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

Supreme Court briefApr 29, 2019

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No. 18-929

IN THE

Supreme Court of the United States

MARCUS & MILLICHAP REAL ESTATE INVESTMENT

SERVICES, INC., AND MARCUS & MILLICHAP CAPITAL

CORPORATION,

Petitioners,

RAE WEILER,

Respondent.

On Petition for a Writ of Certiorari to the

California Court of Appeal, Fourth Appellate District

RESPONDENT’S BRIEF IN OPPOSITION

CORNELIUS P. BAHAN

CORNELIUS P. BAHAN, INC.

113 Avenida Granada

San Clemente, CA 92672

(949) 622-0200

SCOTT L. NELSON

Counsel of Record

RYLEE SOMMERS-FLANAGAN

PUBLIC CITIZEN

LITIGATION GROUP

1600 20th Street NW

Washington, DC 20009

(202) 588-1000

snelson@citizen.org

Attorneys for Respondent

April 29, 2019

QUESTIONS PRESENTED

1. Whether the California Court of Appeal’s ruling

remanding for further proceedings is a final judgment

within the meaning of 28 U.S.C. § 1257.

2. Whether petitioners waived their argument

that the Federal Arbitration Act preempts a state rule

that ensures indigent litigants access to a forum.

3. Whether the California Court of Appeal was

right to decide a question referred to it by an

arbitration panel.

TABLE OF CONTENTS

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

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

INTRODUCTION ....................................................... 1

STATEMENT .............................................................. 3

REASONS FOR DENYING THE WRIT .................... 6

This Court lacks jurisdiction because the

decision below is not final. ................................... 6

II. Petitioner waived its preemption argument. .... 10

III. Lower courts are not divided over either of

the petition’s questions presented. .................... 13

A. There is no conflict over whether the FAA

preempts a court from providing relief to a

party unable to pay costs of arbitration. ....... 13

B. No conflict exists over whether a court can

decide a cost-allocation issue referred to it by

the arbitrators. ............................................... 20

IV. Petitioner’s preemption claims lack merit. ....... 22

V. A state-court decision presents a poor vehicle

for review of FAA issues. ................................... 25

CONCLUSION.......................................................... 27

iii

TABLE OF AUTHORITIES

Cases

Page(s)

Allied-Bruce Terminix Cos. v. Dobson,

513 U.S. 265 (1995) ............................................. 26

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

570 U.S. 228 (2013) ....................................... 16, 25

AT&T Mobility LLC v. Concepcion,

563 U.S. 333 (2011) ............................................. 26

Bradford v. Rockwell Semiconductor Sys., Inc.,

238 F.3d 549 (4th Cir. 2001) ............................... 14

Brandao v. Jan-Pro Franchising Int’l, Inc.,

95 Mass. App. Ct. 1103,

2019 WL 1244627 (2019) ..................................... 20

Camacho v. Holiday Homes, Inc.,

167 F. Supp. 2d 892 (W.D. Va. 2001) .................. 19

Chavarria v. Ralphs Grocery Co.,

733 F.3d 916 (9th Cir. 2013) ............................... 14

Christianson v. Colt Indus. Operating Corp.,

486 U.S. 800 (1988) ............................................... 9

City of Springfield v. Kibbee,

480 U.S. 257 (1987) ............................................. 11

Clark v. Jeter,

486 U.S. 456 (1988) ............................................. 11

Cox Broadcasting Corp. v. Cohn,

420 U.S. 469 (1975) ..................................... 8, 9, 10

Dealer Computer Servs., Inc. v. Old

Colony Motors, Inc.,

588 F.3d 884 (5th Cir. 2009) ................... 19, 21, 22

DIRECTV, Inc. v. Imburgia,

136 S. Ct. 463 (2015) ........................................... 26

Doctor’s Assocs., Inc. v. Stuart,

85 F.3d 975 (2d Cir. 1996) ................................... 15

Epic Sys. Corp. v. Lewis,

138 S. Ct. 1612 (2018) ......................................... 26

Erich v. Granoff,

167 Cal. Rptr. 538 (Cal. Ct. App. 1980) .............. 24

Faber v. Menard, Inc.,

367 F.3d 1048 (8th Cir. 2004) ........... 14, 16, 17, 18

Florida v. Thomas,

532 U.S. 774 (2001) ............................................... 9

Green Tree Fin. Corp. v. Bazzle,

539 U.S. 444 (2003) ....................................... 26, 27

Green Tree Fin. Corp.-Ala. v. Randolph,

531 U.S. 79 (2000) ......................................... 16, 25

Gutierrez v. Autowest, Inc.,

7 Cal. Rptr. 3d 267 (Cal. Ct. App. 2003) ............... 5

Heath v. Alabama,

474 U.S. 82 (1985) ............................................... 11

Hernandez v. Acosta Tractors Inc.,

898 F.3d 1301 (11th Cir. 2018) ........................... 25

Howsam v. Dean Witter Reynolds, Inc.,

537 U.S. 79 (2002) ......................................... 14, 21

James v. McDonald’s Corp.,

417 F.3d 672 (7th Cir. 2005) ......................... 15, 17

Jameson v. Desta,

420 P.3d 746 (Cal. 2018) ..................................... 23

Jefferson v. City of Tarrant,

522 U.S. 75 (1997) ................................................. 7

Johnson v. California,

541 U.S. 428 (2004) ............................................... 7

Kam-Ko Bio-Pharm Trading Co. Ltd-Australasia v.

