# Amicus Curiae Brief — Circuit City Stores, Inc. v. Adams

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2001
- **Citation:** 532 U.S. 105

## Text

——————— Oo —— — _

No. 99-1379 FILED

_~

CIRCUIT CITY STORES, INC.. Petitioner,
Vv.

SAINT CLAIR ADAMS, Respondent.

ON WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
for the NINTH CIRCUIT

BRIEF OF THE STATES OF CALIFORNIA, ARIZONA,
ARKANSAS, COLORADO, CONNECTICUT, IDAHO,
ILLINOIS, LOWA, MASSACHUSETTS, MINNESOTA,

MISSISSIPPI, MISSOURI, MONTANA, NEVADA, NEW

JERSEY, NEW YORK, NORTH DAKOTA, PENNSYLVANIA,
VERMONT, WASHINGTON, AND WEST VIRGINIA, AS
AMICI CURIAE IN SUPPORT OF RESPONDENT

BILL LOCKYER JANET NAPOLITANO
Attorney General of the Attorney General
State of California State of Arizona
RICHARD M. FRANK
Chief Assistant Attorney MARK PRYOR
General Attorney General
LOUIS VERDUGO, JR. of Arkansas
Assistant Attorney General
CATHERINE Z. YSRAEL KEN SALAZAR
Supervising Deputy Attorney General
Attorney General State of Colorado
THOMAS P. REILLY
Deputy Attorney General RICHARD BLUMENTHAL
Counsel of Record Attorney General of the
1515 Clay Street, 20th Floor State of Connecticut
Oakland, California 94612-1413
Telephone: (510) 622-2224 (Additional counsel

Fax No: (510) 622-2121 listed on inside cover)

ALAN G. LANCE
Attorney General
State of Idaho

JAMES E. RYAN
Attorney General
State of Illinois

THOMAS J. MILLER
Attorney General
of lowa

THOMAS F. REILLY
Attorney General
of Massachusetts

MIKE HATCH
Attorney General
State of Minnesota

MIKE MOORE
Attorney General
of the State of Mississippi

JEREMIAH W. (JJAY) NIXON
Attorney General
of Missouri

JOSEPH P. MAZUREK
Montana Attorney General

FRANKIE SUE DEL PAPA
Attorney General
of the State of Nevada

JOHN J. FARMER, JR.
Attorney General
of New Jersey

ELIOT SPITZER
Attorney General
of New York

HEIDI HEITKAMP
Attorney General
of North Dakota

D. MICHAEL FISHER
Attorney General
of Pennsylvania

WILLIAM H. SORRELL
Attorney General
of the State of Vermont

CHRISTINE O. GREGOIRE
Attorney General
of Washington

DARRELL V. McGRAW, JR.
Attorney General

of West Virginia

Attorneys for Amici Curiae

BEST AVAILABLE COPY

QUESTION PRESENTED

Whether the Federal Arbitration Act should be
interpreted to apply to contracts of employment when such an
interpretation will necessarily preempt a significant body of
state law intended to protect workers’ rights and to promote
the public policy of eliminating invidious employment
discrimination.

TABLE OF CONTENTS TABLE OF CONTENTS
(continued)
Page Page
INTEREST OF THE AMICI CURIAE ............ l C. The States Have a Vital Interest in
Protection of Workers and Advancement
SUMMARY OF ARGUMENT ................. l of Public Policy Through Enforcement
of Their Employment Laws; This
RES och cc cndcccvccsceccsensceear 3 Interest Is Compromised If Employment
Discrimination Claims Are Removed
EES oc ccccccatsaceveweeuenes 3 From the Jurisdiction of State Courts
PS cc ccesnoeesesecess 9
I. THE PRESUMPTION AGAINST PREEMPTION
IN AREAS OF TRADITIONAL STATE POLICE D. A Significant Number of States Have
POWER AUTHORITY ARGUES STRONGLY Addressed These Issues in Statutory
AGAINST INTERPRETING THE FAA TO Enactments and State Court Decisions;
REACH CONTRACTS OF EMPLOYMENT .... 4 If the FAA is Interpreted to Apply to
Contracts of Employment, These State
A. Our Federal System of Dual Sovereignty Laws Would Be Subject to Preemption
Leads to a Presumption Against Wherever the Employer Has a
Preemption of State Law in Areas Connection to Interstate Commerce ....... 15
Traditionally Regulated by the States in
the Absence of an Unambiguous E. The FAA Does Not Reflect the
Statement of Congressional Intent. ........ 4 Requisite Congressional Intent to
Preempt State Law In This Area. ........ 20
B. Employment Law Is An Area of
Traditional State Regulation And Il. THIS CASE ILLUSTRATES A SECOND
Preemption Should Not Be Lightly . SIGNIFICANT ISSUE OF CONCERN TO THE
RE GEGEN ccccccncecesceuss 6 STATES: THE INCREASING TENDENCY
OF FEDERAL COURTS TO ISSUE

UNWARRANTED INJUNCTIONS AGAINST
STATE COURTS, SUPPOSEDLY IN
FURTHERANCE OF THE FAA’S POLICY TO
ENCOURAGE ARBITRATION ............ 21

iv

TABLE OF CONTENTS
(continued)
Page

lil. PETITIONER’S ARGUMENT FOR A

NATIONALIZATION OF EMPLOYMENT

LAW IS INCONGRUENT WITH OUR

SYSTEM OF FEDERALISM ............. 26
Ee hare be a ewig ete de wd as 28

Vv
TABLE OF AUTHORITIES
Page(s)

Cases
A.L. Williams & Assocs., Inc. v. McMahon

697 F.Supp. 488 (N.D. Ga. 1988) ............. 23
Alamo Rent A Car, Inc. v. Galarza

306 N.J. Super. 384, 703 A.2d 961

Pn PED 66 646 dada eases ues 17
Alexander v. Gardner-Denver Co.

I oe Oo es 12-14
Allied-Bruce Terminix Cos. v. Dobson

PS Ae ere ee 5, 24
Amalgamated Clothing Workers v. Richman Bros.

RS eee 22
Armendariz v. Foundation Health Psychcare
Services, Inc.

_ Eee... Khe,

___ Cal. Rptr.2d__—- 2000 Cal. LEXIS 6120

No. S075942 (August 24, 2000) ............... 18
Atchison T. & S.F.R. Co. v. Buell

6 ee Ee nan 66's i ees 14
Atlantic Coast Line R. Co. v. Locomotive Engineers

CS ee en ee 22

Barrentine v. Arkansas-Best Freight System
Sy CEE ob wed ecteceesecenceses 14

TABLE OF AUTHORITIES
(continued)
Page(s)

California Federal S. & L. Assn. v. Guerra

Ga EE oc ce ececeeceebeaseeeances 7
California v. Thompson

SG CEE «cob eccéseanredboseeneees 7
Chick Kam Choo v. Exxon Corp.

See DEED oc eevsetodvceeeeeseoees 22
Colorado Anti-Discrimination Commission
v. Continental Air Lines, Inc.

4 Ge eee ee 7
Commodore Home Systems, Inc. v. Superior Court

32 Cal.3d 211, 649 P.2d 912,

je & |) PPT Ereree eee 19
Copley v. NCR Corp.

183 W.Va. 152, 394 S.E.2d 751 (1990) ......... 17
Correll v. Distinctive Dental Services, P.A.

607 N.W.2d 440 (Minn. 2000) ............... 17
Craft v. Campbell Soup Co.

po | 8 | Pere ee 3
Doctor’s Associates, Inc. v. Casarotto,

gee e eT ee 19, 24
EEOC v. Wyoming

i eee eS 27

el

vii
TABLE OF AUTHORITIES
(continued)
Page(s)

Erie R. Co. v. Williams

8 Er ee 7
Ex Parte Clements

Dy GT EE cc ccccccecesvbcces 16
Fort Halifax Packing Co. v. Coyne

DT <i s Cb ttbeeseuseubeansses es 8
Gilmer v. Interstate/Johnson Lane Corp.

