# Respondents Brief — Green Tree Financial Corp. v. Bazzle > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0614%3A08 ## Record - **Collection:** Supreme Court brief - **Document type:** Respondents Brief - **Published:** January 1, 2003 - **Citation:** 539 U.S. 444 ## Text _— Foe wn Supreme Court, U.S. wr Fyre D No. 02-634 MAR 27 2003 IN THE Supreme Court of the United GREEN TREE FINANCIAL CorP. A/K/A GREEN TREE ACCEPTANCE CorpP. A/K/A GREEN TREE FINANCIAL SERVICES CORP. N/K/A CONSECO FINANCE CorpP., Petitioner, Ve LYNN W. BAZZLE AND BuRT A. BAZZLE, IN A REPRESENTATIVE CAPACITY ON BEHALF OF A CLASS AND FOR. ALL OTHERS SIMILARLY SITUATED; DANIEL B. LACKEY, GEORGE BUGGS AND FLORINE BUGGS, IN A REPRESENTATIVE CAPACITY ON BEHALF OF A CLASS AND FOR ALL OTHERS SIMILARLY SITUATED, Respondents. On Writ of Certiorari to the Supreme Court of South Carolina BRIEF FOR RESPONDENTS MARY LEIGH ARNOLD CORNELIA T.L. PILLARD MARY LEIGH ARNOLD, P.A. Counsel of Record P.O. Box 265 GEORGETOWN UNIVERSITY Mt. Pleasant, SC 29465 LAW CENTER 600 New Jersey Ave, NW STEVEN W. HAMM Washington, D.C. 2000] RICHARDSON, PLOWDEN, (202) 662-939] CARPENTER & ROBINSON, P.A. P.O. Drawer 7788 Columbia, SC 29202 Counsel for Respondents [Additional Counsel Listed On Inside Cover] ES Eee WILSON-EPES PRINTING Co., INC. — (202) 789-0096 -— WASHINGTON, D C. 20001 (BEST AVAILABLE COPY BRADFORD P. SIMPSON D. MICHAEL KELLY B. RANDALL DONG SUGGS & KELLY LAWYERS, P.A. P.O. Box 8113 Columbia, SC 29202-0008 T. ALEXANDER BEARD BEARD LAW FIRM 1002 Anna Knapp Blvd Mt. Pleasant, SC 29464 CHARLES L. DIBBLE DIBBLE LAW OFFICES P.O. Drawer 1240 Columbia, SC 29202 CHARLES L.A. TERRENI P.O. Box 11904 Columbia, SC 29211 DANIEL WEBSTER WILLIAMS BEDINGFIELD & WILLIAMS P.O. Box 616 Barnwell, SC 29812 CHARLES RICHARD KELLY C. RICHARD KELLY, PA Post Office Box | 1648 Columbia, SC 29211 THOMAS MATTHEW FRYAR 2614 BURNEY Dr. COLUMBIA, SC 29205 QUESTION PRESENTED Whether the Federal Arbitration Act, 9 U.S.C. §§ | et seq., divests a state court of authority to allow an arbitrator to decide state-law claims on a class-wide basis in accordance with the arbitration agreement and state law. (1) —— ee TABLE OF CONTENTS QUESTION PRESENTED. ......:ccsssssssssssssssssseseesseseeees TABLE OF AUTHORITIES .........ssssssscssssssccccessesseseee i accceraeatnncecaeniielnisbeneintaaana SUMMARY OF ARGUMENT j.....cssossssssssssssssssseeeee Te THE SOUTH CAROLINA SUPREME COURT’S DECISION TO PERMIT ARBITRATION OF CLASS CLAIMS FULLY COMPORTS WITH THE FAA. .......... A. Under the FAA, State Law and Arbitrator Discretion Supply Rules of Arbitration Procedure Not Specified in an Agreement Op ee cnrncnnscsiennncdanncnsieninansinien B. FAA § 2 Preemption Is Limited to Ensuring that State Law Does Not Disfavor Arbitration .................:ccccccceeeeeeees THE FAA DOES NOT ESTABLISH A FEDERAL COMMON LAW OF CONTRACT INTERPRETATION UNDER WHICH THE ARBITRATION AGREE- MENT’S REFERENCE TO “THIS CONTRACT” WOULD FORECLOSE CEA FCCC UITS cccscenccenssesecersssnseneseesens A. Under the FAA, General Principles of State Law Govern Questions of Inter- pretation of Arbitration Agreements ......... B. The State Court Faithfully Applied State Law To Hold That The Agreement Permitted Class Arbitration ...................... (111) 20 20 30 iv TABLE OF CONTENTS—Continued 1. The State Court’s Decision Is Strongly Supported By State Law and the Terms of the Agreement ...... 2. There is No Basis for Petitioner’s Contention That The State Court “Rewrote” The Parties’ Agreement in Order To Serve its Own Policy EPA a ee lil. THE FAA DOES NOT CREATE A FEDERAL PRESUMPTION AGAINST CLASS ARBITRATION THAT WOULD FORECLOSE CLASS = ARBITRATION ___ REET EP Spurene eee nee eS A. The FAA Does Not Preempt State Court Procedures For Multiparty Arbitration ...... B. Congress Acted Reasonably in Not Blocking Class Arbitration ........................ ee ae ee aE Te Ee ND Page 36 37 38 46 50 i ee CASES Vv TABLE OF AUTHORITIES Page Allied-Bruce Terminix Cos., Inc., v. Dobson, 5\3 ea all ccnuenineetincasiecenbedneneniniancsseeaniides 24, 28, 43 Amchem Prods. v. Windsor, 521 U.S. 591 IPE ae icesicsmapebnsianeiindunntiisiphdimteenpdpnedieetemiuaaetes 49 American Airlines v. Wolens, 513 U.S. 219 Ie iicicisnninhadnidienmnendeteeS 26-27 American Dredging Co. v. Miller, 510 U.S. 443 ETI cececrssdveinntigetesitiaeiisininmeesinnemeutaniatetetmainenemnaneds 4] Blue Cross of California v. Superior Court, 78 Cal. Rptr. 2d 779 (Cal. Ct. App. 1998)... 38 Boynton v. Carswell, 233 S.E. 2d 185 (Ga. 1977) overruled on other grounds by Callaway v. Carswell, 242 S.E.2d 103 Oy SUD careisenseciniieiecnsctliciitascieiaieneierimteientibasnsnmpiniteniibamntan 38 Champ v. Siegel Trading Co., 55 F.3d 269 (7th 2 ER RE esi yee ees 16, 40, 43, 45 Connecticut General Life Ins. Co. v. Sun Life Assurance Co. v. Canada, 210 F.3d 771 (7th Deposit Guaranty Nat. Bank v. Roper, 446 U.S. gE Oa keer OAS NEN esa eo 49 Dickler v. Shearson Lehman Hutton, Inc., 596 ees Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681 ia al a ahead 24 EEOC v. Waffle House, Inc., 534 U.S. 279 Ee at Pein ene ck enn 48 English v. General Elec. Corp., 496 U.S. 72 SEES RSET RS ne een ween ne eee Sees en ee 23 Episcopal Housing Corp. v. Federal Ins. Co., ee Ie NFO ciccncitaticcnsceciieninieliiiitinin Erie Railroad Co. v. Tompkins, 304 U.S. 64 erated cicuvecveissinesininhiniediadinictibcaiadeddieitabadiulideaiiiiibetuninen 3] 4) vi TABLE OF AUTHORITIES—Continued Evins v. Richland County Historic Preservation Comm'n, 532 S.E.2d 876 (S.C. 2000)... Ex Parte Kampis, 826 So. 2d 819 (Ala. 2002)....... First Options of Chicago, Inc. v. Kaplan, 514 OF Bs Fey CII Picenensresesesnnscseresenscomeminene 28-29, 44, 48 Freightliner Corp. v. Myrick, 514 U.S. 280 Gilmer v. Interstate Johnson Lane Corp., 500 ee eee icnrnenesseinepietinnennanicingdntcbiaeanatinas: Green Tree Financial Corp. of Alabama \v. Randolph, $31 U.S. 79 (2000) .............cessseeees Gregory v. Ashcroft, 501 U.S. 482 (1991)... Hanna v. Plumer, 380 U.S. 460 (1968) .0.00........ Hines v. Davidowitz, 312 U.S. $2 (1941) 0. Howsam v. Dean Witter Reynolds, Inc., 123 S.Ct ae ae ee ee er John Wiley & Sons, Inc. v. Livingston, 376 US. Pe iithcidsadinagueastngaindunntidpsmmnaiuctentsniiben Johnson v. Fankell, 520 U.S. QUT (1997) Keating v. Superior Court, 645 P.2d 1192 (Cal. FEE -nvsniasstitettimanieginasinannatitninntsioiainmnpsenenauanintaiiien Major League Baseball Players Ass'n v. Garvey, Fe Sas Se Re Pentvcavitcisentivincnesennsetciennens 16, 22, Marina “ove Condo. Owners’ Assn., 34 P.3d 86 i ee ad IRD en hs Io nt aan Mastrobuono vy. Shearson Lehman Hutton, Inc, Fee Gee De COO Picctenssseviansecssnstnmniom 1S, 31, 32, 33, Med Center Cars, Inc. v. Smith, 727 So.2d 9 SER PO iicsieesticlicsieniieaiesisiliesishiiaieptncnioaaiititinaiiiaiiis Mitsubishi Motors Corp. v. Soler Chrvysler- Plymouth Inc., 473 U.S. 614 (1985S) 0. Moses H. Cone Mem 'l Hosp. v. Mercury Constr. I, Sar Gr Ce sccsiininninsnintiacensnctisniiaisitainn vil TABLE OF AUTHORITIES—Continued Page Myrtle Beach Lumber Co., Inc. v. Willoughby, PO ie See Ge GOED cerneencenseneseenssermeninsens 15, 30 O'Melveny & Myers v. FDIC, 512 U.S. 79 SIFU UTTscvcnantisictantstintesnanienavenmenautavemmeninnesmusens 28 Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999)... 