Amicus Curiae Brief — Robyn Morgan, Petitioner v. Sundance, Inc.

Supreme Court briefJan 6, 2022

Ask Donna

What actually matters in this document.

Text

No. 21-328

IN THE

Supreme Court of the United States

ROBYN MORGAN, ON BEHALF OF HERSELF AND ALL

SIMILARLY SITUATED INDIVIDUALS,

Petitioner,

SUNDANCE, INC.,

Respondent.

On Writ of Certiorari to the United States

Court of Appeals for the Eighth Circuit

BRIEF OF AMICUS CURIAE PUBLIC CITIZEN

IN SUPPORT OF PETITIONER

SCOTT L. NELSON

Counsel of Record

ALLISON M. ZIEVE

PUBLIC CITIZEN

LITIGATION GROUP

1600 20th Street NW

Washington, DC 20009

(202) 588-1000

snelson@citizen.org

Attorneys for Amicus Curiae

January 2022

TABLE OF CONTENTS

Page

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

INTEREST OF AMICUS CURIAE ............................ 1

SUMMARY OF ARGUMENT .................................... 2

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

Enforcement of arbitration agreements under

the FAA involves the interplay of both federal

and state law. ....................................................... 3

II. Where generally applicable principles of state

contract law provide for waiver of contract rights

regardless of prejudice, the FAA does not

superimpose a requirement of prejudice. ............ 6

CONCLUSION.......................................................... 10

TABLE OF AUTHORITIES

Cases

Page(s)

Allied-Bruce Terminix Cos. v. Dobson,

513 U.S. 265 (1995) ............................................... 5

Arthur Andersen LLP v. Carlisle,

556 U.S. 624 (2009) ................................... 3, 5, 6, 8

AT&T Mobility LLC v. Concepcion,

563 U.S. 333 (2011) ....................................... 4, 5, 9

Buckeye Check Cashing, Inc. v. Cardegna,

546 U.S. 440 (2006) ........................................... 4, 5

Coleman v. Thompson,

501 U.S. 722 (1991) ............................................... 7

Commercial Cas. Ins. Co. v. Consol. Stone Co.,

278 U.S. 177 (1929) ............................................... 7

DIRECTV, Inc. v. Imburgia,

577 U.S. 47 (2015) ................................................. 5

Doctor’s Assocs. v. Casarotto,

517 U.S. 681 (1996) ........................................... 4, 5

Epic Sys. Corp. v. Lewis,

138 S. Ct. 1612 (2018) ....................................... 4, 9

Erie R. Co. v. Tompkins,

304 U.S. 64 (1938) ................................................. 5

First Options of Chicago, Inc. v. Kaplan,

514 U.S. 938 (1995) ............................................... 5

Kamen v. Kemper Fin. Servs., Inc.,

500 U.S. 90 (1991) ................................................. 8

Kennedy v. Plan Adm’r for DuPont Sav. & Inv. Plan,

555 U.S. 285 (2009) ............................................... 7

iii

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

137 S. Ct. 1421 (2017) ................................... 4, 5, 9

Lamps Plus, Inc. v. Varela,

139 S. Ct. 1407 (2019) ........................................... 5

Neirbo Co. v. Bethlehem Shipbuilding Corp.,

308 U.S. 165 (1939) ............................................... 7

Perry v. Thomas,

482 U.S. 483 (1987) ....................................... 4, 5, 6

Prima Paint Corp. v. Flood & Conklin Mfg. Co.,

388 U.S. 395 (1967) ............................................... 4

Rodriguez v. FDIC,

140 S. Ct. 713 (2020) ............................................. 5

Stern v. Marshall,

564 U.S. 462 (2011) ............................................... 7

Town of Newton v. Rumery,

480 U.S. 386 (1987) ............................................... 7

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

Leland Stanford Jr. Univ.,

489 U.S. 468 (1989) ............................................... 5

Wright v. Universal Maritime Serv. Corp.,

525 U.S. 70 (1998) ................................................. 7

Statutes and Rules

Federal Arbitration Act,

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

9 U.S.C. § 2 ............................................ 2, 3, 4, 5, 6

9 U.S.C. § 3 ............................................ 2, 3, 5, 6, 8

9 U.S.C. § 4 ............................................ 2, 4, 5, 6, 8

Fed. R. Civ. P. 38(d) .................................................... 7

INTEREST OF AMICUS CURIAE1

Public Citizen is a consumer advocacy organization

that appears on behalf of its members and supporters

nationwide before Congress, administrative agencies,

and the courts. Public Citizen works on a wide range

of issues, including enactment and enforcement of

laws protecting consumers, workers, and the public.

Public Citizen has a longstanding interest in issues

concerning the enforcement of mandatory predispute

arbitration agreements, and it has appeared as amicus curiae in many cases involving such issues in this

Court and other federal and state courts.