500 U.S. 20, 36-43 (1991)... 2. ee, 3, 13
Gregory v. Ashcroft

fF Fe eee 4-6
Holden v. Hardy

DT <setbeséevsaesecaessdess 6
Knoxville Iron Co. v. Harbison

DP EE WS.5n06646460 00600086508 7
Kremer v. Chemical Constr. Corp.

SNEED Coe neccbssetiesedesers 11
McDonald v. West Branch

DD Saving oueues ee be eeeeeei 14
McLean v. Arkansas

Pc. Stone dnb boekebe ee dete. 7
Metropolitan Life Ins. Co. v. Massachusetts

See ey CEE 6 Se RSehO ee Eso coreRceNe 8

TABLE OF AUTHORITIES
(continued)
Page(s)

Moses H. Cone Hospital v. Mercury Constr. Corp.

2 FS, = ere ree ee eee 22, 24, 25
Network Cinema Corp. v. Glassburn

357 F.Supp. 169 (S.D. N.Y. 1973) ............ 23
New York State Conference of Blue Cross &
Blue Shield Plans v. Travelers Ins. Co.

Se es ED 8 cn bee cebetnas ones ane 5
New State Ice Co. v. Liebmann

1 2 & |) rrr rrrrrrrr sees 8
Polk County v. Civil Rights Com'n,

468 N.W.2d 811 (lowa 1991) .............55. 17
Prima Paint v. Flood & Conklin

4 eS ee ee eee 12
Railway Mail Assn. v. Corsi

PPD -csée ees edeceeecienne wen 7
Rembert v. Ryan’s Steak Houses

596 N.W.2d 208 (Mich.App. 1999) ............ 18
Rice v. Santa Fe Elevator Corp.

— fs eS =Garrrreerererrrr es 5
Shaw v. Delta Airlines, Inc.

ee ee ee 7

-—_-_--- eo

ix
TABLE OF AUTHORITIES
(continued)
Page(s)
Southland Corp. v. Keating
PP ET hae ekeude ae enekaceneeuks 24
St. Louis, Iron Mountain etc. Railway v. Paul
Pa vcteueveee te veeeeewas 6
State v. Nebraska Ass'n of Public Employees
239 Neb. 653, 477 N.W.2d 577 (1991) ......... 16
Steck v. Smith Barney, Harris Upham & Co., Inc
661 F.Supp. 543 (D.N.J. 1987) .............. 17
United States v. Lopez
ee eee ee 6
Volt Info. Sciences v. Leland Stanford Jr. U.
EE 3 oan 655 4 ee 6m eee eee 20
Wertheim & Co. v. Halpert
48 N.Y.2d 681, 397 N.E.2d 386,
Se PE no cnn cusveseens se’ 17
Will v. Michigan Dept. of State Police
Cg eee a eee 6
Wright v. Universal Maritime Service Corp.
PE «ad vdecteeseand tees cee 13
Constitutional Provisions
U.S. Constitution
26

a ae a a a re

x
TABLE OF AUTHORITIES
(continued)
Page(s)
Statutes
All Writs Act
I i a Se ahd ae ie eee es eee Oe 23
Americans with Disabilities Act
oe Se eid or we oles 8
Anti-Injunction Act
ny +iCeee sees ec ceK Wee awe 23, 24
Family and Medical Leave Act of 1993
Pee eee ee 8
Federal Arbitration Act (FAA) i
a fae | Be ee eee 1, passim
National Labor Relations Act
A er eee en hee 12
DE. Js06s cena teeeesed suena aaa 7, 8, 13
Alabama Code
iD. «ts 6's 66 o0-0beeb eee eeien 16
Arizona Revised Statutes
8 ae ee eee ee 15
Arkansas Statutes Annotated

SD RD GUUED coca cece ree cccsenceee 15

TABLE OF AUTHORITIES
(continued)
Page(s)
California Government Code
«i tbb see een bee aee Se eds 9, 21
I er ara EG Gx he Nie iy aka sant ou aa 21
| Se eee ee Ty Te re ry ee rr 18
California Labor Code
I i i ig ce ne ae ee el 9
I a in i ee 9
California Unemployment Insurance Code
IY i i Gh oe ee a 9
California’s Fair Employment and Housing Act
Dc trceetese ace hk wee abe b eb Oa ke 21
Official Code of Georgia Annotated
EE Se a ee ae rer 16
Idaho Code
i 7 eh rk eas SO A ae el 16
lowa Code
ry ee ee 15
Kansas Statutes Annotated
§ 5-401 (1999) ...... PEUTe TT ee eee Te Tee eT 16
Kentucky Revised Statutes
i. + ihe ss 6 eke eae ake hoe e ke 16
en. .i yas dah ae a eee ee 15

TABLE OF AUTHORITIES
(continued)
Page(s)
Louisiana Revised Statutes
§§ 9:4216 (2000) .. 1... eee ee ee ee ees 15
Maryland Courts and Judicial Proceedings Code
Annotated
RSBIS CIID) 2. ccc cc cvecsssevessecees 16
New Hampshire Revised Statutes Annotated
Sst) Serre re eee eee eee 16
North Carolina General Statutes
8 1-967.2(19DD) ow wcrc ccccceseccsceses 16
15 Oklahoma Statutes
|) eee eee eee 15
South Carolina Code Annotated
8 15-48-10 (1999)... ccc cece cere eevee. 16
Wisconsin Statutes
) ' 0). Peers eee 15

Miscellaneous

Paul D. Carrington and Paul H. Haagen, Contract
and Jurisdiction, 1996 Sup.Ct. Rev. 331 (1996) ... 11, 12

Archibald Cox, Grievance Arbitration in the Federal

Courts, 67 Harv.L.Rev. 591 (1954) ...........---. 3

ee en

Al ee le ee Ad. ay,

Xili

TABLE OF AUTHORITIES
(continued)

Page(s)

Henry H. Drummonds, The Sister Sovereign States:
Preemption and the Second Twentieth Century

Revolution in the Law of the American Workplace,

62 Fordham L.Rev. 469 (1993)............... 6, 8

EEOC Policy Statement on Mandatory Binding
Arbitration of Employment Discrimination Disputes
as a Condition of Employment, EEOC Notice

Number 915.002, July 10,1997 ............... 11
Samuel Estreicher, Predispute Agreements to

Arbitrate Statutory Employment Claims, 72

Fs CP. CEPEETD occ cceceesececsacn 20

Matthew W. Finkin, Employment Contracts Under
the FAA -- Reconsidered, 48 Labor L.J. 329 (1997) ... 3

Matthew W. Finkin, "Workers’ Contracts" Under

the United States Arbitration Act: An Essay in

Historical Clarification, 17 Berkeley J. Emp.
COE. kc h%bGdskioee ak eee 3

Joseph R. Grodin, Arbitration of Employment
Discrimination Claims: Doctrine and Policy in

the Wake of Gilmer, 4 Hofstra Lab.