33 Perry v. Thomas, 482 U.S. 483 (1987)... passim fhillips Petroleum v. Shutts, 472 U.S. 797 IF GFOIIEDscsslereinicarniscanneinsnciasiimsinesiotenbiaitiaeatanapianntantenes 38, 48, 49 Pittman Mortgage Co. v. Edwards, 488 §.E.2d Fe is GT Ricccinnteniniiasinneaainnanieenmenaiiaisin 16, 22 Plaza Development Services v. Joe Harden Builder, Inc., 365 $.E.2d. 231 (S.C. Ct. App. SIT acshiesivenietiecabalibeasiilaatseieleiniialiicniisisidaiiabinsiehinildduaes 15 Shearson American Express v. McMahon, 482 ek I Eiricnicieniesemeninaiteciiceininasinamineee 25 Southern Atlantic Fin. Services, Inc. _ v. Middleton, 562 S.E.2d 482, 486 (S.C. Ct. App. IEITTITTT crsshasheeoreavipuibineastevindesaediesiainaliallalanisdbialtinapianaeaeaits 30 Southland Corp. v. Keating, 465 U.S | (1984)...... passim State v. Berger, 567 S.E.2d 265 (W.Va. 2002), cert. denied sub nom Friedman's Inc. v. West Virginia, 123 S.Ct. 695 (2002)... cceeeeees 40 Textile Workers Union of America v. Lincoln ee 40 Ting v. AT&T, 319 F.3d 1126 (9th Cir. 2002)....... 40) Tilley v. Pacesetter Corp., 508 $.E.2d 16 (S.C. ne ee 6 Volt Info. Sciences Inc., v. Bd. of Trustees, 489 Si Se A icsetcciitceBesmaincinianntssinsvetaniiiahone: passim Zabinski v. Bright Acres Assocs, 553 §.E.2d 110 Vill TABLE OF AUTHORITIES—Continued STATUTES Page ions Uh vaieishiesinieieiiattchael ahi Sea 42 i iesthiinhaaticatlaataiiagiailidaiaaic halide ica las passim i arsieniiishaiiniehiaiidaechdnschensisillcaetanantiaadanitinaeaid 42 I i isciepibhinisitiaininpiaieabaeieinieipsibcaatabiitadile 16, 42, 43, 45 iy Weinpiciieihilleitneiapiibiepdd ahi 21 iP Soe essiesiiiiipaiadahiabiabialienideiiaininndiniieaseasaiuaanmetinini 17 B.C. Come Ame. GO 1S-4B- 16 .nn..cccccccccccccccscccecessscoses 21 fe eenaaeree 16-17 Be acre 22 i Sapo cidisisicisteblahituiaibcaiiiiiieaies 48 fe eren 5 OE cintnsitadusittenniniiinidiidas 5 a ne AU Pe i dclacisinsitcthitiienittniaabtsbiiaclabiatdsi 5 atin UU idlahihiahdinieaiii tia ia ah a 6 RULES 8 «Rf RIE R eer a ee 48 SR eee ee 41,45 es Ns es i 45 SaaS. Aili iaiesiiciainoasbinnseheiippaiidhenuniidnuiesiemamtebiieeoniigis 12,31 OTHER AUTHORITIES American Arbitration Association website, http:// www.adr.org/index2. | jsp?JSPssid=15739 ........ 25 NASD Code of Arbitration Procedure, Section STD siadtcicsiiietibesiariennseinoudhassiebiadiiininiihiitieicatac 50 Ralph K. Anderson, Jr., SOUTH CAROLINA © REQUESTS TO CHARGE - CIVIL, § 19-7 Contract Rules of Construction (2002).............. 30 Restatement (Second) of Contracts §206 (1981)... 31 Sternlight, Arbitration Meets the Class Action, 42 Wm. & Mary L. Rev. 1, 8 (2000) .........00000... 50 wae ae IN THE Supreme Court of the United States No. 02-634 GREEN TREE FINANCIAL CorpP. A/K/A GREEN TREE ACCEPTANCE Corp. A/K/A GREEN TREE FINANCIAL SERVICES CORP. N/K/A CONSECO FINANCE COoRP., Petitioner, Vv. LYNN W. BAZZLE AND BuRT A. BAZZLE, IN A REPRESENTATIVE CAPACITY ON BEHALF OF A CLASS AND FOR ALL OTHERS SIMILARLY SITUATED; DANIEL B. LACKEY, GEORGE BUGGS AND FLORINE BUGGS, IN A REPRESENTATIVE CAPACITY ON BEHALF OF A CLASS AND FOR ALL OTHERS SIMILARLY SITUATED, Respondents. On Writ of Certiorari to the Supreme Court of South Carolina BRIEF FOR RESPONDENTS STATEMENT This case concerns whether the Federal Arbitration Act (“FAA”) requires that an arbitration clause, governed by state law and interpreted by the state’s highest cor .* to allow class arbitration, be reinterpreted under a new federal standard of FAA contract interpretation to foreclose class arbitration. Green Tree wrote a sweeping arbitration clause in its standard-form adhesion contract and imposed it on respon- dents when they obtained mortgage-secured financing from Green Tree for home improvements or manufactured housing 2 in South Carolina. That agreement stated that it would be “governed by the law of the State of South Carolina,” R. App. 2162, which permits class arbitration in the absence of contract language specifically forbidding it. Employing standard rules of contract interpretation applicable to all other contracts, the state high court held that Green Tree’s clause “does not limit the arbitration to non-class arbitration,” Pet. App. 19a, and that South Carolina law permits class-wide arbitration, id. at 2la-22a. Under these circumstances, it is consistent with the FAA for respondents to pursue their wholly state-law claims in an arbitration class action. Years before respondents filed these cases, Green Tree had been held liable to other individuals for the same violations at issue here. Rather than correct its unlawful conduct, Green Tree continued to impose its illegal credit procedure on thousands of additional borrowers. The arbitrator found that Green Tree had engaged in “wilful, wanton and egregious” disregard of state law. Pet. App. 108a. After persisting for years in wholesale violation of the South Carolina Consumer Code (“Consumer Code”), undeterred by successive individ- ual cases, Green Tree opposes class treatment in this case. When respondents sought redress for Green Tree’s pred- atory lending practices, they were bound by contract to arbi- trate before an arbitrator chosen by Green Tree. Respondents filed their two complaints as class actions, and the arbitrator decided to proceed on a class-wide basis in both cases. Green Tree objected to class arbitration, however, asserting that it was foreclosed by the arbitration clause. Every legal decision maker to have considered the question—including the arbitra- tor himself and the state courts up to and including the South Carolina Supreme Court—has uniformly concluded that the agreement permitted class arbitration, and that respondents’ claims were appropriately arbitrated on a class-wide basis. Green Tree now seeks to convert the state-law question of the scope of the arbitration clause into a federal question under ro 3 the FAA. That position is untenable. Green Tree advocates a dramatic expansion of the reach of the FAA into routine matters of state law that was never intended by Congress and cannot be squared with this Court’s cases. 