Appellees Brief — Volt Info. Sciences, Inc. v. Bd. of Trustees of Leland Stanford Jr. U.

Supreme Court brief1989

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Text

In The S)

Supreme Court of the United States . 3

October Term, 1987

+ ;

VOLT INFORMATION SCIENCES, INC.,

Appellant,

vs.

THE BOARD OF TRUSTEES OF THE LELAND

STANFORD JUNIOR UNIVERSITY, a body

' having corporate powers,

Appellee.

ON APPEAL FROM THE COURT OF APPEAL

OF THE STATE OF CALIFORNIA

SIXTH APPELLATE DISTRICT

APPELLEE’S BRIEF ON THE MERITS

~—

McCurcnen, Doyviz, Brown

& ENERSEN

Davip M. Haisron

(Counsel of Record)

Lesuz G. LaNDau

STEPHEN L. GopcHAUX

Three Embarcadero Center

San Francisco, CA 94111

Telephone: (415) 393-2000.

The Board of Prastees ofthe

Leland nior

- Stanford Ju

OR CACAL COURT a SO

QUESTIONS PRESENTED

Two private parties agreed that their private con-

struction contract was to be governed by the law of the

place where the construction project was located. The

contract contained an arbitration clause. The project was

located in Santa Clara County, California, so a state court

found that the parties meant their contract to be gov-

erned by the law of that place, California, and to arbitrate

under the rules set forth in California law. The Court

enforced the parties’ agreement to arbitrate under the

rules set forth in California law, in accordance with the

agreement’s terms.

1. Does the Federal Arbitration Act, 9 U.S.C. § 1 et

seq., force parties who agree to arbitrate in accordance

with state rules to arbitrate instead in accordance with

federal rules?

Does that present a substantial federal question?

2. Does the private parties’ private agreement mean

what the state court found it to mean?

Does that contract interpretation question present a

federal question and, if it does, is it substantial?

LIST OF RELATED COMPANIES REQUIRED BY

UNITED STATES SUPREME COURT RULE 28.1

Pursuant to Supreme Court Rule 28.1, Appellee The

Board of Trustees of The Leland Stanford Junior Univer-

sity lists the following non-wholly owned subsidiary and

affiliate:

Stanford University Hospital

iii

TABLE OF CONTENTS

Page

QUESTHIIGD PROSE oc cc ccccccccccccccccccces i

L, FERED ec cccedscccccessevecnncsessees 1

Ri, Fe iedatccecesuetbensedensescs 1

DD, We nh ee neiekicccselcs 5

1. Volt’s Argument About Names....... 7

2. Volt’s Argument That The Ordinary

Rule Does Not Apply ................ 8

3. Volt’s Argument That FAA Rules of

Construction Apply ..............005. 12

4. Conclusion As To Jurisdiction With

Respect To Volt’s Contract Interpreta-

ED cle ceieagereeennes 15

II. STATEMENT OF THE CASE................. 17

III. SUMMARY OF ARGUMENT................. 22

BV, A nae eben dn cckddidudasntndicceces 25

A. THE FAA ENFORCES AGREEMENTS IN

ACCORDANCE WITH THEIR TERMS, NO

SEs CE ME ccvsbevcesesecvoceceoses 25

B. THE CONTRACT MEANT WHAT THE

TRIAL COURT AND COURT OF APPEAL

PEPE? Oe ME cecccccceccccccccesess 31

1. The Argument that the Court of

Appeal’s Interpretation of the Contract

“Is Discordant With the Common

Understanding of the Function” of

Choice-Of-Law Clauses............... 37

TABLE OF CONTENTS-Continued

Page

2. The Argument That the “Literal Terms

of the Parties’ Contract” Mean What

Volt Argues They Mean ..............

3. The Argument That “Basic Tenets of

Federalism Dictate” That The Agree-

ment Be Interpreted Volt’s Way.......

4. The Argument That “The Only Evi-

dence In The Record, Regarding The

Parties’ Intent . . . Suggests” That Volt’s

Interpretation Is Right................

5. The Argument That “The Over-

whelming Weight of Authority . . . Sup-

ports” Volt’s Interpretation ...........

6. The Argument That The Choice-Of-Law

Clause Must Be Generously Construed

Because Arbitration Agreements Must

C. SECTIONS 3 AND 4 OF THE FAA WOULD

NOT APPLY IN THIS STATE COURT PRO-

CEEDING, EVEN ABSENT THE PARTIES’

PT Sacrecccccsvcensceseeceveces

Se i cccrcosesdusttoveuvicndccesvees

TABLE OF AUTHORITIES

Page(s)

Cases

Abie State Bank v. Bryan, 282 US. 765 (1931)......... 10

Ake v. Oklahoma, 470 U.S. 68 (1985) ..............4.. 10

Aro Mfg. Co. v. Convertible Replacement Top Co., 377

Se Se ED ad vabbeuncednescdeedescdcéccecccccss 9

Atkinson v. Sinclair Refining Co., 370 U.S. 238

DP McAPEGUcedeusEsvESsthunedeeeenanestiewescces 27

Bernhardt v. Polygraphic Co., 350 U.S. 198 (1956)

MPSA AAERe UNAS deWeeeENeanenetnedene 25, 45, 46

Bishop v. Wood, 426 U.S. 341 (1976).................. 16

Boyle v. United Technologies Corp., __ U.S. __, 56

Se GUE GED Be HD ccccccccccccccocecess 11

Bowen v. United States, 570 F.2d 1311 (7th Cir. 1978) ....34

Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697 (1945)...... 9

Burke County Public Schools Bd. of Ed. v. Shaver

P’ship., 279 S.E. 2d 816 (N.C. 1981) ............... 41

Burr v. Western States Life Ins. Co., 211 Cal. 568

DM ARGUaGadENetdadeuNn neal dennhewbavccecens 35

Cal. Retail Liquor Dealers Ass'n v. Midcal Alum., 445

Ee ct cauesaanidbedseeununyensce ss 16

Central Vermont Ry. v. White, 238 U.S. 507 (1915)..... 49

Chan v. Drexel Burnham Lambert, Inc., 178 Cal.

ee Se ES duapebinneiddteeconstaccssss 28

Claflin v. Houseman, 93 U.S. 130 (1876) .............. 39

Commonwealth Edison Co. v. Gulf Oil Corp., 541 F.2d

ee i cbddecerendsdecedendccess 41, 42

Cone Mills Corp. v. August F. Nielsen Co., 455 N.Y.S.

ee Ge ee A GR Fie cc cccscccccccvcccceses 42

Coover Const. Co. v. Johnson, No. 83 AP-235, slip

op. (Ohio Ct. App., August 4, 1983) .............. 33

TABLE OF AUTHORITIES - Continued

Page(s)

Day & Zimmerman, Inc. v. Challoner, 423 U.S. 3

ED vccdckededbossensenscedsdedasseceedasicedeness 6

Dean Witter Reynolds, Inc. v. Byrd, 470 US. 213

SE in.6.06ccdeddencecauscacuenessacdesseene 3, 21, 27

Delta Lines, Inc. v. International Brotherhood of Team-

sters, 66 Cal. App. 3d 960 (1977)..............50 29

Demorest v. City Bank Farmers Trust Co., 321 U.S. 36

RESP TTT eer TTT CTT TTT TT eTTTLITTy 10

Dice v. Akron, Canton & Youngstown R.R. Co., 342

Ss GP GREED ceeds cccdcnccectctccccasacaccees 9, 49

Ducey v. United States, 713 F.2d 504 (9th Cir. 1983) ....33

Episcopal Housing Corp. v. Federal Ins. Co., 239 S.E.

ee Gs, dc ddvencacccacsdndenedddusecenes 41

Eric A. Carlstrom Constr. Co. v. Independent School

Dist. No. 77, 256 N.W. 2d 479 (Minn. 1977) ... 32, 33

Erie R. Co. v. Tompkins, 304 U.S. 64 (1938)........ 5, 49

Fidelity Federal S & L Assn. v. de la Cuesta, 458 U.S.

Pe ebededeucauctassbendcuseeeses 12, 39, 40, 41

Ford v. Shearson Lehman Amer. Express Co., 180 Cal.

RD. GE TESS GEOG occ cccccscccccesccccscesccece: 32

Fox Film Corp. v. Muller, 296 U.S. 207 (1935)...... 6, 10

Fox River Paper Co. v. Railroad Commission of Wis-

COMET, TFS UE. GEG GED oc ccccccccccccccccccccs: 10

Garden Grove Community Church v. Pittsburgh-Des

Moines Steel Co., 140 Cal. App. 3d 251 (1983)...... 32

Garrett v. Moore-McCormack Co., 317 U.S. 239

6 664'666505404600000 005 0neSceeNendstestenacnss 9

vii

TABLE OF AUTHORITIES - Continued

Page(s)

Gelley v. Astra Pharmaceutical Products, Inc., 610

Pe Se GN ES Was ccccccccesecbusvecudcess 33

Giesler v. Berman, 6 Cal. App. 3d 919 (1970).......... 7

Gowdy v. United States, 412 F.2d 525 (6th Cir. 1969)

cert. den. 396 U.S. 960, reh. den. 396 U.S. 1063..... 33

Guaranty Trust Co. v. York, 326 U.S. 99 (1945)........ 49

Hauenstein v. Lynham, 100 U.S. 483 (1880)............ 39

Hines v. Davidowitz, 312 U.S. 52 (1941) .............. 25

Huber, Hunt & Nichols v. Architectual Stone Co., 625

§ 2 | ry rere 41, 42

International Longshoreman’s Ass'n v. Davis, 476

ee tab ebdknedscdunddccnsscucdecedcnes 10

].W. Petersen Coal & Oil Co. v. United States, 323 F.

Ss ee CUE OE MI chendccuvaccccccececccs 33

Jenne v. Jenne, 192 Cal. App. 2d 827 (1961).......... 35

Klaxon v. Stentor Mfg. Co., 313 U.S. 487 (1941)........ 6

Lane-Tahoe, Inc. v. Kindred Constr. Co., 536 P. 2d 491

DY MUNN d6bcdebedsedcunkenencesetessxce 32, 33

Liddington v. The Energy Group, 192 Cal. App. 3d

Pn odddddncuvhdecuncesseuseusssdececsse. 32

Liner v. Jafco, Inc., 375 U.S. 301 (1964)................ 9

Local 926, Int'l Union of Operating Engineers v.

Se, Se Ge Gr GUD vk cncecccectcceccsdvcseccs 4

Main v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,

SF Ges CS GS OP GOD devecccvncscesaseccceses 28

viii

TABLE OF AUTHORITIES - Continued

Page(s)

Mamlin v. Susan Thomas, Inc., 490 S.W. 2d 634

(Tex.Civ.App. 1973) ........cccccccccccccsceccecens 41

McCarthy Bros. Constr. Co. v. Pierce, 832 F.2d 463

SE GI, Dw euncecsecccceccesvcnssesveseueenss 33

Merrill Lynch, Pierce, Fenner & Smith v. Ware, 414

BBO GUE Sidon scnccccbbucsscdécocusenecseees 28

Mesa Operating Ltd. P’ship. v. Louisiana Intra State

Gas Corp., 797 F.2d 238 (Sth Cir. 1986) ............ 42

Michigan Canners & Freezers Assn. v. Agricultural

Marketing & Bargaining Board, 467 U.S. 461

FRED vce vccdisdcccecdececnccesevectesesncstceeves 25

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,

Inc., 473 U.S. 614 (1985) .... 2... ee eee ee eee. passim

Mondou v. New York, N.H. & H.R. Co., 223 U.S. 1

EE ccbvvvccheusesccuseccnscdenetaceunseeeeseens 39

Morton v. Travelers Indemnity Co., 121 Cal. App. 2d

| EEPPTTITT IT TT TTT TT TTT 35

Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp.,

GD TE. 8 GERD cc ccccnscccccsesesscccssececs passim

O'Malley v. Wilshire Oil Co., 59 Cal. 2d 482 (1963) ....28

Pas-Ebs v. Group Health, Inc., 442 F. Supp. 937

Ss COOEP cei cceceadcccetseeucusesusesnetcess 29

Paul Allison, Inc. v. Minikin Storage, Inc., 486 F.

