Petition for Writ of Certiorari — Comcast Corporation, et al., Petitioners v. Charles E. Tillage, et al.

No.

IN THE

pìéêÉãÉ=`çìêí=çÑ=íÜÉ=råáíÉÇ=pí~íÉë=

_______________

COMCAST CORPORATION, COMCAST CABLE

COMMUNICATIONS, LLC,

Petitioners,

v.

CHARLES TILLAGE, JOSEPH LOOMIS,

Respondents.

_______________

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Ninth Circuit

_______________

PETITION FOR A WRIT OF CERTIORARI

_______________

SEAMUS C. DUFFY

MARK A. PERRY

AKIN GUMP STRAUSS HAUER

Counsel of Record

& FELD LLP

JOSHUA M. WESNESKI

Two Commerce Square

GIBSON, DUNN & CRUTCHER LLP

2001 Market Street, Suite 4100 1050 Connecticut Avenue, N.W.

Washington, D.C. 20036

Philadelphia, PA 19103

(202) 955-8500

(215) 965-1212

MPerry@gibsondunn.com

Counsel for Petitioners

(Additional Counsel Listed on Inside Cover)

MICHAEL J. STORTZ

AKIN GUMP STRAUSS HAUER

& FELD LLP

580 California Street,

Suite 1500

San Francisco, CA 94104

(415) 765-9508

Counsel for Petitioners

QUESTIONS PRESENTED

The Federal Arbitration Act makes written arbitration agreements “valid, irrevocable, and enforceable,” although its “saving clause” permits the application of defenses that “exist at law or in equity for the

revocation of any contract.” 9 U.S.C. § 2. But even a

defense that falls within the saving clause is

preempted by the Act if it interferes with fundamental

attributes of arbitration, such as bilateralism. See

Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1623 (2018).

In 2017, the California Supreme Court announced

for the first time that provisions in predispute arbitration agreements waiving the parties’ right to seek

“public injunctive relief” in any forum are contrary to

California public policy and unenforceable.

See

McGill v. Citibank, N.A., 393 P.3d 85 (Cal. 2017). This

so-called “McGill rule” effectively precludes bilateral

arbitration of consumer disputes in California. The

questions presented are:

1. Whether the McGill rule falls outside the FAA’s

saving clause because it is not a ground that “exist[s]

at law or in equity” for the “revocation” of any contract?

2. Whether, even if the McGill rule falls within the

FAA’s saving clause, it is otherwise preempted by the

FAA because it interferes with fundamental attributes of arbitration by negating the parties’ agreement

to resolve their dispute bilaterally?

ii

PARTIES TO THE PROCEEDING AND

RULE 29.6 STATEMENT

All parties to the proceeding are set forth in the

caption.

Pursuant to this Court’s Rule 29.6, undersigned

counsel state that petitioner Comcast Cable Communications, LLC is an indirect subsidiary of petitioner

Comcast Corporation, a publicly held corporation.

Comcast Corporation has no parent corporation and

no publicly held corporation owns 10% or more of its

stock.

iii

RULE 14.1(b)(iii) STATEMENT

Pursuant to this Court’s Rule 14.1(b)(iii), the following proceedings are related to this case:



Tillage et al. v. Comcast Corp. et al., No. 3:17cv-06477-VC-DMR (JCS) (N.D. Cal.).



Tillage et al. v. Comcast Corp. et al., No. 1815288 (9th Cir.) (judgment entered June 28,

2019, petition for rehearing denied January

17, 2020).

There are no additional proceedings in any court

that are directly related to this case.

iv

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES .................................... vi

OPINIONS BELOW ................................................. 1

JURISDICTION ....................................................... 1

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED ...................................... 1

STATEMENT ........................................................... 2

REASONS FOR GRANTING THE PETITION .... 11

I.

THE MCGILL RULE FALLS OUTSIDE THE FAA’S

SAVING CLAUSE ................................................. 13

A. The McGill Rule Is Not A Defense

Providing For Revocation Of Contracts .. 13

B. Review Is Warranted To Protect

Consumer Arbitration In California........ 22

II. THE MCGILL RULE UNDERMINES THE FAA’S

PROTECTION OF BILATERAL ARBITRATION ........ 27

A. The Decision Below Interferes With

Bilateral Arbitration ................................ 27

B. Review Is Warranted To Correct The

McGill Rule’s Intrusion On

Bilateralism .............................................. 32

CONCLUSION ....................................................... 34

v

TABLE OF APPENDICES

Page

APPENDIX A: Memorandum Disposition of

the U.S. Court of Appeals for the Ninth

Circuit (June 28, 2019) ......................................1a

APPENDIX B: Opinion of the U.S. Court of

Appeals for the Ninth Circuit in Blair v.

Rent-A-Center, Inc. (June 28, 2019) ..................3a

APPENDIX C: Order of the U.S. District

Court for the Northern District of California Denying Motion to Compel Arbitration

(Feb. 15, 2018) ..................................................29a

APPENDIX D: Order of the U.S. Court of Appeals for the Ninth Circuit Denying Petition for Panel Rehearing and Rehearing

En Banc (Jan. 17, 2020) ...................................33a

APPENDIX E: Constitutional and Statutory

Provisions Involved ..........................................34a

U.S. Const. art. VI, cl. 2 ....................................34a

9 U.S.C. § 2 ........................................................34a

9 U.S.C. § 4 ........................................................35a

APPENDIX F: Excerpts from 2017 Subscriber

Agreement ........................................................37a

vi

TABLE OF AUTHORITIES

Page(s)

Cases

Allied-Bruce Terminix Cos. v. Dobson,

513 U.S. 265 (1995) ........................................ 18, 24

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

570 U.S. 228 (2013) .................................... 5, 27, 29

AT&T Mobility LLC v. Concepcion,

563 U.S. 333 (2011) ...... 2, 3, 4, 5, 14, 22, 23, 24, 28

............................................................ 30, 31, 32, 33

Bernhardt v. Polygraphic Co. of Am.,

350 U.S. 198 (1956) ................................................ 2

Bishay v. Icon Aircraft, Inc.,

No. 19-CV-178, 2019 WL 3337885

(E.D. Cal. July 25, 2019) ...................................... 30

Broadley v. Mashpee Neck Marina, Inc.,

471 F.3d 272 (1st Cir. 2006) ................................ 16

Broughton v. Cigna Healthplans,

988 P.2d 67 (Cal. 1999) ........................................ 33

Cel-Tech Commc’ns, Inc. v. L.A. Cellular

Tel. Co.,

973 P.2d 527 (Cal. 1999) ...................................... 23

Dean Witter Reynolds, Inc. v. Byrd,

470 U.S. 213 (1985) .................................... 2, 24, 25

vii

DIRECTV, Inc. v. Imburgia,

136 S. Ct. 463 (2015) ............................................ 24

Discover Bank v. Superior Court,

113 P.3d 1100 (Cal. 2005) ...................................... 5

Doctor’s Assocs. v. Casarotto,

517 U.S. 681 (1996) .................................... 4, 17, 20

Duncan v. Walker,

533 U.S. 167 (2001) .............................................. 17

Epic Sys. Corp. v. Lewis,

138 S. Ct. 1612 (2018) ................ 2, 6, 22, 28, 29, 31

Ferguson v. Corinthian Colls., Inc.,

733 F.3d 928 (9th Cir. 2013) ................................ 33

Fernandez v. Bridgecrest Credit Co.,

No. 19-CV-877, 2019 WL 7842449

(C.D. Cal. Oct. 29, 2019) ...................................... 32

First Hartford Corp. Pension Plan & Tr.

v. United States,

194 F.3d 1279 (Fed. Cir. 1999) ............................ 15

Gozlon-Peretz v. United States,

498 U.S. 395 (1991) .............................................. 15

Halcon Int’l, Inc. v. Monsanto Austl.

Ltd.,

446 F.2d 156 (7th Cir. 1971) .................... 15, 25, 26

Hardt v. Reliance Standard Life Ins.

