereby move, pursuant to Supreme Court Rule 37.2, for

leave to file a brief amici curiae in support of the petition

for writ of certiorari to the California Court of Appeal,

Fourth Appellate District. CBIA, CBPA, CMTA, CALA,

and Lion are filing this motion because Respondent

declined to consent to the filing of their brief.* A copy of

the proposed brief is attached.

As explained more fully on pages 1 through 3 of

the attached brief under “Interest of Amici Curiae,”

proposed amici have a strong interest in this case. CBIA

is a statewide non-profit trade association comprised

of over 3,000 member companies that are involved in

all aspects of the housing and home-building industry

throughout California. Collectively, its members employ

approximately 100,000 people and are responsible for

producing approximately 80 percent of all new homes

built and sold annually in California. CBIA’s members

often employ arbitration agreements in their contracts.

CBIA thus has a strong interest in the proper application

and enforcement of the Federal Arbitration Act (“FAA”).

CBPA is the recognized voice of all aspects of the

commercial retail industrial real estate industry in

California—representing the largest commercial real

* Proposed amici requested consent from Respondent on

February 7, 2019. Respondent had not responded as of February

18, 2019.

estate consortium with over 10,000 industry members.

CBPA is a coalition of the Leading companies and

professional associations in the commercial, industrial,

and retail real estate sector. Established in 1972,

CBPA proudly serves as the legislative and regulatory

advocate for property owners, tenants, developers,

retailers, contractors, land use attorneys, brokers, and

other professionals in the industry by representing their

interests at the State Capitol and in Washington, DC.

CMTA is an independent not-for-profit business

association that works to improve and enhance a strong

business climate for California’s 30,000 manufacturing,

processing, and technology-based companies. CMTA

represents 400 businesses from the entire manufacturing

community—an economic sector that generates more than

$230 billion every year and employs more than 1.2 million

Californians. CMTA regularly appears before the courts

as an amicus curiae in cases of importance to California

businesses, including in cases involving the application

of the FAA.

CALA is a nonpartisan grassroots movement of

concerned citizens and businesses fighting against

lawsuit abuse across the United States. CALA serves as

a watchdog to challenge abuses within our civil justice

system, and engages the public and the media to deliver

the message that lawsuit abuse is alive and well, and that

all Americans are paying the price. CALA members and

supporters represent a broad and diverse cross section

of people. They own small retail stores and hotels,

manufacturing firms, real estate brokerages, trucking

companies, and more. However, the bulk of CALA’s

supporters are several thousand workers and consumers

concerned about the impacts of lawsuit abuse. CALA and

its members believe that arbitration is a pro-consumer

alternative to litigation that allows legal disputes to be

fairly and efficiently resolved without incurring the cost,

stress, and often lengthy ordeal of a lawsuit.

Lion is a multifamily and commercial property

investor based in Los Angeles, CA. Since its founding in

2007, Lion has acquired close to 100 properties with a total

purchase price of over $400 million and invested over $185

million of equity on behalf of investors. Lion currently

owns and operates multifamily and commercial properties

in Texas, Tennessee, North Carolina, and California. Lion

often includes arbitration clauses in contracts and has a

strong interest in ensuring that parties honor—and the

courts enforce—these agreements.

Collectively, proposed amici have a strong interest

in the fair and consistent enforcement of arbitration

agreements, as well as in the Court’s faithful and

consistent application of the FAA and its “equal-footing

principle.” Kindred Nursing Ctrs. Ltd. P’ship v. Clark,

137 S. Ct. 1421, 1428 (2017).

Accordingly, proposed amici respectfully request

that the Court grant leave to file the attached brief as

amici curiae.

