Amicus Curiae Brief — OTO, L.L.C., Petitioner v. Ken Kho, et al.

No. 19-875

IN THE

Supreme Court of the United States

____________________

OTO, L.L.C.,

Petitioner,

v.

KEN KHO ET AL.,

Respondents.

____________________

On Petition for a Writ of Certiorari

to the Supreme Court of California

____________________

BRIEF OF THE CALIFORNIA NEW CAR

DEALERS ASSOCIATION, CALIFORNIA

EMPLOYMENT LAW COUNCIL, AND

ASSOCIATION OF SOUTHERN CALIFORNIA

DEFENSE COUNSEL AS AMICI CURIAE IN

SUPPORT OF PETITIONER

____________________

BENJAMIN G. SHATZ

MANATT, PHELPS

& PHILLIPS, LLP

11355 W. Olympic Blvd

Los Angeles, CA 90064

(310) 312-4383

bshatz@manatt.com

ANNA-ROSE MATHIESON

Counsel of Record

CHARLES KAGAY

CALIFORNIA APPELLATE

LAW GROUP LLP

96 Jessie Street

San Francisco, CA 94105

(415) 649-6700

annarose@calapplaw.com

Attorneys for Amicus

ASCDC

Attorneys for Amicus

CNCDA

Additional Counsel

PAUL GROSSMAN

PAUL HASTINGS LLP

515 South Flower Street

Twenty-Fifth Floor

Los Angeles, CA 90071

(213) 683-6000

paulgrossman@paulhastings.com

PAUL W. CANE JR.

PAUL HASTINGS LLP

101 California Street

Forty-Eighth Floor

San Francisco, CA 94111

(415) 856-7000

paulcane@paulhastings.com

Attorneys for Amicus Curiae CELC

i

TABLE OF CONTENTS

Page

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

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

INTRODUCTION AND SUMMARY OF

ARGUMENT ......................................................... 3

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

I.

THE CALIFORNIA SUPREME

COURT’S FACT-INTENSIVE

PROCEDURE IS INCONSISTENT

WITH THE FAA. ........................................... 4

A. The procedure frustrates

fundamental attributes of

arbitration. ........................................... 5

B. The procedure discriminates

against arbitration agreements. .......... 9

II. CALIFORNIA MAY NOT REFUSE TO

ENFORCE AN ARBITRATION

AGREEMENT BECAUSE THE STATE

BELIEVES A DIFFERENT FORUM

WOULD OFFER MORE BENEFITS. ........ 11

III. THIS COURT SHOULD SUMMARILY

REVERSE.................................................... 14

CONCLUSION ........................................................ 17

ii

TABLE OF AUTHORITIES

Page

CASES

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

570 U.S. 228 (2013) ...................................... 6, 7, 8

Armendariz v. Found. Health Psychcare

Servs., Inc.,

24 Cal. 4th 83 (2000) .................................... 10, 13

AT&T Mobility LLC v. Concepcion,

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

Buckeye Check Cashing, Inc. v. Cardegna,

546 U.S. 440 (2006) ............................................ 11

DIRECTV, Inc. v. Imburgia,

136 S. Ct. 463 (2015) .......................................... 16

Discover Bank v. Superior Court,

36 Cal. 4th 148 (2005) .......................................... 5

Epic Sys. Corp. v. Lewis,

138 S. Ct. 1612 (2018) .......................................... 3

Kindred Nursing Ctrs. Ltd. Partnerships v.

Clark,

137 S. Ct. 1421 (2017) .................................... 3, 10

KPMG LLP v. Cocchi,

565 U.S. 18 (2011) .............................................. 16

Lamps Plus, Inc. v. Varela,

139 S. Ct. 1407 (2019) ........................................ 16

Marmet Health Care Ctr., Inc. v. Brown,

565 U.S. 530 (2012) ............................................ 16

Maryland v. Dyson,

527 U.S. 465 (1999) ............................................ 15

iii

TABLE OF AUTHORITIES

(continued)