Ss Se SE 6 bs ws Wow as hs ees 3, 11, 16

Carrie Menkel-Meadow, Do the "Haves" Come Out
Ahead in Alternative Judicial Systems ?: Repeat Players
in ADR, 15 J. Disp. Resol. 19 (1999) ............ 11

xiv

TABLE OF AUTHORITIES
(continued)
Page(s)

Jean R. Sternlight, Forum Shopping for

Arbitration Decisions: Federal Courts’ Use

of Antisuit Injunctions Against State Courts, |
" . i th here rrr reer 3, passim

Stone, Employment Arbitration Under the Federal
Arbitration Act in Employment Dispute Resolution
and Worker Rights 57 (IRRA, 1989) ............ 10

Henry C. Strickland, The Federal Arbitration

Act’s Interstate Commerce Requirement:

What's Left for State Arbitration Law?,

21 Hofstra L. Rev. 385 (1992) ..........52006- 17

——— =

INTEREST OF THE AMICI CURIAE

The Attorneys General of the amici States have a vital
interest in the resolution of this case. As constitutional
officers of the States they represent, the Attorneys General
have the responsibility to oversee enforcement of employment
laws, and particularly employment discrimination laws,
within their jurisdictions. Many of the States, either through
legislation or in the decisions of their courts, have expressed
a public policy based opposition to enforcement of mandatory
arbitration agreements where individual statutory employment
rights are involved. The States’ strong interest in providing
public forums to their citizens seeking adjudication of claims
involving important statutory rights, particularly in the area
of employment discrimination, compels amici to participate
in this case.

The States strongly support the use of alternative dispute
resolution procedures when there is an extant dispute to be
resolved and when both parties voluntarily agree to resolve
the dispute via arbitration or some other alternative
procedure. Ultimately, however, each State should be
permitted to make its own determination regarding the
enforceability of mandatory arbitration agreements in the
context of employment relations. Interpretation of the Federal
Arbitration Act to include contracts of employment would
have the effect of preempting a significant body of state law.
This would deprive the amici States of their ability effectively
to regulate in an important area of traditional state police
power.

SUMMARY OF ARGUMENT
Our federal system of dual sovereignty leads to a

presumption that Congress does not preempt state law in areas
traditionally regulated by the States. To find preemption in

such areas, the Court requires a clear and manifest statement
of congressional intent.

The law of employment relations--and particularly
employment discrimination law-- is an area of traditional state
authority. The States play a vital role in the development of
employment discrimination law and they have a vital interest
in enforcing their laws in this area. In furtherance of this
interest, many States provide low-cost alternative forums for
adjudication of employment discrimination claims.

Mandatory preemployment arbitration agreements like
the one at issue in this case can frustrate the purposes of state
civil rights laws by removing employment-related disputes
from public forums and by depriving individual employees of
procedural and substantive rights. For this reason, a
significant number of States have enacted legislation
regulating the enforceability of such agreements. In other
States, such agreements have been determined to be
unenforceable as a matter of public policy.

Interpretation of the Federal Arbitration Act to reach
contracts of employment would have the effect of preempting
state law wherever the employer can demonstrate a
connection to interstate commerce. This would result in a
federalization of employment law which Congress certainly
did not intend.

This case raises an additional issue of federalism and
comity. The federal district court in this case issued an
injunction prohibiting the state court from exercising its
jurisdiction. This injunction, unaccompanied by any analysis
of the profound policy issues implicated, is an unwarranted
derogation of state courts’ ability to interpret and enforce the
law and constitutes a significant affront to federalism.
Interpreting the Federal Arbitration Act to exclude contracts
of employment will help to remedy an unfortunate trend in
this area.

Petitioner's argument that national uniformity in this area
is necessary to avoid local inconsistencies ignores the basic

federal principle that States are authorized to regulate local
matters as local conditions warrant. In particular, the States
should be free to enact and enforce laws protective of the
civil rights of their citizens.

ARGUMENT

INTRODUCTION

The amici States are persuaded by the arguments of
Justice Stevens" and by the consensus of legal scholarship ¥
that, in enacting the Federal Arbitration Act (FAA), 9 U.S.C.
§ 1 et seq., in 1925, Congress intended to and did exclude all
contracts of employment from its coverage. Respondent and
other amici have provided the Court with a thorough

1. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20,
36-43 (1991) (Stevens, J., dissenting.)

2. See Matthew W. Finkin, "Workers’ Contracts" Under the
United States Arbitration Act: An Essay in Historical Clarification,
17 Berkeley J. Emp. & Lab. L. 282 (1996); Matthew W. Finkin,
Employment Contracts Under the FAA -- Reconsidered, 48 Labor
L.J. 329 (1997). In addition to Professor Finkin’s two articles, the
Ninth Circuit relied upon articles by nine other commentators in
Craft v. Campbell Soup Co., 177 F.3d 1083 (9" Cir. 1999),
including Archibald Cox, Grievance Arbitration in the Federal
Courts, 67 Harv.L.Rev. 591 (1954), reaching or supporting the
same conclusion. To these can be added Joseph R. Grodin,
Arbitration of Employment Discrimination Claims: Doctrine and
Policy in the Wake of Gilmer, 14 Hofstra Lab. L.J. 1, 19 (1996)
and Jean R. Sternlight, Forum Shopping for Arbitration Decisions:
Federal Courts’ Use of Antisuit Injunctions Against State Courts,
147 U.Pa.L.Rev. 91, 193, n. 438 (1998) ("The federal courts have
typically found that the FAA applies to employment disputes
despite statutory language that would seem to preclude such
coverage.").

recapitulation of the textual analysis and legislative history
underlying these opinions. It is not necessary to repeat those
arguments here. Rather, this brief addresses important issues
of state sovereignty and federalism necessarily implicated in
the question before the Court.

The Court’s consideration of this question should be
informed by the knowledge that an interpretation of the FAA
to apply to contracts of employment will seriously impair the
States’ ability to enact and enforce laws protective of
employees by preempting a significant body of state law in an
area traditionally within the States’ police power. This case
also raises serious issues of comity and federalism relating to
the propriety of federal court injunctions prohibiting state
courts from exercising their jurisdiction in cases raising only
state law claims. In the absence of any clear and manifest
congressional intent to supersede state law, these
considerations should weigh heavily against interpreting the
FAA to include contracts of employment.

I. THEPRESUMPTION AGAINST PREEMPTION IN
AREAS OF TRADITIONAL STATE POLICE
POWER AUTHORITY ARGUES STRONGLY
AGAINST INTERPRETING THE FAA TO REACH
CONTRACTS OF EMPLOYMENT.

A. Our Federal System of Dual Sovereignty Leads
to a Presumption Against Preemption of State
Law in Areas Traditionally Regulated by the
States in the Absence of an Unambiguous
Statement of Congressional Intent.

"{Ojur Constitution establishes a system of dual
sovereignty between the States and the Federal Government."
Gregory v. Ashcroft, 501 U.S. 452, 457 (1991). Within this
system, the Federal Government is vested with limited

powers, while the States retain substantial sovereign
authority. /d.

"This federalist structure of joint sovereigns preserves to
the people numerous advantages." Jd. at 458. Among these
are a decentralized government more sensitive to the diverse
needs of society, the opportunity for more innovation and
experimentation in government, and increased responsiveness
of state governments as they compete for a mobile citizenry.
Id. at 458. This federalist system requires a proper balance
between the States and the Federal Government. "In the
tension between federal and state power lies the promise of
liberty." Jd. at 459.

These considerations counsel caution in examining
federal legislation arguabiy preemptive of state law in areas
of traditional state authority. While "Congress may legislate
in areas traditionally regulated by the States" as long as it acts
"within the powers granted it under the Constitution," the
Court "must assume Congress does not exercise [this power]
lightly." Jd. at 460.

The Court presumes that "Congress does not intend to
supplant state law," New York State Conference of Blue Cross
& Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 654
(1995). Indeed, in cases "where federal law is said to bar
state action in fields of traditional state regulation," the Court
operates “on the ‘assumption that the historic police powers
of the States were not to be superseded by the Federal Act
unless that was the clear and manifest purpose of Congress.’"
Id. at 655, quoting Rice v. Santa Fe Elevator Corp., 331 U.S.
218, 230 (1947).