Respectfully submitted,

Thomas R. McCarthy

Counsel of Record

J. Michael Connolly

Consovoy McCarthy Park PLLC

A ntonin Scalia Law School

Supreme Court Clinic

3033 Wilson Boulevard, Suite 700

Arlington, VA 22201

(703) 243-9423

tom@consovoymccarthy.com

Attorneys for Amici Curiae

February 19, 2019

i

TABLE OF CONTENTS

Page

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

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

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 California Court of Appeal Violated

The FAA By Refusing To Enforce the

Pa r ties’ A rbit ration A g reement A s

Written And Singling Out Arbitration For

Disfavored Treatment . . . . . . . . . . . . . . . . . . . . . . 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 Ignores The

Terms Agreed To By The Parties,

Violati ng T he P r i nciple T hat

Arbitration Is A Matter Of Consent . . . . . 11

C. The Decision Below Runs A foul

Of The Liberal Federal Policies In

Favor Of Arbitration And Arbitration

Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 13

ii

Table of Contents

Page

II. Summary Reversal Is Appropriate . . . . . . . . . . 14

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

iii

TABLE OF CITED AUTHORITIES

Page

Cases

14 Penn Plaza LLC v. Pyett,

556 U.S. 247 (2009) . . . . . . . . . . . . . . . . . . . . . . . . 14, 15

Allied-Bruce Terminix Cos. v. Dobson,

513 U.S. 265 (1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Am. Express Co. v. Italian Colors Rest.,

570 U.S. 228 (2013) . . . . . . . . . . . . . . . . . . . . . . . 4, 8, 12

AT&T Mobility LLC v. Concepcion,

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

Buckeye Check Cashing, Inc. v. Cardegna,

546 U.S. 440 (2006) . . . . . . . . . . . . . . . . . . . . . . . . 4, 7, 8

Circuit City Stores, Inc. v. Adams,

532 U.S. 105 (2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

DIRECTV, Inc. v. Imburgia,

136 S. Ct. 463 (2015) . . . . . . . . . . . . . . . . . . . . . 7, 14, 16

Doctor’s Assocs., Inc. v. Casarotto,

517 U.S. 681 (1996) . . . . . . . . . . . . . . . . . . . . . . . 4, 9, 10

Epic Sys. Corp. v. Lewis,

138 S. Ct. 1612 (2018) . . . . . . . . . . . . . . . . . . . . . . . 7, 10

Gilmer v. Interstate/Johnson Lane Corp.,

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

iv

Cited Authorities

Page

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

137 S. Ct. 1421 (2017) . . . . . . . . . . . . . . . . . . . 3, 7, 9, 11

Marmet Health v. Brown,

565 U.S. 530 (2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Mastrobuono v. Shearson Lehman Hutton, Inc.,

514 U.S. 52 (1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Moses H. Cone Mem’l Hosp. v.

Mercury Constr. Corp.,

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

Perry v. Thomas,

482 U.S. 482 (1987) . . . . . . . . . . . . . . . . . . . . . . . . 7, 8, 9

Preston v. Ferrer,

552 U.S. 346 (2008) . . . . . . . . . . . . . . . . . . . . . . . . . 8, 15

Rent-A-Ctr., W., Inc. v. Jackson,

561 U.S. 63 (2010) . . . . . . . . . . . . . . . . . . . . 9, 11, 12, 14

Scherk v. Alberto-Culver Co.,

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

Schweiker v. Hansen,

450 U.S. 785 (1981) . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

v

Cited Authorities

Page

Statutes and Other Authorities

U.S. Const., Art. VI, cl. 2 . . . . . . . . . . . . . . . . . . . . . . . . . 14

9 U.S.C. § 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 9

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

1

INTEREST OF AMICI CURIAE1

The California Building Industry Association

(“CBIA”) is a statewide non-profit trade association

comprised of over 3,000 member companies that are

involved in all aspects of the housing and home-building

industry throughout California. Collectively, its members

employ approximately 100,000 people and are responsible

for producing approximately 80 percent of all new homes

built and sold annually in California. CBIA’s members

often employ arbitration agreements in their contracts.

CBIA thus has a strong interest in the proper application

and enforcement of the Federal Arbitration Act (“FAA”).

The California Business Properties Association

(“CBPA”) is the recognized voice of all aspects of the

commercial retail industrial real estate industry in

California—representing the largest commercial real

estate consortium with over 10,000 industry members.

CBPA is the designated legislative advocate for the

International Council of Shopping Centers (ICSC), the

California Chapters of the Commercial Real Estate

Development Association (NAIOP), the Building Owners

and Managers Association of California (BOMA), the

Retail Industry Leaders Association (RILA), the Institute

of Real Estate Management (IREM), and the Association

of Commercial Real Estate—Northern and Southern

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 received timely notice of amici

curiae’s intent to file. While Petitioners consented to the filing of

this brief, Respondent did not, and this brief is filed pursuant to

the preceding motion.