Page

Moses H. Cone Memorial Hosp. v. Mercury

Constr. Corp.,

460 U.S. 1 (1983) .................................................. 8

Nitro-Lift Techs., L.L.C. v. Howard,

568 U.S. 17 (2012) .................................. 15, 16, 17

Oblix, Inc. v. Winiecki,

374 F.3d 488 (7th Cir. 2004) ........................ 10, 11

Perry v. Thomas,

482 U.S. 483 (1987) ........................................ 9, 16

Preston v. Ferrer,

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

Sanchez v. Valencia Holding Co., LLC,

61 Cal. 4th 899 (2015) .......................................... 7

Sonic-Calabasas A, Inc. v. Moreno,

51 Cal. 4th 659 (2011) .......................................... 5

Sonic-Calabasas A, Inc. v. Moreno,

57 Cal. 4th 1109 (2013) .................................... 6, 9

Sonic-Calabasas A, Inc. v. Moreno,

573 U.S. 904 (2014) .............................................. 6

Sonic-Calabasas A, Inc. v. Moreno,

565 U.S. 973 (2011) .............................................. 5

Southland Corp. v. Keating,

465 U.S. 1 (1984) ................................................ 16

Wherry v. Award, Inc.,

192 Cal. App. 4th 1242 (2011) ........................... 13

iv

TABLE OF AUTHORITIES

(continued)

Page

STATUTES

9 U.S.C. § 2 ...................................................... 3, 6, 11

Federal Arbitration Act,

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

OTHER AUTHORITIES

U.S. Bureau of Labor Statistics, State

Occupational Employment and Wage

Estimates: California (May 2018),

https://www.bls.gov/oes/current/

oes_ca.htm#00-0000 (last modified Apr. 2,

2019) ................................................................... 15

BRIEF OF THE CALIFORNIA NEW CAR

DEALERS ASSOCIATION, CALIFORNIA

EMPLOYMENT LAW COUNCIL, AND

ASSOCIATION OF SOUTHERN CALIFORNIA

DEFENSE COUNSEL AS AMICI CURIAE IN

SUPPORT OF PETITIONER

Amici respectfully submit this brief in support of

petitioner OTO, L.L.C. 1

0F

INTEREST OF AMICI CURIAE

The California New Car Dealers Association

(CNCDA) is the nation’s largest state automobile

dealer association, representing nearly 1,200 franchised new car and truck dealers throughout California. CNCDA seeks to create a business environment

in which new car dealers can thrive, provide the best

products and services to consumers, and maintain

high employment rates. CNCDA also protects and

promotes the interests of franchised new car dealers

before government and regulatory agencies. To that

end, it represents the views of its members on important issues that arise in public forums, including

the courts.

The California Employment Law Council (CELC)

is a voluntary, non-profit organization that promotes

the common interests of employers and the general

public in fostering the development in California of

1 No counsel for any party authored this brief in whole or in

part, and no person other than amici or their counsel have made

any monetary contribution intended to fund the preparation or

submission of this brief. Amici notified the parties of their intention to file this brief more than ten days before the due date,

and all parties provided consent to the filing of this brief.

2

reasonable, equitable, and progressive rules of employment law. CELC’s membership includes about 70

private sector employers in the State of California

who collectively employ well in excess of a half-million

Californians. CELC prides itself on being a moderate

employer organization, and seeks evenhanded employment laws in California, fair to employer and employee alike.

The Association of Southern California Defense

Counsel (ASCDC) is the nation’s largest regional organization of lawyers who specialize in defending civil

actions. ASCDC counts as members over 1,000 attorneys in Southern and Central California, and is actively involved in assisting courts on issues of interest

to its members. It has appeared as amicus curiae in

numerous cases, including those that concern the

scope and application of the Federal Arbitration Act

(FAA).

Like many businesses throughout the United

States, the members and clients of CNCDA, CELC,

and ASCDC enter into contracts with their employees

and consumers that adopt the time- and cost-saving

options afforded by the FAA to resolve disputes

promptly and efficiently. Judicial decisions that undermine the FAA thwart these efforts to achieve a

swift, economical, and fair outcome when disagreements arise.

The California Supreme Court’s ruling in this case

frustrates the purposes of the FAA, singles out arbitration agreements for disfavored treatment, and

puts employers seeking to use arbitration agreements

in a bind. This Court should summarily reverse or

grant review for reasons explained below.

3

INTRODUCTION AND

SUMMARY OF ARGUMENT

Congress passed the FAA nearly a hundred years

ago “in response to widespread judicial hostility to arbitration agreements.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011). The Act bars both

explicitly disfavoring arbitration, and “covertly accomplish[ing] the same objective,” Kindred Nursing

Ctrs. Ltd. Partnerships v. Clark, 137 S. Ct. 1421, 1426

(2017), through the use of “more subtle methods” that

“target arbitration,” Epic Sys. Corp. v. Lewis, 138 S.