Mayne Pharma (USA) Inc.,

560 F.3d 935 (9th Cir. 2009) ................... 14, 15, 17

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

137 S. Ct. 1421 (2017) ......................................... 26

Lamps Plus v. Varela,

No. 17-988 (U.S. Apr. 24, 2019) .................... 24, 26

Mendez v. Palm Harbor Homes, Inc.,

45 P.3d 594 (Wash. Ct. App. 2002) ..................... 18

Mkt. St. Ry. Co. v. R.R. Comm’n of Cal.,

324 U.S. 548 (1945) ............................................... 7

Moran v. Riverfront Diversified, Inc.,

968 N.E.2d 1 (Ohio Ct. App. 2011) ..................... 18

Morrison v. Circuit City Stores, Inc.,

317 F.3d 646 (6th Cir. 2003) ............................... 14

O’Dell v. Espinoza,

456 U.S. 430 (1982) ............................................... 8

Parada v. Super. Ct.,

98 Cal. Rptr. 3d 743 (Cal. Ct. App. 2009) ....... 5, 19

Perry v. Thomas,

482 U.S. 483 (1987) ............................................. 10

Phillips v. Assocs. Home Equity Servs., Inc.,

179 F. Supp. 2d 840 (N.D. Ill. 2001) ................... 18

Pre-Paid Legal Servs., Inc. v. Cahill,

786 F.3d 1287 (10th Cir. 2015) ......... 18, 20, 22, 25

Rickard v. Teynor’s Homes, Inc.,

279 F. Supp. 2d 910 (N.D. Ohio 2003) ................ 18

Roldan v. Callahan & Blaine,

161 Cal. Rptr. 3d 493 (Cal. Ct. App. 2013) ..passim

Southland Corp. v. Keating,

465 U.S. 1 (1984) ..................................... 10, 13, 26

Spinetti v. Serv. Corp. Int’l,

324 F.3d 212 (3d Cir. 2003) ................................. 14

Tillman v. Tillman,

825 F.3d 1069 (9th Cir. 2016) ................. 19, 22, 25

Torres v. Simpatico, Inc.,

781 F.3d 963 (8th Cir. 2015) ......................... 15, 16

United States v. United Foods, Inc.,

533 U.S. 405 (2001) ............................................ 11

Volt Info. Scis., Inc. v. Bd. of Trustees of Leland

Stanford Junior Univ.,

489 U.S. 468 (1989) ................................. 13, 23, 24

Wilson v. 21st Cent. Ins. Co.,

171 P.3d 1082 (Cal. 2007) ................................... 12

Statutes and Rules

28 U.S.C. § 1257(a) ........................................... 2, 7, 10

Cal. Code Civ. P. § 1284.2..................................... 6, 11

Cal. R. of Ct. 8.500(c)(1) ............................................ 12

Federal Arbitration Act,

9 U.S.C. §§ 1 et seq........................................passim

INTRODUCTION

Petitioners Marcus & Millichap Real Estate

Investment Services and Marcus & Millichap Capital

Corporation (collectively, Marcus & Millichap) seek

this Court’s review of a nonfinal state-court decision

on an issue not properly raised below. The decision

does not address any issue of federal preemption, does

not bar Marcus & Millichap from arbitrating, and does

not determine the terms on which arbitration will

take place. It only calls for further proceedings in the

trial court to decide an issue concerning allocation of

arbitration costs. The decision also does not interfere

with arbitral authority, because the arbitrators

themselves directed the parties to obtain a resolution

of the cost-allocation issue from the courts. This Court

lacks jurisdiction to review the state court’s nonfinal

decision, which would not merit review in any event

because it does not conflict with any decision of this or

any other court and is not erroneous in any respect.

Respondent Rae Weiler is an elderly woman who

trusted Marcus & Millichap with her assets. Marcus

& Millichap fraudulently induced Ms. Weiler and her

husband into making a real estate investment that led

to devastating losses. Ms. Weiler pursued claims

against Marcus & Millichap in arbitration for nearly

three years, but, on the verge of insolvency, she

invoked California state law, see Roldan v. Callahan

& Blaine, 161 Cal. Rptr. 3d 493 (Cal. Ct. App. 2013),

to ask the arbitration panel to order Marcus &

Millichap to advance her share of the arbitration

costs. Concluding that it lacked jurisdiction to apply

the Roldan rule, the arbitration panel ordered Ms.

Weiler back to court to seek a judgment determining

whether Roldan applied.

In the decision below, an intermediate California

appellate court ruled, based on briefing that never

referred to the Federal Arbitration Act (FAA), that if

Ms. Weiler could prove she was unable to afford

further arbitration fees, Marcus & Millichap must be

given a choice between paying the fees and continuing

the arbitration, or proceeding in court. The appellate

court remanded the case to the trial court to

determine whether Ms. Weiler could in fact establish

her inability to pay further fees. Thus, the decision

below neither addressed any preemption argument

nor definitively resolved whether Ms. Weiler may be

relieved from bearing the costs of arbitration. Rather,

it called for the trial court to apply a state-law rule

based on the general principle that civil litigants

cannot be denied meaningful access to judicial process

based on ability to pay—a rule that California applies

in a great variety of contexts and that does not single

out arbitration for disfavored treatment. In addition,

if the trial court ultimately decides that Ms. Weiler

cannot bear further arbitration fees, Marcus &

Millichap will not be precluded from arbitrating; it

will only bear some additional costs in doing so.

Because the decision below is not final, and the

federal preemption issue that Marcus & Millichap

asks this Court to decide was not properly pressed and

passed on below, this Court lacks jurisdiction over this

petition under 28 U.S.C. § 1257(a). In any event,

review would be unwarranted because this case does

not present a question of federal law over which there

is any disagreement among federal courts of appeals

or state supreme courts. Marcus & Millichap cites no

decision holding that the FAA prevents courts from

protecting parties against losing their rights because

of an inability to afford high arbitration costs. And its

reliance on a single federal appellate decision holding

that a court may not intervene to set aside an

arbitrator’s order on costs says nothing about whether

a court may rule on such an issue when an arbitrator

declines to assert jurisdiction over it and refers it to

the court. The petition for certiorari should be denied.

STATEMENT

Respondent is 84-year-old Rae Weiler. Petitioner

Marcus & Millichap is an experienced real estate

brokerage and investment advisory firm with

extensive market experience in acting as the

representative for buyers and sellers in commercial

real estate transactions.

In 2006, Ms. Weiler and her husband contracted

with Marcus & Millichap to represent them in a

property exchange under Internal Revenue Code

§ 1031. Pet. App. 3a. The couple owned two properties

in Las Vegas, Nevada, which they exchanged for a Red

Robin restaurant in Abilene, Texas. Id. Marcus &

Millichap claimed that the Red Robin commercial

property was worth $4.1 million, which turned out to

be more than double its actual value. Id. at 3a–4a.

When they acquired the Red Robin, Ms. Weiler and

her husband understood that the tenant would be

obligated to pay property taxes and make rent

payments. Id. at 3a. But the tenant failed to pay taxes

or rent almost immediately and persisted in default

for seven years, costing the couple more than $600,000

in lost income. Id. at 4a.