2

California (ACRE), the National Association of Real

Estate Investment Trusts (NAREIT), AIR Commercial

Real Estate Association (AIR CRE), and the California

Association for Local Economic Development (CALED).

CBPA is a coalition of the leading companies and

professional associations in the commercial, industrial,

and retail real estate sector. Established in 1972,

CBPA proudly serves as the legislative and regulatory

advocate for property owners, tenants, developers,

retailers, contractors, land use attorneys, brokers, and

other professionals in the industry by representing their

interests at the State Capitol and in Washington, DC.

The California Manufacturers & Technolog y

Association (“CMTA”) is an independent not-for-profit

business association that works to improve and enhance

a strong business climate for California’s 30,000

manufacturing, processing, and technology-based

companies. CMTA represents 400 businesses from the

entire manufacturing community—an economic sector

that generates more than $230 billion every year and

employs more than 1.2 million Californians. CMTA

regularly appears before the courts as an amicus curiae

in cases of importance to California businesses, including

in cases involving the application of the FAA.

Citizens Against Lawsuit Abuse (“CALA”) is a

nonpartisan grassroots movement of concerned citizens

and businesses fighting against lawsuit abuse across the

United States. CALA serves as a watchdog to challenge

abuses within our civil justice system, and engages the

public and the media to deliver the message that lawsuit

abuse is alive and well, and that all Americans are paying

the price. CALA members and supporters represent a

3

broad and diverse cross section of people. They own small

retail stores and hotels, manufacturing firms, real estate

brokerages, trucking companies, and more. However, the

bulk of CALA’s supporters are several thousand workers

and consumers concerned about the impacts of lawsuit

abuse. CALA and its members believe that arbitration

is a pro-consumer alternative to litigation that allows

legal disputes to be fairly and efficiently resolved without

incurring the cost, stress, and often lengthy ordeal of a

lawsuit.

Lion Real Estate Group LLC (“Lion”) is a multifamily

and commercial property investor based in Los Angeles,

CA. Since its founding in 2007, Lion has acquired close

to 100 properties with a total purchase price of over $400

million and invested over $185 million of equity on behalf of

investors. Lion currently owns and operates multifamily

and commercial properties in Texas, Tennessee, North

Carolina, and California. Lion often includes arbitration

clauses in contracts and has a strong interest in ensuring

that parties honor—and the courts enforce—these

agreements.

Collectively, amici have a strong interest in the fair

and consistent enforcement of arbitration agreements, as

well as in the Court’s faithful and consistent application

of the FAA and its “equal-footing principle.” Kindred

Nursing Ctrs. Ltd. P’ship v. Clark, 137 S. Ct. 1421, 1428

(2017).

4

INTRODUCTION AND SUMMARY

OF ARGUMENT

Congress enacted the Federal A rbitration Act

(“FAA”) nearly a century ago to override judicial hostility

toward arbitration and ensure that parties’ agreements to

arbitrate would be enforced according to their terms. See

Am. Express Co. v. Italian Colors Rest., 570 U.S. 228, 23233 (2013). The FAA makes written arbitration agreements

“valid, irrevocable, and enforceable” as a matter of federal

law, 9 U.S.C. § 2, and places them “on equal footing with

all other contracts.” Buckeye Check Cashing, Inc. v.

Cardegna, 546 U.S. 440, 443 (2006). Accordingly, courts

must enforce arbitration agreements according to their

terms, except on state-law grounds that are generally

applicable to any contract. See AT&T Mobility LLC

v. Concepcion, 563 U.S. 333, 343 (2011). When a court

refuses to enforce an arbitration agreement based on

the application of a state-law rule or policy that disfavors

arbitration agreements, the decision is “inconsonant with,

and is therefore preempted by, the federal law.” Doctor’s

Assocs., Inc. v. Casarotto, 517 U.S. 681, 688 (1996) (internal

quotation marks omitted). This is precisely the issue here.

Respondent and her husband—who have decades

of experience in commercial real estate—purchased

a restaurant property in Texas, for which Petitioners

served as real estate and loan brokers. The parties’

purchase contract included a clause obligating all parties

to arbitrate any dispute arising from the transaction.