Public Citizen submits this brief because it has

long been concerned that federal appellate decisions

addressing waiver of arbitration have generally failed

to recognize that, in the context of the Federal Arbitration Act, waiver has both a federal-law and a statelaw dimension. Federal law may determine whether a

party has waived its rights to invoke the Act’s provisions that empower federal courts to enforce arbitration agreements, but state law continues to control

whether, as a matter of contract law, a party’s entitlement to enforce a provision in an agreement that

might otherwise provide for arbitration has been

waived. Public Citizen submits this brief to explain

this distinction in the expectation that it may be helpful to the Court in addressing the issues posed by this

case.

––––––––––––––––––––––––

1 This brief was not authored in whole or part by counsel for

a party. No one other than amicus curiae made a monetary contribution to preparation or submission of the brief. Counsel for

both parties have consented in writing to its filing.

SUMMARY OF ARGUMENT

The question in this case is whether a party seeking to establish that an opponent has waived its right

to compel arbitration of a dispute under the Federal

Arbitration Act (FAA) must demonstrate that it was

prejudiced by the conduct that it claims amounted to

a waiver. Answering that question requires the Court

to consider that the entitlement to compel arbitration

under the FAA has both federal- and state-law components.

The FAA provides as a matter of federal law that

agreements to arbitrate disputes are enforceable to

the same extent as other contracts, and that a federal

court may compel arbitration and stay litigation pending arbitration to the extent that a dispute is subject

to an arbitration agreement. 9 U.S.C. §§ 2–4. In principle, whether a party has waived the right to invoke

the procedural entitlements conferred by the FAA

could be a question governed by federal law, at least

in a case arising in a federal court.

The general contract-law principles that, under the

FAA, determine the enforceability of an arbitration

agreement are not, however, matters of federal law:

Their source is state law. Even if, as a matter of federal law, a party has not waived its right to invoke

whatever rights it may have under the FAA, the FAA

provides no right to enforce an agreement to arbitrate

that may not be enforced under neutral principles of

state contract law. Thus, if the application of general

state contract-law principles to the facts shows that a

party has waived a contractual provision that would

otherwise require arbitration, the FAA’s mechanisms

give a court nothing to enforce. If those state contractlaw principles do not require a showing of prejudice to

establish waiver, the FAA does not impose additional

requirements that would permit enforcement of a contract that is unenforceable under neutral principles of

state contract law.

Because, as the petitioner demonstrates, neutral

state contract-law principles typically do not require a

showing of prejudice to establish a waiver of contractual rights, in most instances a court will need go no

further than consulting state contract law to reject an

assertion that such a showing is required. In such

cases, whether the party seeking to arbitrate has also

waived its right to invoke the FAA as a matter of federal law is a purely theoretical question. Only in cases

where neutral state contract-law principles require a

showing of prejudice for waiver does it matter

whether, as a matter of federal law, a party’s right to

invoke the FAA’s procedures is waived by inconsistent

litigation conduct regardless of prejudice.

ARGUMENT

Enforcement of arbitration agreements

under the FAA involves the interplay of

both federal and state law.

The FAA provides, as a matter of federal law, that

agreements to arbitrate disputes involving transactions affecting interstate and foreign commerce are

enforceable by federal courts, subject to defenses applicable to the enforcement of contracts generally. See

9 U.S.C. § 2; Arthur Andersen LLP v. Carlisle, 556

U.S. 624, 629–30 (2009). The statute further provides

parties to arbitration agreements with two procedural

mechanisms for enforcing them in the federal courts:

motions to stay litigation of issues that are arbitrable

under such agreements pending arbitration, see 9

U.S.C. § 3, and applications to compel arbitration

when a party to an arbitration agreement is in “default” of its obligation to arbitrate as required by the

agreement, see id. § 4.

This Court has held that the FAA thus creates a

federal “ ‘equal-treatment rule’ for arbitration agreements.” Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1622

(2018). Under this equal-treatment principle, as the

Court has repeatedly stated, enforcement of arbitration agreements is subject to “generally applicable

contract defenses.” Doctor’s Assocs. v. Casarotto, 517

U.S. 681, 687 (1996). That is, arbitration agreements

are subject to defenses that “govern issues concerning

the validity, revocability, and enforceability of contracts generally,” Perry v. Thomas, 482 U.S. 483, 492

n.9 (1987), that do not “apply only to arbitration or …

derive their meaning from the fact that an agreement

to arbitrate is at issue,” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 340 (2011), and that do not “disfavor[ ] contracts that … have the defining features of

arbitration agreements,” Kindred Nursing Ctrs. Ltd.