1. The Arbitration Agreement. Petitioner Green Tree drafted the arbitration agreement at issue in this case and included it in a standard form consumer Retail Installment Contract and Security Agreement (“Agreement”). Green Tree presented the Agreement on a take-it-or-leave-it basis to each member of the respondent class when the prospective borrower sought to purchase manufactured housing or home improvements financed by Green Tree. The underlying claim common to all the class members is thus governed by the same arbitration clause in the same standard-form contract of adhesion. Green Tree’s Agreement barred the use of juries, but otherwise said nothing about procedures for arbitration. In- stead, it generally provided that “this contract will be govern- ed by the law of the State of South Carolina.” R. App. 2162. South Carolina law permits class arbitration, and neither the arbitration provision nor any other document Green Tree used in the transactions at issue made any reference to waiver of class actions. The arbitration clause stated only that the par- ties waived their right to a jury trial, both in arbitration and in court. Pet. App. 110a.' Not until November 1998, well after the parties had completed the transactions at issue in this case, did Green Tree amend its arbitration clause to require signatories to waive their right to “to participate as a repre- ' Green Tree’s arbitration clause preserved Green Tree’s own right to elect to go to court when if sought enforcement of any “mortgage, deed or trust, or other security agreement,” yet provided that any such suit would not impair Green Tree’s right to compel purchasers to arbitrate their claims, including any counterclaims to claims Green Tree filed in court. Pet. App. Illa. 4 sentative or a member of any class of claimants pertaining to any claim arising from or relating to this agreement.” Green Tree’s Agreement provided for mandatory, binding arbitration of “[a]ll disputes, claims, or controversies arising from or relating to this contract or the relationships which result from this contract, or the validity of this arbitration clause or the entire contract.” The Agreement specifically granted the arbitrator authority over “all disputes arising under case law, statutory law, and all other laws, including, but not limited to, all contract, tort, and property disputes.” The Agreement did not set forth arbitration procedures, but instead conferred on the arbitrator “all powers provided by the law and the contract.” Those powers, the agreement stated, “shall include all legal and equitable remedies, including, but not limited to, monetary damages, declaratory relief, and injunctive relief.” Pet. App. 1 10a. 2. The Underlying Claims. The respondent classes assert only state-law, non-diversity claims arising under the Consumer Code. The Bazzle and Lackey cases, consolidated in the final opinion issued by the South Carolina Supreme Court, began as two class actions arbitrated separately before the same arbitrator. Purchasers of mobile homes comprise the Lackey class, and purchasers of home improvements comprise the Bazzle class. Both cases involve real-estate secured transactions, all of which Green Tree structured in the same way, using the same agreement, and all of which were affected by the identical violation of state consumer law. As the arbitrator ultimately found, Green Tree violated the class members’ rights by systematically ignoring a clear statutory requirement that creditors in real-estate secured transactions * See Resp. Reply Brief to Amici Curiae, filed in No. 00-CP-18-443 (Supreme Court of South Carolina), at 6 & Attachment A. The validity of those agreements is not at issue in this case. 5 alert consumers of the need to retain their own lawyers and insurance agents to represent their interests. a. The South Carolina Attorney Preference law. \n \982, the South Carolina General Assembly (“General Assembly’’) amended the Consumer Code to relieve creditors of usury restrictions, but sought to protect consumers against predatory lending practices by reinforceing consumers’ right to legal representation and insurance advice in real-estate secured transactions. The 1982 Consumer Code amendments elimi- nated caps on the interest rates that creditors could charge for consumer credit, and authorized creditors to charge certain fees. 1982 S.C. Act 385 § 56. To safeguard consumers, the General Assembly also included a requirement that creditors advise each consumer of his or her right to retain an attorney and insurance agent to provide professional services at the closing of real estate transactions. S.C. CODE ANN. § 37-10- 102 (the “Preference Statute”).” Under the Preference Statute, the creditor was required to record on the first page of each credit application the consumer’s chosen representa- tives. /d. The Preference Statute applies to all consumer loans secured by real estate without regard to whether the underlying contract contains an arbitration clause. The Gen- eral Assembly enacted the Preference Statute to prevent creditors from locking consumers into usurious interest rates or other unfair contract terms and securing those loans with * Section 37-10-102(a) provides, in pertinent part: Whenever the primary purpose of a loan that is secured in whole or in part by a lien on real estate is for a personal, family or household purpose—{a) The creditor must ascertain the preference of the borrower as to the legal counsel that is employed to represent the debtor in all matters of the transaction relating to the closing of the transaction and . . . the insurance agent to furnish required hazard and flood property insurance in connection with the mortgage and comply with such preference, and the credit application on the first page thereof must contain information as is necessary to ascertain these preferences of the borrower. 6 the consumer’s real estate without the consumer having the benefit of an attorney and insurance agent to give advice. In the absence of professional guidance, consumers often fail to appreciate the terms and the total dollar cost of a “deal.” and may remain unaware that a loan will be secured by liens on their real property that can hinder property sale or lead to forfeiture if payment is not timely made. R. App. 1720, 1722. In May 1997, after both the Bazzle and Lackey complaints had been filed, the General Assembly amended the Preference Statute. The Preference Statute previously placed no special limits on the right of consumers to proceed against violators on a class-wide basis. See Tilley v. Pacesetter Corp., 508 S.E.2d 16, 21 (S.C. 1998). The statute’s pre-1977 penalty provision also provided that violators could be required to forfeit the total amount of the loan finance charge, repay to the consumer double the amount of interest collect- ed, pay costs of the action, and allow the consumer to repay the balance of the loan without any loan finance charges. See Tilley, 508 S.E.2d at 36 n.2. The 1997 Preference Statute amendments foreclosed future class actions for violations of the Preference Statute and established a fixed penalty range of $1,500-$7,500. The same amendment, however, expressly directed that all Preference Statute cases “filed as class actions, without regard to certification, prior to May 2, 1997, may proceed.” 