Ct. 1612, 1622 (2018).

Yet judicial hostility to arbitration continues unabated in the nation’s most populous state. As this

Court has observed, “California’s courts have been

more likely to hold contracts to arbitrate unconscionable than other contracts.” Concepcion, 563 U.S. at

342-43. The California Supreme Court’s method of

choice for targeting arbitration has been the unconscionability doctrine, because the FAA allows states

to apply generally applicable defenses to void arbitration agreements. 9 U.S.C. § 2.

In this case, the California Supreme Court held

that a standard employment arbitration agreement

that treats employees fairly—allowing broad discovery and requiring the employer to pay the costs of arbitration—is nevertheless both procedurally and substantively unconscionable.

That decision is flatly wrong. A state court may

not, under the guise of applying the unconscionability

doctrine, frustrate the fundamental purposes of arbitration. Nor may a state apply less favorable rules to

evaluate arbitration agreements than other contracts.

4

Nor may a state void an arbitration agreement just

because the state believes that a different forum

would provide superior benefits to certain of its citizens. Yet the California Supreme Court did all three

in the decision below.

The California courts’ dismissive attitude toward

arbitration impacts millions of employers and employees. This case involves a straightforward application of principles announced by this Court in Concepcion and other cases. Summary reversal is appropriate.

ARGUMENT

I. THE CALIFORNIA SUPREME

COURT’S FACT-INTENSIVE

PROCEDURE IS INCONSISTENT

WITH THE FAA.

This case concerns the validity of a standard employment arbitration agreement. Despite having

agreed to arbitrate all disputes with his former employer, respondent Ken Kho sought to avoid arbitration and instead engage in an administrative process

known as a Berman hearing.

The California Supreme Court struck down the arbitration agreement as both procedurally and substantively unconscionable, but stressed that its holding was limited and fact-intensive. The court repeatedly noted that it deemed this case to have a high degree of procedural unconscionability, and suggested

its conclusion might be different otherwise. E.g., Pet.

App. 33a.

The fact-intensive nature of this holding is no impediment to this Court’s review; indeed, the fact-

5

intensive test itself violates the FAA for at least two

reasons. First, the procedure mandated by the California Supreme Court—conducting a minitrial on the

benefits of arbitration compared to an alternate procedure—frustrates the aims of the FAA and is therefore preempted. Second, the inquiry prescribed by the

court violates the rule that arbitration agreements

must be placed on the same footing as other agreements.

A. The procedure frustrates fundamental attributes of arbitration.

The California Supreme Court’s use of a fact-specific test is not in any way a sign of deference to the

FAA. In an earlier case, the California Supreme

Court tried to impose a categorical rule that all arbitration agreements in the employment context are per

se unconscionable because of the lack of Berman process. Sonic-Calabasas A, Inc. v. Moreno, 51 Cal. 4th

659 (2011), cert. granted, judgment vacated, 565 U.S.

973 (2011) (Sonic I).

But that rule was short-lived. Just a few months

after Sonic I, this Court decided Concepcion, overturning an earlier California Supreme Court decision

rejecting an arbitration agreement on unconscionability and public policy grounds. Concepcion, 563 U.S.

at 341-42 (overturning Discover Bank v. Superior

Court, 36 Cal. 4th 148 (2005)). This Court vacated

and remanded Sonic I, and based on the clear analysis

of Concepcion, even the California Supreme Court

had to grudgingly concede that its “categorical rule”

prohibiting a waiver of Berman procedures was

6

preempted. Sonic-Calabasas A, Inc. v. Moreno, 57

Cal. 4th 1109, 1124, 1139-41 (2013) (Sonic II). 2

1F

Since a categorical approach was not an option after Concepcion, the court pivoted to a fact-intensive

approach, explaining “[a]rbitration agreements could

not be deemed categorically unconscionable simply

because they entail a waiver of the Berman proceedings. However, . . . an employee’s Berman waiver,

while not dispositive, remains a significant factor in

considering unconscionability.” Pet. App. 11a (citation omitted). 3

2F

While the FAA allows states to apply generally applicable contract defenses, 9 U.S.C. § 2, states may not

apply “rules that stand as an obstacle to the accomplishment of the FAA’s objectives.” Concepcion, 563

U.S. at 343; Am. Exp. Co. v. Italian Colors Rest., 570

U.S. 228, 233 (2013). Nor may states use the unconscionability analysis to achieve ends that “conflict

with the FAA or frustrate its purpose to ensure that

private arbitration agreements are enforced according to their terms.” Concepcion, 563 U.S. at 347 n.6.