P’ship v. Clark, 137 S. Ct. 1421, 1426 (2017). In these

ways, the FAA puts arbitration agreements “on equal

footing with all other contracts,” Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006), by

making them “as enforceable as other contracts, but

not more so.” Prima Paint Corp. v. Flood & Conklin

Mfg. Co., 388 U.S. 395, 404 n.12 (1967).

Beyond establishing this equal treatment principle, however, the FAA does not create the generally

applicable contract-law principles that determine

whether a court may deny enforcement of an arbitration agreement on grounds applicable to “any contract,” 9 U.S.C. § 2, or whether it may find a party to

be in “default” of its contractual obligations and order

that party to arbitrate, id. § 4. Nor do the controlling

contract-law principles have any other federal-law

source in most cases. “As this Court has put it, there

is ‘no federal general common law.’ ” Rodriguez v.

FDIC, 140 S. Ct. 713, 717 (2020) (quoting Erie R. Co.

v. Tompkins, 304 U.S. 64, 78 (1938)). Rather, state

common law generally provides “rules readymade for

such tasks” as enforcing contracts. Id. at 716.

Accordingly, this Court has consistently recognized

that state contract law generally supplies the neutral,

generally applicable rules governing the formation

and revocation of contracts, as well as defenses to

their validity and enforcement, that courts must apply

under sections 2, 3, and 4 of the FAA. See Lamps Plus,

Inc. v. Varela, 139 S. Ct. 1407, 1415 (2019); Kindred,

137 S. Ct. at 1426; DIRECTV, Inc. v. Imburgia, 577

U.S. 47, 54 (2015); Concepcion, 563 U.S. at 343; First

Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944

(1995); Volt Info. Scis., Inc. v. Bd. of Trustees of Leland

Stanford Jr. Univ., 489 U.S. 468, 474–75 (1989); Doctor’s Assocs., 517 U.S. at 686–87; Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 281 (1995); Perry,

482 U.S. at 492 n.9.

As the Court explained in Arthur Andersen, the

FAA’s operative provisions do not “purport[ ] to alter

background principles of state contract law regarding

the scope of agreements (including the question of who

is bound by them).” 556 U.S. at 630. It retains state

contract law as “an external body of law” governing

both “§ 2’s enforceability mandate” and the procedural

mechanisms set forth in sections 3 and 4 that implement it. Id. “ ‘[S]tate law,’ therefore, is applicable to

determine which contracts are binding under § 2 and

enforceable under § 3 ‘if that law arose to govern issues concerning the validity, revocability, and enforceability of contracts generally.’ ” Id. at 630–31 (quoting

Perry, 482 U.S. at 493 n.9). Importantly, Arthur Andersen makes clear that the role of state contract law

under the FAA is grounded not only in section 2’s “saving clause,” which subjects section 2’s enforceability

mandate to defenses applicable to “any contract,” 9

U.S.C. § 2, but also in the language of sections 3 and

4, which necessarily rely on state contract law for the

determination whether a dispute is “referable to arbitration under an agreement,” id. § 3, and whether a

party is in “default” of its obligations under an arbitration agreement, id. § 4. Thus, the FAA’s “terms are

fulfilled” when an arbitration agreement is enforced to

the extent provided for by general principles of “state

contract law.” Id.

II. Where generally applicable principles of

state contract law provide for waiver of

contract rights regardless of prejudice, the

FAA does not superimpose a requirement

of prejudice.

The nature of the rights conferred by the FAA necessarily affects analysis of whether a party has waived

them. Analytically, waiver principles may come into

play at two levels. A party may, as a matter of federal

law, have waived its right to invoke the FAA’s provisions for compelling arbitration and/or staying litigation pending arbitration. But even if the party has not

waived its entitlement to invoke its FAA rights, those

rights go no further than its rights under general principles of state contract law. Thus, if neutral principles

of state contract law provide a defense to enforcement

of a contract based on waiver, and the waiver defense

does not require a showing of prejudice, a federal court

must apply those same state-law contract principles

in determining whether the party seeking arbitration

has waived its contractual entitlement to arbitrate.

A. To the extent that the FAA creates federal statutory entitlements to compel arbitration and/or stay

litigation pending arbitration, those entitlements—

like most others created by federal law—may be

waived or forfeited. See, e.g., Stern v. Marshall, 564

U.S. 462, 478–82 (2011); Neirbo Co. v. Bethlehem

Shipbuilding Corp., 308 U.S. 165, 168 (1939).

Whether a federal statutory right has been waived is

generally a question of federal law. See, e.g., Kennedy

v. Plan Adm’r for DuPont Sav. & Inv. Plan, 555 U.S.

285, 299 (2009); Town of Newton v. Rumery, 480 U.S.

386, 392 (1987).2 While the law sometimes imposes

heightened protections to protect against unknowing

waivers of important substantive or constitutionally

protected rights, see, e.g., Wright v. Universal Maritime Serv. Corp., 525 U.S. 70 (1998), other rights, and

particularly procedural ones, are typically found to be

waived or forfeited by a failure to assert them in a

timely manner, see, e.g., Commercial Cas. Ins. Co. v.