Co.,

560 U.S. 242 (2010) .............................................. 14

viii

Huffman v. Saul Holdings Ltd. P’ship,

194 F.3d 1072 (10th Cir. 1999) ............................ 15

Hurd v. Hodge,

334 U.S. 24 (1948) ................................................ 16

Ins. Co. v. Morse,

87 U.S. (20 Wall.) 445 (1874) ............................... 19

Johnson Controls, Inc. v. City of Cedar

Rapids,

713 F.2d 370 (8th Cir. 1983) ................................ 19

Kill v. Hollister

(1746) 95 Eng. Rep. 532 (KB) .............................. 18

Kindred Nursing Ctrs. Ltd. P’ship v.

Clark,

137 S. Ct. 1421 (2017) .......................... 4, 28, 29, 30

Kulukundis Shipping Co., S/A v.

Amtorg Trading Corp.,

126 F.2d 978 (2d Cir. 1942) ................................. 18

Lamie v. U.S. Tr.,

540 U.S. 526 (2004) .............................................. 15

Long Beach Drug Co. v. United Drug

Co.,

88 P.2d 698 (Cal. 1939) ........................................ 16

Lyons v. NBCUniversal Media, LLC,

No. 19-CV-3830, 2019 WL 6703396

(C.D. Cal. Sept. 27, 2019) .................................... 32

ix

McArdle v. AT&T Mobility LLC,

772 F. App’x 575 (9th Cir. 2019) ......................... 10

McGill v. Citibank, N.A.,

393 P.3d 85 (Cal. 2017) .......... 2, 6, 7, 20, 22, 30, 32

Mellouli v. Lynch,

135 S. Ct. 1980 (2015) .......................................... 17

Middlesex County v. Gevyn Construction

Corp.,

450 F.2d 53 (1st Cir. 1971) .................................. 25

Mitsubishi Motors Corp. v. Soler

Chrysler-Plymouth, Inc.,

473 U.S. 614 (1985) .............................................. 26

Moses H. Cone Mem’l Hosp. v. Mercury

Constr. Corp.,

460 U.S. 1 (1983) .................................................... 3

Nat’l R.R. Passenger Corp. v. Consol.

Rail Corp.,

892 F.2d 1066 (D.C. Cir. 1990) ............................ 26

Neder v. United States,

527 U.S. 1 (1999) .................................................. 15

Olosoni v. HRB Tax Grp., Inc.,

No. 19-CV-3610, 2019 WL 7576680

(N.D. Cal. Nov. 5, 2019) ....................................... 32

Perry v. Thomas,

482 U.S. 483 (1987) .......................................... 3, 24

x

Preston v. Ferrer,

552 U.S. 346 (2008) ................................................ 3

Prima Paint Corp. v. Flood & Conklin

Mfg. Co.,

388 U.S. 395 (1967) .............................................. 18

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

561 U.S. 63 (2010) .................................................. 3

Sakkab v. Luxottica Retail North

America, Inc.,

803 F.3d 425 (9th Cir. 2015) ...................... 9, 31, 33

Shearson/American Express, Inc. v.

McMahon,

482 U.S. 220 (1987) .............................................. 25

Southland Corp. v. Keating,

465 U.S. 1 (1984) .................................................... 4

Stolt-Nielsen S.A. v. AnimalFeeds Int’l

Corp.,

559 U.S. 662 (2010) ........................................ 18, 27

Supak & Sons Mfg. Co. v. Pervel Indus.,

Inc.,

593 F.2d 135 (4th Cir. 1979) ................................ 26

Volt Info. Scis., Inc. v. Bd. of Trs. of

Leland Stanford Junior Univ.,

489 U.S. 468 (1989) ........................................ 18, 27

Wilko v. Swan,

346 U.S. 427 (1953) .............................................. 30

xi

Statutes

9 U.S.C. § 2 ........................................ 2, 3, 4, 13, 14, 17

9 U.S.C. § 4 .......................................................... 14, 18

29 U.S.C. § 157 ............................................................ 6

Cal. Civ. Code § 3513 ...................................... 7, 11, 21

Cal. Lab. Code § 2698 .......................................... 10, 31

Other Authorities

Henry Campbell Black, A Treatise on

the Rescission of Contracts &

Cancellation of Written Instruments

(1916) .................................................................... 16

Mathieu Blackston, California’s Unfair

Competition Law—Making Sure the

Avenger Is Not Guilty of the Greater

Crime, 41 San Diego L. Rev. 1833

(2004) .................................................................... 22

Stephen A. Broome, An Unconscionable

Application of the Unconscionability

Doctrine: How the California Courts

Are Circumventing the Federal

Arbitration Act, 3 Hastings Bus. L.J.

39 (2006) ............................................................... 33

xii

Comment, Erie, Bernhardt, and Section

2 of the United States Arbitration

Act: A Farrago of Rights, Remedies,

and a Right to a Remedy, 69 Yale

L.J. 847 (1960)................................................ 17, 21

Alison Frankel, The 9th Circuit Just

Blew Up Mandatory Arbitration in

Consumer Cases, Reuters (July 1,

2019), https://reut.rs/30Ufvxq ............................. 23

Sales and Contracts to Sell in Interstate

and Foreign Commerce, and Federal

Commercial Arbitration: Hearing on

S. 4213 and S. 4214 Before the S.

Subcomm. on the Judiciary, 67th

Cong. (1923) ......................................................... 19

Williston on Contracts (4th ed. 2019) ....................... 16

PETITION FOR A WRIT OF CERTIORARI

Petitioners Comcast Corporation and Comcast

Cable Communications, LLC respectfully petition for

a writ of certiorari to review the judgment of the

United States Court of Appeals for the Ninth Circuit.

OPINIONS BELOW

The memorandum disposition of the court of appeals (Pet. App. 1a–2a) is reported at 772 F. App’x

569. The opinion of the court of appeals in a parallel

case raising the same issues (Pet. App. 3a–28a) is reported at 928 F.3d 819. The district court’s order (Pet.

App. 29a–32a) is unreported but available at 2018 WL

4846548.

JURISDICTION

The judgment of the court of appeals was entered

on June 28, 2019. Pet. App. 1a. A timely petition for

rehearing was denied on January 17, 2020. Pet. App.

33a. The jurisdiction of this Court is invoked under

28 U.S.C. § 1254(1).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

Relevant provisions of the Constitution and the

Federal Arbitration Act are reproduced in the Appendix. Pet. App. 34a–43a.

2

STATEMENT

The Federal Arbitration Act (“FAA”) provides that

written arbitration agreements are “valid, irrevocable, and enforceable,” except “upon such grounds as

exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. This Court recently “[p]ut to the

side the question of what it takes to qualify as a

ground for ‘revocation’ of a contract,” while reiterating

that the FAA “protect[s] pretty absolutely” the ability

of contracting parties to agree to “use individualized . . . procedures” to resolve disputes. Epic Sys.

Corp. v. Lewis, 138 S. Ct. 1612, 1621–22 (2018). In

this case, the Ninth Circuit sustained a judge-made

rule rendering unenforceable arbitration provisions

that preclude requests for public injunctive relief—

that is, relief that primarily benefits persons other

than the individual plaintiff. Pet. App. 1a–28a (citing

McGill v. Citibank, N.A., 393 P.3d 85, 87 (Cal. 2017)).

The court of appeals ruled both that this “McGill rule”

falls within the FAA’s saving clause, and that it does

not interfere with the fundamental attribute of arbitral bilateralism. Pet. App. 19a, 24a. As a result, the

McGill rule now effectively precludes bilateral arbitration of consumer disputes in California.

1. The FAA was enacted in 1925 (and recodified

in 1947) “in response to widespread judicial hostility

to arbitration agreements.” AT&T Mobility LLC v.

Concepcion, 563 U.S. 333, 339 (2011). Prior to its enactment, the “traditional judicial hostility against

ousting courts” had resulted in the nonenforcement of

otherwise valid agreements to arbitrate. Bernhardt v.

Polygraphic Co. of Am., 350 U.S. 198, 210 (1956). The

purpose of the Act is “to ensure judicial enforcement

of privately made agreements to arbitrate.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 219 (1985).

3

In doing so, the FAA establishes “a liberal federal policy favoring arbitration agreements, notwithstanding

any state substantive or procedural policies to the contrary.” Moses H. Cone Mem’l Hosp. v. Mercury Constr.

Corp., 460 U.S. 1, 24 (1983).

The linchpin of the FAA is Section 2, which provides:

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a

controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such

grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2. Section 2 “reflects the fundamental principle that arbitration is a matter of contract.”

Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 67

(2010).

Under the Supremacy Clause (U.S. Const. art. VI,

cl. 2), state laws that conflict with the FAA are displaced by the FAA through the doctrine of preemption

(see Preston v. Ferrer, 552 U.S. 346, 353 (2008)). Under Section 2, a State may not impose rules that—

whether explicitly or covertly—disfavor arbitration.

See Concepcion, 563 U.S. at 341. This Court has applied Section 2 to hold preempted a number of state

rules (many of them originating in California) undermining the enforceability of arbitration agreements.

See, e.g., Preston, 552 U.S. at 352, 359 (holding that

the FAA preempted a California statute requiring the

Labor Commissioner to determine certain issues relevant to the dispute); Perry v. Thomas, 482 U.S. 483,

4

491–92 (1987) (holding that the FAA preempted a California statute requiring a judicial forum for resolving

wage disputes); Southland Corp. v. Keating, 465 U.S.

1, 10, 16–17 (1984) (holding that the FAA preempted

the California Supreme Court’s interpretation of a

statute to require a judicial forum for claims arising

under the Franchise Investment Law).

Section 2 of the FAA provides a limited exception

to the general rule that written arbitration agreements are “valid, irrevocable, and enforceable”: A

party resisting arbitration may raise, as a defense,

state-law grounds that “exist at law or in equity for

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

added). The saving clause of the FAA therefore “permits agreements to arbitrate to be invalidated by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability,’ but not by defenses that

apply only to arbitration or that derive their meaning

from the fact that an agreement to arbitrate is at issue.” Concepcion, 563 U.S. at 339 (quoting Doctor’s

Assocs. v. Casarotto, 517 U.S. 681, 687 (1996)). The

saving clause does not, however, permit state-law

rules that “covertly” discriminate against arbitration

“by disfavoring contracts that (oh so coincidentally)

have the defining features of arbitration agreements.”

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

1421, 1426 (2017).

Even a ground “at law or in equity for the revocation of any contract,” and thus within the saving

clause, will be preempted by the FAA if it “interferes

with fundamental attributes of arbitration.” Concepcion, 563 U.S. at 344. In Concepcion, this Court held

that the FAA preempted a California rule prohibiting

waivers of class-action relief in consumer arbitration

5

agreements. Id. at 340 (citing Discover Bank v. Superior Court, 113 P.3d 1100, 1110 (Cal. 2005)). Because

of the complexities and costs associated with classwide arbitration, this Court concluded that applying

the Discover Bank rule to invalidate arbitration agreements containing class-action waivers would frustrate

the FAA’s twin goals of “enforcement of private agreements and encouragement of efficient and speedy dispute resolution.” Id. at 345 (quotation marks omitted).

Justice Thomas, who joined the majority in Concepcion, also wrote a concurrence regarding the scope

of the saving clause. He explained that because the

saving clause permits application of only “such

grounds as exist at law or in equity for the revocation

of any contract,” “[i]t would be absurd to suggest that

[the saving clause] requires only that a defense apply

to ‘any contract.’” Concepcion, 563 U.S. at 352

(Thomas, J., concurring) (some quotation marks omitted). Instead, “the FAA requires that an agreement to

arbitrate be enforced unless a party successfully challenges the formation of the arbitration agreement,

such as by proving fraud or duress.” Id. at 353. Justice Thomas further observed that Section 4 of the

FAA requires that “upon being satisfied that the making of the agreement for arbitration or the failure to

comply therewith is not in issue, the court must order

arbitration in accordance with the terms of the agreement.” Id. at 354–55 (quotation marks omitted).

Reading the saving clause and Section 4 “harmoniously,” the saving clause “require[s] enforcement of an

agreement to arbitrate unless a party successfully asserts a defense concerning the formation of the agreement to arbitrate, such as fraud, duress, or mutual

mistake.” Id. at 355. The Discover Bank rule was not

such a defense. Id. at 356–57; see also Am. Express

6

Co. v. Italian Colors Rest., 570 U.S. 228, 239 (2013)

(Thomas, J., concurring) (advancing the same interpretation).

More recently, this Court held in Epic that the

FAA’s enforcement of arbitration agreements was not

displaced by the National Labor Relations Act, which

prohibits employers from barring employees from engaging in “‘concerted activit[y].’” 138 S. Ct. 1612

(quoting 29 U.S.C. § 157). The Court explained that

the FAA protects “pretty absolutely” the right of parties in arbitration “to use individualized rather than

class or collective action procedures.” Id. at 1621. And

for that reason, “an argument that a contract is unenforceable just because it requires bilateral arbitration”

cannot withstand scrutiny under the FAA. Id. at

1623. Thus, “by attacking (only) the individualized

nature of the arbitration proceedings, the [challengers’ argument] s[ought] to interfere with one of arbitration’s fundamental attributes.” Id. at 1622. Justice Thomas, in concurrence, reiterated his view of the

limited scope of the saving clause. See id. at 1632–33

(Thomas, J., concurring). The majority did not disagree; rather, the Court “[p]ut to the side the question

of what it takes to qualify as a ground for ‘revocation’

of a contract” (id. at 1622), and decided the case on

other grounds.

2. After Concepcion—but before Epic—the California Supreme Court announced a new “rule” regarding “the validity of a provision in a predispute arbitration agreement that waives the right to seek [public

injunctive relief] in any forum.” McGill, 393 P.3d at

87. “[P]ublic” injunctive relief is a type of relief in California that has “the primary purpose and effect of

prohibiting unlawful acts that threaten future injury

to the general public.” Id. at 90 (quotation marks

7

omitted). The individual plaintiff benefits, “if at all,

only incidentally and/or as a member of the general

public.” Id. at 89 (alteration and quotation marks

omitted). Public injunctive relief is frequently sought

in false advertising suits, where the plaintiff is already aware of the alleged falsity and cannot benefit

from prospective relief.

In McGill, the California Supreme Court held that

a waiver “in a predispute arbitration agreement” of

the right to seek public injunctive relief “in any forum”

is “contrary to California public policy and is thus unenforceable under California law.” 393 P.3d at 87 (emphasis added). To reach that holding, the court excavated a provision from California’s “Maxims of Jurisprudence,” enacted in 1872 to aid statutory construction (Cal. Civ. Code § 3513), that has never been applied as a defense to contract formation or as a ground

for the “revocation” of a contract. Nevertheless, the

California Supreme Court held that its new rule was

not preempted by the FAA because it preserved substantive rights, citing Italian Colors, which was not a

preemption case, for the proposition that the FAA

does not require enforcement of an arbitration clause

“that forbids the assertion of certain statutory rights.”

McGill, 393 P.3d at 94–95 (alteration and quotation

marks omitted). Even as it applied the new rule in

McGill itself, the court did not hold the parties’ contract, or even the arbitration clause, “revoked” or invalid; rather, the court remanded the case for the

lower court to determine whether the rest of the arbitration agreement could nonetheless be enforced. Id.

at 97–98.

3. Respondents are subscribers to petitioners’ cable, Internet, and/or telephone services. In the course

of their relationship with petitioners, respondents

8

each received and assented to several iterations of petitioners’ Subscriber Agreement. Each version of the

Subscriber Agreement contains a materially identical

arbitration clause. The most recent version in effect—

the 2017 Subscriber Agreement—sets forth the terms

of arbitration in Section 13, entitled “BINDING

ARBITRATION,” providing that “[a]ny Dispute involving [respondents] and [petitioners] shall be resolved through individual arbitration.” Pet. App. 37a.

In subsection (h), the 2017 Subscriber Agreement

includes a “Waiver of Class Actions and Collective Relief”:

THERE SHALL BE NO RIGHT OR AUTHORITY FOR ANY CLAIMS TO BE ARBITRATED OR LITIGATED ON A CLASS

ACTION, JOINT OR CONSOLIDATED

BASIS OR ON BASES INVOLVING CLAIMS

BROUGHT IN A PURPORTED REPRESENTATIVE CAPACITY ON BEHALF OF

THE GENERAL PUBLIC (SUCH AS A PRIVATE ATTORNEY GENERAL), OTHER

SUBSCRIBERS, OR OTHER PERSONS.