"(T]he preemptive effect of a federal statute is
fundamentally a question of congressional intent." Allied-
Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 283 (1995)
(O’Connor, J., concurring). And "[i]f Congress intends to
alter the usual constitutional balance between the States and
the Federal Government, it must make its intention to do so
unmistakably clear in the language of the statute." Gregory,

501 U.S. at 460, quoting Will v. Michigan Dept. of State
Police, 491 U.S. 58, 65 (1989) (internal quotation marks
omitted).

The Court uses "special care when interpreting alleged
congressional intrusions into state sovereignty under the
Commerce Clause." /d. at 463 n. 1. In this context, the
Court "must be absolutely certain" of congressional intent.
Id. at 464. “[MJere congressional ambiguity" cannot be
allowed to displace state legislation. Jd. The Court's
deference to the principle of dual sovereignty serves to
maintain the vital "distinction between what is truly national
and what is truly local." United States v. Lopez, 514 U.S.
549, 567-68 (1995).

B. Employment Law Is An Area of Traditional
State Regulation And Preemption Should Not Be
Lightly Inferred In This Area.

In our federal system, employment law is clearly within
the traditional police power of the States.” This Court has
frequently ratified the States’ authority to regulate the
employment relationship as a valid exercise of the police
power. Pertinent examples include Holden v. Hardy, 169
U.S. 366 (1898) (upholding a Utah statute regulating the
employment of miners and mandating an eight-hour day); Sr.
Louis, Iron Mountain etc. Railway v. Paul, 173 U.S. 404
(1899) (upholding an Arkansas law requiring that discharged

3. In this brief, the term “employment law” refers to all labor
market regulation other than legal regulation of unions and the
collective bargaining process. It includes non-discrimination
statutes, wage and hour laws, regulation of workplace safety, and
wrongful discharge doctrines. See Henry H. Drummonds, The
Sister Sovereign States: Preemption and the Second Twentieth
Century Revolution in the Law of the American Workplace, 62
Fordham L.Rev. 469, 472 n.6 (1993).

railway workers receive back wages); Knaxville Iron Co. v.
Harbison, 183 U.S. 13 (1901) (upholding a Tennessee law
requiring that employer scrip for wages be redeemable in cash
rather than merchandise); and McLean v. Arkansas, 211 U.S.
539 (1909) (upholding an Arkansas law mandating that miners
be paid by the weight of coal they mine before it is screened).
In 1914, the Court upheld a New York statute requiring that
railroads pay their employees semi-monthly and prohibiting
employment contracts that would evade or nullify this
statutory requirement. Erie R. Co. v. Williams, 233 U.S. 685
(1914).

The Commerce Clause does not divest the States of their
power to regulate matters of local concern, even when the
regulation may have an effect on interstate commerce.
California v. Thompson, 313 U.S. 109, 113 (1941)
(upholding a California statute requiring licensure of
transportation agents). In Colorado Anti-Discrimination
Commission v. Continental Air Lines, Inc., 372 U.S. 714
(1963), the Court upheld a Colorado statute prohibiting
employment discrimination on enumerated bases including
race, observing that "the hiring within a State of an employee,
even for an interstate job," is a “localized matter." /d. at
721.

Discrimination in the workplace is especially a matter
suitable for state regulation. The Court has held that statutes
addressing workplace discrimination lie solidly within a
State’s "regulation of its internal affairs." Railway Mail Assn.
v. Corsi, 326 U.S. 88, 95 (1945). Indeed, both Congress and
this Court have acknowledged the special role the States have
played in the development of employment discrimination law.
The text of Title VII, for example, "reflects the importance
Congress attached to state antidiscrimination laws in
achieving Title VII’s goal of equal employment opportunity ."
California Federal S. & L. Assn. v. Guerra, 479 U.S. 272,
283 (1987). As the Court noted in Shaw v. Delta Airlines,
Inc., 463 U.S. 85, 100-104 (1983), States may extend their

anti-discrimination laws more broadly than federal law; Title
VII does not preempt state laws extending broader
employment protection.”

In short, in regulation of the employment relationship,
"[flederal law ... is interstitial, supplementing state law where
compatible, and supplanting it only when it prevents the
accomplishment of the purposes of the federal [enactment]."
Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724,
756 (1985). Hence, because "the establishment of labor
standards falls within the traditional police power of the
State," "pre-emption should not be lightly inferred in this
area." Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 21
(1987).

4. In his famous dissent in New State Ice Co. v. Liebmann, 285
U.S. 262, 310 (1932), Justice Brandeis observed: "It is one of the
happy incidents of the federal system that a single courageous State
may, if its citizens choose, serve as a laboratory; and try novel
social and economic experiments without risk to the rest of the
country.” Nowhere is this argument more apt than in the area of
employment discrimination law. Many States, for example,
prohibited private-sector disability discrimination before the 1990
passage of the Americans with Disabilities Act, 42 U.S.C. §§
12101-12213. At least 35 States had some type of official policy
concerning family and medical leave prior to enactment of the
Family and Medical Leave Act of 1993, 29 U.S.C. §§ 2601 et seq.
Drummonds, supra note 3, at 490 nn. 112-113.

t

C. The States Have a Vital Interest in Protection of
Workers and Advancement of Public Policy

Through Enforcement of Their Employment
Laws; This Interest Is Compromised If
Employment Discrimination Claims Are
Removed From the Jurisdiction of State Courts

and State Agencies.

Just as the States play a special role in the development
of employment law, and particularly employment
discrimination law, so they have a particular interest in
guaranteeing their citizens protection of their legal rights and
in overseeing the vindication of public policy in this area.
These concerns have led, in many States, to the establishment
of administrative forums which provide low cost alternatives
for adjudication of employment-related claims.

In California, for example, an employee who feels he or
she has suffered illegal workplace discrimination can file a
complaint with the Department of Fair Employment and
Housing, have the matter investigated, have the case
conciliated, and, if that fails and the Department considers the
complaint meritorious, have the matter decided by the Fair
Employment and Housing Commission, ail at the State’s
expense. Cal. Gov. Code, §§ 12900 ef seq. Similar
administrative forums exist for adjudication of wage disputes,
unemployment cases, and workers’ compensation claims.
Cal. Lab. Code, §§ 98 ef seg., Cal. Unemp. Ins. Code, §§
1326 et seq., Cal. Lab. Code, §§ 5300 et seg. Under some
preemployment arbitration agreements, these administrative

10

alternatives to litigation are foreclosed.® Nor can an aggrieved
employee seek enforcement of statutory rights in state court.

It is evident that use of such binding arbitration
agreements is on the increase. In its Petition for Writ of
Certiorari, Circuit City stated that it alone employs
approximately 60,000 workers potentially subject to such
dispute resolution agreements. (Petition for Writ of Certiorari
at 13.) Circuit City also refers to "large national employers"
"who use the same arbitration agreement for their entire
workforce" and to the “many hundreds of thousands of
employees"subject to such agreements nationwide. (Jd. at
10.) Over ten years ago, it was estimated that from eight to
ten percent of the entire workforce of the United States was
covered by such agreements.”

From a public policy perspective, whether this
development is salutary or pernicious may be a subject of
legitimate debate. Certainly, however, the wholesale removal
of statute-based employment claims from public forums and
their relegation to private dispute-resolution procedures with
no provision for judicial review or public scrutiny raises
significant issues particularly pertaining to the enforcement of
civil rights laws.

The Equal Employment Opportunity Commission
(EEOC) has addressed some of these issues in its policy
statement on mandatory arbitration. As the EEOC notes, the

5. The dispute resolution agreement between Petitioner and
Respondent in this case appears to allow individual employees to
"file administrative charges" with responsible state agencies. (J.A.
at 13, 22.) It is not clear whether employees can actually take
employment discrimination charges to an administrative hearing or
judicially enforce monetary awards resulting from such
administrative proceedings. (/d.)