1997 S.C. Act 99 § 5. Bazzle and Lackey were both filed before that date, and the General Assembly was aware of the pendency of these and other Preference Statute class actions when it amended the Consumer Code. See R. App. 75a. b. The Transactions. As noted above, the two cases at issue here involve two types of transactions secured by South Carolina real estate: mobile-home purchase transactions (Lackey) and home-improvement transactions (Bazz/e). — —— a ; In a typical mobile-home transaction (litigated in Lackey), the purchaser entered into a preprinted consumer installment contract and security agreement with Green Tree to buy a mobile home. Green Tree's dealer had the purchaser fill out a Green Tree credit application. The credit application did not include the required Preference Statute disclosure. If Green Tree elected to extend credit, it set the terms of the credit, prepared all the necessary documents for closing, and wane- mitted the documents to its dealer. The documents included a mortgage prepared by Green Tree. The mortgage, on its face, directed the local recording office to return tt directly to Green Tree. No attorney was involved in those transactions, nor were consumers advised of the need to consult counsel. Pet. App. 87a-88a. The Bazzle transaction is typical of a home-improvement transaction. A home-improvement contractor offering financ- ing through Green Tree solicited customers Goer-to- it can be read affirmatively to authorize such a procedure, and certainly provides no more than the most strained support for petitioner’s contrary reading. First, the Agreement’s own choice-of-law clause authorized the application of South Carolina law to the arbitration in this case, and South Carolina law permits class actions in arbitration as well as litigation. See S.C. R. Civ. P. 23 (authorizing class actions); Pet. App. 21a (“no case law or statute in South Carolina prohibits class-wide arbitration’) (citing Episcopal Housing Corp. v. Federal Ins. Co., 255 a contract is entered into upon a form prepared by a party, the language of the contract will be strictly construed against that party.”) '* See Restatement (Second) of Contracts § 206 (1981) (“In choosing among the reasonable meanings of a promise or agreement or a term thereof, that meaning is generally preferred which operates against the party who supplies the words or from whom a writing otherwise proceeds.”). '° Compare Green Tree's revised standard form contract containing an express waiver of buyers’ rights to bring participate in class actions, supra at 3-4. 32 S.E.2d 451 (S.C.1979) (authorizing consolidated arbitration in appropriate circumstances)). Green Tree’s contract ex- pressly states that “this contract will be governed by the law of the State of South Carolina.” R. App. 2162. The Agreement fails to specify any other set of procedural rules to govern the arbitration, making state law a natural source to fill that gap. Under South Carolina law, “state procedural rules that do not undermine the enforceability of an otherwise valid contract to arbitrate may be deemed to have been incorporated into a contract through choice of law previsions.” Zabinski v. Bright Acres Assocs., 553 S.E.2d 110, 118 (S.C. 2001). Green Tree’s own choice-of-law provision thus incorporates the South Carolina default rule permitting class arbitration.'° Second, the Agreement expressly grants to the arbitrator “all powers provided by the law and the contract,” which are fairly understood to include the authority to certify a class. The power to certify a class is a power provided by South Carolina law, even if it is not otherwise expressly provided by a contract. See R. App. 62-63 (trial court refusing to enjoin class arbitration because contract’s “all powers provided by the law” clause authorizes it). Third, the Agreement gives the arbitrator power over “all disputes” arising under any source of law whatsoever. Just as '© Mastrobuono’s treatment of the New York choice-of-law provision is not to the contrary. There was language in the Mastrobuono contract that contradicted application of the choice-of-law clause to the disputed damages question, 514 U.S. 58-59, and such contradictory language is lacking here. Moreover, as the Court noted in Mastrobuono, it was reviewing “a federal court's interpretation of [a] contract,” which was not entitled to any special deference. The precedent more relevant to a state case like this one is Volt, in which the contractual choice of state law supported application of state multiparty arbitration rules. This case, like Volt, 489 U.S. 486, is governed by the rule of “defer[ence] to the [state] court's construction of its own State's law.” Mastrobuono, 514 U.S. at 60 n. 4 (distinguishing Volt on that ground). 33 the reference to “any controversy” in the agreement at issue in Mastrobuono supported the arbitrator’s authority to award punitive damages, so, too, the broad reference to “all disputes” in the Green Tree agreement permits the arbitrator to decide whether the arbitration should proceed on a class- wide basis. See also Conn. Gen. Life Ins. Co. v. Sun Life Assurance Co. of Canada, 210 F.3d 771, 774, (7th Cir. 2000) (Posner, J.) (applying “usual methods of contract interpre- tation” to hold that agreement to arbitrate “any dispute arising out of the interpretation, performance or breach of this Agreement “authorized consolidation of arbitration because “the word ‘dispute’ . . . does not exclude a dispute involving multiple parties”). Fourth, the Agreement specifies that the arbitrator’s authority is not limited to simple contract remedies, but includes “equitable” powers. That reference can reasonably be read to encompass authority to certify a class. “[T]he class action was an invention of equity to enable it to proceed to a decree in suits where the number of those interested in the litigation was too great to permit joinder.” Phillips Petroleum v. Shutts, 472 U.S. 797, 808 (1985) (emphasis added); see Ortiz v. Fibreboard Corp., 527 U.S. 815, 832-837 (1999); Dickler v. Shearson Lehman Hutton Inc., 596 A.2d 860 (Pa. 1991) (holding that authority to conduct class arbitration is an equitable power of the arbitrator). Fifth, the contract’s express waiver of the right to a jury implies that other questions of arbitration procedure were left to background principles of law and the arbitrator’s discre- tion. South Carolina courts recognize as a general matter of contract interpretation that “expressio unius est exclusio alterius,” i.e., the expression of one thing implies the exclu- sion of another. Evins v. Richland County Historic Preser- vation Comm'n, 532 S.E.2d 876 (S.C. 2000). That principle suggests that the Agreement, which expressly required buyers 34 to waive their jury trial rights, did not effect a waiver of any other specific procedures. Petitioner’s principal argument is that the Agreement’s reference to disputes arising from or relating to “this con- tract” precludes class arbitration. But the clause in which that phrase appears refers to the underlying substantive claims and defenses that must be arbitrated, and not to the procedures that the arbitrator should use in conducting the arbitration. It states: All disputes, claims or controversies arising from or relating to this contract or the relationships which result from this contract, or the validity of this arbitration clause or the entire contract, shall be resolved by binding arbitration .... Pet. App. 110a. That clause does not address multiparty issues at all, but only makes clear that the agreement to arbitrate encompasses not only contract claims as such, but related tort or statutory claims, as well as gateway issues such as the validity of the Agreement. As Petitioner itself charac- terizes it, that clause “identifies the matters that will be subject to arbitration.” Pet. Br. 8. There is no question that the underlying claims of all the class members “relate[d]” to the identical contracts