Specifically, the arbitration clause stated that “[t]he

parties have agreed to submit disputes to mandatory

arbitration” and “[e]ach of [the parties] waives the right

to commence an action in connection with this Agreement

5

in any court and expressly agrees to be bound by the

decision of the arbitrator….” Pet. Br. 10-11. The clause

required arbitration under the Commercial Arbitration

Rules of the American Arbitration Association (“AAA”);

those rules include a cost-sharing provision, providing that

“[t]he expenses of witness for either side shall be paid by

the party producing such witnesses. All other expenses

of the arbitration, including required travel and other

expenses of the arbitrator, AAA representatives, and any

witness and the cost of any proof produced at the direct

request of the arbitrator, shall be borne equally by the

parties[.]” Pet. Br. at 11; see AAA Commercial Arbitration

Rules, R-54. Notably, AAA rules reserve authority to the

arbitrator to reallocate costs in any final award. Id.

Respondent’s investment was not as successful as

she had hoped, and approximately seven years after the

purchasing the property, she filed a California state court

complaint against Petitioners claiming that “she acquired

the Texas property for $2 million above fair market value,

based on misrepresentations and other wrongdoing by

defendants” and seeking compensatory and punitive

damages. Pet. App. 4a. Petitioners responded by moving

to compel arbitration. Respondent did not contest that

the dispute was properly arbitrable, and the trial court

stayed the case and ordered the matter to be arbitrated

before AAA. Pet. App. 4a. In January of 2013, Respondent

initiated arbitration, advancing a claim for $2.8 million.

Pet. App. 4a-5a.

The parties proceeded with arbitration before a threearbitrator panel for nearly three years before Respondent

for the first time complained about the cost-sharing

provision in the arbitration clause. Pet. App. 27a. Although

6

“it is undisputed that [she] could afford the arbitration

fees at the time the agreement was entered into,” Pet.

App. 27a, Respondent filed an action for declaratory

relief in California Superior Court, seeking to be excused

from her obligation to pay half of the arbitration costs

and demanding that the Petitioners either pay the full

arbitration costs or lose the right to arbitrate altogether.

Pet. App. 6a.

The trial court rejected Respondent’s attack on the

cost-sharing provision. Pet. App. 29a-30a. The court

granted summary judgment for Petitioners, emphasizing

that “[n]o authority has been provided by [Respondent]

which would authorize this court to interrupt an ongoing

arbitration to consider a party’s ability to pay arbitration

costs,” Pet. App. 27a, and noting that arbitrators retain

the right to reallocate costs in any final award, Pet. App.

28a; see AAA Commercial Arbitration Rules, R-23, R-54.

The California Court of Appeal reversed. Instead

of viewing Respondent’s challenge to the arbitration

agreement as based on unconscionability, the Court

of Appeal construed her attack as one grounded in

public policy. Paying mere lip service to the FAA, the

court stated that “the enforcement of valid arbitration

provisions, in some situations … must cede to an even

greater, unwavering interest on which our country was

founded—justice for all.” Pet. App. 2a. And the Court of

Appeal remanded the case to the trial court to determine

whether Respondent’s present circumstances render

continued arbitration unaffordable for her and thus

“outweigh [Petitioners’] contractual right to arbitrate.”

Pet. App. 3a, 9a.

7

This refusal to enforce a routine arbitration clause

based on abstract public-policy grounds flouts the FAA

in multiple respects: it singles out arbitration agreements

for disfavored treatment, see Kindred Nursing Ctrs.

Ltd. P’ship v. Clark, 137 S. Ct. 1421, 1426 (2017); refuses

to “respect and enforce the parties’ chosen arbitration

procedures,” Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612,

1621 (2018); and runs contrary to the federal policy in

favor of arbitration, Buckeye Check Cashing, Inc., 546

U.S. at 443. Not only is the decision below incorrect, but

in refusing to enforce an arbitration agreement on the

basis of its hostility to a routine cost-sharing provision, it

jeopardizes millions of arbitration agreements that include

similar cost-sharing mechanisms.

Sadly, this is not the first time this Court has needed

to remind the California courts of these basic precepts

of law. See, e.g., Concepcion, 563 U.S. 333; Preston v.