THE ARBITRATOR MAY AWARD RELIEF

ONLY IN FAVOR OF THE INDIVIDUAL

PARTY SEEKING RELIEF AND ONLY TO

THE EXTENT NECESSARY TO PROVIDE

RELIEF WARRANTED BY THAT INDIVIDUAL PARTY’S CLAIM.

Pet. App. 41a. It is undisputed that this provision prohibits either side from seeking public injunctive relief

in arbitration.

Respondents and two other consumers brought

this lawsuit in California state court in 2017, alleging

9

that petitioners engage in false and misleading advertising with respect to the pricing of their cable television service packages. Respondents seek relief under

California’s Unfair Competition Law (Cal. Bus. &

Prof. Code § 17200 et seq.), False Advertising Law (id.

§ 17500 et seq.), and Consumer Legal Remedies Act

(Cal. Civ. Code § 1750 et seq.), and also allege breach

of contract. First Am. Compl. ¶¶ 237–93. In addition

to seeking to certify a class of “approximately two million California consumers” (id. ¶ 232), respondents

also “seek public injunctive relief for the benefit of

themselves and for the benefit of millions of other California consumers” (id. ¶ 180). Petitioners removed

the case to the United States District Court for the

Northern District of California on the basis of diversity and filed a motion to compel individual arbitration with respect to two plaintiffs (respondents here);

the other two plaintiffs timely opted out of arbitration.

Respondents did not dispute that their claims fall

within the arbitration provision, but resisted arbitration principally on the ground that the McGill rule

renders Section 13(h)’s waiver of public injunctive relief in arbitration unenforceable; and therefore, because the 2017 Subscriber Agreement contains a nonseverability clause (Pet. App. 41a), the entire arbitration provision is unenforceable (but not revoked). In

reply, petitioners argued that the FAA preempts the

McGill rule.

In February 2018, the district court denied the

motion to compel arbitration, relying entirely on the

McGill rule. Pet. App. 29a–32a. The court cited two

other district court decisions applying the McGill rule

in analogous circumstances. Pet. App. 30a. Each of

them had relied in substantial part on Sakkab v. Luxottica Retail North America, Inc., 803 F.3d 425 (9th

10

Cir. 2015)—a case in which a divided panel of the

Ninth Circuit upheld against a FAA challenge a different California “rule” prohibiting arbitral waivers of

the right to bring a representative claim under California’s Private Attorneys General Act. See Cal. Lab.

Code § 2698. Petitioners here filed a timely appeal

pursuant to 9 U.S.C. § 16(a)(1)(B).

4. The Ninth Circuit heard oral argument in three

related cases all raising the same issue: Whether the

FAA preempts the McGill rule. Emphasizing the

weight of Supreme Court precedent requiring the enforcement of arbitration agreements, counsel for petitioners had the following exchange with the panel:

Counsel: We have every Supreme Court case

for the last thirty years on our side, and they

have Sakkab on their side. I mean, that’s really the weighing that’s before the Court,

right?

The Court: That’s actually fairly common.

You’ve got the Supreme Court over there and

the Ninth Circuit over here.

That colloquy proved prescient: On June 28, 2019, the

Ninth Circuit issued a panel opinion in the first filed

of the three related cases, holding that the FAA does

not preempt the McGill rule. Pet. App. 3a. It simultaneously issued a memorandum disposition in this

case (Pet. App. 1a–2a) as well as in another case involving AT&T (see McArdle v. AT&T Mobility LLC,

772 F. App’x 575 (9th Cir. 2019)).

With respect to the applicability of the FAA’s saving clause, the Ninth Circuit held that “[t]he McGill

rule . . . is a generally applicable contract defense.”

Pet. App. 16a. The panel did not engage with the extensive arguments presented by petitioners in this

11

case regarding the limited scope of the saving clause.

See C.A. Br. 27; C.A. Reply Br. 5–8. Rather, the panel

discussed only the fact that the California statute

from which the California Supreme Court purported

to derive the McGill rule (Cal. Civ. Code § 3513) had

been applied in a variety of different contexts. Pet.

App. 18a–19a. The panel did not (and could not) identify any cases in which the statute had been applied

to revoke a contract. Nevertheless, the panel summarily concluded that the rule “is a ground for the revocation of any contract and falls within the FAA’s saving

clause.” Pet. App. 19a (alterations and quotation

marks omitted).

On the question of whether the McGill rule interferes with fundamental attributes of arbitration, the

panel relied principally on the majority decision in

Sakkab. Pet. App. 20a. The court did not even address the California Supreme Court’s erroneous reliance on the “effective vindication” doctrine set forth in

Italian Colors. Instead, the panel held that public injunctive relief did not interfere with bilateralism, because a request for such relief does not implicate

“state-law class procedures,” and a plaintiff seeking

public injunctive relief “files the lawsuit on his or her

own behalf and retains sole control over the suit.” Pet.

App. 20a–21a (quotation marks omitted).

Petitioners filed a timely petition for panel rehearing and rehearing en banc, which the court denied on

January 17, 2020. Pet. App. 33a.

REASONS FOR GRANTING THE PETITION

This petition presents two important questions

under the Federal Arbitration Act that should be decided by this Court at this time. The first is whether

12

state anti-arbitration rules that are not generally applicable defenses to contract formation fall within the

FAA’s saving clause, an issue that Justice Thomas has

identified in a series of concurring opinions but the

full Court has never addressed; the second is whether

such state rules (even if they fall within the saving

clause) are preempted outside the class- or collective-action context.

First, this case squarely presents the question

whether the FAA’s saving clause applies only to those

defenses that provide a ground for the “revocation” of

a contract, such as those defenses going to the formation of the agreement. This Court has expressly

reserved judgment on whether the saving clause can

sweep more broadly than its plain text permits. That

question should be decided now, in this case, to provide guidance to lower courts and contracting parties.

The saving clause, by its express terms and consistent

with the structure and history of the FAA, permits application only of those defenses that relate to the formation of an arbitration agreement. The McGill rule

is not such a defense. The panel decision, by concluding that the McGill rule is within the saving clause,

conflicts with the FAA itself as well as decisions of

other courts of appeals. Review is warranted to resolve that conflict.

Second, even if the McGill rule is within the saving clause, it interferes with fundamental attributes

of arbitration by rendering unenforceable an arbitration provision because it requires bilateral arbitration, and therefore is preempted. This Court recently

held in Epic that the FAA “pretty absolutely” protects

parties’ ability to agree to individualized arbitration

procedures. The McGill rule violates that maxim by

13

requiring parties to arbitrate requests for public injunctive relief (or lose access to arbitration altogether), even though that relief is manifestly not bilateral. The panel decision ignored the pertinent part

of Epic and sought to limit the Court’s previous decision in Concepcion to the realm of class actions; review

is warranted to bring the Ninth Circuit, once again, in

line with this Court’s precedent.

I.

THE MCGILL RULE FALLS OUTSIDE THE FAA’S

SAVING CLAUSE

The scope of the FAA’s saving clause as it relates

to judge-made rules, like the McGill rule, that do not

provide for the “revocation” of any contract is an important and recurring question.

While Justice

Thomas has identified and addressed this issue in a

series of concurring opinions, the full Court has expressly reserved judgment on it—electing instead to

rule on other grounds in past cases. But this case

squarely presents the issue and is the ideal vehicle to

resolve that uncertainty.

A. The McGill Rule Is Not A Defense

Providing For Revocation Of Contracts

Section 2 of the FAA makes written arbitration

agreements involving interstate commerce “valid, irrevocable, and enforceable.” 9 U.S.C. § 2. The sole

exception to that mandate is set forth in the saving

clause of Section 2, which permits the application of

“such grounds as exist at law or in equity for the revocation of any contract.” Ibid. Overlooking this plain

text, the panel’s decision assumed, without analysis,

that a state-law doctrine (such as the McGill rule)

that applies to “any contract” is covered by the saving

clause, even if it does not provide for the “revocation”

of contracts. Pet. App. 16a–19a. That holding is in

14

direct conflict with the plain text and structure of the

FAA, and undermines the purpose and objectives of

the Act.

1. Justice Thomas has persuasively analyzed the

text of Section 2 and concluded that the saving clause

applies only to those state-law defenses that exist “at

law or in equity” and provide for the “revocation” of

contracts. See AT&T Mobility LLC v. Concepcion, 563

U.S. 333, 352–53 (2011) (Thomas, J., concurring).