2 This Court denied the petition for certiorari in Sonic II, 573

U.S. 904 (2014), but that petition was from an interlocutory decision—the California Supreme Court had remanded for the trial

court “to examine additional evidence regarding the particulars

of the arbitration process set out in the agreement.” Pet. App.

12a (citing Sonic II). The case was resolved in the trial court on

remand (Los Angeles Super. Ct. No. BS107161, Sept. 4, 2014 Minute Order), so this Court had no other chance to review the final

decision.

3 Using the lack of Berman process as a “significant factor”

is just as preempted as using it as the sole factor for the reasons

explained in Section II.

7

Yet the California Supreme Court has prescribed

a complex process to assess arbitration agreements in

employment cases: The trial court must sit in judgment of the arbitration procedure and ensure arbitration is as beneficial for employees as an administrative proceeding. See, e.g., Pet. App. 12a. As the court

explained here, “in exchange” for the employee’s decision to give up Berman rights, the “arbitral scheme

must offer employees an effective means to pursue

claims for unpaid wages, and not impose unfair costs

or risks on them or erect other barriers to the vindication of their statutory rights.” Pet. App. 26-27a.

To evaluate whether the arbitration agreement

meets this test the California Supreme Court instructed lower courts to “closely scrutinize” the terms

of the arbitration agreement, being “sensitive to ‘the

context of the rights and remedies that otherwise

would have been available to the parties.’ ” Pet. App.

20-21a (quoting Sanchez v. Valencia Holding Co.,

LLC, 61 Cal. 4th 899, 922 (2015)). The courts must

compare arbitration to the administrative Berman

process, “examin[ing] both the features of dispute resolution adopted” in the arbitration agreement “as well

as the features eliminated.” Id. at 21a.

The FAA bars this procedure. As this Court put it

in Italian Colors, “[s]uch a preliminary litigating hurdle would undoubtedly destroy the prospect of speedy

resolution that arbitration in general and bilateral arbitration in particular was meant to secure.” Italian

Colors Rest., 570 U.S. at 239. Requiring a minitrial

on the comparative benefits of arbitration interferes

with the FAA’s goal of “ensur[ing] the enforcement of

arbitration agreements according to their terms so as

to facilitate streamlined proceedings.” Concepcion,

8

563 U.S. at 344; see also, e.g., Preston v. Ferrer, 552

U.S. 346, 357 (2008). The “FAA does not sanction

such a judicially created superstructure.” Italian Colors Rest., 570 U.S. at 239.

This case is a good illustration. The proceedings

have taken more than four years—and counting—just

to determine whether the arbitration agreement is

enforceable. Pet. App. 25a n.15. The trial court ruled

that the employee’s loss of Berman procedures was

substantively unconscionable, Pet. App. 5-6a, the

court of appeal ruled it was not and reversed, id. at

109a-116a, and the California Supreme Court reversed again, id. at 39a.

Indeed, even though the state court of last resort

reviewed this case, that court went to great lengths to

make clear it was not even resolving the enforceability of other identical arbitration agreements, let alone

different agreements. Pet. App. 30-31a (suggesting

that the same arbitration provision “might pass muster under less coercive circumstances”).

Under the California Supreme Court’s framework,

every future California wage-dispute case in which an

employee makes a claim of unconscionability will require a full-blown evidentiary analysis to judge the

arbitration process and scrutinize whether that process provides employees as many rights as a state administrative proceeding. “Arbitration, if it ever occurred . . . would likely be long delayed, in contravention of Congress’ intent ‘to move the parties to an arbitrable dispute out of court and into arbitration as

quickly and easily as possible.’ ” Preston, 552 U.S. at

357 (quoting Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 22 (1983)). But this

9

Court has made clear that state law is preempted

when it “ ‘stands as an obstacle to the accomplishment

and execution of the full purposes and objectives’ ” of

the FAA. Concepcion, 563 U.S. at 352.

The fact-intensive procedure set out by the California Supreme Court for judging the comparative

benefits of arbitration agreements stands as an obstacle to the FAA’s goal of streamlining arbitration procedures and enforcing parties’ agreements according

to their terms. It is thus preempted.

B. The procedure discriminates

against arbitration agreements.