Just before selling the Red Robin at a $2.1 million

loss in 2012, Ms. Weiler filed suit against Marcus &

Millichap, asserting claims for breach of fiduciary

duty, negligence, and elder abuse. Id. at 4a. She

alleged that she had informed the firm that she knew

very little about commercial real estate investing and

wanted a safe and secure investment with a decent

return. Id. She also alleged that the firm represented

that the Texas property would be a prosperous

investment and that she had acquired the property for

$2 million above fair market value because of

petitioner’s misrepresentations. Id. When Marcus &

Millichap moved to compel arbitration, Ms. Weiler did

not oppose, and the court ordered arbitration through

the American Arbitration Association, staying the

underlying court action pending its completion. Id.

The arbitration proceeded slowly, and, at every

turn, Marcus & Millichap pursued the most expensive

options available in the arbitral forum. It insisted, for

example, that Ms. Weiler’s $2.8 million claim required

that the case be heard by a panel of three arbitrators.

Id. at 4a–5a, 13a. Ms. Weiler argued that one

arbitrator was permissible and appropriate, but an

arbitrator agreed with Marcus & Millichap and

decided that a three-person panel would hear the case,

at an hourly rate of $1,450. Id. at 5a. The panel set a

discovery schedule and the parties proceeded. Id.

Nearly three years into arbitration, Ms. Weiler

informed the arbitrators that she was unable to

continue paying half of the arbitration costs. Id. at 5a.

Her costs had already exceeded $15,000 and she

anticipated that her share would ultimately exceed

$100,000. Id. Ms. Weiler asserted that the expense

would prohibit her from pursuing her claims at all if

she were required to continue paying half the fees. Id.

Ms. Weiler argued that Roldan v. Callahan & Blaine,

161 Cal. Rptr. 3d 493, permitted the arbitration panel

to order Marcus & Millichap either to “(1) continue

with the arbitration and pay the entire cost of it; or (2)

have the matter tried in superior court instead.” Pet.

App. 5a. The panel concluded, however, that this

question fell outside its jurisdiction and directed Ms.

Weiler to ask the superior court whether Roldan

applied. Ms. Weiler thus sought declaratory relief

from that court in early 2015. Id. at 5a–6a, 27a.

In the 2013 Roldan decision, the California Court

of Appeal relied on state court decisions dating back

to 2003 to conclude that, although the arbitration

agreements at issue were enforceable, the plaintiffs,

having established that they qualified “to proceed in

forma pauperis in the trial court, could likewise be

excused from the obligation to pay fees associated with

arbitration.” 161 Cal. Rptr. 3d at 499 (discussing

Parada v. Super. Ct., 98 Cal. Rptr. 3d 743 (Cal. Ct.

App. 2009), and Gutierrez v. Autowest, Inc., 7 Cal.

Rptr. 3d 267 (Cal. Ct. App. 2003)). Recognizing that it

could not order the arbitration forum to waive its fees,

“as a court would do in the case of an indigent

litigant,” and that it could not order a defendant to pay

plaintiffs’ share of those fees, the court gave the

defendant a choice: It could choose to pay plaintiffs’

share of costs up front and remain in arbitration, or

waive its right to arbitrate plaintiffs’ claims. Id.

In this case, when Marcus & Millichap moved for

summary judgment, it characterized Ms. Weiler’s

claim as one of “unconscionability.” Id. at 6a. It argued

that unconscionability must be determined as of the

time the arbitration agreement was entered into and

claimed that Ms. Weiler was indisputably wealthy at

that time. Id. The trial court expressed concern that

Ms. Weiler’s depleted finances might prevent her from

bringing her claims at all, but granted summary

judgment to Marcus & Millichap because it believed

that state law barred its consideration of Ms. Weiler’s

current financial status. Id. at 29a–30a.

On appeal, Ms. Weiler argued that, under Roldan,

Marcus & Millichap could not “force her to continue

with the arbitration despite the drastic change in her

financial circumstances.” Id. at 9a. She did not argue,

however, that the arbitration agreement was itself

unenforceable. Id. at 16a. Nonetheless, Marcus &

Millichap continued to mischaracterize Ms. Weiler’s

argument as one about unconscionability and,

therefore, to argue that the only factor relevant to the

inquiry was the parties’ financial status when the

contract was signed. Id. at 6a–7a; see also id. at 16a–

17a. Nowhere in its brief on appeal did Marcus &

Millichap assert that application of the Roldan

decision to the circumstances of this case would be

preempted by the FAA; indeed, the brief did not

mention or cite the FAA, and instead relied on a

provision of California’s arbitration law, California

Code of Civil Procedure § 1284.2.

The California Court of Appeal reversed, holding

that “when a party who has engaged in arbitration in

good faith is unable to afford to continue in such a

forum, that party may seek relief from the superior

court.” Id. at 17a. Finding triable issues of fact as to

Ms. Weiler’s present ability to pay her agreed share of

the anticipated arbitration costs, the court of appeal

remanded to the trial court. Id. at 3a. The court of

appeal did not decide whether Ms. Weiler would

ultimately be excused from paying further fees, and

its decision does not prevent arbitration from

resuming once the trial court determines whether Ms.

Weiler is able to pay further arbitration fees. The

court did not decide any questions concerning federal

preemption because it had been alerted to no respect

in which California law supposedly conflicted with the

FAA. See Pet. App. 13a–14a.

REASONS FOR DENYING THE WRIT

I. This Court lacks jurisdiction because the

decision below is not final.

This Court has jurisdiction to review only state

courts’ “[f]inal judgments or decrees.” 27 U.S.C.

§ 1257(a). “Compliance with the provisions of § 1257

is an essential prerequisite to [this Court’s] deciding

the merits of a case brought here under that section.”

Johnson v. California, 541 U.S. 428, 431 (2004). As

part of its obligation to establish this Court’s

jurisdiction, a petitioner must demonstrate that a

state-court decision satisfies the finality requirement.

See id.

To be reviewable before this Court, “a state-court

judgment must be final ‘in two senses: it must be

subject to no further review or correction in any other

state tribunal; it must also be final as an effective

determination of the litigation and not of merely

interlocutory or intermediate steps therein. It must be

the final word of a final court.’” Jefferson v. City of

Tarrant, 522 U.S. 75, 81 (1997) (quoting Mkt. St. Ry.