This means that “the FAA requires that an agreement

to arbitrate be enforced unless a party successfully

challenges the formation of the arbitration agreement, such as by proving fraud or duress.” Id. at 353

(citing 9 U.S.C. §§ 2, 4). Justice Thomas reached that

conclusion by noting that “the statute does not parallel the words ‘valid, irrevocable, and enforceable’ by

referencing the grounds as exist for the ‘invalidation,

revocation, or nonenforcement’ of any contract,” and

that other provisions of the FAA likewise focus on the

making of the agreement. Id. at 354–55. Defenses

“unrelated to the making of the agreement—such as

public policy”—therefore cannot “be the basis for declining to enforce an arbitration clause.” Id. at 355.

The plain text of Section 2 demonstrates that only

defenses providing for the revocation of any contract

may qualify for protection under the saving clause.

See Hardt v. Reliance Standard Life Ins. Co., 560 U.S.

242, 251 (2010) (“We must enforce plain and unambiguous statutory language according to its terms”). In

Section 2’s preemption clause, Congress made arbitration agreements “valid, irrevocable, and enforceable.”

See 9 U.S.C. § 2. Yet in the saving clause, Congress

“save[d]” only those state-law defenses providing for

the “revocation” of any contract. Ibid. The implica-

15

tion of that omission is clear: The saving clause applies only to defenses providing for “revocation,” and

not to those rendering an arbitration provision invalid

or unenforceable. See Gozlon-Peretz v. United States,

498 U.S. 395, 404 (1991) (“Where Congress includes

particular language in one section of a statute but

omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and

purposely in the disparate inclusion or exclusion” (alteration and quotation marks omitted)). To construe

the

statute

otherwise

would

impermissibly

“read . . . absent word[s] into the statute.” Lamie v.

U.S. Tr., 540 U.S. 526, 538 (2004).

“Revocation” is not synonymous with unenforceability or invalidity. Although the FAA does not provide a definition of “revocation,” “[w]here,” as here,

“Congress uses terms that have accumulated settled

meaning under the common law, . . . Congress means

to incorporate the established meaning of these

terms.” Neder v. United States, 527 U.S. 1, 21 (1999)

(alteration and quotation marks omitted). And in the

context of the FAA, “revocation” “obviously is intended

to be synonymous with ‘rescission.’” Halcon Int’l, Inc.

v. Monsanto Austl. Ltd., 446 F.2d 156, 159 (7th Cir.

1971).

Revocation and rescission are common-law remedies that have the effect of extinguishing a contract

and rendering it void ab initio. See, e.g., First Hartford Corp. Pension Plan & Tr. v. United States, 194

F.3d 1279, 1296 (Fed. Cir. 1999) (“[R]escission

amounts to the unmaking of a contract or an undoing

of it from the beginning and not merely a termination

of the contract” (quotation marks omitted)); Huffman

v. Saul Holdings Ltd. P’ship, 194 F.3d 1072, 1081

16

(10th Cir. 1999) (“Rescission contemplates an annulment voiding the contract ab initio, accompanied by

restoration of the parties to their pre-contract status”

(quotation marks omitted)). The focus of revocation is

on the circumstances of the making of the agreement—if an agreement was the result of fraud (see 27

Williston on Contracts § 69:47 (4th ed. 2019)), duress

(see 28 id. § 71:8), or mistake (see 27 id. § 70:40), it is

subject to revocation (see 1 Henry Campbell Black, A

Treatise on the Rescission of Contracts & Cancellation

of Written Instruments § 14 (1916) (“[A] contract

properly entered into by competent parties and

founded upon a consideration . . . cannot be rescinded

by the other, unless he is able to show the existence of

some well-recognized title to equitable relief, such as

fraud, mistake, or duress”)).

“Unenforceability” and “invalidity” are different.

Unlike revocation and rescission, unenforceability

and invalidity address issues unrelated to whether

the parties have in fact mutually agreed to the contract. For example, a contractual provision may be

held unenforceable or invalid if it is too vague (see

Long Beach Drug Co. v. United Drug Co., 88 P.2d 698,

701 (Cal. 1939)), if it too broadly exempts a party from

liability (see Broadley v. Mashpee Neck Marina, Inc.,

471 F.3d 272, 276 (1st Cir. 2006)), or if it is otherwise

contrary to public policy (see Hurd v. Hodge, 334 U.S.

24, 34–35 (1948)). These defenses relate not to the

mutual assent of the parties to the terms of a contract,

but to substantive judgments about the desirability or

undesirability of certain provisions of that contract.

And they generally apply only to a particular provision, and not to the entire contract.

Understood in that context, only state-law defenses that go to contract formation fall within the

17

saving clause. To expand “revocation” in the saving

clause to include “unenforceability” and “invalidity”

would essentially rewrite the statute while making

Section 2’s mandate that arbitration agreements be

honored as “valid” and “enforceable” superfluous. See

Duncan v. Walker, 533 U.S. 167, 174 (2001) (“It is our

duty to give effect, if possible, to every clause and word

of a statute” (quotation marks omitted)). The FAA anticipates that arbitration agreements not properly

formed under state law will be revocable, but that

state-law judgments about the substantive validity of

arbitration provisions will have no force.

The limited scope of the saving clause is further

confirmed by the fact that the clause applies only to

those defenses that “exist at law or in equity.” 9

U.S.C. § 2. By restricting the defenses “saved” under

Section 2 to those existing “at law or in equity,” the

FAA plainly does not permit judges to contrive new,

ad hoc rules to thwart arbitration. See Comment,

Erie, Bernhardt, and Section 2 of the United States

Arbitration Act: A Farrago of Rights, Remedies, and

a Right to a Remedy, 69 Yale L.J. 847, 860 (1960)

(“Congress probably meant prevailing rules of law and

equity . . .”). To the contrary, this Court has identified

the paradigmatic, common-law defenses applicable

under the FAA, which, not surprisingly, all provide for

the “revocation” of a contract in appropriate circumstances. See Doctor’s Assocs. v. Casarotto, 517 U.S.

681, 687 (1996) (“[G]enerally applicable contract defenses, such as fraud, duress, or unconscionability,

may be applied to invalidate arbitration agreements

without contravening § 2”).

Other provisions in the FAA confirm this reading.

Courts should interpret statutes to form a “symmetrical and coherent regulatory scheme.” Mellouli v.

18

Lynch, 135 S. Ct. 1980, 1989 (2015) (quotation marks

omitted). The FAA’s analytical scheme expressly contemplates that a court will order a case to arbitration

only after “being satisfied that the making of the

agreement for arbitration or the failure to comply

therewith is not in issue.” 9 U.S.C. § 4. This Court

therefore has held that federal courts may adjudicate

only claims that “go[] to the ‘making’ of the agreement

to arbitrate.” Prima Paint Corp. v. Flood & Conklin

Mfg. Co., 388 U.S. 395, 404 (1967).

Although Section 4 addresses only the forum for

resolution of contract defenses, it is reflective of the

FAA’s “basic precept that arbitration is a matter of

consent, not coercion.” Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 681 (2010) (quotation

marks omitted). The FAA’s “primary purpose” is “ensuring that private agreements to arbitrate are enforced according to their terms.” Volt Info. Scis., Inc.

v. Bd. of Trs. of Leland Stanford Junior Univ., 489

U.S. 468, 479 (1989) (emphasis added). That framework is undermined by state-law rules that place substantive limitations on which arbitration terms may

be enforced: “What States may not do is decide that a

contract is fair enough to enforce all its basic terms

(price, service, credit), but not fair enough to enforce

its arbitration clause.” Allied-Bruce Terminix Cos. v.

Dobson, 513 U.S. 265, 281 (1995).

The context in which the FAA was enacted also

provides evidence of the saving clause’s scope. Starting at least in the 18th century, English courts began

holding arbitration agreements invalid and unilaterally revocable on the ground that “the agreement of

the parties cannot oust [a] Court” of jurisdiction. Kill

v. Hollister (1746) 95 Eng. Rep. 532 (KB); see also Kulukundis Shipping Co., S/A v. Amtorg Trading Corp.,

19

126 F.2d 978, 983 (2d Cir. 1942) (“[B]y way of rationalization, it became fashionable in the middle of the

18th century to say that [arbitration] agreements

were against public policy because they ‘oust the jurisdiction’ of the courts”). American courts soon

adopted this hostility to arbitration. See, e.g., Ins. Co.

v. Morse, 87 U.S. (20 Wall.) 445, 450 (1874).