Ferrer, 552 U.S. 346 (2008); Perry v. Thomas, 482 U.S.

482 (1987). Indeed, the Court recently admonished the

California Court of Appeal that “[t]he Federal Arbitration

Act is a law of the United States, and ... the judges of every

State must follow it” and “authoritative interpretation[s]”

thereof. DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463, 468

(2015). Here, again, the Court must step in; summary

reversal is warranted given that this case flies in the face

of clearly established precedent that no state court can

diminish.

8

ARGUMENT

I.

The California Court of Appeal Violated The FAA

By Refusing To Enforce the Parties’ Arbitration

Agreement As Written And Singling Out Arbitration

For Disfavored Treatment.

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., 546 U.S. at 443; see also Am. Express Co.,

570 U.S. at 232 (“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.”).

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. The section

also “create[s] a body of federal substantive law of

arbitrability,” Perry, 482 U.S. at 489, the central tenet of

which is that arbitration agreements must be “enforced

according to their terms.” Volt Info. Sciences, Inc., 489

U.S. at 479.

9

In its decision below, the California Court of Appeal

violated three fundamental principles of the FA A:

(1) the “equal footing” principle that prohibits courts from

imposing rules that single out arbitration for disfavored

treatment, Concepcion, 563 U.S. at 339; (2) the principle

that arbitration agreements must be enforced “according

to their terms,” Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S.

63, 68 (2010); and (3) the “liberal federal policy favoring

arbitration agreements,” Moses H. Cone Mem’l Hosp., 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.”).

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, 552 U.S. at 353, except to the extent preserved

by its savings clause. The savings clause preserves state

law only if it serves as a ground “for the revocation of

any contract.” 9 U.S.C. § 2. 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 provision for suspect status.”

Doctor’s Assocs., Inc., 517 U.S. at 687 (1996). For good

reason, this rule is sometimes called the “equal-footing

principle.” Kindred Nursing Ctrs., 137 S. Ct. at 1428.

The equal-footing principle prevents both express

and subtle disfavoring of arbitration. This principle thus

prohibits states from adopting novel laws or rules that

apply only to arbitration. See Perry, 482 U.S. at 492 (“A

10

state-law principle that takes its meaning precisely from

the fact that a contract to arbitrate is at issue does not

comport with this requirement of § 2.”) (citations omitted);

Doctor’s Assocs., Inc., 517 U.S. at 687 (“Courts may not

... invalidate arbitration agreements under state laws

applicable only to arbitration provisions.”). The principle

applies just as forcefully to bar the manipulation of

generally applicable contract defenses in a “fashion that

disfavors arbitration.” Concepcion, 563 U.S. at 341.

The lower court violated the FAA in applying a

public-policy exception specific to arbitration agreements.

The parties agree that the arbitration agreement is

enforceable. See Pet. App. 16a (noting that the plaintiff

did not challenge the enforceability of the agreement).

Unsurprisingly then, the court below did not find the

agreement unenforceable under California law. See Pet.

App. 16a. But the court nevertheless refused to enforce

the agreement according to its terms.

“This is where the [Respondent’s] argument [and the

decision below] stumble[]. They don’t suggest that [the]

arbitration agreement[] w[as] extracted, say, by an act

of fraud or duress or in some other unconscionable way

that would render any contract unenforceable.” Epic Sys.

Corp., 138 S. Ct. at 1622. Instead, Respondent and the

lower court approached the case “from a public policy

standpoint” that singled out arbitration for disfavored

treatment. Invoking an abstract state policy of “justice

for all,” Pet. App. 2a, 12a, the court refused to enforce the

parties’ cost-sharing provision. And it remanded to the

trial court, where a finding that continued arbitration is

unaffordable to Respondent would force Petitioners to pay

all of the arbitration costs or else forego their contractual

11

right (and release Respondent of her concomitant

contractual obligation) to arbitrate. Pet. App. 12a; Pet.

App. 16a-17a.

Without even considering the relative costs of

traditional litigation, the lower court simply held that

“justice for all” may require justice to be had only in

court or else by stripping Petitioners of their right to have

Respondent share in the costs of arbitration. This ruling

has no basis in state contract law and is not generally

applicable to other contracts. It is therefore preempted

under the FAA. See Kindred Nursing Ctrs., 137 S. Ct. at

1426.