BA, © GEN Fe GOOD ov cccscccccevsccecccceccess 42

Perry Education Ass’n v. Perry Local Educators

eg eee 4

Perry v. Thomas, __, U.S. __, 107 S. Ct. 2520

PTD SS UON id cevcescenceeuscéuccensissseaesees passim

- me gy

TABLE OF AUTHORITIES —- Continued

Page(s)

Pickens v. Hess, 573 F.2d 380 (6th Cir. 1978) ......... 33

Prima Paint Corp. v. Flood & Conklin, 388 U.S. 395

SUPE oe nGNe6 15606 eveccctncectucucusees 26, 27, 45, 46

Ramirez v. Wilshire Ins. Co., 13 Cal. App. 3d 622

PUPS EUSVES cGevbNchosn cubs benuebaceiesuanuackese. 7

Reliance Life Ins. Co. v. Jaffe, 121 Cal. App. 2d 241

SE ch4bb wes bused cdccubeuernssenacabevaeeoseCeu. 35

Richards v. United States, 369 U.S. 1 (1962)........... 33

Robinson v. United States, 408 F. Supp. 132 (N.D. IIL.

SOU nc hehe SsueuaeschGcbacdenucuceuGnlebccsantacs 34

Safer v. Perper, 569 F.2d 87 (D.C. Cir. 1977).......... 33

Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974)

eA ral a ee i Car ae aoa 2 27, 30, 31, 41

Shearson Amer. Express, Inc. v. McMahon, __ U.S.

seal SET Oe Oe SE IE ooh ccs vancennensedtaccs 27

Silkwood v. Kerr-McGee Corp., 464 U.S. 238 (1984) .. 4, 5

Smith v. Pena, 621 F.2d 873 (7th Cir. 1980)........... 33

Sola Electric Co. v. Jefferson Electric Co., 317 U.S. 173

SE oNGoducusseshentusereedtcncceneseesceccciccss 9

South Dakota v. Neville, 459 U.S. 553 (1983).......... 10

Southern Pac. Transp. Co. v. United States, 471 F.

BU. WUD Gs GR, GIF UR occ cccnnccscccccccccecs 33

Southland Corp. v. Keating, 465 U.S. 1 (1984)

COSbb0 OUSNON SOU dNESheUd0rst008sebeNseReeeseens passim

Standard Co. v. Elliott Constr. Co., Inc., 363 So. 2d

BRR ere errs ree meme 32, 33

TABLE OF AUTHORITIES - Continued

Page(s)

Starr Elec. Co., Inc. v. Basic Constr. Co., 586 F. Supp.

De Gee CP non ccc cavncccsencvessusceseons 33

State ex rel. St. Joseph Light & Power Co. v. Donelson,

631 S.W. 2d 887 (Mo.App. 1982) ............-+54- 42

Stoleson v. United States, 708 F.2d 1217 (7th Cir.

in 506 onc bsnhaunscdssecspsuaneonsteaacess<kars 33

Sun Oil Co. v. Wortman, 56 U.S.L.W. 4601 (June 15,

DS Rocca bined cd caddscchnuwesneaenesesées 48, 49, 50

Swift v. Tyson, 41 U.S. 1-(1842).............55, 6, 13, 36

Tennessee River Pulp & Paper Co. v. Eichleay Corp.,

GBF GWE. BB GES CHOM. WOGRD on cc ccvccescccccccess 41

Testa v. Katt, 330 U.S. 386 (1947) .............00 eee 39

The Kensington, 183 U.S. 263 (1901).............. 30, 31

United States v. Little Lake Misere Land Co., 412 U.S.

IK 644 664 400RN 8 G45 sheeeesedaenenitees 6edes 11

United States v. Sutro, 235 F.2d 499 (9th Cir. 1956) ....33

United States Fidel. & G. Co. v. Bangor Area Jt. Sch.

Auth., 355 F. Supp. 913 (E.D. Penn. 1973) ......... 33

Vespe Contracting Co. v. Anvan Corporation, 399 F.

Supp. 516 (E.D. Pa. 1975).......ccccsscccccccccess 29

Zacchini v. Scripps-Howard Broadcasting Co., 433

nda An enn giidene <ewaete ed beenene se 10

Zenith Radio Corp. v. Hazeltine Research Co., 401

Ci SEE s6crssbenbednenushenes5eusesensueess 9

TABLE OF AUTHORITIES — Continued

Page(s)

STATUTES AND RULES

FREE ina dcdececescceseueuesnessuens passim

Es eave ns ddbu neesescaceaceavesensdiues 34

ee ED oo 6u ois de bnckddoesseucenueus 4,5

Be ED one cesceccvcsviucnversans 1, 4, 5, 16

I BI nk cacccccccuscccavecseccucsaes 4, 16

NGC ht40sbvu bee enb ec éedsessassteacvened 34

ee Nah wisic Cesbaceuvcunsktaveseeseeeceus 33

ee rcs 645 eenevsnendaned<scenssaus’ 34

EI A bad banccucenveeschesseuvenennenad 34

28 U.S.C. § 1346(b)........ dautneneeeedeerusdyaaeee 33

ci wncaeskddensedsndeesecaetuecuedd 34

Se CE SII sk ce senccdvedesecescesneene 5

han ng o5cnc den kbudadskasneessss 5

es ee Me in ci ccnsecsseeeucecave 11, 35, 38

Cal. Civ. Code § 1646.............. cece ceeceeees 11, 35

Cal. Civ. Proc. Code § 1281.2(c)..............e eee. passim

See Ss CR OD cc ccctccdusenencceeuen 15

oe Be B. Be fF hf rrrrrrrrrrT TT TTT eTe 15

eo Bs SB ee lS er ee ere 15

ee ee I, CN OY WE oe wins cvcndecesesnsccwies 15

H.R. Rep. No. 96, 68th Cong. Ist Sess. 1 (1924) .. 2, 26

Oe henna de0enneseess dann ekasnssaeessees 1

I Oso sadn acesccuceusussseusnsuneeuees 4, 16

xii

TABLE OF AUTHORITIES - Continued

_ Page(s)

MISCELLANEOUS

I I re ee al aes

Feldman, Arbitration Modernized — The New Califor-

nia Arbitration Act, 34 So. Calif. L. Rev. 413

EEE PPPTTTYTITTTITITiTiT Tritt

Hart, The Relations Between State and Federal Law,

54 Colum. L. Rev. 489 (1954) ............... 7,

Hart & Wechsler, The Federal Courts and The Federal

System (2d ed. 1973).........cccccsecccseceess

Mishkin, The Variousness of “Federal Law”: Compe-

tence And Discretion In The Choice Of National

and State Rules For Decision, 105 U. Pa. L. Rev.

PE GUN a se cceconsctnenecvtccccseussnsseese

Restatement (2d) of Conflict of Laws, § 10, Repor-

a te ed cae ceuveebousaaneds

I. JURISDICTION

Appellant asserts that 28 U.S.C. § 1257(2) provides

“(ne statutory basis of the Court’s jurisdiction” on this

appeal (O. Br. 1),’ but it does not. This case presents two

questions. The first is federal but not substantial, the

other is not federal or substantial, and neither presents a

§ 1257(2) question for review. We address those questions

here, because the Court postponed further consideration

of jurisdiction to the hearing on the merits. (Supreme

Court Rule 16.8)

A. First Question

The California Court of Appeal, “the highest court of

the State in-which a decision could be had” (O. Br. 4),

found that Volt and Stanford had agreed to arbitrate in

accordance with the rules set forth in California law.

(Dec. J.A. 65) The trial court applied the rule set forth in

California Code of Civil Procedure (“CCP”) § 1281.2(c) to

the parties’ agreement to arbitrate,2 and so enforced the

agreement in accordance with its terms. The Court of

Appeal affirmed. (Dec. J.A. 78-80)

The parties’ contract was in interstate commerce.

Therefore, the rules set forth in the Federal Arbitration

1 We refer to Appellant’s Opening Brief as “O. Br.__,” the

Joint Appendix as “J.A.__,” the California Court of Appeal’s

decision in this case as “Dec. J.A.__,” Appellant Volt Informa-

tion Sciences, Inc. as “Volt” and The Board of Trustees of The

Leland Stanford Junior University as “Stanford.”

2 Section 1281.2(c) permits a court to stay an arbitration to

avoid piecemeal, duplicative litigation and the danger of con-

flicting judgments with respect to the same set of facts. See p.

20, below.

Act, 9 U.S.C. § 1, et seq. (“FAA”),3 would have applied to

their agreement (O. Br. 63-64) had the parties not agreed

that California rules would apply to it. The Court of

Appeal having enforced the parties’ agreement to arbi-

trate in accordance with California rules, this question is

put: Does the FAA force parties who agree to arbitrate in

accordance with state rules to arbitrate instead in accor-

dance with federal rules?

That question is federal, but insubstantial; the

answer is no. Arbitration is a matter of agreement. Parties

can agree to arbitrate in any way they want; thus they can

agree to arbitrate some disputes, and not all, in some

circumstances, and not all, or not at all. A court cannot

force parties to arbitrate a dispute they have not agreed

to arbitrate or in a way they have not agreed to arbitrate.

Those are basic principles of arbitration law, and the FAA

does not change them.

The FAA is meant to put arbitration agreements

“upon the same footing as other contracts.” H.R. Rep. No.

96, 68th Cong. Ist Sess. 1 (1924); Southland Corp. v. Keating,

465 U.S. 1, 15-16 (1984). It prohibits a state or federal

3 Actually, §§ 1 and 2 of the FAA would apply, but §§ 3

and 4, the procedural provisions of the FAA, would not apply

in state court proceedings, whether or not the parties had

agreed to be bound by state court rules. CCP § 1281.2(c) does

not conflict with §§ 1 and 2 of the FAA, whether or not it does

with §§ 3 and 4; accordingly, the FAA would not have pre-

vented the state court’s application of CCP § 1281.2(c) in state

court proceedings, whether or not the parties had agreed to

arbitrate in accordance with state court rules. The Court, how-

ever, need not reach this question. See Argument, Part IV C,

below.

court from refusing to enforce an arbitration agreement

subject to the FAA in accordance with the agreement's

terms. See, e.g., Southland Corp., above, 465 U.S. at 16 n.11

(state cannot refuse to arbitrate Franchise Act claims

where parties agreed to arbitrate them). The FAA does

not mandate any court to disregard the parties’ agree-

ment, much less compel parties to arbitrate a dispute

they have not agreed to arbitrate or in a way they have

not agreed to arbitrate. To the contrary. The FAA man-

dates that courts enforce arbitration agreements in accor-

dance with their terms, no more, no less. See Argument,

Part IV A, below; Dean Witter Reynolds, Inc. v. Byrd, 470

U.S. 213, 219 (1985) (emphasis added):

“The legislative history of the Act establishes that the

purpose behind the passage was to ensure judicial enforce-

ment of privately made agreements to arbitrate. We there-

fore reject the suggestion that the overriding goal of

the Arbitration Act was to promote the expeditious

resolution of claims. The Act, after all, does not mandate

the arbitration of all claims, but merely the enforcement -

upon the motion of one of the parties — of privately

negotiated arbitration agreements.”

That is settled law; there is no authority the other

way. See Argument, Part IV A, below. The Court of

Appeal’s decision followed that settled law. It held that

the parties were free “to choose the terms under which

they will arbitrate”; that that choice “will not run afoul of

the FAA;” and that it would turn those basic principles of

arbitration law and the FAA upside down were the Court

to force the parties to arbitrate under federal, not state,

rules when they had agreed to arbitrate under state, not

federal, rules. (Dec. J.A. 71-73) Therefore, it enforced the

parties’ agreement.

Accordingly, the federal question this case puts is

settled, not substantial. Certainly it presents no “special

and important reasons” for review by certiorari under 28

U.S.C. § 1257(3) and Supreme Court Rule 17. It presents

no ground for appeal under 28 U.S.C. § 1257(2). Section

1257(2) provides for appeal “where is drawn in question

the validity of a statute of any state on the ground of its

being repugnant to the Constitution, treaties or laws of

the United States, and the decision is in favor of its

validity.”

The Court of Appeal’s decision does not uphold the

validity of § 1281.2(c) as not repugnant to the laws or

Constitution of the United States; the decision assumed

the laws of the United States would apply but for the

parties’ agreement. (Dec. J.A. 65; O. Br. 62-63) The Court

of Appeal’s decision simply upholds the validity of the

parties’ agreement as not repugnant to the laws or Con-

stitution of the United States. (Dec. J.A. 71-73)

That decision is in accord with settled federal law,

presents no substantial federal question (pp. 2-3, above,

25-30, below), and since it validates an agreement, not a

state statute, is not subject to review by appeal under

§ 1257(2). See Local 926, Int’l Union of Operating Engineers

v. Jones, 460 U.S. 669, 675 n.7 (1983) (decision upholding

validity of state common law tort action not appealable

under § 1257(2), since state common law is not a “state

statute”); Perry Education Ass'n v. Perry Local Educators

Ass'n, 460 U.S. 37, 42 (1983) (decision as to invalidity of

sections of collective bargaining agreement not appeal-

able under 28 U.S.C. § 1254(2), the reciprocal of § 1257(2),

because an agreement is not a statute, and the statute

under which agreement made was not found invalid);

Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 247 (1984)

(decision as to invalidity of punitive damages award

rendered under statute not appealable under § 1254(2),

because an award is not a statute, and statute was not

found invalid). Contrast Southland Corp., above, 465 U.S.

at 6-8 (decision upholding validity of Cal. Corp. Code

§ 31512g, a statute, appealable under § 1257(2)); Perry v.