The FAA was Congress’s response to that practice,

“specifically enacted to reverse antiquated state rules

of law that ma[d]e arbitration agreements revocable

at will anytime prior to the issuance of the arbitration

award.” Johnson Controls, Inc. v. City of Cedar

Rapids, 713 F.2d 370, 376 (8th Cir. 1983). Section 2

was drafted broadly to ensure that no judge-made

rules would prevent the recognition and enforcement

of arbitration agreements. By making arbitration

agreements “valid, irrevocable, and unenforceable,”

Congress preempted the common-law practice

permitting parties to repudiate their arbitration

agreements. See Sales and Contracts to Sell in

Interstate and Foreign Commerce, and Federal

Commercial Arbitration: Hearing on S. 4213 and S.

4214 Before the S. Subcomm. on the Judiciary, 67th

Cong. 3–4 (1923) (statement of Charles L.

Bernheimer).

The limited exception, codified in the saving

clause, is that a defense providing for the revocation

of any contract could still apply. But Congress did not

intend for that provision to permit the application of

state-law rules that would undermine the

enforceability of arbitration agreements by placing

substantive restraints on the types of arbitration

provisions to which parties may agree—that would

defeat the very purpose of the preceding clause

preempting common-law rules that did just that.

20

Thus, nothing in the FAA suggests that Congress

intended to preserve state-law defenses to the

enforcement of arbitration agreements other than the

limited class of defenses expressly carved out in the

statute—those providing for the “revocation of any

contract.”

2. The McGill rule is not a ground at law or in

equity for the “revocation” of any contract. By its own

terms, the rule only makes “unenforceable” provisions

waiving the right to seek public injunctive relief, and

does so as a matter of “California public policy.”

McGill, 393 P.3d at 87. The rule does not relate to the

“revocation” of any contract, and in fact, the court in

McGill remanded the case to the trial court to determine whether the other provisions of the arbitration

agreement were severable—an exercise that would be

pointless if the McGill rule went to the formation of

the agreement. Id. at 98.

More broadly, the McGill rule is simply a judicial

declaration regarding the enforceability of certain arbitration provisions as a matter of California public

policy. See McGill, 393 P.3d at 87 (waivers of public

injunctive relief are “contrary to California public policy”). It says nothing about whether the parties actually agreed to arbitrate or to the terms of that arbitration. It bears no resemblance to the traditional

grounds for rescission—fraud, duress, mistake, etc.—

contemplated by the FAA as grounds to resist arbitration. See Doctor’s Assocs., 517 U.S. at 687. Instead, it

reflects a State’s judgment about whether and in what

situations agreed-to arbitration provisions should be

enforced according to their terms, and such a rule cannot stand under the FAA.

In fact, the McGill rule is not even a contract defense at “law” or in “equity.” The statute from which

21

the McGill rule is derived provides, in full, that “[a]ny

one may waive the advantage of a law intended solely

for his benefit. But a law established for a public reason cannot be contravened by a private agreement.”

Cal. Civ. Code § 3513. This opaque statement (which

says nothing about contracts, let alone revoking them)

appears in California’s “Maxims of Jurisprudence,” a

section of the Civil Code whose stated purpose is to

“aid in the[] just application” of the Civil Code. Id.

§ 3509. Section 3513 is a principle of statutory construction; it has nothing to do with contract law and

has no relation to the type of traditional contract formation defenses the saving clause was plainly intended to cover. See Comment, supra, at 860 (“Congress probably meant [in the saving clause] prevailing

rules of law and equity . . .”).

The McGill rule itself was contrived by the California Supreme Court in 2017, 92 years after the enactment of the FAA, as an apparent response to Concepcion. The California Supreme Court repurposed a

hoary “[m]axim” of statutory construction to preclude

enforcement of predispute arbitration agreements.

Thus, even if the McGill rule could be conceived as a

ground for the “revocation” of a contract (it cannot), it

is not a ground at “law” or in “equity”—it was manufactured by a state supreme court from a moribund

statute having nothing to do with contract law, solely

to impair the enforcement of arbitration clauses.

The Ninth Circuit panel was wrong to summarily

conclude that “the McGill rule is a generally applicable contract defense derived from long-established

California public policy,” or that it is a “ground for the

revocation of any contract.” Pet. App. 19a (alterations

and quotation marks omitted). It plainly is neither,

22

and a faithful reading of the FAA does not permit contracting parties to resist arbitration on the ground

that certain terms of arbitration are contrary to the

public policy of a State.

B. Review Is Warranted To Protect

Consumer Arbitration In California

This Court so far has not had an occasion to resolve the scope of the saving clause. In Concepcion,

Justice Thomas observed that the question “ha[d] not

been fully developed by any party,” and “could benefit

from briefing and argument in an appropriate case.”

563 U.S. at 353 (Thomas, J., concurring). In Epic, this

Court expressly reserved judgment on this important

issue, saying that it would “[p]ut to the side the question of what it takes to qualify as a ground for ‘revocation’ of a contract.” Epic Sys. Corp. v. Lewis, 138 S.

Ct. 1612, 1622 (2018) (citing Concepcion, 563 U.S. at

352–55 (Thomas, J., concurring)). That issue should

not be “[p]ut to the side” any longer. The lack of guidance regarding the scope of the saving clause has substantial implications in this case and others. The

Ninth Circuit’s decision is in tension—or outright conflict—with the decisions of several other courts of appeals. Certiorari is warranted to resolve that conflict

and avoid further harm arising from the McGill rule.

1. The effect of the McGill rule is to render unenforceable scores of consumer arbitration agreements

in California.

While the McGill rule applies only to cases in

which a plaintiff seeks public injunctive relief (see

McGill, 393 P.3d at 90), a plaintiff in California can

do so in virtually every California consumer case (see

Mathieu Blackston, California’s Unfair Competition

Law—Making Sure the Avenger Is Not Guilty of the

23

Greater Crime, 41 San Diego L. Rev. 1833, 1839

(2004)). That is because public injunctive relief is

available under California’s Unfair Competition Law,

and a plaintiff can plead a claim under that statute

for “‘any unlawful’” business practice—which means

an alleged violation of any other law, state or federal.

See Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co.,

973 P.2d 527, 539–40 (Cal. 1999).

In effect, any plaintiff who is a party to an otherwise valid arbitration agreement and waives the right

to seek representative relief—the same provision at

issue in Concepcion (563 U.S. at 336)—can plead her

way out of arbitration by simply tacking onto her complaint a request for public injunctive relief under the

Unfair Competition Law. And because many consumer arbitration agreements include a severability

provision similar to that here (Pet. App. 41a), the effect will be the unenforceability of those arbitration

agreements in toto. The ruling below thus “blesse[s]

a tactic that will allow plaintiffs lawyers litigating

California consumer class actions to defeat defense

motions to compel arbitration.” Alison Frankel, The

9th Circuit Just Blew Up Mandatory Arbitration in

Consumer

Cases, Reuters (July 1, 2019),

https://reut.rs/30Ufvxq.

It is no solution for petitioners and others to

simply rewrite their arbitration agreements to conform with California’s new public-policy rule. As in

Concepcion, the harm is not that the McGill rule requires arbitration of public injunctive relief, but that

“it allows any party to a consumer contract to demand

it ex post.” Concepcion, 563 U.S. at 346. In other

words, the McGill rule forces parties to choose between litigation and non-bilateral arbitration (with

limited procedural protections or judicial review).

24

And faced with that choice, companies will have little

incentive to arbitrate at all (id. at 347), contravening

the underlying purpose and objectives of the FAA.

Thus, as long as the McGill rule is in effect, it will cast

a shadow over consumer arbitration agreements in

California that, like this one, require bilateral arbitration.

But the question of the proper scope of the saving

clause goes far beyond this particular case or rule.

This Court has on numerous occasions taken up cases

implicating Section 2, involving attempts by plaintiffs

to evade binding arbitration agreements on the

ground that state policy prohibits enforcement of the

agreement as written. See, e.g., DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463 (2015); Concepcion, 563 U.S.

