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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appellees Brief
- **Published:** January 1, 1989
- **Citation:** 489 U.S. 468

## 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

4-

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?

ii

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

iv

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

37

38

40

41

42

a

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

vi

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

ix

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

x

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 bsnhaunscdssecspsuaneonsteaacessl 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.

‘
i
3
‘

33

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.

.

34

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

i

35

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.

36

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

37

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

38

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.

39

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).

40

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.

41

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.

42

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

43

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)

44

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)

45

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).

46

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.

47

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.”)

48

“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

)

49

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.

50

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

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0649%3A08. Public record. Not legal advice.