Co. v. R.R. Comm’n of Cal., 324 U.S. 548, 551 (1945)).

The decision below is not final in any sense, and

Marcus & Millichap has made no effort to demonstrate that it is. First, the decision is not an “effective

determination of the litigation.” Id. The case continues

even now because the California Court of Appeal

remanded it to the trial court to determine Ms.

Weiler’s financial status. Even after the trial court

rules, the case will be far from over: Depending on the

court’s ruling and on Marcus & Millichap’s choices, it

will continue either in arbitration or in court. In short,

the judgment below cannot be final because the case

is ongoing.

Second, the decision will not be free from “further

review or correction in any state tribunal.” Id. Should

Ms. Weiler be found unable to pay her arbitration

costs, Marcus & Millichap will continue to have

opportunities to seek review, including appeal from an

ultimate final judgment and, potentially, interlocutory appellate proceedings. Furthermore, the decision

below is that of an intermediate state court remanding

for further proceedings on the question before it—

hardly the final word of a final court. The California

Supreme Court could yet weigh in when the case has

been finally decided by the lower state courts.

This Court has exercised its certiorari jurisdiction

over state-court judgments that do not terminate a

case in only a “limited set of situations in which [the

Court has] found finality as to the federal issue

despite the ordering of further proceedings in the

lower state courts.” O’Dell v. Espinoza, 456 U.S. 430

(1982) (per curiam). In Cox Broadcasting Corp. v.

Cohn, 420 U.S. 469 (1975), this Court identified four

such categories of cases. Id. at 477. Each category

applies only where the state supreme court’s ruling

finally determines a federal question on which the

petitioner seeks review. None of the four categories

can apply here, because Marcus & Millichap did not

properly raise its federal claims below—neither

preemption nor application of the FAA—and the court

below thus never addressed the federal questions on

which the petition seeks review. See supra p. 6; see

also infra pp. 10–13. For that reason alone, this case

does not fit within any of the Cox exceptions.

Even leaving aside that the court below did not

decide the federal questions Marcus & Millichap now

raises, its decision does not fit any of the four Cox

categories. This case is not one in which “the outcome

of further proceedings [is] preordained,” as the first

Cox category requires. Id. at 479. Marcus & Millichap

may still prevail on the financial-circumstances

determination or on the merits of Ms. Weiler’s claims.

Similarly, there is no possibility that, if Marcus &

Millichap were to prevail in the state court, the federal

issues it now seeks to raise would “survive and require

decision regardless of the outcome” of future

proceedings, and so the second Cox exception is also

inapplicable. Id. at 480. Third, Marcus & Millichap

cannot contend this case is among the rare set of cases

(usually criminal proceedings) where there is an

insurmountable bar to any further appellate

proceedings subject to potential review in this Court

no matter the outcome below. Id. at 481; see Florida v.

Thomas, 532 U.S. 774, 779 (2001); Christianson v.

Colt Indus. Operating Corp., 486 U.S. 800, 817 (1988).

Finally, this case does not fall within the fourth

Cox exception, which applies when a “federal issue has

been finally decided in the state courts with further

proceedings pending in which the party seeking

review here might prevail on the merits on nonfederal

grounds, thus rendering unnecessary review of the

federal issue by this Court, and where reversal of the

state court on the federal issue would be preclusive of

any further litigation on the relevant cause of action.”

420 U.S. at 482–83. Even where, unlike here, a federal

issue has been finally decided, this exception is

reserved for issues of such importance that failing to

review now “might seriously erode federal policy.” Id.

at 483. There is no such possibility here. If the trial

court finds Ms. Weiler unable to pay her share of

arbitration costs, Marcus & Millichap will not be

denied its ability to arbitrate: It could opt to pay those

costs and proceed in arbitration. That Marcus &

Millichap retains access to arbitration no matter the

outcome below means that withholding review of the

decision below cannot erode any federal policy

favoring arbitration.

This case is thus wholly unlike Southland Corp. v.

Keating, 465 U.S. 1, 7–8 (1984), and Perry v. Thomas,

482 U.S. 483, 489 n.7 (1987), where this Court held

that definitive state-court decisions refusing to compel

arbitration were “final” for purposes of § 1257 as

construed in Cox. Furthermore, the decision whether

to review the preemption claim here would be better

informed if the Court had the benefit of the state

courts’ determination of Ms. Weiler’s ability to pay

and knew whether her claims would be litigated in

court or continue in arbitration. It would make little

sense to consider review before those matters have

been decided.

II. Petitioners waived the issues they raise

here.

The petition for certiorari suffers from another

fatal flaw: Marcus & Millichap’s failure to press below

the arguments it raises now. Marcus & Millichap did

not cite the FAA in its response brief before the

California Court of Appeal, let alone argue that the

FAA preempts the Roldan rule. Rather, it relied on

state-law arguments and, for principles of applicable

law, referenced the California Code of Civil Procedure,

not the FAA. See Cal. Ct. App. Resp. Br. 5–6 (Table of

Auths.). Specifically, Marcus & Millichap argued that

“California statutes do not provide an in forma

pauperis exception to the duty to arbitrate.” Id. at 22

(capitalization omitted). It claimed that Ms. Weiler’s

“request is inconsistent with California law,” id. at 23,

and discussed the state legislature’s intent with

regard to a fee-splitting rule, id. at 24 (citing Cal. Code

Civ. Proc. § 1284.2), among other state-law

arguments.

This Court does not decide questions “not raised or

litigated in the lower courts.” City of Springfield v.

Kibbee, 480 U.S. 257, 259 (1987) (per curiam); accord

United States v. United Foods, Inc., 533 U.S. 405, 417

(2001) (declining petitioner’s invitation to consider

“new substantive arguments attacking … the

judgment when those arguments were not pressed in

the court” below, nor “passed upon by it”). This

“longstanding rule,” Heath v. Alabama, 474 U.S. 82,

87 (1985), applies equally to questions of federal

preemption, Clark v. Jeter, 486 U.S. 456, 459–60

(1988). Marcus & Millichap’s failure to raise FAA

preemption before the court of appeal, and that court’s

consequent failure to address it, thus precludes review

here.