333; Allied-Bruce, 513 U.S. 265; Perry v. Thomas, 482

U.S. 483 (1987). The scope of the saving clause was

relevant—and potentially dispositive—in each of

those cases. The issue therefore informs not just this

case, but any case in which a plaintiff asserts a (purportedly) generally applicable state-law rule to resist

arbitration. Resolution of this important question is

needed now, before more judicial resources are expended adjudicating the propriety of state-law rules

that frustrate arbitration.

2. The panel decision conflicts with the decisions

of this Court and of other federal courts of appeals.

Several of this Court’s decisions have emphasized

that Section 2 contemplates only that the district

court will assure itself that the parties have actually

agreed to arbitrate. In Dean Witter Reynolds, Inc. v.

Byrd, the Court explained that the FAA “mandates

that district courts shall direct the parties to proceed

to arbitration on issues as to which an arbitration

agreement has been signed,” and that “agreements to

25

arbitrate must be enforced, absent a ground for revocation of the contractual agreement.” 470 U.S. 213,

218 (1985) (second emphasis added). More pointedly,

in Shearson/American Express, Inc. v. McMahon, this

Court explained that “[a]bsent a well-founded claim

that an arbitration agreement resulted from the sort

of fraud or excessive economic power that would provide grounds for the revocation of any contract,” the

FAA “provides no basis” for disfavoring arbitration

agreements. 482 U.S. 220, 226 (1987) (quotation

marks omitted).

The holdings of the federal courts of appeals are

even more on point.

In Middlesex County v. Gevyn Construction Corp.,

the plaintiff sought to avoid arbitration by claiming

that the defendant’s material breach of the contract

rendered the entire agreement, including the

arbitration clause, unenforceable. 450 F.2d 53, 54 (1st

Cir. 1971). The First Circuit rejected that contention,

explaining that the FAA limited the grounds upon

which a party could seek to avoid arbitration,

explaining that “the only grounds for revocation which

meet the requirement of 9 U.S.C. § 2 are mutual

agreement or a condition which vitiates agreement ab

initio, i.e., fraud, mistake, or duress,” because “it is

only this kind of ‘revocation’ which can be harmonized

with adjudication directed to ‘the making of the

agreement for arbitration.’” Id. at 56.

Likewise, in Halcon International, the Seventh

Circuit held that a defense of laches—which, if

accepted, would have rendered the entire contract

“unenforcable”—was to be adjudicated by the

arbitrator, and that such a defense could not be

applied to invalidate the arbitration agreement. See

446 F.2d at 159. The court explained that because

26

“the savings clause of Section 2 is limited to

‘revocation,’” it applies only to “an unmaking resulting

from the mutual cancellation of the contract by the

parties or the voiding of the transaction due to fraud,

mistake or duress.” Ibid.; see also ibid. (contrasting

grounds

for

rescission

with

grounds

for

unenforceability).

Other courts have strongly indicated that the

saving clause applies only to defenses going to the

formation of the agreement to arbitrate. The D.C.

Circuit has explained that Section 2, “especially when

read in conjunction with [Section] 4,” indicates “that

Congress created an exception to the general rule

(that an arbitration clause will be enforced by its

terms) only when there is a flaw in the formation of

the agreement to arbitrate.” Nat’l R.R. Passenger

Corp. v. Consol. Rail Corp., 892 F.2d 1066, 1070 (D.C.

Cir. 1990) (citing Mitsubishi Motors Corp. v. Soler

Chrysler-Plymouth, Inc., 473 U.S. 614, 627 (1985))

(emphasis added). And the Fourth Circuit has

likewise held that “Section 2 dictates the effect of a

contractually agreed-upon arbitration provision, but

it does not displace state law on the general principles

governing formation of the contract itself.” Supak &

Sons Mfg. Co. v. Pervel Indus., Inc., 593 F.2d 135, 137

(4th Cir. 1979) (emphasis added).

The panel’s decision here—which permits

application of a state-law rule that does not require a

“flaw in the formation of the agreement to arbitrate”

(Nat’l R.R. Passenger Corp., 892 F.2d at 1070)—is in

conflict with the decisions of several other courts of

appeals. Review is needed to resolve that conflict and

answer a purely legal question of national importance,

which was preserved by petitioners below and

27

actually decided (incompletely and incorrectly) by the

court of appeals.

II. THE MCGILL RULE UNDERMINES THE FAA’S

PROTECTION OF BILATERAL ARBITRATION

Even if the McGill rule were within the saving

clause (or if the Court elects once again to put that

question to the side), this case also presents a second

question—whether a rule prohibiting waivers of public injunctive relief conflicts with the FAA’s requirement that courts enforce bilateral arbitration agreements according to their terms. The McGill rule is

such a rule, and under this Court’s precedents, it is

preempted by the FAA because it interferes with the

bilateral nature of arbitration. Certiorari is warranted to bring the Ninth Circuit in line with this

Court.

This second question is the focus of AT&T’s petition for a writ of certiorari in McArdle, which petitioners hereby adopt and incorporate by reference. (RentA-Center settled the Blair case after the Ninth Circuit

panel decision issued.)

A. The Decision Below Interferes With

Bilateral Arbitration

The panel decision conflicts with precedent from

this Court holding that the FAA protects parties’

agreements to engage in bilateral arbitration.

1. This Court has explained that the FAA requires courts to “rigorously enforce arbitration agreements according to their terms.” Am. Express Co. v.

Italian Colors Rest., 570 U.S. 228, 233 (2013) (quotation marks omitted). This includes “with whom the[]

[parties] choose to arbitrate their disputes” (StoltNielsen, 559 U.S. at 683), and “the rules under which

that arbitration will be conducted” (Volt Info. Scis.,

28

Inc., 489 U.S. at 479). Thus, in Concepcion, this Court

held that the FAA preempted a judge-made rule prohibiting the enforcement of waivers of class-action relief in arbitration agreements. See 563 U.S. at 344.

The Court expounded on these principles in Epic.

There, the Court held that the plaintiffs could not rely

on a federal statute making class and collective action

waivers illegal to avoid arbitration, because such a defense “attack[ed] (only) the individualized nature of

the arbitration proceedings.” Epic Sys., 138 S. Ct. at

1622. Noting that the parties had “specif[ied] the

rules that would govern their arbitrations, indicating

their intention to use individualized rather than class

or collective action procedures,” the Court observed

that the FAA “seems to protect pretty absolutely” that

election. Id. at 1621. The Court warned that courts

“must be alert to new devices and formulas” that disfavor arbitration much in the same way the common

law did prior to the FAA’s passage, and that “a rule

seeking to declare individualized arbitration proceedings off limits is . . . just such a device.” Id. at 1623.

Most critically, the Court held that “an argument that

a contract is unenforceable just because it requires bilateral arbitration” is one “that impermissibly disfavors arbitration.” Ibid.

The Court’s holding in Epic resonates with its earlier admonition in Kindred Nursing Centers Ltd. Partnership v. Clark, 137 S. Ct. 1421 (2017). In striking

down a state-law rule that required a clear statement

from a principal before a representative could waive

the principal’s jury rights (i.e., enter into an arbitration agreement), the Court observed that the FAA

“displaces any rule that covertly” disfavors arbitration

“by disfavoring contracts that (oh so coincidentally)

have the defining features of arbitration agreements.”

29

Id. at 1426. The state court therefore had impermissibly “adopt[ed] a legal rule hinging on the primary

characteristic of an arbitration agreement.” Id. at

1427.

2. The panel opinion conflicts with this precedent

because the McGill rule impairs the parties’ ability to

agree to bilateral arbitration.

Section 13 of the 2017 Subscriber Agreement at

issue here ensures that the parties will arbitrate with

each other to resolve any disputes as between the two

parties. Pet. App. 41a. In other words, it is a set of

terms providing “with whom” the parties will arbitrate and “the rules under which that arbitration will

be conducted.” Am. Express Co., 570 U.S. at 233 (emphasis and quotation marks omitted). And what Section 13 specifies is that the parties will engage in bilateral arbitration.

The McGill rule, however, nullifies the choice of

the parties to engage in bilateral arbitration and effectively forces them to arbitrate the rights and interests of scores of consumers who have not even entered

into an arbitration agreement with Comcast. This is

the very kind of “device” disfavoring arbitration that

the Court warned of in Epic. See 138 S. Ct. at 1623.