Thomas, __ U.S. __, 107 S. Ct. 2520, 2525 n.7 (1987)

(decision upholding validity of Cal. Lab. Code § 229, a

statute, appealable under 1257(2)).4

Volt has nothing to say about any of this.5

B. Second Question

The Court of Appeal construed the clause “law of the

place where the project is located” to mean the law of

California, where the project was located. It had “no

doubt” that that is what the parties “intended” the “word

‘place’ ” to “mean.” (Dec. J.A. 66)®

Volt objects to that “interpretation” (O. Br. 37, 38) of

the parties’ choice-of-law clause and argues that there

was no “extrinsic evidence” to support it. (O. Br. 48, 75)

The clause really means, Volt goes on, California-law-

* Silkwood also notes the relevance of § 1257 and § 1254

cases to one another, because of the “history of . . . close

relationship between” them. 464 U.S. at 247 n.9 (citation

omitted)

5 Indeed, Volt’s jurisdictional argument proves the point.

Almost all of it is directed to the contract interpretation (state

law) question. (O. Br. 25-54, 55-58) As to this (federal) ques-

tion, Volt says that if the arbitration “clause” means what the

Court interpreted it to mean, the “clause” (not § 1287.2(c))

would violate “federal policy.” (O. Br. 54-55)

* Volt paraphrases the Court’s determination, incorrectly,

this way:

“ ‘[wle have no doubt’ that the particular terms of this

clause were meant to exclude federal law from any appli-

cation to this controversy (J.A. 66).” (O. Br. 38)

plus-the-law-of-all-the-“political-entities” -whose-

laws-“are-applicable-in-one-way-or-another” -in-Califor-

nia, specifically including federal law. (O. Br. 75) That is

Volt’s “principal contention” on this “appeal.” Therefore,

the second, and according to Volt, principal question is

whether the Court’s or Volt’s interpretation of the parties’

choice-of-law clause is right.

That is not a federal question. Volt admits “that the

general subjects of choice-of-law and contract interpreta-

tion are ordinarily regarded as the exclusive concern of

the state courts and legislatures . . . ” (O. Br. 26), and that

is certainly so. Klaxon v. Stentor Mfg. Co., 313 U.S. 487, 496

(1941) (federal court in diversity case must apply state

conflicts rules); Day & Zimmermann, Inc. v. Challoner, 423

U.S. 3, 4 (1975) (same; “federal court in a diversity case is

not free to engraft onto those state rules exceptions or

modifications which may commend themselves to the

federal court, but which have not commended themselves

to the State in which the federal court sits”). Erie R. Co. v.

Tompkins, 304 U.S. 64, 71, 75, 78 (1938) (holding that

“there is no federal general common law,” and overruling

Swift v. Tyson, 41 U.S. 1, 18 (1842); Swift had held that

federal general common law existed and applied, among

other things, “to the construction of ordinary contracts”

and “the true exposition of the contract .. . ”); Fox Film

Corp. v. Muller, 296 U.S. 207, 210 (1935) (state law deter-

mines whether clause in private contract is severable).

Volt tries to metamorphose this state choice-of-law/

contract-interpretation question into a federal question,

and starts with names.

1. Volt’s Argument About Names.

Volt says, first, that the rule that state choice-of-law

rules govern private contracts only applies to “ ‘horizon-

tal’ choices between the laws of two different states,” not

to a “ ‘vertical’ choice between state and federal law,”

because no one calls a vertical conflict a “ ‘choice of law’

problem.” (O. Br. 27)

Volt admits that “no direct citation can be provided

for this conclusion” (O. Br. 28), and it is wrong. The rule

that state choice-of-law rules govern private contracts

does not depend on the angle of relationship between

laws, or geometry. For example, state law governs choices

as to private contracts between the laws of states and

foreign sovereigns, whose relationships are hardly hori-

zontal. Restatement (2d) of Conflict of Laws, § 10, Repor-

ter’s Note. See, e.g., Ramirez v. Wilshire Ins. Co., 13 Cal.

App. 3d. 622 (1970) (conflict between California and Mex-

ican law); Giesler v. Berman, 6 Cal. App. 3d. 919 (1970)

(conflict between California and Swiss law). Moreover, if

names matter, courts and commentators in fact call

choices between state and federal law choice-of-law prob-

lems. See, e.g., Perry v. Thomas, 107 S. Ct. at 2527 n9

(referring to “choice-of-law issue” as between “federal

and state law principles”); Hart, The Relations Between

State And Federal Law, 54 Colum. L. Rev. 489, 506 (1954);

Mishkin, The Variousness Of Federal Law: Competence And

Discretion In The Choice Of National And State Rules For

Decision, 105 U. Pa. L. Rev. 797, 802-3 (1957).

But, Volt goes on, the issue as to whether state or

federal law applies here is not one of “ ‘choice of law’ at

all, but is instead a straightforward issue of federal

supremacy... .” “Any other conclusion,” Volt warns,

would “consign the entire issue of Supremacy Clause

adjudication to the courts of the fifty states... .” (O. Br.

28) That hyperbole reflects Volt’s fundamental error. Fed-

eral law is no doubt supreme, and whether a federal law

preempts a conflicting state law is no doubt a federal

question. That is not this question.

Here private parties chose to be governed by the law

of the place where their project was located. The question

is what the parties meant. The answer turns on intent, not

the Constitution; the Supremacy Clause does not tell

private parties what they intend, and what they intend

does not affect the Supremacy Clause.”

State law determines the interpretation of clauses in

private parties’ contracts; what one names the clause

does not matter. Therefore state law determines what

these parties’ choice-of-law clause means, whether or not

Volt’s contention is right that the clause ought not be

called a choice-of-law clause. Volt grants that to be the

rule “ordinarily.” (O. Br. 29) That ordinary rule governs.

2. Volt’s Argument That The Ordinary Rule Does

Not Apply.

Volt says the ordinary rule does not apply for two

reasons. First, Volt notes that the interpretation of a

“waiver or release of rights conferred by a federal stat-

ute” is governed by federal law. That is true. Volt says the

parties’ agreement to be governed by California law is

the same as a release of the right to arbitrate under

federal law. (O. Br. 30-36) That is false. A release gives up

7 The Supremacy Clause makes federal law supreme,

“anything in the Constitution or Laws of any State to the con-

trary notwithstanding.” Constitution, Article VI (emphasis

added) It says nothing about private intent.

claims that have arisen under a place’s law.® An agree-

ment to be governed by a place’s law gives up no claim; it

chooses the law under which claims are to be resolved

when they arise. Moreover, it makes sense for the law of

the place that creates a right to determine its release. See

Dice v. Akron, Canton & Youngstown R.R. Co., 342 U.S. at

361-63 (state law ought not control what “defeats” a

federal claim). It makes no sense for the law of the place

parties did not choose to determine their rights under the

law of the place they did choose.?

Second, Volt objects that the Court of Appeal

“invoked no general rule of contract interpretation or

8 See Volt’s Supreme Court cases, O. Br. 31-32: Zenith Radio

Corp. v. Hazeltine Research Co., 401 U.S. 321, 343-44 (1971) (effect

of release of federal antitrust claim); Aro Mfg. Co. v. Convertible

Top Co., 377 U.S. 476, 500-01 (1964) (effect of release of patent

infringer); Dice v. Akron, Canton & Youngstown R.R. Co., 342

U.S. 359, 361-62 (1952) (effect of release of FELA claim);

Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 704-07, 715 (1944)

(effect of release of Fair Labor Standards Act claim); Garrett v.

Moore-McCormack Co., 317 U.S. 239, 243-47 (1942) (effect of

release of Merchant Marine Act claim). Volt’s other two cases

are even further off the mark. See Sola Electric Co. v. Jefferson

Electric Co., 317 U.S. 173, 175-76 (1942) (Sherman Act preempts

use of common law estoppel rules to permit price fixing); Liner

v. Jafco, Inc., 375 U.S. 301, 308-09 (1964) (“local rules which

purport to preclude state appellate court jurisdiction of [a]

federal preemption claim cannot conclusively render the case

moot for the purposes of this Court’s review”).

* Particularly where the law of the place they chose — the

state — “ordinarily” (Volt’s word) determines the interpretation

question to begin with.

choice-of-law” - no “rule of general application.”

Instead, Volt says the Court adopted the “specialized

rule” that “law of the place where the project is located”

means the law of the state where the project is located,

not the laws of the United States. (O. Br. 38-40) That

supposed rule, Volt goes on, is “precisely and narrowly

intended to foreclose the application of federal law.” (O.

Br. 42) Therefore, Volt advises, the federal interest “in the

substantive content” of the “specialized rule” is “of the

same order of magnitude as the federal interest in the

resolution of any question of federal supremacy.” (O. Br.

10 Volt claims that “earlier cases” hold that a state law

principle does not provide an “independent state ground”

where the principle is not of general application. (O. Br. 37-38)

But: (1) We agree there is a federal question here [Question 1,

above], and do not claim the Court of Appeal’s interpretation

of the contract is an “independent state ground” foreclosing

review of that question. (2) Volt’s cases do not say that a state

law principle must be of “general application” anyway. They

deal with other things. See Ake v. Oklahoma, 470 U.S. 68 (1985)

(state procedural rule was not independent ground because its

application turned on whether federal constitution was vio-

lated); International Longshoreman’s Ass'n v. Davis, 476 U.S. 380

(1986) (federal preemption must be considered whenever it

arises in state court); Zacchini v. Scripps-Howard Broadcasting

Co., 433 U.S. 562 (1977) (Court decided first amendment ques-

tion, leaving state intellectual property question for state

court); South Dakota v. Neville, 459 U.S. 553 (1983) (reversing

State Court ruling suppressing evidence of refusal to take

blood test); Fox River Paper Co. v. Railroad Commission of Wiscon-

sin, 274 U.S. 651 (1927) (accepting State Court ruling on rip-

arian rights); Demorest v. City Bank Farmers Trust Co., 321 U.S.

36 (1944) (accepting State Court ruling on property rights); Fox

Film Corp. v. Muller, 296 U.S. 207 (1935) (accepting State Court

ruling on severability of contract); Abie State Bank v. Bryan, 282

U.S. 765 (1931) (reviewing State Court estoppel ruling that

turned on federal constitutional right).

40-41) Volt acknowledges that it lacks “supportive

authority for this conclusion,” but finds United States v.

Little Lake Misere Land Co., 412 U.S. 580 (1973), “the clos-

est analogue.” (O. Br. 41)

Little Lake Misere has nothing to do with Volt’s propo-

sition. It merely held invalid a state law that retroactively

took away the property right of the United States and no

one else. 412 U.S. at 597-601."! Volt’s proposition likewise

has nothing to do with this case. The Court of Appeal did

not adopt any rule, much less a “specialized rule”

intended “to foreclose the application of federal law.”

The Court simply interpreted a provision in the private

contract before it, and determined what it meant. The

Court - like the trial court ~ had “no doubt” what it

meant.

There are indeed rules of “general application”

which informed the Court’s determination. They are

familiar and hardly sinister: “A contract is to be inter-

preted according to the law and usage of the piace where

it is to be performed,” and its words “are to be under-

stood in their ordinary and popular sense... .” See

California Civil Code §§ 1644, 1646.’

11 See Boyle v. United Technologies Corp., ___ U.S. __, 56

U.S.L.W. 4792, 4793 (June 27, 1988) (noting Little Lake Misere

and like cases dealt with “uniquely federal interest” that

“obligations to and rights of the United States under its con-

tracts are governed exclusively by federal :aw”).

12 We return to these familiar state rules at Argument, Part

IV B, below. The Court did not cite those rules, nor did the

parties, and there was no occasion to. The truth that the

contract should be interpreted in accordance with its plain

meaning and local usage was not in issue. No one suggested

that federal law determined what the contract meant.

The “substantive content” of those common sense

rules presents no federal — let alone Supremacy Clause -

question.

3. Volt’s Argument That FAA Rules of Construc-

tion Apply.

Volt says that “any interpretation of a contract deter-

mining the arbitrability of a dispute under the Federal

Arbitration Act must be infused by a sympathetic attune-

ment to the federal policy favoring arbitration.” (O. Br.