Marcus & Millichap attempts to cover for this

defect by blaming the California Court of Appeal for

giving the FAA short shrift in its opinion. See Pet. 14

(“The court mentioned the FAA and the California

Arbitration Act in passing and noted that these

statutes were ‘to be interpreted in a like manner’—

meaning that there was no need to ‘decide which

scheme govern[ed] here.’”). But because Marcus &

Millichap never suggested below that preemption was

at issue, it is unsurprising—and entirely proper—that

the court did not consider it.

In its petition for review to the California Supreme

Court, Marcus & Millichap belatedly mentioned the

FAA, but even then only briefly, as an apparent

afterthought. See Pet. for Review 8 (arguing that the

decision below will inject trial courts into the

arbitration process, a result “which the Federal

Arbitration Act precludes”); id. at 16 (stating that the

“FAA creates a presumption in favor of arbitrability

and permits courts to refuse to enforce agreements

only upon such grounds as exist at law or in equity for

revocation of any contract”). Yet even had Marcus &

Millichap fully articulated a federal-law argument in

the petition for review, such an argument would have

come too late to preserve the issue: “As a policy

matter, on petition for review the [California]

Supreme Court normally will not consider an issue

that the petitioner failed to timely raise in the Court

of Appeal.” Cal. R. of Ct. 8.500(c)(1); see, e.g., Wilson v.

21st Cent. Ins. Co., 171 P.3d 1082, 1090 (Cal. 2007)

(“Because 21st Century did not timely raise this issue

in the Court of Appeal, however, we decline to address

it.”). Marcus & Millichap offered the California

Supreme Court no explanation for failing to raise the

issue in the court of appeal and provided no reason

why the state supreme court should overlook that

failure. Thus, Marcus & Millichap waived any FAA

preemption argument.

Marcus & Millichap’s failure to invoke the FAA is

not merely a procedural default: It renders the

preemption arguments it now belatedly asserts

substantively invalid. The FAA does not preempt

application of a state arbitration statute “where the

parties have agreed their arbitration agreement will

be governed by the law of [a state].” Volt Info. Scis.,

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

Univ., 489 U.S. 468, 470 (1989). Marcus & Millichap

only turned to the FAA after having lost in the court

of appeal under California state law. The briefing in

that court gave every indication that both parties

agreed they were subject to California arbitration law

and litigated the case according to that belief. The

parties’ agreement to abide by state law governing

arbitration procedures means that, even if the FAA

would not itself incorporate the state-law rule applied

below concerning allocation of fees, it does not

preempt a state court from applying that rule.

Although the FAA preempts state laws that “require

a judicial forum for the resolution of claims which the

contracting parties agreed to resolve by arbitration,”

Southland Corp., 465 U.S. at 10, “it does not follow

that the FAA prevents the enforcement of agreements

to arbitrate under different rules than those set forth

in the Act itself,” Volt Info., 489 U.S. at 479.

III. The lower courts are not divided over

either of the petition’s questions presented.

The petition argues that the decision below creates

a divide among lower courts on two issues. The first is

“whether the FAA preempts a state rule that denies

enforcement of a cost-sharing provision of an

arbitration agreement without finding that the

provision violates a general principle of state contract

law.” Pet. 17. The second is “whether an arbitrator

should decide a dispute over the payment of

arbitration costs” under the principles of Howsam v.

Dean Witter Reynolds, Inc., 537 U.S. 79 (2002). Id.

at 23. Both contentions lack merit.

A. There is no conflict over whether the FAA

preempts a court from providing relief to

a party unable to pay costs of arbitration.

1. As to the first purported divide, the petition

identifies decisions from four federal courts of appeals,

Pet. 23–27, which it claims reveal conflict with the

decision below in two ways. According to the petition,

these courts “refused to invalidate a cost-sharing

provision without a determination that the provision

was void under generally applicable state contract

law.” Id. at 26. Moreover, the petition argues, had one

of these courts found a cost-sharing provision

unconscionable, the court would not have considered

“whether to rewrite” the cost-sharing provision, but

would instead have invalidated it. Id. These arguments dramatically mischaracterize the cited decisions as well as the decision below.1

In three of the four cases Marcus & Millichap cites,

the courts found only that the party claiming an

inability to pay fees had failed to carry its burden of

showing that arbitration was cost-prohibitive—not

that a cost-sharing provision could never be

prohibitively expensive. See Torres v. Simpatico, Inc.,

781 F.3d 963 (8th Cir. 2015); Kam-Ko Bio-Pharm

Trading Co. Ltd-Australasia v. Mayne Pharma (USA)

––––––––––––––––––––––––

1 The petition does not directly argue that courts disagree

over whether cost-sharing provisions can ever render an

arbitration agreement unconscionable. That argument would be

demonstrably false. See, e.g., Chavarria v. Ralphs Grocery Co.,

733 F.3d 916, 926 (9th Cir. 2013) (holding an arbitration

agreement unenforceable where its terms imposed significant

costs on the employee up front); Faber v. Menard, Inc., 367 F.3d

1048, 1054 (8th Cir. 2004); Spinetti v. Serv. Corp. Int’l, 324 F.3d

212, 217 (3d Cir. 2003) (affirming the district court’s finding that

plaintiff was financially unable to share arbitration costs);

Morrison v. Circuit City Stores, Inc., 317 F.3d 646 (6th Cir. 2003)

(finding an arbitration agreement’s cost-splitting provision

unenforceable and severable); Bradford v. Rockwell

Semiconductor Sys., Inc., 238 F.3d 549, 556 (4th Cir. 2001)

(evaluating whether the arbitral forum “is an adequate and

accessible substitute to litigation … focus[ing], among other

things, upon … whether th[e] cost differential is so substantial

as to deter the bringing of claims”).

Inc., 560 F.3d 935 (9th Cir. 2009); James v.

McDonald’s Corp., 417 F.3d 672 (7th Cir. 2005). In the

fourth case, the Second Circuit rejected a claim that

an arbitration clause was unconscionable, and hence

unenforceable, because it did not disclose costs.

Doctor’s Assocs., Inc. v. Stuart, 85 F.3d 975 (2d Cir.

1996). Ability to pay costs, not their disclosure, is at

issue here.