they entered with Green Tree. Given that the law in South Carolina does not prevent an individual party to a bilateral contract to act as a class representative in order to pursue claims relating to that contract in a class action, there is no reason to think that the arbitrator would lack the power to authorize a plaintiff to play a similar representative role in an appropriate case pending in arbitra- tion. If the Agreement contained the same sentence, but with the word “litigation” in place of “binding arbitration,” nobody would contend that the terms operated sub silentio to foreclose class actions. Even assuming the reference to “this contract” could some- how be read to be relevant to procedures rather than to the 35 substantive matters to be arbitrated, it would not foreclose class arbitration. It provides for arbitration, not just of claims “arising from” the contract, but of any “disputes . . . relating to this contract or the relationships which result from this contract.” The dispute over whether class arbitration is permissible “relates to” the contract and the relationships that derive therefrom. It is a dispute about whether the named plaintiffs may, in the context of their suit against the defend- ant, play a role as representatives of other persons similarly situated with respect to the defendant. The dispute also “relates to” the substantive “claims” because it turns on the typicality and commonality of the named plaintiffs’ claims vis-a-vis those of the unnamed class members. The sentence is devoid of limiting language that would support the notion that the arbitrator could consider only procedural issues relating exclusively to the two parties and not to identical claims presented by similarly situated others under the same contract language. Green Tree’s reliance on the clause referring to “arbitration by one arbitrator selected by us with consent of you” fares no better. That clause sets forth the parties’ respective roles in the selection of an arbitrator. It plainly was not designed to limit the scope of any arbitral dispute to one that is necessarily “bilateral.” Pet. Br. 39. Nor does the clause guarantee Green Tree the right “to select, in the first instance, the individual who would have authority to resolve the disputes arising from or relating to each specific contract.” Id. at 43. Indeed, that argument is wholly circular: If the Agreement is otherwise consistent with class arbitration, as we have argued and the state high court held, then Green Tree's selection of an arbitrator for any given plaintiff's claim was subject to the possibility that the case might go forward under that arbitrator on a class-wide basis. That argument is also particularly weak in this case because plaintiffs filed class 36 complaints in both Bazzle and Lackey, putting Green Tree on actual notice in both cases that its selection of an arbitrator for each case would (unless one of its other anti-class- arbitration arguments prevailed) amount to selection for purposes of the class action." Green Tree’s contention that the Agreement precludes class arbitration is utterly implausible. As we have shown, the Agreement’s terms, viewed evenhandedly under South Carolina contract law, squarely refute Green Tree’s objection that class arbitration is contractually “foreclosed.” Pet. Br. 42. The Agreement does not specifically mention class proceedings, just as the contract in Mastrobuono did not mention “punitive damages,” but the Agreement here, as there, “strongly implies” the disputed coverage. 514 U.S. at 60. Green Tree is responsible for any ambiguity in its Agreement, and thus “cannot now claim the benefit of the doubt.” Mastrobuono, 514 U.S. at 63. 2. There is No Basis for Petitioner's Contention That The State Court “Rewrote” The Parties’ Agreement in Order To Serve its Own Policy Preferences Only in the most exceptional cases, in which a state court has somehow distorted its law in a manner that discriminates against or is hostile to arbitration rights, are questions of state law subject to preemption under the FAA. See Point |. B., supra. Petitioner can show no such discrimination or hos- '’ The unnamed class members’ right under the Agreement to withhold their consent to Green Tree's selected arbitrator was preserved by the right to opt out of the plaintiff classes—a right which several class members elected to exercise. Moreover, in the context of a class action, the reference to “you” may be read as plural. See Conn. Gen. Life Ins. Co., 210 F.3d at 775 (Posner, J.) (reading reference to “each party” in context of arbitrator selection provision to refer to each “side” in the dispute). a 8 ar ss A wir Mab enter >. Ee 37 tility, and accordingly resorts to inflated rhetoric, asserting repeatedly that the state court “modified,” “rewrote,” “re- formed,” “distorted” or “attempted to improve upon” the written terms of the parties’ contract, “disregarding” or “ignoring” Green Tree’s chosen language in order to “im- pose,” “intrude” or “superimpose” on it the court’s own pol- icy preferences. See, e.g., Pet. Br. 3, 4, 5, 15, 18, 22, 23, 24, 25, 28, 30, 31, 32. Shom of the rhetoric, however, petitioner’s argument amounts to nothing more than a quibble with the arbitrator’s and the state court’s uniform interpre- tation of the contract. All of Green Tree’s expressions of outrage do not change the fact that, even if the state court erred in applying its own law, which it plainly did not, there is no federal issue in this case. For example, petitioner decries what it characterizes as the State “impos|ing] on the parties its own notions of ‘efficiency and equity.” Pet. Br. 32; id. at 3. The court did no such thing. Rather, as explained above, the court applied ordinary, arbitration-neutral principles of contract interpretation and found that the Agreement was at best ambiguous regarding class arbitration and that, under state law, class arbitration procedures were therefore available in appropriate cases. Petitioner wholly miscasts the role of the “efficiency and equity” inquiry to which the state court referred. Far from signaling any free-ranging power to rewrite contracts to suit the court’s own notions of fairness, the terms refer to considerations relevant to an arbitrator’s decision whether to certify a class where class procedures are an available option under the contract. iil. THE FAA DOES NOT CREATE A FEDERAL PRESUMPTION AGAINST CLASS ARBITRA- TION THAT WOULD FORECLOSE CLASS ARBITRATION HERE Where, as here, an agreement to arbitrate does not expressly provide for or prohibit class arbitration, the South 38 Carolina background rule permits it. Although another state might apply 4 different default rule,'* there is no preemptive FAA background rule against class arbitration that foreclosed South Carolina state law from permitting it here. Indeed, petitioner’s concession (Pet. Br. 32) that parties are free to agree to class-wide arbitration without running afoul of the FAA makes any suggestion of an inherent conflict untenable. A. The FAA Does Not Preempt State Court Procedures For Multiparty Arbitration Conflict preemption requires a showing that state law actually conflicts with federal law. Yet the FAA is wholly agnostic as to class arbitration. Petitioner consequently cannot point to any actual conflict here. This Court in Volt recognized that state procedures for multiparty arbitration are compatible with the FAA. The Court ruled that the FAA did not preempt a state-law procedural rule that authorized arbitration of state-law claims to be stayed pending litigation of related claims among parties not subject to arbitration. 