49-50) Therefore, Volt says, “no state-court construction of

any contractual provision which determines the arbitra-

bility of a dispute subject to the Federal Arbitration Act

can ever be truly independent of the influence of federal

law.” (QO. Br. 51, emphasis added) Accordingly, Volt

apparently concludes, the interpretation of the parties’

choice-of-law clause is a federal question.’

Volt’s proposition is amazing. According to it, federal

law governs the interpretation of “any” provision in a

13 Volt claims that Fidelity Federal S. & L. Ass'n v. de la

Cuesta, 458 U.S. 141 (1982), resolves the “jurisdictional issue”

as to whether interpretation of this clause presents a federal

question, “albeit sub silentio.” (O. Br. 43) But silence states no

rule. We address Fidelity on the merits in Argument, Part IV B,

below.

Volt also says that interpretation of the clause is “necess-

arily dependent upon and interwoven with an issue of federal

law,” so it cannot be an “independent state ground” preclud-

ing review. (O. Br. 46-47) We do not contend that the inter-

pretation of the agreement provides an independent state

ground precluding review of the federal, but insubstantial,

question present here. See Question 1, above. Accordingly, we

do not respond to Volt’s non-independent-state-ground argu-

ments. (O. Br. 45-58)

contract in interstate commerce containing an arbitration

clause, whatever the provision is, where the interpreta-

tion of it bears on arbitrability. So federal law becomes

the potential determinant of the meaning of every clause

in a private contract containing an arbitration clause, and

Swift v. Tyson is, so far, born again.

That is not the law. The law is that the “federal

substantive law of arbitrability” is applicable to the con-

struction of the “arbitration agreement” itself, and

requires that that agreement be “generously construed.”

See Mitsubishi, above, 473 U.S. at 626; Moses H. Cone,

above, 460 U.S. at 24-25. Volt says the same thing else-

where: “The [Mitsubishi - Moses H. Cone] rule requires

that all such agreements [to arbitrate] be ‘generously con-

strued.’” (O. Br. 94; emphasis added.)

Federal law is not applicable to the interpretation of

provisions in a private contract other than the arbitration

agreement, whether or not their interpretation “bears on

arbitrability.” Perry v. Thomas, above, so holds. There,

among other things, a party resisting arbitration argued

that two parties seeking to enforce the arbitration agree-

ment were not parties to the contract which contained the

agreement, and therefore had no “standing” to enforce it.

This Court observed that that argument “presents a

straightforward issue of contract interpretation”:

+ &#

As we perceive it, Thomas’ “standing” argument

simply presents a straightforward issue of contract

interpretation: whether the arbitration provision

inures to the benefit of appellants and may be con-

strued, in light of the circumstances surrounding the

litigants’ agreement, to cover the dispute that has

arisen between them.

107 S.Ct. at 2527

The resolution of that contract interpretation issue

obviously “bore on arbitrability,” indeed determined it.

This Court nevertheless remanded that “issue” to the

state court, and held that state law respecting the inter-

pretation of contracts generally governed it (but that a

state law principle that took “its meaning precisely from

the fact that a contract to arbitrate is at issue” would not):

[S]tate law, whether of legislative or judicial origin, is

applicable if that law arose to govern the validity,

revocability, and enforceability of contracts generally.

A state law principle that takes its meaning precisely

from the fact that a contract to arbitrate is at issue

does not comport with this requirement of § 2.

107 S.Ct. at 2527 n.9 (emphasis in original).

The rule could not be otherwise. If it were, federal

law would determine the interpretation of a provision in

a contract where it affected arbitrability, and state law

would determine interpretation of the same provision in

the same contract where it did not. So the same words in

the same provision could mean different things depend-

ing on whether federal or state law determined what they

meant. Parties do not use the same words in the same

provision to mean different things."

14 For example, on Volt’s theory the choice-of-law clause

here would mean state-plus-federal law when applied to the

arbitration clause, and state law only when applied anywhere

else.

(Continued on following page)

The Court of Appeal interpreted the parties’ choice-

of-law clause, guided by California law respecting the

interpretation of “contracts generally.” It did not base its

interpretation on any “state law that takes its meaning

precisely from the fact that a contract to arbitrate is at

issue... .” (See Part 1 B 2, above) Therefore its interpreta-

tion presents a state, not federal, question.

4. Conclusion As To Jurisdiction With Respect To

Volt’s Contract Interpretation Question.

We deal with Volt’s arguments on the merits of this

state contract question in the Argument, Part IV B. The

merits do not bear on jurisdiction, but what Volt pre-

sumably wants this Court to do on the merits does. What

does Volt want this Court to do in respect to the contract

interpretation question Volt presents to it? Rule that the

(Continued from previous page)

Moreover, the choice-of-law provision here is arbitration

neutral. California law is “friendly to arbitration,” (p. 28 n.20,

below) and some provisions of California law are more favor-

able to arbitration than federal law is. For example, California

law provides four years to enforce an arbitration award and

federal law one (CCP § 1288; 9 U.S.C. § 9); California law

provides for discovery with respect to some arbitrations, and

federal law provides for none (CCP §§ 1283.05, 1283.1); Califor-

nia law provides that the filing of a mechanics lien action does

not waive the right to arbitrate, and federal law says nothing

about that. (CCP § 1281.5) Volt’s theory is that the choice-of-

law clause must be interpreted to favor arbitration. (O. Br. 94)

Is the clause to mean federal law when that is more favorable

to arbitration, and California law when it is not, so the clause

means different things at different times on that score as well?

Court of Appeal erred in interpreting the choice-of-law

clause in these parties’ private contract? Reinterpret the

clause in that private contract? Hold that the words “law

of the place where the project is located” mean state-plus-

federal law in all private contracts? So hold (a) whether

that is the popular meaning of the words or not or (b)

because this Court finds that is the popular meaning of

the words in (1) California or (2) everywhere?

None of those questions is federal. Even if any were,

there is no occasion for this Court to answer them. Cer-

tainly the Court of Appeal’s interpretation of this private

contract does not draw in question the validity of a state

statute as repugnant to the Constitution or laws of the

United States, so the Court’s interpretation is not subject

to review by appeal under 28 U.S.C. § 1257(2).1° Certainly

none of those contract interpretation questions presents

“special and important reasons” for review by certiorari

under 28 U.S.C. § 1257(3) and Supreme Court Rule 17.

Local courts ought to determine the meaning of words

used locally. See pp. 31-37, below. This Court does not sit

to determine what they mean, nor sit to review error,

particularly state law error. See Cal. Retail Liquor Dealers

Ass'n v. Midcal Alum., 445 U.S. 97, 111-112 (1980) (this

Court accords “great weight” to state’s highest court on

“matters of state law”); Bishop v. Wood, 426 U.S. 341, 346

n.10 (1976) (same; local courts are “familiar” with “local

law and practice”).

There was no error, state or federal, here.

15 Volt’s waiver cases (n. 8, above), for example, came to

this Court by writ of certiorari, not by appeal under 28 U.S.C.

§ 1257(2).

II. STATEMENT OF THE CASE

The underlying dispute arises out of a construction

project at the Stanford University campus adjoining Palo

Alto, California. Volt was the construction contractor for

the project. (J.A. 9, 29-35) During the course of construc-

tion, Stanford terminated the Volt contract because of

Volt’s material breaches of it. (J.A. 9) Volt then requested

reinstatement, the parties negotiated about that, and they

signed a reinstatement agreement. (J.A. 9-10) In the rein-

statement agreement Volt agreed it would not seek any

additional compensation for work it performed in order

to remedy its past breaches of the construction contract.

(J.A. 10)

On August 27, 1986, Volt presented Stanford with a

demand for arbitration of a claim that seeks additional

compensation for the work Volt performed to remedy its

own breaches of the construction contract and for which

it agreed it would not seek additional compensation. (J.A.

10-11, 48-52) Thus Volt violated the reinstatement agree-

ment and broke its promise not to seek compensation for

the corrective work its earlier breaches required. Volt

claimed instead that the corrective work was necessary

primarily because construction drawings and project

management provided to Stanford by defendants Brian-

Kangas-Foulk & Associates (“BKF&A”) and Telecom-

munications International, Inc. (“TII”) were inadequate.

(J.A. 51-52)16 Volt seeks to hold Stanford, as the owner of

the property on which the project was constructed, liable

for the claimed errors of TII and BKF&A.

16 BKF&A and TII were defendants, but had not appeared

when the motions to stay and compel arbitration were argued,

and were not parties to the trial court’s order staying arbitra-

tion, the subject of this “appeal.”

The contract between Stanford and Volt provides that

it shall be governed by the law of “the place where the

Project is located.” (J.A. 37) Subject to the provisions of

the governing law and the rules of the American Arbitra-

tion Association, the parties also agreed to arbitrate dis-

putes “relating to this contract or the breach thereof.”

(J.A. 40) The contracts between Stanford and TII and

Stanford and BKF&A contain no arbitration provision.

(J.A. 11-12, 44-45)

Volt points out that the arbitration clause in its con-

tract provided that in “any other arbitration, commenced

or demanded pursuant to this Contract, . . . either par-

ty... shall join in such arbitrations and agree to the

consolidation of the arbitrations.” (O. Br. 8; emphasis

added) Volt says that that clause provides “for the consol-

idation of separate arbitrations that might arise from the

parties’ transaction,” and so complains that that clause

would have helped it consolidate arbitrations had Stan-

ford not “inexplicably neglected to include arbitrations

agreements” in its contracts with TII and BKF&A. (O. Br.

9-10) But: (1) That clause would not have helped Volt

consolidate anything, because it does not apply to “con-

solidation of arbitrations that might arise from the par-

ties’ transaction.” It only applies to consolidation of arbi-

trations “commenced or demanded pursuant to this

contract,” and neither TI] or BKF&A was a party to the

Volt-Stanford contract. (2) Volt has a cavalier view as to

how agreements are made. One party does not just

“include” provisions in them; both parties to them nego-

tiate terms, and agree to some but not others. Stanford,

TII and BKF&A did not agree to arbitrate. That is the fact

that matters here.

On August 27, 1986, Stanford and Volt concluded

settlement discussions seeking to resolve their dispute.

That is the same day that Volt filed its arbitration

demand. (J.A. 48-52) One week later, on September 4,

1986, Stanford filed its complaint in the Superior Court,

naming as defendants Volt, BKF&A and TII. (J.A. 6-27)

The complaint states claims against Volt based upon,

among other things, fraud, estoppel, breach of contract,

and bad faith denial of the existence of a contract. It also

asks for a judgment declaring that, if Stanford is held

liable to Volt on account of TII or BKF&A’s errors, then

TII or BKF&A must indemnify Stanford for any amounts .

it must pay Volt.

Stanford could not arbitrate its indemnity claims

against TII and BKF&A, because it had no arbitration

agreement with either of them. If Stanford were forced to

arbitrate Volt’s claims alone before an arbitrator, the arbi-

tration could result in a determination that TII and

BKF&A drawings or TII’s project management were inad-

equate, and an award for Volt. If Stanford then were

forced separately to litigate its indemnity claims against

TII and BKF&A in court, TII and BKF&A might not be

bound by the arbitrator’s award. A court or jury could

find that their drawings and management were adequate,

and deny indemnity. That would be most unfair. If Volt

were at fault, it must suffer its losses. If Til and BKF&A

were at fault, it must pay for those losses. Stanford

should not have to pay for them in any case, because the

fault was either Volt’s or TII’s and BKF&A’s, not

Stanford's.

Stanford filed its lawsuit in Superior Court to avoid

the danger of those conflicting results and to resolve all

these disputes at the same time and place. The Superior

Court was the only forum in which Volt’s claims against

Stanford and Stanford’s claims against Volt, TII and

BKF&A all could be resolved at the same time and place.

Volt moved to stay the Superior Court proceeding

while the arbitration went forward, and Stanford sought

an order under CCP § 1281.2(c) staying the arbitration

while the litigation went forward. CCP § 1281.2(c) pro-

vides that (1) where a party to an arbitration agreement is

also a party to a court action; and (2) where the Court

action and arbitration arise out of the same transaction;

and (3) where there is a possibility of conflicting rulings

on common questions of law and fact, the Superior Court

may stay the arbitration and try those common questions

in a single proceeding. Section 1281.2(c)’s purpose is to

avoid piecemeal litigation and conflicting rulings. All

three of its conditions were met here.