All of these cases couched their holdings in terms

of unconscionability because they involved parties

who were resisting motions to compel arbitration and

who invoked unconscionability as the basis for finding

the agreements unenforceable as a matter of state

contract law. Here, by contrast, Ms. Weiler has abided

by the arbitration agreement to the best of her ability

and is not unwilling to continue arbitrating, but she

cannot continue to pay the costs of arbitration. The

decision below is thus different from those that

Marcus & Millichap invokes in multiple significant

respects: Procedurally, it does not arise from an

opposition to a motion to compel arbitration.

Substantively, the consequence of a ruling in her favor

will not be to render an arbitration agreement

unenforceable. And, unlike in the decisions the

petition cites, the court has not yet determined

whether Ms. Weiler can carry her burden of showing

financial hardship. None of the decisions Marcus &

Millichap cites addresses such a situation, let alone

holds that the FAA preempts a rule comparable to

California’s Roldan doctrine. To the contrary, the

Roldan remedy is similar to what courts across the

country order in like circumstances.

A more detailed analysis of the decisions Marcus &

Millichap cites confirms their inapplicability. In

Torres, the Eighth Circuit considered whether an

arbitration provision was “unconscionable and should

not be enforced because the prohibitively high costs

associated with an individual arbitration proceeding

prevent [plaintiffs] from pursuing their claims.”

781 F.3d at 969. The court explained that the party

seeking to establish that arbitration would be

prohibitively expensive bears the burden of proving

“that it is likely, as opposed to merely speculative, that

the prohibitive costs will actually be incurred.” Id.

(citing Green Tree Fin. Corp.-Ala. v. Randolph, 531

U.S. 79, 92 (2000)). In addition, that party “must

establish more than a ‘hypothetical inability to pay’

the costs of arbitration … so that the court can

determine whether the arbitral forum is accessible.”

Id. (quoting Faber v. Menard, Inc., 367 F.3d 1048,

1053–54 (8th Cir. 2004)). The court found that the

plaintiffs had adduced insufficient evidence to show

that costs would prevent them “from effectively

vindicating their rights in the arbitral forum.” Id.

at 970 (citing Am. Express Co. v. Italian Colors Rest.,

570 U.S. 228, 236 (2013)).

Torres’s approving citation of Faber makes clear

that the Eighth Circuit has not, as Marcus &

Millichap suggests, adopted a rule against granting

relief to a litigant who is unable to afford arbitration

fees. In Faber, the Eighth Circuit remanded a case for

determination of the plaintiff’s ability to pay and

directed that, if the district court found that requiring

the plaintiff “to pay half of arbitrators’ fees would

prevent access to the arbitral forum and preclude him

from vindicating his rights, it should sever that clause

and then enter an order compelling arbitration.”

Faber, 367 F.3d at 1054. The Eighth Circuit’s

recognition that proof of a plaintiff’s inability to pay

arbitration fees would require the court to relieve her

of the obligation to pay is fully consistent with the

decision below.

Similarly, in Kam-Ko Bio-Pharm Trading Co. LtdAustralasia v. Mayne Pharma (USA) Inc., 560 F.3d

935 (9th Cir. 2009), the Ninth Circuit cited six cases

that had held “that high arbitration costs can

effectively deny a plaintiff access to a forum to obtain

justice and thereby render an arbitration clause

unconscionable,” but found that the plaintiff “failed to

meet its burden” of showing it could not afford to pay.

Id. at 942. Likewise, in James v. McDonald’s Corp.,

417 F.3d 672 (7th Cir.), the Seventh Circuit noted that

plaintiff had “not provided any evidence concerning

the comparative expense of litigating her claims” and

so failed to show that being required “to proceed

through arbitration … will effectively deny her legal

recourse.” Id. at 679.

Here, the state courts below have not yet

determined whether the costs of arbitration will

effectively deny Ms. Weiler continued access to the

arbitral forum. Nothing in the court of appeal’s

decision to afford her the opportunity to prove her

inability to pay conflicts with the decisions Marcus &

Millichap cites holding that a plaintiff who cannot

bear that burden is entitled to no relief.

The decision to remand to the trial court the issue

of Ms. Weiler’s ability to pay is also fully consistent

with decisions of many other courts facing like

circumstances. See, e.g., Rickard v. Teynor’s Homes,

Inc., 279 F. Supp. 2d 910, 918 (N.D. Ohio 2003)

(granting plaintiff leave to show she would be

financially unable to pursue her claims in arbitration);

Phillips v. Assocs. Home Equity Servs., Inc., 179 F.

Supp. 2d 840, 847 (N.D. Ill. 2001) (concluding that

plaintiff “carried her burden of proving that costs

associated with arbitration would effectively preclude

her from vindicating her federal statutory rights”);

Moran v. Riverfront Diversified, Inc., 968 N.E.2d 1, 10

(Ohio Ct. App. 2011) (allowing evidentiary hearing, if

requested, on plaintiff’s ability to pay arbitration

costs); see also Mendez v. Palm Harbor Homes, Inc.,

45 P.3d 594, 607 (Wash. Ct. App. 2002) (finding that

plaintiff “made a sufficient showing” that “costs of

AAA arbitration would be prohibitively high”).

Simply put, there is no disagreement among courts

over whether prohibitively expensive arbitration can

render a cost-sharing provision unenforceable.

2. In any event, the proper points of comparison for

this case are not cases concerning whether an

arbitration agreement is enforceable in the first

instance, but cases in which arbitration has

commenced but been suspended or terminated

because a party has stopped paying its arbitration fees

or has requested relief from further payment. In such

cases, courts do not consider whether the arbitration

agreements are unconscionable and unenforceable;

they consider how best to enforce arbitration

agreements in light of a party’s inability or

unwillingness to pay. See, e.g., Tillman v. Tillman,

825 F.3d 1069 (9th Cir. 2016); Pre-Paid Legal Servs.,

Inc. v. Cahill, 786 F.3d 1287 (10th Cir. 2015); Dealer

Computer Servs., Inc. v. Old Colony Motors, Inc.,

588 F.3d 884 (5th Cir. 2009). No court in such

circumstances has held that the FAA preempts

consideration of a party’s continuing ability to pay or

the provision of some form of relief if she proves the

costs are beyond her means.

The court of appeal’s statement that “this case is

not about ‘unconscionability’” or enforceability, Pet.