The California Supreme Court’s decision also violates the rule that a court may not apply the unconscionability doctrine “in a fashion that disfavors arbitration,” Concepcion, 563 U.S. at 341, nor may it construe an arbitration “agreement in a manner different

from that in which it otherwise construes nonarbitration agreements under state law,” Perry v. Thomas,

482 U.S. 483, 492 n.9 (1987).

California law generally focuses the analysis of

unconscionability on whether the agreement is unfairly one-sided. Pet. App. 20a. The party attacking

the agreement must prove the contract contains a

“substantial degree of unfairness beyond ‘a simple

old-fashioned bad bargain.’ ” Sonic II, 57 Cal. 4th at

1160; Pet. App. 20a.

As explained above, though, when employees attack arbitration agreements, that standard is inverted. The court must hold a minitrial on the costs

and benefits of arbitration compared to alternate employee-friendly administrative procedures.

E.g.,

Sonic II, 57 Cal. 4th at 1146. Rather than placing the

10

burden on the party attacking the agreement to show

“a substantial degree of unfairness,” the court must

police the agreement to ensure the party attacking

that agreement did not lose any rights and got a good

bargain. E.g., Pet. App. 26-27a.

This is simply not how contract law usually works,

in California or elsewhere. Courts don’t usually scrutinize every aspect of a bargain to be sure that each

party got the same rights under the agreement as

they gave up. New and separate consideration is not

required for every individual item that a party gives

up in agreeing to the contract—and analyzing contract claims would be hopelessly complicated if it

were. See Pet. App. 58-60a (Chin, J. dissenting) (explaining how test set out by majority is far more elaborate than usually required under California law); see

also Oblix, Inc. v. Winiecki, 374 F.3d 488, 491-92 (7th

Cir. 2004) (Easterbrook, J.) (applying California law).

Indeed, the California Supreme Court itself candidly admitted that it was applying an arbitrationspecific test, noting that “the ordinary principles of

unconscionability may manifest themselves in forms

peculiar to the arbitration context.” Armendariz v.

Found. Health Psychcare Servs., Inc., 24 Cal. 4th 83,

119 (2000).

This Court has made clear that the FAA incorporates “an equal-treatment principle: A court may invalidate an arbitration agreement based on ‘generally

applicable contract defenses’ like fraud or unconscionability, but not on legal rules that ‘apply only to arbitration or that derive their meaning from the fact that

an agreement to arbitrate is at issue.’ ” Kindred

Nursing, 137 S. Ct. at 1426. When “a state treats

11

arbitration differently, and imposes on form arbitration clauses more or different requirements from

those imposed on other clauses, then its approach is

preempted by § 2 of the Federal Arbitration Act.”

Oblix, Inc., 374 F.3d at 492. California’s use of a special just-for-wage-arbitration test violates federal

law.

II. CALIFORNIA MAY NOT REFUSE TO

ENFORCE AN ARBITRATION

AGREEMENT BECAUSE THE STATE

BELIEVES A DIFFERENT FORUM

WOULD OFFER MORE BENEFITS.

The California Supreme Court held that the parties’ decision to resolve their disputes before a neutral

arbitrator, rather than in an administrative Berman

proceeding, made the agreement substantively unconscionable. But that conclusion flouts the FAA. A

state court may not invalidate an arbitration agreement based on its own “judgment concerning the forum for enforcement of [a] state-law cause of action.”

Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S.

440, 446 (2006).

As the court of appeal decision bluntly acknowledged and the California Supreme Court never questioned, the arbitration procedure here treated the

parties equally. Pet. App. 6-7a. There was no unfair

fee-shifting, one-sided discovery rules, or other features that favored the employer. Instead, the agreement provided for arbitration “before a retired superior court judge, pursuant to the California Arbitration Act, with full discovery permitted.” Id. at 4a (citations omitted). The employer must “pay both the

costs of arbitration and a successful claimant’s reasonable attorney fees.” Id. at 6a (citations omitted);

12

see also id. at 111a (“One Toyota acknowledges that it

must pay all costs of arbitration under the Agreement”).

The California Supreme Court declared the arbitration agreement substantively unconscionable because it was insufficiently one-sided—that is, because

it did not put a thumb on the scale for the employee

as a Berman hearing would but treated both sides

equally like court litigation. The court enumerated

various ways in which the alternative Berman procedure slants in favor of the employee: hand-holding by

the administrative agency in initiating a complaint,

counseling of the employee at hearing, and judgments

collection by the Labor Commissioner. Id. at 20-22a,

30-31a. In contrast, the court observed, the arbitration agreement “closely resembled civil litigation.” Id.

at 31a.