Volt argued to the Superior Court that the clause in

the parties’ agreement providing that the agreement shall

be governed by the “law of the place where the Project is

located” did not mean that California law, where the

Project is located, governed. Rather, Volt said, the agree-

ment was in interstate commerce; the FAA accordingly

applied to it, absent the choice-of-law clause; and the

choice-of-law clause changed nothing, since it really

meant that the FAA, not California law, governed. The

FAA contains no counterpart provision to CCP

§ 1281.2(c). Accordingly, Volt’s argument concluded,

§ 1281.2(c) did not apply here.

The Superior Court found that the parties meant that

California law was to govern their agreement. (See J.A.

59-60; O. Br. 13) Accordingly, the Superior Court held that

CCP § 1281.2(c), which is part of California law, applied,

and stayed the arbitration under it. <J.A. 59-60)

Volt appealed to the Sixth Appellate District Court of

Appeal. The Court of Appeal affirmed. It did not “find

reasonable Volt’s interpretation that the ‘place’ where the

project is located be construed to mean not only the State

of California but also the nation of the United States of

America.” It found that the “word ‘place’ was intended to

mean the forum state,” and it had “no doubt” the parties

meant that. (Dec. J.A. 66)

The court further found that the parties’ agreement

did not violate federal law, because “the thrust of the

federal law is that arbitration is strictly a matter of con-

tract.” (Dec. J.A. 71) The FAA does not “mandate the

arbitration of all claims, but merely the enforcement

.. . Of privately made arbitration agreements.” (Dec. J.A.

69-70, quoting Dean Witter Reynolds, Inc. v. Byrd, above,

470 U.S. at 213) “The parties are at liberty,” the court

went on, “to choose the terms under which they will

arbitrate, and such a choice will not run afoul of the

FAA.” (Dec. J.A. 72) The court concluded that “were the

federal rules to be imposed in this case to override the

parties’ choice of law, the effect would be to force the

parties to arbitrate where they had agreed not to arbi-

trate. This result is . . . inimical to the policies underlying

state and federal arbitration law. .. .” (Dec. J.A. 73)'”

The court enforced the agreement, including its

choice-of-law clause, according to its terms. Volt

17 The court also found that the parties could have

“expressly stated in their agreement that they wished to arbi-

trate only those disputes between themselves which did not

involve third parties not bound by the arbitration agree-

ment. . . .” (Dec. J.A. 72) Volt agrees. (O. Br. 84) The court

determined that by their choice-of-law clause the parties essen-

tially agreed to the same thing. See pp. 29-30, below.

petitioned the Supreme Court of California for review. It

told the Supreme Court that the “principal issue” pre-

sented by this case was whether the Court of Appeal

misinterpreted the choice-of-law clause. (Volt’s Petition

for Review at 1) The Supreme Court denied the petition

and directed that the Court of Appeal’s decision not be

published. (J.A. 87)

This appeal followed, and was timely filed. (O. Br. 5)

Ill. SUMMARY OF ARGUMENT

The trial court found that the parties had agreed that

California law, of which CCP § 1281.2(c) is a part, was to

govern their contract. The court applied § 1281.2(c) to the

contract, issued a stay under it, and so enforced the

contract in accordance with its terms. That is exactly what

the court should have done.

Arbitration is a matter of agreement and the FAA

does not change that. To the contrary, it makes arbitration

agreements enforceable according to their terms, no

more, no less; every case decided by this Court under the

FAA so holds. The Court of Appeal simply followed that

settled law. It concluded that forcing the parties to arbi-

trate under federal, not state, rules when they had agreed

to arbitrate under state, not federal, rules would turn the

FAA upside down. That is certainly right. (Part IV A,

below.)

Volt’s complaint that the Court of Appeal misin-

terpreted the contract presents a state, not federal, ques-

tion. Voit’s-argument is also wrong. The agreement

provides that it shall be governed “by the law of the

place where the project is located.” The court interpreted

the agreement to mean that California law, the place

where the project was located, governs. That is what it

says on its face. Volt argues that the agreement really

means “California law plus all laws of the federal govern-

ment that would otherwise apply.” That is not what it

says on its face.

California law provides that the words of a contract

are to be understood in “their ordinary and popular

sense, rather than their strict legal meaning,” and accord-

ing to local “usage.” Ordinary people in California use

the words “law of the place where the project is located”

to mean law of the state where the project is located.

They do not use those words to mean law of the state,

plus “all laws of the federal government that would

otherwise apply ... .” The Court of Appeal had “no

doubt” about that, and this Court, with great respect, is

not in a position to doubt it. Part IV B, below.

Nor should it. Volt’s arguments that the contract

means what ordinary people would not take it to mean

are contrived, and make no common sense. Volt points to

the technical “literal terms” of the contract, but popular

usage, not literal accuracy, is the test. Volt points to “basic

tenets” of federal jurisprudence, but popular usage, not

jurisprudence, is still the test. Volt invites the same words

in the same phrase of the same contract to mean different

things at the same time, but ordinary people do not use

words that way. In sum, there is no ground or occasion

for this Court to determine that the words “law of the

place where the project is located” mean what Volt says

they mean in California, or anywhere else. Part IV B,

below.

Volt points out that the FAA contains no counterpart

provision to § 1281.2(c), and that an FAA procedural rule

compels arbitration notwithstanding the duplicative liti-

gation and inconsistent judgments an order to compel

might cause. Volt asserts that there is “no serious contro-

versy” that, absent the parties’ agreement, that FAA rule

would obtain in this state court proceeding.

This Court need not reach that assertion, because the

parties’ agreement is not absent, and it is valid. But if the

Court does reach it, the assertion is false. The “substan-

tive law” of the FAA does apply in federal and state

court; but this Court has expressly not held that §§ 3 and

4 of the FAA, its procedural sections, apply in state court,

let alone that its rule compelling-arbitration-notwith-

standing-duplicative-litigation- and -inconsistent-judg-

ments does.

There are three very good reasons to hold that they

do not. First, §§ 3 and 4 apply by their terms to federal,

not state court, proceedings. Second, the FAA’s legislative

history shows that Congress meant what it said. Third,

the procedural business of state courts is ordinarily the

business of state courts, and federal law generally takes

state courts as it finds them. No federal interest demands

that a state court compel piecemeal litigation or effect

inconsistent judgments contrary to state law. Part IV C,

below.

The appeal should be dismissed or the judgment

affirmed. Part V, below.

IV. ARGUMENT

A. THE FAA ENFORCES AGREEMENTS IN

ACCORDANCE WITH THEIR TERMS, NO

MORE, NO LESS.

The Court of Appeal interpreted the parties’ agree-

ment under state law, and found that the parties had

agreed that the “laws of California, of which CCP

§ 1281.2 is certainly a part, are to govern the contract.”

(Dec. J.A. 65) The Superior Court thus properly applied

CCP § 1281.2(c) in accordance with the agreement, issued

a stay under it, and so enforced the agreement in accor-

dance with its terms. See pp. 21-22, above.

The question is whether the FAA prohibits a state

court from applying state rules to an arbitration agree-

ment in accordance with the agreement’s terms. The

answer is no. Federal law preempts state law which

“stands as an obstacle to” — that is, conflicts with the

accomplishment of - the purpose of federal law. Hines v.

Davidowitz, 312 U.S. 52, 66-67 (1941).'8 A state court order

enforcing an arbitration agreement in accordance with its

terms does not conflict with the FAA or any other federal

law. Rather, it follows federal law and effects its purpose,

exactly.

Arbitration is a matter of agreement. A court cannot

force parties to arbitrate a dispute they have not agreed

to arbitrate. They can agree to arbitrate in any way they

18 Federal law may also preempt state law expressly or by

occupying the field. Michigan Canners & Freezers Assn. v. Agri-

cultural Marketing & Bargaining Board, 467 U.S. 461, 469 (1984).

The FAA contains no express preemption provision, and it

does not occupy the field of arbitration law. See, e.g., Bernhardt

v. Polygraphic Co., 350 U.S. 198 (1956). No one claims otherwise.

want; thus they can agree to arbitrate some disputes and

not all, or in some circumstances and not all, or not at all.

Nothing in the FAA changes any of that or takes

those rights away. Again, the contrary is so. The FAA is

meant to enforce the parties’ agreement, whatever it is,

no less and no more than it is. Its purpose is to “make

arbitration agreements as enforceable as other contracts,

but not more so.” Prima Paint Corp. v. Flood & Conklin, 388

U.S. 395, 404 n.12 (1967); H.R. Rep. No. 96, 68th Cong,, Ist

Sess. 1 (1924); see pp. 2-3, above.

Prima Paint is the seminal case, and illustrates the

point. It held that a claim for fraudulent inducement was

arbitrable where the parties had agreed that it was. It also

observed that that claim would not be arbitrable “where

the parties otherwise intend.” 388 U.S. at 402. No one so

much as claimed that the parties were “not entirely free”

to otherwise intend, and “so contract.” 388 U.S. at 406.

Accordingly, the FAA makes arbitration agreements

enforceable in accordance with their terms,'® but only in

accordance with their terms. Every case since Prima Paint

so holds. Thus, the FAA preempts state laws which pro-

hibit arbitration of disputes the parties have agreed to

arbitrate. For example, the FAA preempts the California

Corporations Code to the extent it prohibits arbitration of

state franchise claims the parties had agreed to arbitrate;

the Code could not be “applied to invalidate a contract

for arbitration,” and “to nullify a valid contract made by

private parties. . . .” Southland Corp., above, 465 U.S. at

19 The FAA applies to agreements in interstate commerce

and to maritime agreements, not all agreements. See 9 U.S.C.

§§ 1-2.

6, 7. Again, the FAA preempts the California Labor Code

to the extent it prohibits arbitration of wage claims the

parties had agreed to arbitrate; the purpose of the FAA is

to “enforce private agreements into which parties have

entered. .. .” Perry v. Thomas, above, 107 S.Ct. at 2525-26

(citations omitted).

The converse is also true. The FAA does not “man-

date the arbitration of all claims, but merely the enforce-

ment - upon the motion of one of the parties - of

privately negotiated arbitration agreements.” Dean Witter

Reynolds, Inc. v. Byrd, above, 470 U.S. at 219. The FAA

likewise does not mandate what parties must arbitrate, or

how or under what circumstances; private parties are free

to limit the “scope” of their agreement as they see fit. See

Mitsubishi, above, 473 U.S. at 628 (citing Prima Paint,

above). The Court’s job, to end at the beginning, is to

enforce the parties’ agreement in accordance with its

terms, no more, no less. Accord Atkinson v. Sinclair Refin-

ing Co., 370 U.S. 238, 241 (1962) (“[A]rbitration is a matter

of contract and a party cannot be required to submit to

arbitration any dispute which he has not agreed to so

submit”); Moses H. Cone, above, 460 U.S. at 20 (federal

court should compel arbitration even if that causes piece-

meal litigation “where necessary to give effect to an

arbitration agreement”); Shearson Amer. Express, Inc. v.

McMahon, __ U.S. __, 107 S. Ct. 2332, 2346 (1987) (hold-

ing parties “to their bargain” to arbitrate Exchange Act

and RICO claims); Scherk v. Alberto-Culver Co., 417 U.S.

506, 519-20 (1974) (holding that “the agreement of the

parties . . . to arbitrate any dispute [including 10b-5 claim]

arising out of their international commercial transaction

is to be respected and enforced by the federal courts”).

The Court of Appeal did not violate those basic prin-

ciples of federal arbitration law.?° It set them forth, cor-

rectly, embraced them, followed them, and so enforced

the parties’ agreement in accordance with its terms. It

held “that the parties are at liberty to choose the terms

under which they will arbitrate, and such a choice will

not run afoul of the FAA.” (Dec. J.A. 72) It concluded that

it would violate those basic principles of arbitration law

were the Court not to enforce the parties’ agreement,

including its choice-of-law clause, in accordance with its

terms (Dec. J.A. 72-73):

“Were the federal rules to be imposed in this case

to override the parties’ choice of law, the effect

would be to force the parties to arbitrate where they

agreed not to arbitrate. This result is not only inimi-

cal to the policies underlying state and federal arbi-

tration law, . . . it also violates basic principles of

contract law.”

Accord Chan v. Drexel Burnham Lambert, Inc., above, 178

Cal. App. 3d at 640, 645:

20 The Court observed that California law is exactly the

same, (Dec. J.A. 71-72), as it is. See, e.g., Main v. Merrill Lynch,

Pierce, Fenner & Smith, Inc., 67 Cal. App. 3d 19, 32 (1977):

“Arbitration is a matter of contract and a party cannot be

required to submit to arbitration any dispute which he has

not agreed so to submit.”