6. See the surveys reported in Stone, Employment Arbitration
Under the Federal Arbitration Act in Employment Dispute
Resolution and Worker Rights 57 (IRRA, 1989).

a AROS I mE ET Oe SELES

11

arbitration process is private and allows for little public
accountability. Since arbitration decisions are seldom
accompanied by written opinions, they do not foster
development of the law as the published decisions of courts
and administrative agencies do. Arbitration is generally
unsuitable for resolution of class actions or pattern and
practice claims of discrimination. Procedural protections, such
as the right to jury trial and discovery, are often unavailable
to the aggrieved employee in arbitration. Arbitration systems
also incorporate structural biases which tend to favor the more
frequent user of the system. See EEOC Policy Statement on
Mandatory Binding Arbitration of Employment Discrimination
Disputes as a Condition of Employment, EEOC Notice
Number 915.002, July 10, 1997.

Further problems of fairness can arise when statutorily
guaranteed employment rights are consigned to arbitration.
These include the inherent advantage employers have in
selection of arbitrators, potentially insurmountable financial
barriers to the arbitration process for an individual worker,
loss of the right to legal counsel, and waiver of rights
available under state law, such as a shortening of the statute
of limitations and waiver of statutory remedies. Grodin,
supra note 2, at 42-48.”

To some extent, the systemic features which make
arbitration a questionable substitute for the courts and
administrative agencies in this context are inherent in the
nature and history of the arbitration process itself.
Arbitration in the United States has generally been "a nonlegal
process, often conducted by nonlawyers...." Paul D.

7. See also Carrie Menkel-Meadow, Do the "Haves" Come Out
Ahead in Alternative Judicial Systems?: Repeat Players in ADR, 15
J. Disp. Resol. 19, 39, 44 (1999), summarizing employment
lawyers’ criticisms of mandatory agreements to arbitrate statutory
employment claims and noting that "repeat players" seem to fare
better in certain kinds of employment arbitration.

12

Carrington and Paul H. Haagen, Contract and Jurisdiction,
1996 Sup. Ct. Rev. 331, 344 (1996). The arbitrator’s task is
to “effectuate the intent of the parties rather than the
requirements of enacted legislation." Kremer v. Chemical
Constr. Corp., 456 U.S. 461, 478 (1982) (internal citations
omitted). The arbitrator’s specialized competence is "the law
of the shop, not the law of the land," and "the factfinding
process in arbitration usually is not equivalent to judicial
factfinding." /d. Even if qualified to do so, arbitrators have
been under "no duty to resolve a dispute in compliance with
the parties’ legal rights." Carrington, supra, at 345. Rather,
they tend to seek a resolution "that is equitable, minimizes
harm to either party, and enables potential adversaries to
maintain a valuable commercial relationship," often by
"halving the objects in dispute." /d. This predisposition
toward compromise rather than scrupulous attention to legal
rights, though admirable in the resolution of commercial
disputes, may be incompatible with the States’ interest in
vindication of important public policy objectives through
vigorous enforcement of statutory employment rights.

This Court’s own opinions reflect a deep skepticism that
arbitration is an appropriate mechanism for the vindication of
statutory employment rights. In 1967, the Court strongly
suggested that it did not then interpret the FAA to apply to
any contracts of employment, noting that “categories of
contracts otherwise within the Arbitration Act but in which
one of the parties characteristically has little bargaining power
are expressly excluded from the reach of the Act. See § 1."
Prima Paint v. Flood & Conklin, 388 U.S. 395, 403 n. 9
(1967). See also the National Labor Relations Act, 29
U.S.C. § 151, explicitly recognizing the disparity of
bargaining power between employers and individual
employees.

A few years later, in Alexander v. Gardner-Denver Co. .,
415 U.S. 36 (1974), the Court considered whether arbitration
could provide an adequate substitute for the federal courts in

13

the vindication of Title VII claims and concluded that it could
not. The Court noted first the public policy function implicit
in any private Title VII case: "[T]he private litigant not only
redresses his own injury but also vindicates the important
congressional policy against discriminatory employment
practices." Jd. at 45. Later, the Court commented upon the
role of the arbitrator:

He is not a public tribunal imposed upon the parties

by superior authority which the parties are obliged

to accept. He has no general charter to administer

justice for a community which transcends the

parties. He is rather part of a system of self-

government created by and confined to the parties.

Id. at 52-53 n. 16.
Finally, the Court enumerated some of the ways in which
arbitral processes are "comparatively inferior to judicial
processes in the protection of Title VII rights." /d. at 57.
These include the arbitrator’s lack of expertise in the
governing law, the lack of procedural safeguards, and the lack
of a comprehensive record. /d. at 57-58. These
considerations led to the conclusion that "there can be no
prospective waiver of an employee’s rights under Title VII."
Id. at 51.

8. More recently, the Court has noted, but has not resolved,
the "tension" between Gardner-Denver and Gilmer vy.
Interstate/Johnson Cane Corp., 500 U.S. 20 (1991) (holding that
a stockbroker’s agreement to arbitrate disputes with his employer
as required by the rules of the New York Stock Exchange was
enforceable, but explicitly reserving the question whether the FAA
excludes “contracts of employment"). Wright v. Universal
Maritime Service Corp., 525 U.S. 70, 76 (1998). Amici submit
that this tension is attributable, in part, to a natural reluctance to
deprive an individual worker of statutorily-guaranteed rights on the
strength of a contract whose terms he could not realistically
negotiate.

14

In Barrentine v. Arkansas-Best Freight System, 450 U.S.
728 (1981), both the majority and the dissenting opinions
reflected doubt that arbitration provided an appropriate
mechanism for resolution of statutory employment
discrimination claims and a conviction that Congress did not
intend that such claims would be subject to binding
arbitration. As Chief Justice Burger noted:

Plainly, it would not comport with the

congressional objectives behind a statute seeking to

enforce civil rights protected by Title VII to allow

the very forces that had practiced discrimination to

contract away the right to enforce civil rights in the

courts. For federal courts to defer to arbitral
decisions reached by the same combination of
forces that had long perpetuated invidious
discrimination would have made the foxes guardians
of the chickens.
Id. at 750 (Burger, C.J. dissenting).

In a unanimous decision in 1987, the Court said that the
presumption in favor of arbitration does not apply to statute-
based employment claims. Citing Barrentine, along with
Gardner-Denver and McDonald v. West Branch, 466 U.S.
284 (1984), Justice Stevens wrote: "[NJotwithstanding the
strong policies encouraging arbitration, ‘different
considerations apply where the employee’s claim is based on
rights arising out of a statute designed to provide minimum
substantive guarantees to individual workers.’" Atchison T. &
S.F.R. Co. v. Buell, 480 U.S. 557, 565 (1987), quoting
Barrentine, supra, at 737 (construing the Railway Labor Act,
45 U.S.C. § 151 et seq., but noting that the underlying theory
applies regardless of the particular arbitration statute under
review).

Different jurisdictions may choose to address doubts
about the appropriateness of arbitration to resolve statute-
based claims of individual workers against their employers in
a variety of different ways. Under our federal system,

15

however, the States--in the exercise of their traditional police
power authority and with their expertise regarding local
conditions--should be permitted to formulate their own
individual approaches to this problem.

D. A Significant Number of States Have Addressed
These Issues in Statutory Enactments and State
Court Decisions; If the FAA is Interpreted to
Apply to Contracts of Employment, These State
Laws Would Be Subject to Preemption Wherever
the Employer Has a Connection to Interstate
Commerce.

Many States have already addressed the issues raised by
arbitration agreements in employment contracts. Arizona, for
example, exempts such contracts from the scope of its
arbitration act; the States of Kentucky, Louisiana, Oklahoma,
and Wisconsin have similar statutory provisions.” Other
States, including Arkansas, lowa, and Kansas, allow for the
enforcement of arbitration agreements between employers and
employees generally , but preclude enforcement of agreements
to arbitrate future disputes in this context.