The court acknowledged that “litigation-like procedures, on their own, are not necessarily so one-sided

as to make an arbitration agreement unconscionable.”

Id. at 25a. Civil litigation has been “carefully crafted

to ensure fairness to both sides” and is not “per se unfair.” Id. at 25-26a. This was a necessary concession,

as otherwise the court would be maintaining that litigation in California’s own system of civil courts is

one-sided.

Still, the court found the arbitration agreement

substantively unconscionable because it mandated

arbitration on an even footing rather than the pro-employee Berman procedure. Or, as the court put it,

“[b]y signing the agreement, [the employee] surrendered the full panoply of Berman procedures and assistance we have described. What he got in return

13

was access to a formal and highly structured arbitration process that closely resembled civil litigation if

he could figure out how to avail himself of its benefits

and avoid its pitfalls.” Id. at 31a (emphasis in original). 4

3F

The court tried to obscure its holding by stressing

that a low level of substantive unconscionability

would suffice in this context to void the agreement.

But the court still acknowledged that some substantive unconscionability was required under California

law to declare an agreement unenforceable. Id. at 14a

(“Both procedural and substantive unconscionability

must be shown” to find unconscionability under California law); id. at 20a (“procedural unconscionability

alone does not invalidate a contract”); see also Armendariz, 24 Cal. 4th at 114.

The court also acknowledged that the only argument for substantive unconscionability was the choice

4 The court’s ruling also puts California employers seeking

to use arbitration agreements in a Catch-22. Under decades-old

precedent, California courts refuse to enforce arbitration agreements if they do not have enough neutral litigation-like procedures. In Armendariz, 24 Cal. 4th at 91, that court held that an

employment arbitration agreement “must meet certain minimum requirements, including neutrality of the arbitrator, the

provision of adequate discovery, a written decision that will permit a limited form of judicial review, and limitations on the costs

of arbitration.” California courts have struck down many agreements for containing insufficient litigation-like procedures. E.g.,

Wherry v. Award, Inc., 192 Cal. App. 4th 1242, 1248-49 (2011).

Yet here the court found the agreement substantively unconscionable because it contained too many neutral litigation-like

procedures. Congress passed the FAA to prevent precisely this

sort of state hostility to arbitration.

14

of arbitration rather than a Berman hearing. Pet.

App. 21a (“[The employee] and the Labor Commissioner do not focus on the fairness of specific, isolated

terms in the agreement. Rather, they contend One

Toyota’s arbitral process is so inaccessible and unaffordable, considered as a whole, that it does not offer

an effective means for resolving wage disputes.”).

Yet the court still held that the arbitration agreement met the threshold for substantive unconscionability. Under the court’s analysis, choosing arbitration rather than a Berman hearing by itself renders

an agreement so “unfairly one-sided” that it qualifies

as substantively unconscionable. Pet. App. 11a.

But a state court may not rule that arbitration is

substantively unconscionable because the court believes a different, non-arbitration procedure would be

better. As explained in Section I.B and in the petition,

this violates the rule that states may not disfavor arbitration agreements or scrutinize them differently

than other contracts. And, as this Court made clear

in Concepcion, 563 U.S. at 351, “[s]tates cannot require a procedure that is inconsistent with the FAA,

even if it is desirable for unrelated reasons.” For this

reason, too, the California Supreme Court’s decision

conflicts with the FAA.

III. THIS COURT SHOULD SUMMARILY

REVERSE.

Summary reversal is unusual, but warranted

here. This Court has repeatedly instructed the California courts that they must enforce to the FAA, but

California continues to ignore that instruction. To

correct California’s persistent refusal to apply the

FAA, this Court need not “decide any new or

15

unanswered question of law, but simply correct[] a

lower court’s demonstrably erroneous application of

federal law.” Maryland v. Dyson, 527 U.S. 465, 467

n.* (1999).

The stakes are high. There are over 17 million

people employed in California, millions of whom work

in sales or other occupations likely to have arbitration

agreements. See U.S. Bureau of Labor Statistics,

State Occupational Employment and Wage Estimates:

California (May 2018), https://www.bls.gov/oes/current/oes_ca.htm#00-0000 (last modified Apr. 2, 2019).