Accord, O'Malley v. Wilshire Oil Co., 59 Cal. 2d 482, 496 (1963);

Chan v. Drexel Burnham Lambert, Inc., 178 Cal. App. 3d 632, 640,

645 (1986). California indeed has an “historical

friendliness . . . to the institution of arbitration.” See Merrill

Lynch, Pierce, Fenner & Smith v. Ware, 414 U.S. 117, 132 (1973)

(quoting Feldman, Arbitration Modernized - The New California

Arbitration Act, 34 S. Cal. L. Rev. 413, 414 (1961)).

“Arbitration is recognized as a matter of con-

tract, and a party cannot be forced to arbitrate some-

thing in the absence of an agreement to do so.” (Vespe

Contracting Co. v. Anvan Corporation (E.D. Pa. 1975)

(399 F. Supp. 516, 520.) The [federal] Act “ ‘does not

dictate that we should disregard parties’ contractual

agreements . . . outlining the boundaries of the areas

intended to be arbitrable.’ ” (Pas-Ebs v. Group Health,

Inc. (S.D.N.Y. 1977) 442 F. Supp. 937, 940), and there

is no policy compelling persons to accept arbitration

of controversies which they have not agreed to arbi-

trate. (Delta Lines, Inc. v. International Brotherhood of

Teamsters (1977) 66 Cal. App. 3d 960, 966 [136 Cal.

Rptr. 345]).”

That is the heart of the Court of Appeal’s decision,

but Volt does not address it. Nor does Volt dispute those

basic principles, or contend that they do not apply here.

Indeed, to the extent Volt says anything on the point it

proves the point. It says that notwithstanding the FAA,

Stanford could have dealt with “the possibility of simul-

taneous disputes with the several participants in the pro-

ject [not parties to the arbitration agreement] and the

consequent problem of duplicative litigation”; all Stan-

ford need have done, Volt states, is to insert “a proviso

expressly excusing it from its duty to arbitrate in the

event of such disputes with non-parties to the agree-

ment.” (O. Br. 83-84.) The Court of Appeal held that that,

in effect, is exactly what Stanford and Volt agreed to do.

“If the parties here had expressly stated in their

agreement that they wished to arbitrate only those

disputes between themselves which did not involve

third parties not bound by the arbitration agreement,

this provision would presumably be enforceable. In

our view they accomplished the same thing by choosing to

be governed by California law, thus incorporating the

California rules of civil procedure governing arbitration

agreements.” (Dec. J.A. 72; Emphasis added.)?!

Volt’s sole answer is this: Assuming the agreement

means what the Court of Appeal found it to mean, Volt

says, enforcing it in accordance with its terms would

violate “a fundamental public policy of the jurisdiction

[the United States] whose law would apply” but for the

agreement. (O. Br. 97) That “fundamental policy,” Volt

goes on, is “a liberal federal policy favoring arbitration

agreements.” (O. Br. 102; see generally O. Br. 96-106.) That

proposition disproves itself. One does not violate a policy

favoring arbitration agreements by enforcing arbitration

agreements in accordance with their terms. One does

violate the law requiring enforcement of arbitration

agreements in accordance with their terms by not enforc-

ing them in accordance with their terms.??

21 Moses H. Cone, above, holds that a federai court should

compel arbitration even if that causes piecemeal litigation

“where necessary to give effect to the arbitration agreement.”

460 U.S. at 20. Even if that rule were applicable in state court

proceedings (it is not —- see Argument, Part IV C), it would not

be applicable here; a rule requiring piecemeal litigation would

have been at odds with these parties’ agreement, not “necess-

ary to give effect” to it.

22 The liberal federal policy favoring arbitration agree-

ments is simply “at bottom a policy guaranteeing the enforce-

ment of private contractual arrangements.” Mitsubishi, above,

473 U.S. at 625.

Volt relies on The Kensington, 183 U.S. 263 (1902), Mit-

subishi, above, and Scherk v. Alberto-Culver Corp., above. Volt is

way off target. Those cases hold that parties cannot by agree-

ment avoid the substantive commands of statutes that apply

(Continued on following page)

;

We turn to the Court of Appeal’s interpretation of the

agreement.

B. THE CONTRACT MEANT WHAT THE TRIAL

COURT AND COURT OF APPEAL FOUND IT

MEANT.

Volt does not attack the settled and controlling prin-

ciples on which the Court of Appeal’s decision is based.

Instead, it complains that the Court of Appeal misin-

terpreted a clause in the parties’ contract. That clause,

Volt says, “must be interpreted” to provide that it is to be

governed by state law plus “all laws of the federal gov-

ernment that would otherwise apply. . . .” (O. Br. 66, 75).

Volt is way off base. First, what the clause means is a

state, not federal question. See pp. 5-16, above, and 35-37,

below. Second, Volt is wrong on the merits, should this

Court reach them.

The agreement provided that it “shall be governed by

the law of the place where the project is located.” The

place the project was located was California, and there is

no place called federal. Therefore, the contract means that

California law, the place the project was located, governs.

The trial court and Court of Appeal had “no doubt”

about that (Dec. J.A. 66), and the parties, who contracted

in California, must be taken to have known it; the year

(Continued from previous page)

regardless of agreements. Thus a carrier cannot evade its statu-

tory liability by agreement (Kensington), an automotive com-

pany cannot avoid the antitrust laws by agreement

(Mitsubishi), and a seller (perhaps) cannot avoid liability under

_ 10b-5 by agreement (Scherk). But here the FAA imposes no

obligations regardless of agreement; it makes agreements to

arbitrate enforceable in accordance with their terms, no more,

no less.

before their “agreement was forged,” the California

Court of Appe>l so held. Garden Grove Community Church

v. Pittsburgh-D.s Moines Steel Co., 140 Cal. App. 3d 251

(1983) (Dec. J.A. 67).?3

The Court of Appeal’s decision and Garden Grove

hardly stand alone. The Court of Appeal pointed out that

“[c]ourts in other states faced with identical language

have reached the same result we do here,” citing Standard

Co. v. Elliott Constr. Co., 363 So. 2d 671 (La. 1978), Eric A.

Carlstrom Constr. Co. v. Independent School Dist. No. 77, 256

N.W. 2d 479 (Minn. 1977), and Lane-Tahoe, Inc. v. Kindred

Constr. Co., 536 P.2d 491 (Nev. 1975). Volt agrees that

Standard reached that result, but objects that Carlstrom

and Lane-Tahoe have no “bearing”; “the possible applica-

tion of federal law” was not at issue there, Volt says. (O.

Br. 90 n.) Volt misses the point. Carlstrom and Lane-Tahoe

both hold that a clause identical to the one at issue here

plainly means that arbitration is to proceed in accordance

with the laws of the state in which the project is located.

256 N.W. 2d at 483; 536 P. 2d at 493. That is the point.

Carlstrom and Lane-Tahoe are in accord with a large

body of case law from around the country. That body

holds that the “law of the place where the project is

located” plainly means the law of the state where the

23 Volt points to Liddington v. The Energy Group, 192 Cal.

App. 3d 1520 (1987) (O. Br. 70, 92 n.), which interpreted a

contract Volt’s way. But Liddington postdated the parties’

agreement, did not discuss the reason for its holding, and did

not reach the centerpiece of the Court of Appeal’s decision

here. (Dec. J.A. 75-76) Volt also points to Ford v. Shearson

Lehman Amer. Express Co., 180 Cal. App. 3d 1011 (1986), but

Ford did not discuss the contract interpretation question

involved here.

‘

project is located. McCarthy Bros. Const. Co. v. Pierce, 832

F.2d 463, 466 n.4 (8th Cir. 1987); Pickens v. Hess, 573 F.2d

380, 384 (6th Cir. 1978); Safer v. Perper, 569 F.2d 87, 91

(D.C. Cir. 1977); Starr Elec. Co., inc. v. Basic Const. Co., 586

F. Supp. 964, 968 (M.D.N.C. 1982); United States Fidel. &

G. Co. v. Bangor Area Jt. Sch. Auth., 355 F. Supp. 913, 914

(E.D. Penn. 1973); Standard Co. v. Elliott Const. Co., Inc.,

363 So. 2d 671 (La. 1978); Coover Const. Co. v. Johnson, No.

83 AP-235, slip op. (Ohio Ct. App. August 4, 1983).*

Carlstrom and Lane-Tahoe are also in accord with a

long list of federal statutes. They plainly use “law of the

place [of a transaction]” to mean the law of the state

where the transaction occurs. See 28 U.S.C. § 1346(b)

(providing that the United States is liable under the Fed-

eral Tort Claims Act “in accordance with the law of the

place where the act or omission occurred”; law of the

place means state law as to damages, Richards v. United

States, 369 U.S. 1, 11 (1962); Stoleson v. United States, 708

F.2d 1217 (7th Cir. 1983); Smith v. Pena, 621 F.2d 873 (7th

Cir. 1980); Southern Pac. Transp. Co. v. United States, 471 F.

Supp. 1186 (E.D. Cal. 1979); United States v. Sutro, 235 F.2d

499 (9th Cir. 1956), and state conflict-of-law principles,

see, ¢.g., Richards, above, 369 U.S. at 11; Ducey v. United

States, 713 F.2d 504, 508 n.2 (9th Cir. 1983); Gelley v. Astra

Pharmaceutical Products, Inc., 610 F.2d 558, 560 (9th Cir.

1979); ].W. Petersen Coal & Oil Co. v. United States, 323 F.

Supp. 1198, 1205 (N.D. Ill. 1970); Gowdy v. United States,

412 F.2d 525, 527 (6th Cir. 1969)); 28 U.S.C. § 2674 (limit-

ing liability of United States to compensatory damages in

24 Those cases do not deal with a federal-versus-state-law

question. They demonstrate the point Carlstrom and Lane-Tahoe

demonstrate — “law of the place where the project is located” is

commonly used to mean state law.

wrongful death cases where “the law of the place where

the act or omission complained of occurred” provides for

punitive damages only; law of the place means state law,

Bowen v. United States, 570 F.2d 1311 (7th Cir. 1978)); 28

U.S.C. § 2672 (providing for settlement of claims against

the federal government where the United States “would

be liable to the claimant in accordance with the law of the

place where the act or omission occurred”; law of the

place means state law governs effect of release, Robinson

v. United States, 408 F. Supp. 132, 136 (N.D. Ill. 1976)); 38

U.S.C. § 103(c) (providing that “whether or not a person

is or was the spouse of a veteran” is to be determined

“according to the law of the place where the parties

resided”; that means state law on its face, where parties

resided in a state); 28 U.S.C. § 534(a)(3) (providing that

the Attorney General shall acquire information to locate

any missing person, “including an unemancipated person

as defined by the laws of the place of residence of such

person”; that means state law on its face, where person

resides in state); 18 U.S.C. § 1821 (prohibiting, in part, the

interstate transportation of dentures without the authori-

zation of a person “licensed to practice dentistry under

the laws of the place into which such denture is sent or

brought”; that means state law on its face, where the

place is a state.) See also Uniform Code of Military Justice,

28 U.S.C. § 849(c), which makes it explicit that the laws of

the place and the laws of the United States are different:

Depositions may be taken before and authenticated

by any military or civil officer authorized by the laws

of the United States or by the laws of the place where the

deposition is taken to administer oaths. (Emphasis

added.)

Volt cites cases that interpret “place” its way, and we

will deal with them. (See pp. 41-42, below.) Buit the pur-

pose of the exercise is not to add up cases and statutes on

ee ee

either side. The cases and statutes we cite just reflect

what real people mean by the ordinary words “place

where something is located.” The purpose of the exercise

was and is to determine what these real people - Volt

points out they were “business executives,” not lawyers

(O. Br. 83) - meant by those ordinary words here. Cer-

tainly that was the Court of Appeal’s task.

California law provides that “the words of a contract

are to be understood in their ordinary and popular sense,

rather than their strict legal meaning . . . ,” and in

accordance with the “usage” of the “place” where the

project is to be performed. Cal. Civ. Code §§ 1644, 1646.25

Those rules are well known and settled, and the case law

follows them: “ ‘The terms of the contract are to be

understood in their ordinary and popular sense and as a

man of average intelligence and experience would under-

stand them.’ ” Morton v. Travelers Indemnity Co., 121 Cal.

App. 2d 855, 858 (1953) quoting Burr v. Western States Life

Ins. Co., 211 Cal. 568, 575 (1931). “The terms of a writing

are presumed to have been used in their primary and

general acceptation.” Jenne v. Jenne, 192 Cal. App. 2d 827,

830 (1961). “The common or usual meaning will be

ascribed to words used in a contract unless the context or

circumstances indicate that in a particular case a special

meaning should be attached to them.” Reliance Life Ins.

Co. v. Jaffe, 121 Cal. App. 2d 241, 245 (1953).