9. Ariz. Rev. Stat. § 12-1517 (2000) (exempting “arbitration
agreements between employers and employees or their respective
representatives” from the State’s arbitration act); Ky. Rev. Stat. §
417.050 (1998) (same); La. Rev. Stat. §§ 9:4216 (2000) (excluding
“contracts of employment of labor"); 15 Okl. St., § 818 (1999)
(excluding “employer and employee relations"); and Wis. Stats. §
788.01 (1999) (excluding “contracts between employers and
employes, or between employers and associations of employes").

10. Ark. Stat. Ann. § 16-108-201 (1999) (exempting
agreements to submit to arbitration “employer-employee disputes"
“thereafter arising between the parties" from the State’s arbitration
act); lowa Code § 679A.1 (1999) (exempting “[a] contract between
employers and employees” “to submit to arbitration a future

16

Kentucky and South Carolina prohibit imposition of an
agreement to arbitrate employment disputes as a condition of
employment. Ky. Rev. Stat. § 336.700 (1998); S.C. Code
Ann. § 15-48-10 (1999). The arbitration acts of Idaho,
Maryland, New Hampshire, and North Carolina each contain
a presumption that the act shall not apply to arbitration
agreements between employers and employees unless the
agreement provides otherwise; in Maryland, New Hampshire,
and North Carolina, to be enforceable the agreement must
make specific reference to the applicable statute. Idaho Code
§ 7-901 (1999); Md. Cts. and Jud. Proc. Code Ann. § 3-206
(1999); New Hampshire Rev. Stat. Ann. § 542:1 (1999);
N.C. Gen. Stat. § 1-567.2 (1999). In Georgia, an arbitration
agreement in a "contract relating to terms and conditions of
employment" is not enforceable unless the arbitration clause
is initialed by all signatories at the time of the contract's
execution. Off. Code Ga. Ann. § 9-9-2 (2000).

In addition, the generally-applicable arbitration law of
some States affects the enforceability of pre-dispute
agreements to arbitrate employment disputes. For example,
the laws of Alabama and Nebraska preclude the enforcement
of agreements to arbitrate future disputes.“ Vermont and a

controversy"), and Kan. Stat. Ann. § 5-401 (1999) (exempting
“contracts between an employer and employees, or their respective
representatives” "to submit to arbitration any controversy thereafter
arising").

11. Ala. Code § 8-1-41 (2000) (providing that an arbitration
agreement cannot be specifically enforced); Ex Parte Clements, 587
So.2d 317, 319 (Ala. 1991) ("[uJniess the FAA is applicable, pre-
dispute arbitration agreements are void in Alabama as against
public policy"); State v. Nebraska Ass'n of Public Employees, 239
Neb. 653, 477 N.W.2d 577, (1991) (holding the Nebraska
Uniform Arbitration Act violates the Nebraska Constitution to the
extent it requires enforcement of agreements to arbitrate future
disputes).

17

number of other States have imposed procedural prerequisites
aimed at assuring notice and consent for the enforcement of
any arbitration agreement. In the absence of preemptive
federal law, these statutory safeguards would be applied to
contracts of employment.

In several States, the courts have addressed these issues.
The courts of Iowa, Minnesota, New York, and West
Virginia, for example, have held that contracts to arbitrate
policy and are, therefore, unenforceable.

12. See Henry C. Strickland, The Federal Arbitration Act's
Interstate Commerce Requirement: What's Left for State Arbitration
Law?, 21 Hofstra L. Rev. 385, 403-404 (1992), and Grodin, supra
note 2, at 18.

13. Polk County v. Civil Rights Com’n, 468 N.W.2d 811, 816
(lowa 1991) ("[T]he arbitration of civil rights violations is against
public policy.”); Correll v. Distinctive Dental Services, P.A., 607
N.W.2d 440 (Minn. 2000) (where the FAA does not preempt state
law, the Minnesota Human Rights Act provides the exclusive
method of resolving employment discrimination claims under the
Act and voids arbitration agreements purporting to waive the right
to a judicial forum); Wertheim & Co. v. Halpert, 48 N.Y .2d 681,
397 N.E.2d 386, 387, 421 N.Y.S.2d 876 (1979) (“Although
arbitration is a favored method of dispute resolution, arbitration
agreements are unenforceable where substantive rights, embodied
by statute, express a strong public policy which must be judicially
enforced."); and Copley v. NCR Corp., 183 W.Va. 152, 394
S.E.2d 751, 756 (1990)("[U]nder West Virginia law, an arbitration
clause in an employment contract cannot defeat a human rights
action filed by the claimant pursuant to [state statute]."). See also
Steck v. Smith Barney, Harris Upham & Co., Inc., 661 F.Supp.
543, 548 (D.N.J. 1987) (suggesting that the New Jersey Supreme
Court would read that State’s Law Against Discrimination as
precluding arbitration of employment discrimination claims and, in
the absence of the FAA, an agreement to arbitrate such claims
would be unenforceable under state law.) But see Alamo Rent A

18

Michigan and California have taken a different approach.
In Michigan, pre-dispute agreements to arbitrate employment
discrimination claims are enforceable, but only so long as "the
employee does not waive any rights or remedies under the
statute and the arbitral process is fair." Rembert v. Ryan’s
Steak Houses, 596 N.W.2d 208, 230 (Mich.App. 1999).
Among other things, the Rembert decision requires that the
employee have clear notice of the agreement to arbitrate and
requires that the arbitration process provide the right to legal
counsel, reasonable discovery, a fair hearing, and a neutral
arbitrator. In addition, the arbitration decision must be in
writing and must contain findings of fact and conclusions of
law and the prevailing employee is entitled to attorney fees.
Id.

The California Supreme Court recently held a pre-
employment agreement to arbitrate employment discrimination
claims unenforceable on the grounds that it violated public
policy and was unconscionably unilateral. In Armendariz v.
Foundation Health Psychcare Services, Inc., __Cal. 4" ___,
__P.2d___,___— Cail. Rptr.2d__, 2000 Cal. LEXIS 6120,
No. $075942 (August 24, 2000), the court held that such
agreements may be valid and enforceable, but only if they
incorporate substantive and procedural protections.
Specifically, they must allow for recovery of all types of relief
otherwise available in court. They must also provide for
neutral arbitrators, adequate discovery, and written arbitration
awards. The agreement may not require the employee to pay
“either unreasonable costs or any arbitrators’ fees or expenses
as a condition of access to the arbitration forum.” (/d., slip
opinion at 18.) Finally, the agreement must evidence “a

Car, Inc. v. Galarza, 306 N.J. Super. 384, 703 A.2d 961, 964
(N.J. Super.A.D. 1997) (holding that the Law Against
Discrimination does not preclude enforcement of agreements to
arbitrate employment discrimination claims but declining to enforce
such an agreement on other grounds).