As Justice Chin warned, “the majority’s new rule will

significantly impact the enforceability of virtually all

mandatory, predispute arbitration agreements in the

employment context” in California. Pet. App. 46a

(Chin, J., dissenting).5

As this Court has noted, “State courts rather than

federal courts are most frequently called upon to apply the [FAA], including the Act’s national policy favoring arbitration. It is a matter of great importance,

therefore, that state supreme courts adhere to a correct interpretation of the legislation.” Nitro-Lift

Techs., L.L.C. v. Howard, 568 U.S. 17, 17-18 (2012).

When state courts have refused to follow these directives, this Court has not hesitated to step in.

California has been perhaps the most frequent offender, and this Court has had to reverse opinions of

California’s courts that were hostile to arbitration

agreements many times. See, e.g., Preston, 552 U.S.

346 (reversing California opinion that refused to

5 Justice Chin, the lone dissenting voice on the California Su-

preme Court for many arbitration cases, has announced his retirement from that court.

16

enforce the terms of an arbitration agreement); Perry,

482 U.S. 483 (same); Southland Corp. v. Keating, 465

U.S. 1 (1984) (same); see also Concepcion, 563 U.S. at

352 (reversing Ninth Circuit decision that applied

California Supreme Court ruling holding class arbitration waivers unconscionable); DIRECTV, Inc. v.

Imburgia, 136 S. Ct. 463, 466 (2015) (reversing California court of appeal decision finding class arbitration waiver unconscionable even after Concepcion);

Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 1415-17

(2019) (reversing Ninth Circuit arbitration decision

applying California law).

This Court has not hesitated to summarily reverse

state court decisions giving short shrift to arbitration

agreements. See, e.g., Nitro-Lift Techs., 568 U.S. at

21 (summarily reversing); Marmet Health Care Ctr.,

Inc. v. Brown, 565 U.S. 530, 531 (2012) (summarily

reversing); KPMG LLP v. Cocchi, 565 U.S. 18, 19

(2011) (summarily reversing).

As in other arbitration cases that this Court has

summarily reversed, the California Supreme Court’s

“interpretation of the FAA was both incorrect and inconsistent with clear instruction in the precedents of

this Court.” Marmet, 565 U.S. at 532. As this Court

explained in DIRECTV, Inc., “Lower court judges are

certainly free to note their disagreement with a decision of this Court. But the ‘Supremacy Clause forbids

state courts to dissociate themselves from federal law

because of disagreement with its content or a refusal

to recognize the superior authority of its source.’ The

Federal Arbitration Act is a law of the United States,

and Concepcion is an authoritative interpretation of

that Act. Consequently, the judges of every State

must follow it.” DIRECTV, 136 S. Ct. at 468 (citations

17

omitted). “ ‘It is this Court’s responsibility to say

what a statute means, and once the Court has spoken,

it is the duty of other courts to respect that understanding of the governing rule of law.’ ” Nitro-Lift

Techs., 568 U.S. at 21.

This is not the first time California has thumbed

its nose at this Court’s arbitration decisions. Nor the

second. While a grant of certiorari would be appropriate here, this Court has already spent a great deal of

its valuable time correcting California’s errant ways.

The Court should summarily reverse.

CONCLUSION

For all these reasons and those set out in the petition, the Court should summarily reverse the decision

of the California Supreme Court, or grant certiorari

and require California to follow the dictates of the

FAA.

18

Respectfully submitted,

ANNA-ROSE MATHIESON

Counsel of Record

CHARLES KAGAY

CALIFORNIA APPELLATE LAW GROUP LLP

96 Jessie Street

San Francisco, CA 94105

(415) 649-6700

annarose@calapplaw.com

Attorneys for Amicus California New Car

Dealers Association

PAUL GROSSMAN

PAUL HASTINGS LLP

515 South Flower Street

Twenty-Fifth Floor

Los Angeles, CA 90071

(213) 683-6000

Attorneys for Amicus California Employment Law Council

PAUL W. CANE JR.

PAUL HASTINGS LLP

101 California Street

Forty-Eighth Floor

San Francisco, CA 94111

(415) 856-7000

Attorneys for Amicus California Employment Law Council

BENJAMIN G. SHATZ

MANATT, PHELPS & PHILLIPS, LLP

11355 W. Olympic Blvd

Los Angeles, CA 90064

(310) 312-4383

Attorneys for Amicus Association of

Southern California Defense Counsel

February 2020