25 California Civil Code § 1644 goes on to provide:

ies i i less

“[U]nless used by the parties in a technical sense, or un

a special meaning is given to them by usage, in which case

the latter must be followed.”

There was no showing that the parties used the word

“place” in a technical sense; they were, again, businessmen,

not lawyers.

Volt apparently invites this Court to reinterpret the

contract (pp. 5-6, above), but it is unclear under what

principle and rules of contract interpretation Volt asks the

Court to do it. There is no general federal common law of

contracts; Swift v. Tyson is long gone and unmourned. See

p. 6, above. It would, at the least, be startling were this

Court to cause Swift to be born again, or to undertake to

interpret this contract under it or some mutant of it. But if

the Court did, presumably it would apply the same com-

mon sense rules of interpretation that obtain in Califor-

nia. For it would make no sense to interpret popular

words in an unpopular way, or to interpret words used in

se place in accordance with the usage of some other

place.

Ordinary people in California use the words “law of

the place where the project is located” to mean law of the

state where the project is located. That seems natural.

Ordinary people in California do not use those words to

mean law of the state, plus “all laws of the federal

government that would otherwise apply. . . .” (O. Br. 66,

75) That seems unnatural. Perhaps that local usage is

parochial, even uninformed. If so, it is regrettable, but it

is the fact. The Court of Appeal had “no doubt” about

that, and found Volt’s interpretation to the contrary

“unreasonable.” This Court, with great respect, is not in a

position to doubt it, nor should it. States undertake to

“deal with the whole gamut of problems cast up out of

the flux of everyday life in the state,” in part because,

being where the flux is, they are in a position to deal with

it. See Hart, above, 54 Colum. L. Rev. at 491.

Volt worries that the Court of Appeal’s interpretation

of the contract makes the contract “dispositive of an issue

of federal preemption.” (O. Br. 70) But it does not; Volt

need not worry. If federal law preempts California law

regardless what the parties agreed to, it does and it

applies. If federal law prohibits these parties from mak-

ing an agreement to arbitrate in accordance with the rules

set forth in California law, it does and the agreement

falls. Obviously parties cannot agree to do what federal

law prohibits, or be free of duties federal law imposes

without regard to what they agree to. See pp. 30-31 n.22,

above. But federal law does not prohibit the agreement

these parties made or impose duties on them they did not

discharge; federal law provides that parties’ agreements

to arbitrate - whatever their terms - are to be enforced

according to their terms, no more, no less. The Court of

Appeal followed that law. Part IV A, above.

We turn to Volt’s six contract interpretation

contentions.

1. The Argument that the Court of Appeal’s Inter-

pretation of the Contract “Is Discordant With

the Common Understanding of the Function” of

Choice-Of-Law Clauses.

Volt says that choice-of-law clauses do not (a)

“encompass federal-state relations” or (b) “federal

supremacy.” (O. Br. 66-73) But as to (a) they do, and it

does not matter what one calls the clause. See pp. 7-8,

above. As to (b), this clause does not undo federal

supremacy, and of course cannot. See pp. 30-31, above.

Volt cites no case that holds what it says, but refers to

“sub silentio” decisions. (O. Br. 68, 72) A silent decision

announces no rule.

2. The Argument That The “Literal Terms of the

Parties’ Contract” Mean What Volt Argues They

Mean.

Volt says that the “only literally correct interpretation

of ... ‘law of the place where the project is located’ . . . is

that it constitutes a collective reference to the laws” of the

City, the County, the State and the United States, “within

whose boundaries the project was in fact situated.” (O.

Br. 75) Perhaps that is an available interpretation, techni-

cally, although one ought to add the laws of gravity,

physics, nations, and so on to be complete. But words ina

contract are to be given their “popular,” not “technical,”

meaning (Cal. Civ. Code § 1644, pp. 35-36, above), and

Volt’s is hardly the popular meaning.

Volt adds that unless the clause is interpreted its way,

the provisions of the contract requiring the contractor to

pay “all taxes .. . applicable to the contractor’s work”

and to comply with “all applicable laws . . . bearing

on... safety” would mean California taxes and Califor-

nia safety laws only. (O. Br. 76-77) That is nonsense.

California law governs the agreement, and requires that

words be given their plain meaning. All applicable taxes

and safety laws plainly means all applicable taxes and

safety laws.?6

3. The Argument That “Basic Tenets of Federalism

Dictate” That The Agreement Be Interpreted

Volt’s Way.

Volt advises that “the basic tenets of American feder-

alism” hold that “federal law constitutes an integral part

of the law of every state and of every ‘place’ within the

26 Also the tax and safety laws “apply” regardless of

agreement. Therefore, the parties could not have contracted

out of liability for them if they had wanted to. The FAA, by

contrast, imposes no obligation absent agreement, and only

makes agreements enforceable in accordance with their terms.

federal union,” citing, among other things,?” Federalist,

Nos. 16, 27. (O. Br. 77) That may well be so as a matter of

jurisprudence. But the question, “quintessential or not”

(O. Br. 49), is not jurisprudential. The question is what

ordinary people - who do not travel with the Federalist -

mean by ordinary words.

Volt also points to Fidelity Federal S & L Assn. v. de la

Cuesta, 458 U.S. 141 (1982) (O. Br. 80). Fidelity did hold

that the phrase “law of the jurisdiction in which the

property is located” meant state and federal law, because

“the ‘law of the jurisdiction’ includes federal as well as

state laws.” 458 U.S. at 157 n.12. The Fidelity clause and

contract are different from this one. Fidelity’s clause used

the technical word “jurisdiction” in the abstract; this

clause uses the common, physical word “place.” More-

over, the Fidelity clause came from a uniform mortgage

instrument issued by a federal agency which had

expressly mandated that federal law was to preempt state

law prohibiting due-on-sale clauses (458 US. at 147, 157

n.12); it would have been self-defeating to promulgate a

uniform instrument containing a clause intended to undo

that express mandate, and this Court found that the

purpose of the clause was otherwise. Ibia.

27 Volt’s cases (O. Br. 78-80) merely stands for the proposi-

tion that state courts with concurrent jurisdiction over federal

rights must enforce them. See Claflin v. Houseman, 93 U.S. 130

(1876) (concurrent jurisdiction permissible); Mondou v. New

York, N.H. & H.R. Co., 223 U.S. 1 (1912) (Connecticut courts

required to enforce FELA claim); Testa v. Katt, 330 U.S. 386

(1947) (Rhode Island court required to enforce treble damage

claim under Emergency Price Control Act); Hauenstein v.

Lynham, 100 U.S. 483 (1880) (federal treaty preempts state law).

In sum, Fidelity dealt with the contract before it. It

did not lay down a “specialized rule” of federal common

law requiring that all clauses the same as, or more or less

like, its clause, be interpreted the same as its clause in all

private contracts in all places. The question remains,

what did the parties mean here? The Court of Appeal

found what they meant and, besides that being a state

question, the Court was right. See pp. 5-16, above.

4. The Argument That “The Only Evidence In The

Record Regarding The Parties’ Intent...

Suggests” That Volt’s Interpretation Is Right.

Volt says that the “clause might be susceptible to the

interpretation placed upon it by the Court of Appeal if it

clearly appeared from the evidence” that that is what the

parties meant. (O. Br. 81-82) But, Volt goes on, “what little

evidence exists on this subject suggests” that the parties’

intent “was precisely the opposite of the one attributed to

them by the” Court of Appeal. (O. Br. 82)

Volt’s “evidence” is its announcement that “Stanford

could easily have dealt with this problem [of duplicative

litigation] by inserting a proviso expressly excusing it

from its duty to arbitrate in the event of . . . disputes with

non-parties to the agreement.” (O. Br. 83-84) But the

Court of Appeal found that that is what the parties, by

a choice-of-law clause, in effect did. See pp. 29-30,

above.

Volt’s argument proves nothing about intent. It does

prove: (1) That the FAA permits the parties to limit the

scope of their agreement to arbitrate in the way the Court

of Appeal found they in effect did (see pp. 26-30, above);

and (2) That the question of intent turns on “evidence,”

not the Constitution, and therefore presents no federal

question.

5. The Argument That “The Overwhelming

Weight of Authority . . . Supports” Volt’s

Interpretation.

Volt claims that an “imposing panoply” of case law

supports its interpretation of the parties’ contract, and a

“meager minority” supports the Court of Appeal’s. (O.

Br. 90)

Volt’s numbers are, to start with, wrong. The “pano-

ply” is made up of three decisions of this Court and 21

decisions of lower courts. Of the three decisions of this

Court, one, Fidelity, is discussed in subsection 3, above; it

does not decide this contract interpretation question. The

other two, Scherk v. Alberto-Culver Co., 417 U.S. 506, and

Bernhardt v. Polygraphic Co., 350 U.S. 198, do not eddress

the issue at all; they are what Volt calls “sub silentio”

rulings (O. Br. 86), and their silence proves nothing.

Of the 21 lower court decisions, eleven (O. Br. 88-89)

are also “sub silentio” rulings, and their silence proves

nothing either. That leaves ten. Of the ten, two, Episcopal

Housing Corp. v. Federal Ins. Co., 239 S.E. 2d 647, 650 n.1

(S.C. 1977) and Huber, Hunt & Nichols v. Architectual Stone

Co., 625 F.2d 22, 25 n.8 (Sth Cir. 1980), are based on Volt’s

literal meaning theory (O. Br. 87); but the purpose is to

determine what the parties meant, not some literal mean-

ing. See pp. 31-37, above.

That leaves eight. Of the eight, four, Burke County

Public Schools v. The Shaver P’ship, 279 S.E. 2d 816, 823, 825

(N.C. 1981); Mamlin v. Susan Thomas, Inc, 490 S.W. 2d 634,

637 (Tex.Civ.App. 1973); Commonwealth Edison Co. v. Gulf

Oil Corp., 541 F.2d 1263, 1270 (7th Cir. 1976); and Tennessee

River Pulp & Paper Co. v. Eichleay Corp., 637 S.W. 2d 853,

857 (Tenn. 1982), are based on Volt’s jurisprudential the-

ory (O. Br. 88); but jurisprudence is not the question here.

See pp. 5-16, above.

That leaves the last four, Paul Allison, Inc. v. Minikin

Storage, Inc., 486 F. Supp. 1, 3 (D. Neb. 1979); State ex rel.

St. Joseph Light & Power Co. v. Donelson, 631 S.W. 2d 887,

891-92 (Mo.App. 1982); Mesa Operating Ltd. P’ship, v. Loui-

siana Intra State Gas Corp., 797 F.2d 238, 243-44 (5th Cir.

1986); Cone Mills Corp. v. August F. Nielsen Co., 455 N.Y.S.

2d 625, 627 (N.Y. Sup. Ct. 1982).28 They are based on

Volt’s theory that enforcement of the parties’ agreement

in accordance with its terms violates the FAA, which

requires Courts to enforce arbitration agreements in

accordance with their terms (O. Br. 88-89); that theory

stands the FAA upside down. See p. 30, above.

On the other side. Stanford’s authorities are hardly a

“meager minority.” (See pp. 32-34, above.) They are, per-

haps, a major mass. But, again, names do not matter. The

purpose of the inquiry is not to add up authorities on

either side and see which stack is higher. The purpose is

to determine what these parties meant by the ordinary

words they used in their contract. That remains a state

question and the Court of Appeal’s answer to it remains

right.

6. The Argument That The Choice-Of-Law Clause

Must Be Generously Construed Because Arbi-

tration Agreements Must Be.

Volt says last, that federal law requires that “any

ambiguities in arbitration agreements within the cover-

age of the Act should generally be resolved in such a way

as to favor arbitration of the parties’ dispute.” (O. Br. 94)

But: (1) The choice-of-law clause was not ambiguous

here; the Court of Appeal had “no doubt” about it. (2)

28 Volt cites Commonwealth Edison Co. v. Gulf Oil Corp,

above, and Huber, Hunt & Nichols, Inc. v. Architectual Stone

Corp., above, a second time for this proposition as well. (O. Br.

88-89)

ee eee ee ee ee ee

That federal rule of interpretation applies to “arbitration

agreements” in a contract, not other provisions in a con-

tract, and could not. Otherwise the same provision in the

same contract could have different state and feder-

al meanings at the same time. See pp. 12-15, above. (3)

That federal rule of interpretation could not apply to this

arbitration neutral choice-of-law provision in this con-

tract. Otherwise the provision would have to mean state

law when it is more favorable to arbitration and federal

law when it is not. So the clause would have different

meanings at the same time on that score as well. See pp.

12-15, above.

The “generously construed” rule has no application

here.