App. 15a–16a, is entirely consistent with this body of

case law. Thus, Marcus & Millichap’s observation that

“[u]nconscionability is determined as of the time the

contract was entered into, not in light of subsequent

events,” Pet. 7 (quoting Parada v. Super. Ct., 98 Cal.

Rptr. 3d 743, 768 (Cal. Ct. App. 2009)), is beside the

point. As the court explained in Camacho v. Holiday

Homes, Inc., 167 F. Supp. 2d 892 (W.D. Va. 2001),

whether an arbitration agreement is unconscionable

is a different issue from whether its application to the

plaintiff would deprive her of a remedy, id. at 896 n.2,

by making the “arbitral forum … financially inaccessible to her” in the absence of an agreement by the

defendant to bear the costs, id. at 897.

Where such issues have arisen in the midst of an

arbitration proceeding, resulting in the suspension or

termination of arbitration, courts have reasoned that

their retained jurisdiction over the underlying action

(which was stayed pending arbitration)—and the fact

that arbitration has been undertaken in accordance

with the agreement—allows them to consider a party’s

request for relief. See Pet. App. 13a–16a; see also

Tillman, 825 F.3d at 1074 (where party lacked

resources to make arbitration deposit and the

“arbitration had ‘been had’ pursuant to the

agreement,” it was proper to proceed in district court

given that the other party had declined to cover the

deposit when asked by the arbitrators); Pre-Paid, 786

F.3d at 1294 (same resolution where recalcitrant

defendant refused to pay arbitration fees and

arbitration was terminated); cf. Dealer, 588 F.3d at

888 (holding that arbitrators acted properly in shifting

costs to a party that could pay and in suspending

proceedings until payment was made); Brandao v.

Jan-Pro Franchising Int’l, Inc., 95 Mass. App. Ct.

1103, 2019 WL 1244627, at *4 (2019) (unpublished)

(remanding the question of one party’s ability to pay

and holding that, if that party is shown to be unable

to pay, the other party must either “agree to bear the

arbitration fees or waive the right to proceed in

arbitration”).

The petition persistently fails to acknowledge that

the issue the arbitration panel referred to the court

was not whether the agreement was unconscionable,

but “whether [Marcus & Millichap] must pay [Ms.

Weiler’s] arbitrator fees as a condition of maintaining

their arbitration rights (Roldan v. Callahan &

Blaine).” C.A. App. 1044; see Pet. 13 (claiming

inaccurately that “[t]he arbitration panel concluded

that a court had to decide an issue of

unconscionability”). As to the issue actually before the

court—what remedy is available when an arbitration

already underway becomes too costly for one party to

bear—the petition does not even attempt to establish

a conflict.

B. No conflict exists over whether a court

can decide a cost-allocation issue

referred to it by the arbitrators.

The petition claims a second purported split over

“whether an arbitrator should decide a dispute over

the payment of arbitration costs.” Pet. at 23. Here,

however, Ms. Weiler did exactly what Marcus &

Millichap says she should have done: She sought relief

in the first instance from the arbitrators. The only

reason the issue was presented to the court was that

the arbitrators concluded that Ms. Weiler’s request for

relief under Roldan was beyond their jurisdiction. Pet.

App. 5a. Marcus & Millichap cites no decisions holding

that a court may not decide a question concerning

payment of costs when the arbitrators have declined

to exercise jurisdiction over it and directed the parties

to resolve it in court.

Marcus & Millichap argues that this Court’s

Howsam decision requires that “procedural questions

which grow out of the dispute and bear on its final

disposition are presumptively not for the judge, but for

an arbitrator, to decide.” Pet. 27 (quoting Howsam,

537 U.S. at 84). This general principle is undisputed.

But nothing in Howsam, or any decision cited by

Marcus & Millichap, suggests that this presumption

remains where the arbitrators have themselves

disclaimed jurisdiction over an issue. Howsam thus

offers no support for Marcus & Millichap’s petition.

Marcus & Millichap’s contention that the decision

below conflicts with the Fifth Circuit’s decision in

Dealer is equally wide of the mark. In Dealer, an

arbitral panel resolved a cost allocation question, and

the Fifth Circuit held that in such circumstances a

court should not set aside the arbitrators’ exercise of

discretion. See 588 F.3d at 887. Specifically, the

plaintiff in Dealer paid its share of the required fees

for arbitration, but the defendant asserted that it was

unable to pay. The arbitrators directed the plaintiff to

pay the defendant’s share and, when it failed to do so,

suspended the proceedings. The plaintiff then asked

the district court to order the defendant to pay its own

share of the fees, and the district court did so. The

Fifth Circuit held that order was improper because

the matter was a “procedural” one for the arbitrators,

and the arbitrators had “discretion” to make the

determination they did. Id. at 887–88; see also PrePaid, 786 F.3d at 1297 (discussing Dealer).

Dealer nowhere suggests that courts lack power to

decide a fee-allocation question when a party has

sought relief in arbitration and the arbitrators have

disclaimed jurisdiction over the issue and suspended

proceedings pending its consideration by the court.

Indeed, Dealer’s reasoning strongly suggests that, in

such circumstances, deference to the arbitrators’

understanding of the scope of their authority is

proper, and that the court should therefore address

the issue that the arbitrators have declined to decide.

Since Deal, at least two federal courts of appeals have

held that a party genuinely unable to make a payment

may seek relief from the court, so long as the relief the

party requests is not inconsistent with the arbitration

panel’s orders. See Tillman, 825 F.3d at 1076; PrePaid, 786 F.3d at 1299. The court of appeal in this case

did not break with any relevant authority.

Marcus & Millichap cites no other decision, and

respondent is aware of none, that addresses the

unusual circumstances here, in which a panel of

arbitrators declined to address a cost-allocation issue

and directed the parties to litigate it in court. Whether

and how principles of judicial deference to arbitral

decision-making on procedural matters should apply

to this situation is a highly factbound question, into

which this Court need not delve absent some

indication that the issue is recurring and has

generated disagreement among the lower courts.