Consol. Stone Co., 278 U.S. 177, 179 (1929) (venue);

Fed. R. Civ. P. 38(d) (right to jury trial in civil case).

See generally Br. of National Academy of Arbitrators.

Where the criteria for waiver of a federal statutory

right are not themselves set forth in a statute or rule,

determining what constitutes a waiver is effectively

an exercise of the courts’ limited federal common-law

––––––––––––––––––––––––

2 In some contexts, the issue whether a federal right has been

waived in state court proceedings may be viewed as a question of

state procedural law. See, e.g., Coleman v. Thompson, 501 U.S.

722 (1991). That principle, by definition, does not apply when the

issue is waiver in a federal court proceeding where state procedural law does not apply.

authority to fill in the interstices of the statutory

scheme—a power that the courts should exercise with

due regard to the limits of their authority and with

recognition of the policies of the relevant statute and

analogous principles of state law. See Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 98 (1991). To the extent that it may be necessary here to address the question presented as a matter of waiver of federal statutory rights, the petitioner’s brief explains thoroughly

why these relevant considerations all point toward

adoption of a rule that a party’s litigation conduct that

is inconsistent with the exercise of its rights under

sections 3 and 4 of the FAA constitutes a waiver of

those rights, regardless of whether the other party can

demonstrate prejudice.

B. In most cases, however, regardless of whether

federal law requires a showing of prejudice to establish a waiver of a party’s statutory rights under the

FAA, general principles of state contract law under

which prejudice is not an element of a waiver defense

will decide the issue of a party’s contractual entitlement to arbitration. As explained in part I above, a

party’s federal statutory entitlement to compel arbitration under the FAA extends no further than its

right under generally applicable principles of state

contract law to enforce an agreement. And doctrines

concerning “waiver” are among the “ ‘traditional principles’ of state law” that the FAA commands courts to

effectuate in determining whether an agreement to arbitrate is enforceable. Arthur Andersen, 556 U.S. at

631.

Thus, to the extent that waiver of contractual

rights is a defense to their enforcement under general

principles of state contract law, the FAA requires

courts to give effect to those state-law principles

unless they discriminate against arbitration or conflict with its fundamental attributes. See Epic, 138 S.

Ct. at 1622. Generally applicable state contract-law

principles that do not require showings of prejudice for

findings of waiver do not in any way single out arbitration for disfavored treatment: They neither discriminate on their face against arbitration by applying

only to arbitration agreements, nor derive their meaning from the fact that an arbitration agreement is at

issue. See Kindred, 137 S. Ct. at 1426. And nothing in

such a defense disfavors contracts that “have the defining features of arbitration agreements.” Id. Nothing about arbitration agreements renders them distinctively vulnerable to waiver.

Likewise, enforcement of state contract-law principles that provide for findings of waiver without a

showing of prejudice does not endanger “fundamental

attributes of arbitration.” Concepcion, 563 U.S. at 344.

The application of state-law waiver principles has no

potential impact on how arbitration is conducted if it

is ordered. And by encouraging parties to assert

claimed contractual rights promptly, waiver defenses

that do not require showings of prejudice help ensure

that disputes genuinely subject to arbitration under

valid agreements are sent to arbitration early on, rather than being partly adjudicated in court contrary to

the terms of those agreements. Waiver doctrines thus

promote the enforcement of arbitration agreements

“according to their terms,” Epic, 138 S. Ct. at 1619,

rather than allowing parties to create hybrid litigation-arbitration proceedings not contemplated in their

agreements by invoking arbitration only at the point

in a case that suits them. In sum, because generally

applicable state-law contractual waiver defenses that

do not require a showing of prejudice are not

inconsistent with arbitration as contemplated by the

FAA, the FAA does not displace such defenses or require a showing of prejudice that state law does not

demand.

As the petitioner’s brief demonstrates, generally

applicable state contract doctrines overwhelmingly

provide that a party’s waiver of a contractual provision is a defense to its attempt to enforce that provision regardless of prejudice. Pet. Br. 19–23. Where

choice-of-law principles point to the laws of such

states as the controlling state laws, the FAA requires

a federal court to give effect to the state waiver defense without adding any requirement of prejudice.

The FAA provides no right to enforce an arbitration

agreement that is unenforceable under generally applicable, arbitration-neutral principles of state contract law. Therefore, a contract right that has been

waived under such state-law principles cannot be enforced under the FAA even if, as a matter of federal

law, a court would not find that the party had waived

its entitlement to invoke whatever rights the FAA

gives it.

CONCLUSION

The Court should reverse the judgment of the court

of appeals.

Respectfully submitted,