CONCLUSION AS TO PART B

The interpretation of the agreement is a state law

question and the Court of Appeal’s interpretation of it

was right.

C. SECTIONS 3 AND 4 OF THE FAA WOULD

NOT APPLY IN THIS STATE COURT PRO-

CEEDING, EVEN ABSENT THE PARTIES’

AGREEMENT.

Volt asserts that: (1) The FAA “contains no counter-

part provisions” to CCP § 1281.2(c). (2) An FAA rule

instead compels arbitration of a claim notwithstanding

“the existence of . . . non-arbitrable third-party claims”

and the duplicative litigation and inconsistent judgments

an order to compel may, by reason of those claims, cause.

(3) Absent these parties’ choice-of-law agreement, there is

“no serious controversy” that that FAA rule would obtain

in this state court proceeding. (O. Br. 59, 61, 62-66)

The Court need not reach those assertions because

the parties’ agreement is not absent, it is valid (Part IV

A), and the Court of Appeal properly interpreted it (Part

IV B; a state question anyway). Should the Court reach

them, however, we grant that assertions 1 and 2 are true.

But assertion 3 is not without “serious controversy,” at

the least.

Sections 1 and 2 of the FAA make valid and enforce-

able “written provisions” to arbitrate in “maritime” con-

tracts and contracts “involving commerce.” Those

sections are the FAA’s “substantive” provisions. See

Southland Corp., above, 465 U.S. at 16 n.10. Section 3

provides for stays of litigation while arbitration proceeds,

and § 4 provides for orders compelling arbitration where

one party refuses to arbitrate. Those sections are pro-

cedural, and they do not by their terms apply to proceed-

ings in state court. To the contrary, § 3 applies by its

terms to proceedings “brought in any of the courts of the

United States” and § 4 to proceedings in “any United

States district court.”29 Section 4 also refers, twice, to the

“Federal Rules of Civil Procedure,” and those Rules do

not apply in state courts. Volt’s assertion that the rule

compelling arbitration-regardless-of-duplicative-litiga-

tion-and-inconsistent-judgment applies in state court

assumes the premise that §§ 3 and 4 apply in state court.

So does Volt’s conclusion that, absent the parties’ agree-

ment, its “petition to compel” would have to have been

granted by this state court (O. Br. 65); § 4, again, provides

for the granting of petitions to compel.

29 There is no difference between “courts of the United

States” and “United States district court,” as used in §§ 3 and

4. See Southland Corp., above, 465 U.S. at 29 n.18 (O’Connor, J.,

dissenting)

This Court has never held that §§ 3 and 4 apply to

proceedings in state court. and this case should not be the

first. This is what the case law holds:

Prima Paint v. Flood & Conklin, above, 388 U.S. 395, is,

again, the beginning.*° It observed that § 3 requires a

“federal court,” to stay litigation, and that § 4 “provides a

federal remedy.” 388 U.S. at 400 (emphasis added). It held

that “in passing upon a § 3 application” a “federal court

may consider only issues relating to the making and

performance of the agreement to arbitrate.” 388 U.S. at

404 (emphasis added). It held further that the FAA was

well within Congressional power to “prescribe how fed-

eral courts are to conduct themselves with respect to

subject matter [interstate commerce and admiralty] areas

over which Congress plainly has power to legislate.” 388

U.S. at 405 (emphasis added).

Thus Prima Paint made clear that the FAA, and in

particular §§ 3 and 4, dealt with federal court proceed-

ings.3! Sixteen years later, in 1983, Moses H. Cone held

that the “effect of . . . [§ 2 of the FAA] is to create a body

of federal substantive law of arbitrability.” 460 U.S. at 24

(emphasis added). Moses H. Cone also said, in dictum,

that that federal substantive law was applicable in “state

or federal court.” Id. Moses H. Cone laid down the rule,

last, that a petition to compel arbitration should be

granted notwithstanding the existence of non-arbitrable

disputes between one party to the arbitration agreement

and others; the “relevant federal law requires piecemeal

30 Bernhardt v. Polygraphic Co., above 350 U.S. 198, predates

Prima Paint; it held that the FAA only applies to maritime

contracts and contracts involving interstate commerce.

31 The dissent pointed out that application of the FAA to

state courts would “flout the intention of the framers of the

Act.” 388 U.S. at 424 (Black, J., dissenting).

resolution when necessary to give effect to an arbitration

agreement,” Moses H. Cone said. 460 U.S. at 20 (emphasis

in original). Moses H. Cone arose in federal court, how-

ever, and it did not hold that that rule compelling arbitra-

tion-regardless-of-duplicative-litigation-and-inconsistent-

judgments applied in state court.*?

Thus the law appeared to be that the FAA’s “federal

substantive law” applied in federal and state court (Moses

H. Cone); that the FAA in general and §§ 3 and 4 in

particular applied in federal court (Prima Paint);°° and

that this Court had not held that the procedural provi-

sions of the FAA, in particular §§ 3 and 4 and Moses H.

Cone’s piecemeal litigation rule, applied in state court.

Southland Corp., above, made clear that that was the law.

Southland Corp. was the first state court case in the line to

reach this Court. It affirmed Moses H. Cone’s dictum that

the “substantive law the .. . FAA created was applicable

in state and federal court.” 465 U.S. at 12. It also

expressly did not “hold that §§ 3 and 4 of the. . . [FAA]

apply to proceedings in state courts.” 465 U.S. at 16 n.10.

Rather, it indicated the opposite was so.

“Section 4, for example, provides that the Federal

Rules of Civil Procedure apply in proceedings to

32 Moses H. Cone noted that “the state courts have almost

unanimously recognized that the stay provision of § 3 applies

to suits in state as well as federal courts, 460 U.S. at 26 n.34,

but did not (and had no occasion to) decide that question.

Since then, the Court expressly did not “hold that §§ 3 and 4 of

the [FAA] . . . apply to proceedings in state courts.” Southland

Corp., above, 465 U.S. at 16 n.10. See pp. 46-47, below.

33 Subject to the Bernhardt maritime/interstate commerce

limit.

compel arbitration. The Federal Rules do not apply in

some state court proceedings.” (Ibid.)

That is where the case law stands.* There is no

reason for this Court to change it, much less hold that

§§ 3 and 4 apply to state court proceedings, let alone hold

that Moses H. Cone’s rule compelling arbitration-regard-

less-of-duplicative-litigation- and -inconsistent-judgments

does. There are three very good reasons to hold they do

not.

First, §§ 3 and 4 by their terms apply to federal, not

state court, proceedings. See pp. 43-46, above; Southland

Corp., above, 465 U.S. at 16 n.10.%

Second, the legislative history shows that Congress

meant what it said. Right after the FAA was signed into

law, the American Bar Association Committee that

drafted it and pressed to pass it, summed it up this way:

34 Post Southland Corp., Mitsubishi, above, 473 U.S. 614,

626, which arose out of the federal courts, recited Southland

Corp.'s “federal substantive law” rule. Volt advises (O. Br. 64-5

n.) that Perry v. Thomas, above, 107 S. Ct. 2520, also post

Southland Corp., “mooted” the issue that Southland Corp. did

not resolve, but Perry did not. Perry arose out of the state

courts, but it did not mention, much less purport to resolve,

the Southland Corp. issue. In fact, Perry's holding was based on

§ 2, the substantive provision of the Act, not §§ 3 or 4. 107 S.Ct.

at 2525-26.

35 Other procedural provisions of the FAA also apply to

federal court proceedings by their terms. See 9 U.S.C. § 7

(“United States court in and for the district” may compel

attendance of witnesses); 9 U.S.C. § 9 (confirmation of award

by “United States court in and for the district”); 9 U.S.C. § 10

(vacation of award by “United States court in and for the

district”); 9 U.S.C. § 11 (modification or correction of award by

“United States court in and for the district.”)

“The statute establishes a procedure in the Federal

courts for the enforcement of arbitration agree-

ments ... A Federal statute providing for the enfor-

cement of arbitration agreements does relate solely to

procedure of the Federal courts. . . .” Quoted in South and

Corp., above, 465 U.S. at 26 (O’Connor, J., dissenting).

The full history is set forth in Justice O’Connor’s

dissent in Southland Corp. We do not mean to reargue the

issue Southland Corp. decided: we agree that the FAA's

substantive law applies in state courts. But the legislative

history makes clear at the least that the FAA’s procedural

rules were meant to apply in federal court only, and not

“by any flight of fancy to permit Congress to control

proceedings in state courts.” See 465 U.S. at 28 (O’Connor,

J., dissenting).*¢

Third, the procedural business of state courts is ordi-

narily the business of state courts, and imposing federal

procedural rules on them is, in general, at odds with our

federal system. “The general rule, bottomed deeply in

belief in the importance of state control of state judicial

procedure, is that federal law takes the state courts as it

finds them.” Hart, 54 Colum. L. Rev. at 508; Southland

Corp., above, 465 U.S. at 32-33. (O’Connor, J., dissenting.)

See also Sun Oil Co. v. Wortman, 56 U.S.L.W. 4601, 4603

(June 15, 1988) (forum state’s application of its statute of

limitation to claim arising in other state does not violate

Full Faith and Credit Clause):

“Since the procedural rules of its courts are surely

matters on which a State is competent to legislate, it

36 That phrase was directed to Congress’ power to legis-

late under Article III, but, we submit, it also applies here.

ee ee es

)

follows that a State may apply its own procedural

rules to actions litigated in its courts.”37

No doubt the FAA makes arbitration agreements sub-

ject to it enforceable. We grant therefore that a state court

cannot refuse to make available the procedural remedies

that obtain in state court to enforce them. But it does not

follow that a state court must issue an order to compel to

enforce them when state law does not provide for orders

to compel, but provides, for example, for injunctive relief.

Nor does it follow that where, as here, state law does

provide for an order to compel (CCP § 1281.2), a state

37 The issue is not whether rules are “substantive” or

“procedural,” or outcome determinative, under Erie R. Co. v.

Tompkins, above, 304 U.S. 64 and Guaranty Trust Co. v. York, 326

U.S. 99 (1945). The issue is whether Congress intended FAA

rules generally taken to be procedural to apply in state court

proceedings. It did not. (See text.) FAA §§ 3 and 4 provide

remedies, and remedies are generally taken to be procedural.

See, e.g., Sun Oil Co. v. Wortman, above, 56 U.S.L.W. at 4604

(“remedies available” are “generally treated as procedural

under conflicts law. . . .”)

Notwithstanding that “matters respecting the remedy” are

generally considered procedural, federal “procedural” rules

may apply in state court where necessary to effect Congress’

purpose. See Central Vermont Ry. v. White, 238 U.S. 507, 511-12

(1915) (burden of proof in FELA case); Dice v. Akron, Canton &

Youngstown R. Co., 342 U.S. 359 (1952) (state court cannot take

factual question of fraud from jury in FELA case; “right to trial

by jury is too substantial a part of the rights accorded by the

Act” to permit State procedural rule to take it away). See

generally Hart & Wechsler, The Federal Courts and The Federal

System, 566-573 (2d ed. 1973). Applying FAA §§ 3 and 4 and

the rule compelling arbitration-regardless-of-duplicative-liti-

gation-and-inconsistent-judgments to these state court pro-

ceedings is not necessary to effect Congress’ purpose. Rather, it

would be contrary to the express terms of §§ 3 and 4 and to

Congress’ expressed intent to legislate in respect to federal

court procedures only.

court must issue that order notwithstanding that state

procedural law militates against it.

It would be particularly untoward if the FAA’s pro-

cedural rules were held to forbid application of this state

procedural law in this state court. This law’s purpose is

to avoid duplicative, piecemeal litigation and inconsi-

stent judgments. Surely the FAA was not intended to

force a state court to issue orders compelling piecemeal

litigation and effecting inconsistent judgments in viola-

tion of state law. Why would Congress want to do that in

1925 or ever? See Sun Oil v. Wortman, above, 56 U.S.L.W.

at 4605 (recognizing a “State’s interests in regulating the

workload of its court”).

CONCLUSION AS TO PART C

The FAA would not foreclose application of CCP

§ 1281.2(c) in state court proceedings even absent the

parties’ agreement. But the agreement is not absent, and

the Court need not reach the question.

V. CONCLUSION

This appeal should be dismissed or the judgment

below affirmed, summarily or on full consideration.

Dated: July 15, 1988.

Respectfully submitted,

McCutcHen, Doyie, BROWN

& ENERSEN

Davip M. HEILBRON

(Counsel of Record)

Lesue G. LANDAU

STEPHEN L. GODCHAUX

Counsel for Appellee

The Board of Trustees of the

Leland Stanford Junior University

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