IV. Petitioners’ preemption claims lack merit.

Marcus & Millichap’s FAA-based arguments would

fail on the merits even if they had been properly

presented below. The court of appeal’s correct

application of California law to the facts here does not

conflict with any relevant command of the FAA. The

FAA was designed to place agreements to arbitrate

“upon the same footing as other contracts” to fulfill “a

congressional desire to enforce agreements into which

parties had entered.” Volt Info., 489 U.S. at 478. The

FAA does not preempt the application of even-handed,

arbitration-neutral rules that protect litigants from

losing their rights because of inability to pay high fees;

indeed, this Court has strongly suggested that the

FAA itself incorporates similar principles.

The protection that the Roldan rule offers to

litigants who might otherwise lose their rights

because of high forum costs is consistent with general

principles of California state law applicable outside of

the arbitration context. California courts afford

“indigent civil litigants the ability to obtain

meaningful access to the judicial process in a great

variety of contexts.” Jameson v. Desta, 420 P.3d 746,

752 (Cal. 2018). For example, California case law

allows indigent civil litigants to obtain a jury trial

without prepayment of fees, to proceed in forma

pauperis, to file appeals without paying fees, to obtain

an injunction without providing a bond, and to have

an affordable, privately compensated discovery

referee, among other accommodations. See id.

The Roldan rule is also consistent with the

contract-law principle that “hindrance of the other

party’s performance operates to excuse that party’s

nonperformance.” Pet. App. 12a (quoting Erich v.

Granoff, 167 Cal. Rptr. 538 (Cal. Ct. App. 1980)). As

the court below explained, that principle is implicated

here because the “very reason [Ms. Weiler] filed the

underlying court action” was that defendants’ alleged

wrongful acts cost the Weilers a significant amount of

money and that “defendants’ tactical decisions”

appear to have “further contributed to [Ms. Weiler’s]

financial ruin.” Pet. App. 12a. This Court has

confirmed that “applying general state-law principles

of contract interpretation to the interpretation of an

arbitration agreement” is appropriate so long as “due

regard” is “given to the federal policy favoring

arbitration.” Volt Info., 489 U.S. at 475–76.

The decision below thus rests on principles that do

not single out arbitration for disfavored treatment.

Moreover, application of the Roldan rule, both

generally and in the circumstances of this case, does

not “undermine the central benefits of arbitration

itself,” Lamps Plus v. Varela, No. 17-988, slip op. at 9

(U.S. Apr. 24, 2019), or “interfer[e] with fundamental

attributes of arbitration,” id. at 11. Allocation of costs

to impecunious parties is hardly an inherent feature

of arbitration. And taking steps to ensure that

arbitration remains affordable is fully consistent with

the expectation of those who enter into arbitration

agreements that arbitration will proceed in a manner

consistent with the “virtues” of “speed and simplicity

and inexpensiveness.” Id. at 8.

The court of appeal’s application of Roldan

endorsed and gave effect to the strong public policy in

favor of enforcing arbitration agreements by withholding judicial intervention until after “arbitration

had ‘been had’ pursuant to the agreement of the

parties” and the proceedings had been suspended, Pet.

App. 15a (citing Tillman, 825 F.3d at 1074), and by

ensuring that, whatever the outcome, Marcus &

Millichap would be able to elect to continue the

arbitration. That approach, consistent with the most

pertinent federal appellate authority, Tillman and

Pre-Paid, fully accords with the FAA’s policies.2

The result below is also consistent with this

Court’s construction of the FAA. The Court has

suggested that the FAA does not permit arbitration

terms that impose “filing and administrative fees

attached to arbitration that are so high as to make

access to the forum impracticable.” Am. Express,

570 U.S. at 236. Likewise, in Randolph, the Court

indicated that the FAA does not countenance “the

existence of large arbitration costs” that could prevent

a plaintiff from vindicating her rights, 531 U.S. at 90.

The Court indicated that a party complaining that

arbitration costs are “prohibitively expensive … bears

the burden of showing the likelihood of incurring such

costs,” id. at 92—a statement that implies the

potential availability of a remedy should the party

carry that burden. The decision below, which does no

more than give Ms. Weiler the opportunity to carry

her burden of showing entitlement to such a remedy,

while ensuring protection of Marcus & Millichap’s

ability to arbitrate should it so choose, is entirely

consistent with this Court’s construction of the FAA.

V. A state-court decision presents a poor

vehicle for review of FAA issues.

Even if Marcus & Millichap’s assertion that the

FAA limits a court’s ability to provide relief to a

litigant who cannot afford high arbitration costs had

some arguable merit, the lingering disagreement

––––––––––––––––––––––––

2 See also Hernandez v. Acosta Tractors Inc., 898 F.3d 1301,

1306 (11th Cir. 2018) (citing Tillman for the proposition that “a

party’s good faith inability to afford the arbitration fees would be

a factor properly considered to weigh against” sanctioning the

party that failed to pay its arbitration fees).

within this Court over whether the FAA applies in

state-court actions would make this case a poor

vehicle for exploring those limits. Marcus &

Millichap’s questions presented, and all of the

arguments in its petition, presuppose that the FAA

applies in state courts. Although a majority of this

Court so held (over substantial dissents) in Southland

Corp. v. Keating, 465 U.S. 1 (1984), and Allied-Bruce

Terminix Cos. v. Dobson, 513 U.S. 265 (1995), one

Justice of this Court continues to adhere to the view

that the FAA does not apply to actions in state courts.

See Kindred Nursing Ctrs. Ltd. P’ship v. Clark, 137 S.

Ct. 1421, 1429 (2017) (Thomas, J., dissenting);

DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463, 471 (2015)

(Thomas, J., dissenting). As Kindred and Imburgia

illustrate, that view will determine the vote of at least

one member of the Court in any case that originates

in state court and raises an FAA issue.

This continuing disagreement makes a state court

case an exceedingly poor candidate for resolving any

significant FAA issue because such issues have often

closely divided the Court. See, e.g., Lamps Plus; Epic

Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1622 (2018);

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

(2011); Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444

(2003). Even if Marcus & Millichap’s arguments here

were strong enough to command any votes at all, the

likelihood that one Justice would vote to affirm on the

ground that the FAA does not apply to state courts

would create a significant chance that no holding on

any issue would command a majority of the Court. See,

e.g., Bazzle, 539 U.S. at 460 (Thomas, J., dissenting).

Review would then consume the time and efforts of the

Court but contribute nothing to the definitive

resolution of any question of federal law.

CONCLUSION

For the foregoing reasons, the petition for a writ of

certiorari should be denied.

Respectfully submitted,