B. The Decision Below Ignores The Terms Agreed

To By The Parties, Violating The Principle

That Arbitration Is A Matter Of Consent.

This Court has repeatedly emphasized the “basic

precept that arbitration ‘is a matter of consent, not

coercion,’” Stolt-Nielsen, 559 U.S. at 681 (quoting Volt,

489 U.S. at 479). Consequently, “parties are ‘generally

free to structure their arbitration agreements as they see

fit.” Id. at 683 (quoting Mastrobuono v. Shearson Lehman

Hutton, Inc., 514 U.S. 52, 57 (1995)). “Just as [parties] may

limit by contract the issues which they will arbitrate, so

too may they specify by contract the rules under which

that arbitration will be conducted.” Volt, 489 U.S. at 479

(citation omitted). After all, “arbitration is a matter of

contract.” Rent-A-Ctr., 561 U.S. at 67.

The purpose of enforcing an arbitration agreement’s

contractual limitations is “to give effect to the intent of

the parties.” Stolt-Nielsen, 559 U.S. at 684. And such

12

enforcement must be “according to the[] [arbitration

agreement’s] terms.” Rent-A-Ctr., 561 U.S. at 67; accord

Volt, 489 U.S. at 478.

The California Court of Appeal did not, however,

respect the parties’ agreement. Instead, the court stated

that contractual obligations in a written arbitration

agreement are not necessarily to be enforced, but a factor

to be balanced against the degree to which Respondent

could afford continued arbitration according to the

contractually agreed-upon procedures. Pet. App. 12.

Even worse, the court reasoned that avoiding a scenario

where the costs of arbitration become too “expensive” for

one party “far outweighs the interest, however strong, in

respecting parties’ agreements to arbitrate.” Pet. App.

12. According to the Court of Appeal, then, Respondent

could be excused from her contractual obligation to pay

her share of the arbitration costs, based upon a public

policy rationale of ensuring that Respondent would

have sufficient economic incentive to continue with the

adjudication of her claim. But this is not a legitimate

basis for overriding the written terms of an arbitration

agreement. See Am. Express Co., 570 U.S. at 235 n.4

(rejecting the idea that a lack of “economically feasible”

ways to pursue claims in arbitration is a public policy

justification for waiver of agreed-upon procedures).

And the flat refusal “to give effect to the intent of the

parties,” Stolt-Nielsen, 559 U.S. at 684, and enforce their

agreement “according to [its] terms” is preempted by the

FAA, Rent-A-Ctr., 561 U.S. at 67. 2

2. Respondent’s naked assertion that Petitioners engaged

in scorched earth tactics during the arbitration does not alter the

straightforward FAA preemption analysis. Pet. App. 11a. Not only

13

C.

The Decision Below Runs Afoul Of The Liberal

Federal Policies In Favor Of Arbitration And

Arbitration Agreements.

The FA A is meant to promote, not to hinder,

arbitration and to favor the enforcement of agreements.

See Concepcion, 563 U.S. at 345-46; Moses H. Cone Mem’l

Hosp., 460 U.S. at 24. The public policy rule applied by

the California Court of Appeal contravenes these federal

policies. Concepcion, 563 U.S. at 344.

“Parties generally favor arbitration precisely

because of the economics of dispute resolution.” 14 Penn

Plaza LLC v. Pyett, 556 U.S. 247, 257 (2009); see also

Concepcion, 563 U.S. at 344 (“The point of affording

parties discretion in designing arbitration processes is

to allow for efficient, streamlined procedures tailored

to the type of dispute.”). But the lower court’s decision

allowing a party to circumvent the freely agreed upon

cost-sharing arrangement undermines this purpose. This

new rule creates uncertainty regarding the enforcement

of arbitration agreements and thus uncertainty in the

negotiation thereof as well. If left uncorrected, it will

inhibit the enforcement of arbitration agreements in

California and undermine arbitration more broadly

as a dispute-resolution mechanism for businesses and

consumers who enter into contracts in California.

is it without factual support, but AAA rules provide arbitrators

with sufficient authority to ensure “a fair, efficient and economical

resolution of the case,” including by reallocating costs. AAA

Commercial Arbitration Rules R-23; see also id. R-54.