489 U.S. 468. As the Court noted, “the FAA itself contains no provision designed to deal with the special practical problems that arise in multiparty contractual disputes when some or all of the contracts at issue include contracts to arbitrate.” /d. at 476 n. 5. California '* Compare Med Center Cars, Inc. v. Smith, 727 So.2d 9, 19-20 (Ala. 1998) (denying class arbitration where agreement did not specifically provide for it) with Dickler v. Shearson Lehman Hutton, Inc., 596 A.2d 860 (Pa. 1991) (allowing class arbitration as within arbitrator's equitable powers); Keating v. Superior Court, 645 P.2d 1192 (Cal. 1982), rev ad in part on other grounds sub nom Southland Corp. v. Keating, 465 U.S. | (allowing class arbitration where agreement does not foreclose it); Blue Cross of California v. Superior Court, 78 Cal. Rptr. 2d 779 (Cal. Ct. App. 1998) (finding state rule permitting class arbitration not preempted by FAA); Boynton v. Carswell, 233 S.E. 2d 185 (Ga. 1977) (allowing class arbitration in challenges to local taxes), overruled on other grounds by Callaway v. Carswell, 242 S.E.2d 103 (Ga. 1978). 39 “ha[d} taken the lead in fashioning a legislative response to this problem, by giving courts authority to consolidate or stay arbitration proceedings in these situations in order to minimize the potential for contradictory judgments.” /d. Application of the California rule was arguably hostile to arbitration because it allowed the state court to stay arbitra- tion pending the resolution of related litigation, the result of which might then control the arbitration. The Court in Volt nonetheless found no actual conflict with the FAA’s “healthy regard for the federal policy favoring arbitration,” id. at 475, and thus no preemption. Under Volt, South Carolina’s approval here of class arbitration is a fortiori not preempted by the FAA. Like the agreement in Vo/t, Green Tree’s Agreement included a clause specifying that state law would govern. R. App. 2162. South Carolina, like California in Volt, has expressed its own state policy with respect to a question of multiparty arbitration. Here, the state has chosen not to foreclose a class proceeding where an agreement allows it and the arbitrator has elected to permit it. Because it facilitates arbitration, South Carolina’s rule is even more compatible with the FAA than the California rule at issue in Volt. The arbitrator did in fact conduct class arbitration here, and South Carolina’s allowance of it eased rather than obstructed arbitration of the parties’ disputes. Respondents here do not assert an entitlement to bring a class action that would divert the case from arbitration into court. Unlike the plaintiff in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), they do not rely on class-action rights as a ground for relief from an agreement to arbitrate. /d. at 32 (rejecting contention that potential unavailability of class arbitration of ADEA claim renders it unfit for arbitration). Rather, respondents joined together as a class in order more efficiently to resolve their claims within arbitration. Nothing in this Court’s FAA preemption jurisprudence suggests that application to arbitra- 40 tion agreements of arbitration-neutral state law which facilitates arbitration is at odds with the FAA." Petitioner identifies only one lower-court case, Champ v. Siegel Trading Co., 55 F.3d 269 (7th Cir. 1995), to support its contention that the FAA mandates a presumption against class arbitration. Champ does not apply here, however, be- cause it rests on FAA § 4, which is inapplicable in state court. By their own terms, each of the FAA procedural provisions that addresses trial-court procedures at the threshold of arbitration applies only to federal courts and does not address the role of state courts. See 9 U.S.C. § 4 (regarding procedure to be used in “any United States district court” to initiate arbitration in cases presenting federal claims); id. § 3 (regard- ing procedure for obtaining a stay of litigation “brought in any of the courts of the United States” pending completion of arbitration); Southland, 465 U.S. at 16 n.10. Such a “federal procedural right . . . simply does not apply in a nonfederal forum.” Johnson v. Fankell, 520 U.S. 911, 921 (1997). Even if the FAA’s procedural provisions supported a presumption against class arbitration in federal court, those provisions in no way bar states from authorizing their trial courts to make class certification decisions before sending cases to arbitration. See Volt, 489 U.S. at 476-477; Southland, 465 U.S. at 31 (O’Connor, J., dissenting) (state courts should be allowed to fashion their own procedures for enforcing the substantive federal rights, if any, that the FAA creates). There is no more cause for petitioner’s concern (Pet. Br. 28) about potentially different state and federal threshold pro- cedures for arbitration than there is about the routine use of '° This case does not present the question whether the FAA preempts state law that abrogates express waivers of rights to proceed on a class basis, such as by rendering unconscionable contracts that waive the right to proceed as a class. See, e.g, Ting v. AT&T, 319 F.3d 1126 (9th Cir. 2002); State v. Berger, 567 S.E.2d 265 (W. Va. 2002), cert. denied sub nom Friedman's Inc. v. West Virginia, 123 S.Ct. 695 (2002). LE Leary as 4) different procedures in state and federal courts under Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938). See American Dredging Co. v. Miller, 510 U.S. 443, 451-452 (1994) (despite potential disuniformity, Jones Act does not preempt state law on forum non conveniens for cases brought in state court under the Act).”° In light of the sovereign autonomy of the states to structure their own court procedures as they see fit, it is doubtful whether Congress could, consistent with constitutional princi- ples of federalism, preempt state-court procedures for certi- fying a class at the threshold of arbitration. At a minimum, a plain statement of Congress’s intent to do so should be re- quired before state courts’ procedural rules are ousted. Cf. Gregory v. Ashcroft, 501 U.S. 452, 460 (1991). Yet the FAA says nothing whatsoever about state procedures, much less class arbitrations, apart from the general nondiscrimination principle it embodies. The states ordinarily “have great latitude to establish the structure and jurisdiction of their own courts,” and a “neutral state rule regarding the administration of the state courts” should not lightly be preempted. Fankell, 520 U.S. at 919 (citing, inter alia, Southland, 465 U.S. at 33 (O’Connor, J., dissenting)); Southland, 465 U.S. at 19 (Stevens, J., concurring in part and dissenting in part) (“we must be cautious in construing the act lest we excessively encroach on the powers which Congressional policy, if not the Constitution, would reserve to the States”). Any reading *° Whether to certify a class is plainly a procedural question. Indeed, if it were otherwise, Federal Rule of Civil Procedure 23 would run afoul of the Rules Enabling Act, 28 U.S.C. § 2072. Both federal and state class- action rules comfortably qualify as rules that regulate only procedure because they address the “process for enforcing rights and duties recognized by substantive law and for justly administering remedy and redress for disregard or infraction of them.” Hanna v. Plumer, 380 U.S. 460, 464 (1965) (emphasis added). In the arbitration context, the nature of the question whether to proceed on a class-wide basis is no different. 