19

modicum of bilaterality,” (id. at 39), that is, the employee
cannot be bound to submit his claims to arbitration if the
employer is free to litigate its claims in court.“

If the FAA is interpreted to apply to contracts of
employment, it will necessarily preempt all the state statutes
cited above whenever the employment relationship is subject
to an arbitration agreement and the employer can show a
connection to interstate commerce. Doctor’s Associates, Inc.
v. Casarotto, 517 U.S. 681, 687 (1996) (holding that
generally applicable contract defenses may be applied to
invalidate arbitration agreements without contravening the
FAA, but “state laws applicable only to arbitration
provisions" are preempted.) (Emphasis in original.) In
addition, it will call into question most or all of the state court
decisions holding such agreements unenforceable as a matter
of public policy. This will have the effect of nullifying most
state law already in place limiting the enforceability of
arbitration agreements in the employment context and of
stifling further development of state law in this important
area. ,

14. The dispute resolution agreement at issue in this case
appears to be unilateral, binding upon the employee but not upon
Circuit City. (J.A. at 21-22.) Its damages limitations appear
inconsistent with the provisions of the State’s employment
discrimination law. (Sze J.A. at 35-36, Commodore Home Systems,
Inc. v. Superior Court, 32 Cal.3d 211, 221, 649 P.2d 912, 185
Cal. Rptr. 270 (1982), and Cal. Gov. Code § 12970.) In addition,
the agreement provides that the employee “shall pay one-half of the
costs of arbitration” unless he prevails, in which case the arbitrator
“may require that Circuit City pay the [employee’s] share of the
costs." (J.A. at 33-34.) On the other hand, if Circuit City
prevails, the employee may be required to pay all costs of
arbitration. (/d.) On these bases, this agreement would probably
be held unenforceable under California law.

At one stroke, the carefully crafted individualized
approaches the States have taken to this issue would be
supplanted by a "federal common law" of employment. Yet
Congress has never undertaken to address the difficult issues
of public policy inherent in the enforcement of arbitration
agreements between employers and their individual
employees. Consequently, once the States are divested of
their authority to enact protective legislation in this area, there
will be a void in the law, with little but an inapposite
presumption in favor of arbitration to guide the courts.

E. The FAA Does Not Reflect the Requisite
Congressional Intent to Preempt State Law In
This Area.

Neither the text nor the legislative history of the FAA
evidence the clear and manifest intent required to preempt
state authority in this vital area. Certainly, "[t}he FAA
contains no express pre-emptive provision, nor does it reflect
a congressional intent to occupy the entire field of
arbitration.” Volt Info. Sciences v. Leland Stanford Jr. U.
489 U.S. 468, 477 (1989). “More importantly, the legislative
history of the FAA reveals no indication that Congress
intended to supplant state arbitration law nor even an
awareness that state law would be affected.” Strickland,
supra note 12, at 454 n. 345.

The consensus of legal scholarship is that the exclusion
of section 1 of the FAA was intended to encompass all
contracts of employment. Even those who favor extending
the FAA to cover most employment contracts acknowledge

at Mie Dee OK Eee, wii OU ee eS Te ee Sl =

21

light of the caveat that congressional ambiguity should not be
construed as expressing an intent to preempt state law in
traditional areas of state regulation, the amici States urge the
Court to interpret the FAA to exclude contracts of
employment.

Il. THIS CASE ILLUSTRATES A SECOND
SIGNIFICANT ISSUE OF CONCERN TO THE
STATES: THE INCREASING TENDENCY OF
FEDERAL COURTS TO _ ISSUE
UNWARRANTED INJUNCTIONS AGAINST
STATE COURTS, SUPPOSEDLY IN
FURTHERANCE OF THE FAA’S POLICY TO
ENCOURAGE ARBITRATION.

One aspect of the FAA’s potential "federalization" of
employment law warrants additional discussion. In this case,
the federal district court enjoined a state court from exercising
its jurisdiction. This injunction was accompanied by virtually
no analysis and relied solely upon the authority of the FAA.
This constitutes a serious affront to comity and the principles
of cooperative federalism and illustrates another derogation of
state sovereignty which would be avoided—at least in
employment cases--by properly interpreting the FAA to
exclude contracts of employment.

In this case, a California citizen filed an action against
Circuit City and three Circuit City employees in California
superior court on November 26, 1997. (J.A. at 10.) The suit
was based upon California’s Fair Employment and Housing
Act (FEHA), Cal. Govt. Code §§ 12900 ef seq., and on state

tj i i aah 1» A 24 2 of Oe see de Bieta eee,

of action. There was no basis for federal jurisdiction over the
case!

Circuit City did not seek to remove the case to federal
court. Instead, relying upon an assertion of diversity of
citizenship between itself (but not the other defendants) and
the plaintiff, it filed a Petition to Stay State Court Action and
to Compel Arbitration in United States District Court. The
district court granted this petition and, on April 29, 1998,
with virtually no discussion or analysis of the issues involved,
issued an order staying the proceedings in the California state
court action pending completion of the arbitration of
plaintiff's dispute with defendants. (J.A. at 43-45.) This
injunction, purporting to suspend the authority of a court of
the sovereign State of California to exercise its jurisdiction
over a case properly filed before it and in which the plaintiff
asserted only state law claims, raises fundamental concerns of
comity and federalism.

Our system of federalism reflects a general policy under
which state court proceedings "should normally be allowed to
continue unimpaired by intervention of the lower federal
courts, with relief from error, if any, through the state
appel'ate courts and ultimately [the Supreme] Court." Chick
Kam Choo v. Exxon Corp., 486 U.S. 140, 146 (1988)(quoting
Atlantic Coast Line R. Co. v. Locomotive Engineers, 398 U.S.
281, 287 (1970)). As the Court has repeatedly enunciated,
American jurisprudence assumes that state courts can be relied
upon to enforce federal laws and policies. See, e.g.,
Amalgamated Clothing Workers v. Richman Bros., 348 U.S.

17. “The [FAA] is something of an anomaly in the field of
federal-court jurisdiction. It creates a body of federal substantive
law establishing and regulating the duty to honor an agreement to
arbitrate, yet it does not create any independent federal-question
jurisdiction .... [E|nforcement of the Act is left in large part to the
state courts _ Moses H. Cone Hospital v. Mercury Constr.
Corp., 460 U.S. 1, 25 n. 32 (1983) (emphasis added).

511, 518 (1955) (attesting to Congress’s confidence in the
state courts to enforce federal law).

When a federal court enjoins the exercise of a state
court’s jurisdiction, it seriously “disparages state courts’
capacity for fairness." Sternlight, supra note 2, at 101. "Such
injunctions, through which a federal entity completely shuts
down the actions of a state court, may be seen as a direct
threat to comity and federalism." Jd. at 93.

Issuance of a federal injunction against a state court
requires, at a minimum, careful consideration of the All Writs
Act, 28 U.S.C. §1651(a), traditional equitable principles, the
Anti-Injunction Act, 28 U.S.C. §2283, and various absention
doctrines, each of which is extremely complex. /d. at 96.
Yet, the federal district courts have been issuing such
injunctions on the theory that they are necessary to effectuate
the purposes of the FAA "without considering many of the
statutes and doctrines that are directly on point." Jd. at 97.
As Professor Sternlight observes, almost none of the reported
decisions examine the important policy questions raised by
these cases; instead, they consist primarily of citations to
earlier cases, themselves lacking in analysis. Jd. at 98.

That characterization is unfortunately apt in this case.
Here, after a cursory reference to the Anti-Injunction Act and
an equally cursory reference to two of the cases Professor
Sternlight cites as examples of the federal courts’ failure of
analysis,“” the district court issued a stay enjoining the
California superior court from any further activity in

18. A.L. Williams & Assocs., Inc. v. McMahon, 697 F.Supp.
488, 495 (N.D. Ga. 1988) and Network Cinema Corp. v.
Glassburn, 357 F.Supp. 169, 172 (S.D. N.Y. 1973), cited in
Sternlight, supra, at 97 n. 36. The court also made glancing
reference to “Circuit City v. Gonzales," evidently an unpublished
decision of the United States District Court for the Eastern District
of California. (J.A. at 51.) It merits noting that neither Williams
nor Network Cinema is an employment case.

plaintiff's case. (J.A. at 50-51.) The district court appeared
to believe that its injunction against the state court was
authorized by Moses H. Cone Hospital, but that case does not
support the proposition that federal courts may enjoin state
courts from exercising their jurisdiction, even when the FAA
is properly invoked.