14

This case illustrates the point. Arbitration of the

underlying dispute has been delayed more than four years

by spurious litigation designed entirely to undermine

Petitioners’ contractual arbitral rights. Pet. App. 27a.

If this tactic is permitted to stand, future parties in

Petitioners’ posture may be coerced into foregoing their

contractual right to shared costs rather than be dragged

into wasteful, time-consuming subsidiary litigation. And

given that cost sharing is often a default rule of arbitration,

see supra pp. 5, 7, an incalculable number parties may find

themselves in this very posture. The Court’s intervention

is needed to vindicate the liberal federal policies in favor of

arbitration and the enforcement of arbitration agreements.

II. Summary Reversal Is Appropriate.

A state court does not have the power to “nullify this

Court’s precedents.” Imburgia, 136 S. Ct. at 468. Indeed,

every state court has an “undisputed obligation” to follow

them. Id. Thus, where the Court has interpreted the

Federal Arbitration Act, “a state court may not contradict

or fail to implement the rule so established.” Marmet

Health v. Brown, 565 U.S. 530, 531 (2012) (citing U.S.

Const., Art. VI, cl. 2).

The decision below is judge-made law in direct

contradiction to this Court’s precedents. As explained

above, it (1) contravenes the “equal footing” principle

that prohibits courts from imposing rules that single out

arbitration for disfavored treatment, Concepcion, 563 U.S.

at 339; (2) flouts the principle that arbitration agreements

must be enforced “according to their terms,” Rent-A-Ctr.,

561 U.S. at 68; and (3) disregards the “liberal federal policy

favoring arbitration agreements,” Moses H. Cone Mem’l

Hosp., 460 U.S. at 24.

15

On top of that, the decision below threatens to blow

a massive hole in the FAA. Cost-sharing between the

parties is a common feature of arbitration. Indeed, the

cost-sharing rule at issue here is a standard AAA rule.

See supra p. 5. And it is fairly common for the adjudication

of any dispute to become economically undesirable for

one of the parties at some point during the process.

If left uncorrected, the decision below will create an

escape hatch from the FAA for parties who have become

dissatisfied with the course of arbitration by allowing

them to shift costs to their adversary in contravention of

their contractual obligations if not negate their arbitral

rights entirely.

Summary reversal is appropriate in this case because

the law “is well settled and stable, the facts are not

in dispute, and the decision below is clearly in error.”

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

J., dissenting). Just this year, this Court prevented a

lower court from “engraft[ing its] own exception onto

the statutory text” of the FAA. Henry Schein, Inc., 139

S. Ct. at 530. Swift action is necessary to reaffirm this

Court’s precedents and reinforce the FAA’s goals of

achieving “streamlined proceedings” and “expeditious

results.” Preston, 552 U.S. at 357 (internal quotation

omitted); see also 14 Penn Plaza LLC, 556 U.S. at 257

(“Parties generally favor arbitration precisely because

of the economics of dispute resolution.”); Circuit City

Stores, Inc. v. Adams, 532 U.S. 105, 122 (2001); AlliedBruce Terminix Cos. v. Dobson, 513 U.S. 265, 280 (1995);

Moses H. Cone Mem’l Hosp., 460 U.S. at 22 (“Congress’s

clear intent, in the Arbitration Act, [is] to move the parties

to an arbitrable dispute out of court and into arbitration

as quickly and easily as possible.”). Finally, summary

16

reversal is particularly appropriate here, as this is not the

first time that the California Court of Appeal has overrun

this Court’s FAA precedents. Imburgia, 136 S. Ct. at 471.

CONCLUSION

Amici curiae respectfully request that the Court

grant the petition for certiorari and summarily reverse

the judgment of the California Court of Appeal.

Respectfully submitted,

Thomas R. McCarthy

Counsel of Record

J. Michael Connolly

Consovoy McCarthy Park PLLC

A ntonin Scalia Law School

Supreme Court Clinic

3033 Wilson Boulevard, Suite 700

Arlington, VA 22201

(703) 243-9423

tom@consovoymccarthy.com

Attorneys for Amici Curiae

February 19, 2019