42 of the FAA to control state-court procedures for referral of cases to class arbitration raises constitutional doubts and should be avoided. Petitioner seeks to sidestep the fact that FAA §§ 3 and 4 expressly apply only to federal courts by asserting that the parties nonetheless agreed that these sections would govern any arbitration under the contract, even one that never made it to federal court. Pet. Br. 16, 28-30. The Agreement supports no such interpretation. The sole sentence upon which petitioner relies states that “[t]his arbitration contract is made pursuant to a transaction in interstate commerce, and shall be governed by the Federal Arbitration Act at 9 U.S.C. section 1.” Pet. App. 110a. It refers only to FAA § 1, not § 3 or § 4, and its reference to § |, defining “commerce” under the Act, establishes only that the parties thought that the contract affected interstate commerce within the meaning of the FAA. In the case of purely intra-state contracts, the FAA lacks even the limited preemptive force of its § 2 non-discrimination principle, and states are free to favor or disfavor arbitration relative to other forms of dispute resolution as they see fit.”' In this case, even though the Agreement governs real property transactions occurring within the State of South Carolina and thus is arguably at the outer edge of Congress’s regulatory power, the contract’s reference to the FAA suggests that the parties contemplated that their agreement involved interstate *" See, e.g., Ex Parte Kampis, 826 So. 2d 819 (Ala. 2002) (owner's claim against in-state home construction company did not involve inter- state commerce triggering FAA application); Marina Cove Condo. Owners’ Ass'n, 34 P.3d 86 (2001) (dispute between Washington condo- minium owner and in-state condo owners’ association regarding alleged construction defects did not involve interstate commerce for purposes of FAA). 43 commerce.” That limited reference lends no support to petitioner’s contention that FAA § 4 language or case law governs this contract. Champ is also inapposite because it addresses only the authority of a federal district court to order class arbitration, and not the authority of an arbitrator to proceed on a class basis if he so chooses, as Judge Ervin did here. Under the logic of Champ, a district court not only lacks power to order class arbitration, but equally lacks the power to enjoin it, thus leaving the matter to the arbitrator. In this case, the arbitrator’s own decision to proceed on a class-wide basis moots any question here regarding whether the FAA would preempt a state trial court’s order directing class arbitration. Petitioner argues that the trial court’s certification of a class in Bazzle before sending the case to arbitration “infected the arbitrations.” Pet. Br. 34-35. That is not the case. The arbitrator exercised his authority to proceed with class arbitration in both the Bazzle and Lackey cases. In Lackey, the arbitrator decided the class certification question and the trial court subsequently affirmed the decision, whereas in Bazzle, the court made an initial class certification order before the case was referred to the arbitrator. After Bazzle was shifted to the arbitral forum, however, and Green Tree moved to decertify the class, the arbitrator made a de novo determination that “a class action should proceed in arbitra- tion” based on his own “careful review of the broadly drafted arbitration clause prepared by Green Tree.” Pet. App. 84a. He independently “found that the requirements for class certification were met and that class certification was appro- priate,” id. at 86a, and did not even cite the state trial court’s class certification decision. Further, he exercised his discre- *? The parties’ contemplation was, until recently, potentially relevant to the question whether even Section 2 of the FAA was applicable to any particular state-court case. See Allied-Bruce, 513 U.S. at 269. 44 tion to reconfigure the Bazzle and Lackey classes so that each class dealt with only one type of transaction, and he excluded out-of-state transactions and opt-outs from the classes.”° In both cases, the Arbitrator’s decision to proceed on a class-wide basis was just the kind of discretionary, procedural decision that, in the absence of contrary state-law or contractual directive, rests in an arbitrators’ sole discretion. There is no reason in either Bazzle or Lackey to conclude that the arbitrator failed to appreciate that the decision was his to make. The fact that the arbitrator and the court agreed on the appropriateness of class certification is wholly unsurprising, given that the case was such an obvious candidate for class treatment. In any event, Green Tree’s objection has never been that the wrong decision maker approved class arbitration here, but rather that its Agreement foreclosed class arbitration altogether. After all, if the error were that the court made a decision that-should have been for the arbitrator, the remedy for resulting prejudice (had there been any) would have been to vacate and remand to the arbitrator, see Garvey, 532 U.S. at 510, a remedy that petitioner never sought here, could not > When respondents urged the trial court to affirm the arbitrator's award to the class in Lackey, they did emphasize that the court had itself earlier approved class certification in identical circumstances in Bazzle. Petitioner contends (Pet. Br. 37) that respondents are thereby estopped from now claiming that the arbitrator's decision in Lackey was independent of the judge’s certification decision in Bazzle. Respondents never argued, however, that the arbitrator was bound by the trial court’s order. The arbitrator's own opinion, which thoroughly considers the relevant Rule 23 factors and does not mention Bazz/e, speaks for itself. Moreover, the Bazz/e court’s certification of the class (like the court’s approval of the class certification in Lackey) is a strength, not a weakness, in respondents’ case. Even were this court to view the class certification question as one for the court and not the arbitrator, see generally First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995), that conclusion would not affect the outcome in this case because both decision makers were in agreement on the matter. — 45 now seek, and in any event does not want. What petitioner urges is that no decision maker could have ordered class arbitration here. Finally, even if it applied here, Champ’s reasoning is no more persuasive than petitioner’s erroneous contract- language argument. The court in Champ found in § 4's requirement that district courts order arbitration “in accor- dance with the terms of the agreement” a negative implication that, where the parties “did not include in their agreement an express term providing for class arbitration,” the district court could not order such proceedings. 