Moreover, bilateralism in the context of arbitration has value as to both the right and the remedy.

Even to the extent the underlying claims in this case

are bilateral, the relief sought is not, and that is no

less offensive to the FAA than a rule prohibiting

class- or collective-action waivers. In fact, this Court

in Concepcion pointed to the higher stakes of class arbitration (i.e., the scope of the remedy) as one of the

reasons the Discover Bank rule was inconsistent with

30

the FAA. See Concepcion, 563 U.S. at 350. Arbitration is a tradeoff wherein parties are able to secure a

“prompt, economical and adequate solution of controversies” in exchange for “less certainty of legally correct adjustment.” Wilko v. Swan, 346 U.S. 427, 438

(1953). The nature of the relief available in arbitration is part of what persuades parties that even with

its limited judicial review, arbitration is desirable because it provides a way to resolve the dispute bilaterally in all respects. The McGill rule dishonors that

tradeoff by making bilateral arbitration unlawful.

Like the rule in Kindred Nursing, the McGill rule

“hing[es] on [one of] the primary characteristics of an

arbitration agreement” (Kindred Nursing Ctrs., 137 S.

Ct. at 1427)—bilateralism—and in fact applies only to

“predispute arbitration agreement[s]” (McGill, 393

P.3d at 87). And although the California Supreme

Court and the panel below each contend that the

McGill rule is applicable to all agreements, as a practical matter, the rule has been applied only to arbitration agreements, save one case in which it was discussed in dicta in a footnote. See Bishay v. Icon Aircraft, Inc., No. 19-CV-178, 2019 WL 3337885, at *4 n.2

(E.D. Cal. July 25, 2019). By design, the rule targets

a “primary characteristic” of arbitration agreements.

Kindred Nursing Ctrs., 137 S. Ct. at 1427. And like

the rule in Kindred Nursing, its application to agreements other than arbitration agreements is purely hypothetical—it functions “much as if it were made applicable to arbitration agreements and black swans.”

Id. at 1428. That the California Supreme Court

sought to defend the McGill rule on the basis of the

“effective vindication” doctrine (McGill, 393 P.3d at

97)—which even the Ninth Circuit appears to agree

applies only to federal remedies—highlights the arbitrary nature of the rule. The McGill rule therefore

31

interferes with the fundamental attributes of arbitration and is preempted.

The panel also relied on the Ninth Circuit’s divided decision in Sakkab, holding that the FAA does

not preempt a similar judge-made rule prohibiting

waivers of claims brought under California’s Private

Attorneys General Act (Cal. Lab. Code § 2698). But

both the majority in Sakkab and the panel below relied on the same misinterpretation of Concepcion, incorrectly assuming that the FAA protects only

non-class arbitration. Sakkab, 803 F.3d at 435; Pet.

App. 20a. By its own lights, Concepcion was not limited to class waivers; rather, any “state-law rules that

stand as an obstacle to the accomplishment of the

FAA’s objectives” are preempted. Concepcion, 563

U.S. at 343.

In fact, the majority in Sakkab based its holding

on its view that the FAA does not “require the enforcement of all waivers of representative claims in arbitration agreements.” 803 F.3d at 436. The dissent in

Sakkab, on the other hand, concluded that the relevant question was whether the state-law rule would

interfere with “individual, bilateral arbitration (what

the parties had agreed to do in their arbitration agreement).” Id. at 446 (N.R. Smith, J., dissenting). This

Court’s decision in Epic resolved that difference of

opinion in favor of the Sakkab dissent, explaining that

the FAA preempts a state-law rule “that a contract is

unenforceable just because it requires bilateral arbitration.” Epic Sys., 138 S. Ct. at 1623. That unambiguous pronouncement of the FAA’s preemptive reach

should have controlled the decision below, yet the

panel all but ignored it.

32

The panel decision paid lip service to the FAA’s

protection of bilateralism, but insisted that public injunctive relief is bilateral. Pet. App. 21a. That is preposterous. Public injunctive relief in California has

“the primary purpose and effect of prohibiting unlawful acts that threaten future injury to the general public.” McGill, 393 P.3d at 90 (quotation marks omitted). Relief whose principal or sole purpose is to benefit persons not party to an arbitration is not “bilateral” in any meaningful sense of that term. The

panel’s artificial distinction between claims brought

“for the benefit of the general public” (public injunctive relief) and those brought “on behalf of specific absent parties” (class actions) finds no footing in precedent or logic. Pet. App. 21a. If, as this Court held in

Concepcion and Epic, litigating on behalf of “specific

absent parties” interferes with the bilateral nature arbitration, then surely expanding the potential beneficiaries to include the “general public”—here, millions

of Californians—without the protections of a class action would exacerbate, not alleviate, that interference.

B. Review Is Warranted To Correct The

McGill Rule’s Intrusion On Bilateralism

California’s aversion to arbitration is well documented by this Court (see Concepcion, 563 U.S. at

342–43 (collecting sources)), and the McGill rule continues that tradition. Since the rule was created in

2017, it has been deployed on numerous occasions to

render numerous arbitration agreements—and only

arbitration agreements—unenforceable. See, e.g.,

Olosoni v. HRB Tax Grp., Inc., No. 19-CV-3610, 2019

WL 7576680, at *3 (N.D. Cal. Nov. 5, 2019); Fernandez v. Bridgecrest Credit Co., No. 19-CV-877, 2019 WL

7842449, at *4–7 (C.D. Cal. Oct. 29, 2019); Lyons v.

NBCUniversal Media, LLC, No. 19-CV-3830, 2019

33

WL 6703396, at *8 (C.D. Cal. Sept. 27, 2019). In fact,

the McGill rule appears to be the California Supreme

Court’s effort to undo (or undermine) this Court’s decision in Concepcion.

The McGill rule joins the conga line of other

“rules”—the Discover Bank rule (see Concepcion, 563

U.S. at 352), the Iskanian rule (see Sakkab, 803 F.3d

at 427), the Broughton-Cruz rule (see Ferguson v. Corinthian Colls., Inc., 733 F.3d 928, 930 (9th Cir.

2013))—that the California Supreme Court has manufactured to discourage or disfavor arbitration. Thus,

“[d]espite clear direction from Congress and the Supreme Court to treat arbitration agreements no less

favorably than ordinary contractual terms, the California courts continue to view arbitration agreements

as a ‘lesser caste’ of contract provision[s].” Stephen A.

Broome, An Unconscionable Application of the Unconscionability Doctrine: How the California Courts Are

Circumventing the Federal Arbitration Act, 3 Hastings Bus. L.J. 39, 65 (2006) (footnote omitted). Like

its predecessors, the McGill rule is preempted by federal law.

The term “public injunctive relief,” as contrasted

with other types of injunctive relief, was not even recognized in California until 1999 (see Broughton v.

Cigna Healthplans, 988 P.2d 67 (Cal. 1999)), and before 2017, nobody thought a 148-year-old “Maxim[] of

Jurisprudence” could be warped to render unenforceable scores of consumer arbitration agreements in

California. That idea came about only after this Court

held in Concepcion that California could not nullify

consumer arbitration agreements by prohibiting

class-action waivers. The California Supreme Court

thus seeks to do through the McGill rule what it could

not do through the Discover Bank rule—discourage

34

arbitration by forcing businesses to choose between

non-bilateral arbitration and litigation. That court’s

determination to contravene this Court’s repeated emphasis on the scope of the FAA yet again warrants this

Court’s intervention.

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted.

SEAMUS C. DUFFY

MARK A. PERRY

AKIN GUMP STRAUSS HAUER

Counsel of Record

& FELD LLP

JOSHUA M. WESNESKI

Two Commerce Square

GIBSON, DUNN & CRUTCHER LLP

2001 Market Street, Suite 4100 1050 Connecticut Avenue, N.W.

Washington, D.C. 20036

Philadelphia, PA 19103

(202) 955-8500

(215) 965-1212

MPerry@gibsondunn.com

MICHAEL J. STORTZ

AKIN GUMP STRAUSS HAUER

& FELD LLP

580 California Street,

Suite 1500

San Francisco, CA 94104

(415) 765-9508

Counsel for Petitioners

February 27, 2020