In Moses H. Cone Hospital, the Court explicitly reserved
the question "whether a federal court might stay a state-court
suit pending arbitration under [the Anti-Injunction Act,] 28
U.S.C. 2283," recognizing that such an injunction would raise
questions of federalism and comity that were not raised in that
case. Moses H. Cone Hospital, 460 U.S. at 25 n. 32. The
Court has never revisited the issue.

In the years since Moses H. Cone Hospital, the Court has
often made it clear that state courts, as well as federal courts,
are obligated to enforce the provisions of the FAA. See, e.g.,
Southland Corp. v. Keating, 465 U.S. 1, 10-16 (1984)
(reversing a California court’s refusal to compel arbitration
under the FAA); Allied-Bruce Terminix Cos. v. Dobson, 513
U.S. 265, 269-70 (1995) (holding that an Alabama court erred
in declining to enforce an arbitration agreement in a local
contract); and Doctor’s Associates, Inc. v. Casarotto, 517
U.S. 681, 683 (1996) (reversing the Montana Supreme
Court’s decision that the trial courts of Montana need not

19. In Moses H. Cone Hospital, the question was whether the
United States District Court had erred in staying its own
proceedings in favor of a prior-filed North Carolina state-court
action arguably subject to the FAA. The Court ruled that, under
the specific facts of the case, the district court ought to have issued
an order to arbitrate the dispute between two of the contestants
under section 4 of the FAA. The federal court’s authority to stay
state court proceedings pending the outcome of arbitration was not
discussed or decided.

enforce arbitration agreements under the FAA if they do not
comport with the procedural requirements of Montana’s
statutes). At this point, it well established that state
courts have the same obligation to enforce the stay provisions
of the FAA, where it applies, as do federal courts. Sternlight,
supra, at 111. Hence, the concern expressed in Moses H.
Cone Hospital regarding "the probable inadequacy of the
state-court proceeding" to prutect the rights of the party
invoking the FAA (460 U.S. at 26) appears to have
significantly diminished. Under these circumstances, Moses
H. Cone Hospital cannot be interpreted to sanction the
issuance of the injunction in this case.

As noted previously, the present case is emblematic of a
disturbing trend. Federal courts “have been far too willing to
grant such injunctions" against state courts under the supposed
authority of the FAA. Sternlight, supra, at 198. When they
do so without carefully considering the full array of policies
and doctrines implicated, they “use the force of federal
supremacy to subordinate state interests" and damage the
relationship between federal and state courts. /d. at 203.

Amici States respectfully request that the Court take this
trend into account in its consideration of this case.
Interpreting the FAA not to apply to contracts of employment
will not entirely resolve the problem, but it will direct a
significant class of cases away from the hazards Professor
Sternlight identifies. Congress assuredly did not intend that
the FAA would become a juggernaut for eliminating state
court jurisdiction over employment disputes. By eliminating
the current uncertainty regarding the scope of the statute and
clarifying that it does not apply to.employment disputes, the
Court can significantly ameliorate a situation seriously at odds
with the principles of comity and federalism.

Il. PETITIONER’S ARGUMENT FOR A
NATIONALIZATION OF EMPLOYMENT LAW IS
INCONGRUENT WITH OUR SYSTEM OF
FEDERALISM.

Petitioner and several of the amici supporting its position
argue that it is "anomalous" that "[aJn employer operating in
several states and utilizing uniform procedures and a
standardized arbitration agreement with its employees
nationwide may find that the agreement is enforceable in some
states but not in others...." (Brief for Petitioner at 34.) One
amicus observes that state law is "quite literally, ‘all over the
map’” in regard to employment arbitrations. (Brief of Amicus
Curiae the Council for Employment Law Equity In Support of
the Petitioner at 14.) Some amici further argue that the Ninth
Circuit’s decision constitutes "[a] dangerous threat" to a
"worthwhile employment practice," advantageous to
employees and employers alike. (/d. at 2-3.) These
arguments ignore our system of federalism and are ultimately
unpersuasive. ,

First, the amici States are aware of no state law that
prohibits employers and employees from _ voluntarily
submitting their disputes to arbitration or to any other
alternative dispute resolution process they choose. If
arbitration is indeed fair and advantageous to employees,
employees will readily submit their claims to arbitration. The
State statutes and decisions cited in this brief address only the
circumstance where one party no longer believes arbitration
will be appropriate or equitable and the other party seeks to
compel arbitration via the judicial process. Under these
circumstances, some States have determined that, for reasons
of public policy, some employer-employee arbitration
agreements are unenforceable under some circumstances.

Second, the fact that the States have decided these issues
differently properly reflects the fact that, under the Tenth
Amendment, the States are free to take local conditions and

preferences into account in developing their laws. Regionai
differences will appropriately give rise to variations in
employment law. This is an integral facet of our system of
dual sovereignty. As Chief Justice Burger observed:
"Barring states from making employment decisions tailored to
meet specific local needs undermines the flexibility that has
long allowed industrial states to live under the same flag as
rural states, and small, densely populated states to coexist
with large, sparsely populated ones." EEOC v. Wyoming,
460 U.S. 226, 264 (1983) (Burger, C.J., dissenting).

The FAA reflects no congressional intent to nationalize
employment law. There is nothing unfair or inequitable in
/equiring employers who choose to do business in several
States to abide by the laws each of those States enacts to
protect its citizens. Petitioner and its amici seem to argue for
a system in which the States may be divested of their
traditional role in regulating conditions in the workplace.
Under that system, employees’ rights would no longer be
protected by state legislatures-and by the decisions of state
appellate courts; instead, the rights and duties of the
employment relationship would be determined by arbitration
agreements drafted by corporate attorneys and made
enforceable by federal law.

Congress has not made this policy decision. Heretofore,
each State’s authority to protect employment rights within its
own jurisdiction has not been questioned. Amici States urge
the Court to interpret the FAA to harmonize with, rather than
to overturn, this integral feature of our constitutional system.

CONCLUSION

For the foregoing reasons, the amici States respectfully
request that the decision of the Court of Appeals be affirmed.

Respectfully submitted,

BILL LOCKYER
Attorney General of the
State of California
RICHARD M. FRANK
Chief Assistant Attorney
General

LOUIS VERDUGO, JR.
Assistant Attorney General

CATHERINE Z. YSRAEL
Supervising Deputy
Attorney General

THOMAS P. REILLY

Deputy Attorney General
Counsel of Record

September 2000

JANET NAPOLITANO
Attorney General
State of Arizona

MARK PRYOR
Attorney General
of Arkansas

KEN SALAZAR
Attorney General
State of Colorado

RICHARD BLUMENTHAL
Attorney General of the -
State of Connecticut

(Additional counsel
listed on next page)

~

ALAN G. LANCE
Attorney General
State of Idaho

JAMES E. RYAN
Attorney General
State of Illinois

THOMAS J. MILLER
Attorney General
of lowa

THOMAS F. REILLY
Attorney General
of Massachusetts

MIKE HATCH
Attorney General
State of Minnesota

MIKE MOORE
Attorney Generai of the
State of Mississippi

JEREMIAH W. (JAY) NIXON
Attorney General
of Missouri

JOSEPH P. MAZUREK
Montana Attorney General

FRANKIE SUE DEL PAPA
Attorney General
of the State of Nevada

JOHN J. FARMER, JR.
Attorney General
of New Jersey

ELIOT SPITZER
Attorney General
of New York

HEIDI HEITKAMP
Attorney General
of North Dakota

D. MICHAEL FISHER
Attorney General
of Pennsylvania

WILLIAM H. SORRELL
Attorney General
of the State of Vermont

CHRISTINE O. GREGOIRE
Attorney General
of Washington

DARRELL McGRAW, JR.

Attorney General
of West Virginia

Attorneys for Amici Curiae

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0355%3A24. Public record. Not legal advice.