55 F.3d at 276. That logic is flawed for the same reason that petitioner’s contention that its agreement, which did not mention class arbitration, thereby prohibited it. See Point II, infra. The reference in § 4 to enforcement of the agreement “in accordance with [its] terms,” like the similar language in this Court’s § 2 cases, refers to enforcement of arbitration agreements on the same terms as other contracts, not a special rule requiring that all arbitrators’ authorities be spelled out.” In sum, the FAA, which says nothing whatsoever about class actions in state proceedings, simply does not speak to the threshold procedures through which state courts refer cases to arbitration, let alone the procedures that arbitrators in state cases should use once cases are referred to them. This Court in Southland let stand a California Supreme Court 4 Champ also considered whether the FAA's silence on class pro- ceedings permits federal courts to rely on Fed. R. Civ. P. 23 to certify classes for arbitration. 55 F.3d at 276. Federal Rule of Civil Procedure 81(aX(3) expressly makes the Federal Rules applicable to FAA proceedings “to the extent that matters of procedure are not provided for” in the FAA. Champ found no authority in Rule 81(a)(3) for a district court to certify a class for arbitration, however, because that rule “only applies to judicial proceedings under the FAA, 55 F.3d at 276, whereas class certification affects the ensuing arbitration. That reasoning, too, rests on procedural provisions applicable only in federal court. 46 decision to permit class-wide arbitration because Southland had not raised and the state courts had not passed on the question whether the state law was preempted by the FAA. 465 U.S. at 8-9. Petitioner here purports to assert the federal ground that was lacking in Southland. We have shown that there is no such preemptive force to the FAA.”° B. Congress Acted Reasonably in Not Blocking Class Arbitration Seeking to erect a conflict where there is none on the face of the statute, petitioner characterizes class arbitration as “‘a bizarre and dangerous hybrid,” and suggests that the FAA °° Strong concerns about whether Southland was correctly decided counsel, at a minimum, against any expansion here of the FAA's preemptive scope. In Southland, Justices O'Connor and Rehnquist would have held that FAA § 2 does not apply in state court. 465 U.S. at 24 (O'Connor, J., joined by Rehnquist, J., dissenting). Justice Stevens in Southland would have found no preemption of the state law excluding wage claims from arbitration, 465 U.S. at 17-21 (concurring in part and dissenting in part), and in his dissent in Perry, he characterized Southland as having “rewritten the statute to give it a pre-emptive scope that Congress certainly did not intend,” 482 U.S. at 493 (Stevens, J., dissenting). See, id. at 494-495 (O'Connor, J. dissenting). In Allied- Bruce, Justices Scalia and Thomas would have held that the FAA does not apply in state courts, 513 U.S. at 284 (Scalia, J., dissenting); id. at 285-97 (Thomas, J., joined by Scalia, J., dissenting), whereas Justice O’Connor acquiesced on stare decisis grounds in the majority's decision to uphold Southland even while she thought is was “wrong” and “continue[d] to believe that Congress never intended the Federal Arbitration Act to apply in state courts,” 513 U.S. at 283 (O'Connor, J., concurring). See generally Brief of Law Professors as Amici Curiae in Support of Respondents (setting forth arguments in favor of overruling Southland). Because the judgment in this case is clearly correct even under Southland, we do not believe that the Court need decide here whether to overrule that decision, but if there were any conflict between Southland and the decision of the South Carolina Supreme Court, Southland should yield. See Brief of Law Professors as Amici Curiae in Support of Respondents. 47 thus should be construed to have preempted states from allowing such procedures absent express authorization in the arbitration agreement. Pet. Br. 41. In particular, petitioner and its amici raise the specter of due process concerns related to class arbitration. Those issues are not before this Court, where the question presented is limited to the statutory preemption issue. There is no basis in the record for any claim of due process violation, petitioner waived any such claim, Pet. App. 25a, and it is not at all clear, given Green Tree’s bankruptcy, that petitioner would have standing to invoke the due process rights of class members. Unnamed class members’ due process rights were carefully preserved in these cases by the arbitrator’s adherence to the best class action procedural protocols, including careful definition of the classes and the first-class mailing to each individual class member of a fully informative notice of opt- out rights.°° See Shutts, 472 U.S. at 811 (describing *° The arbitrator approved the notice of the class arbitration that class counsel mailed to each class member. J.A. 17-23. The notice specified that the case was in arbitration, and was signed by the arbitrator. It stated in capital letters at the outset: “PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. YOUR RIGHTS WILL BE AFFECTED BY PROCEEDINGS IN THIS LITIGATION.” J.A. 17. The notice described the claims, the contours of the class, and the status of the case. It outlined class members’ options and their consequences, including that persons opting out would “not be entitled to share in the benefits of any settlement or judgment if it is favorable to the Class,” and would “not be bound by the settlement or judgment if it is adverse to the class.” J.A. 19-20. Correspondingly, the notice specified that “[a]ny class member who does not request to be excluded will automatically be included in the Action as members of the Class represented by the Named Plaintiffs,” and be “bound by the orders entered and notices hereafter given in this Action.” J.A. 20 (emphasis in original). The Notice alerted class members of their right to enter an appearance through an attorney of their choice, and stated that if they chose not to do so they would be represented by class counsel, whose names and addresses were listed. 48 constitutionally adequate notice). Even if this Court found such concerns relevant to the FAA preemption question presented, there is no reason to think that states and state arbitrators cannot design workable procedures for facilitating arbitration consistent with due process requirements. Indeed, the process followed in this case refutes such a suggestion. In any event, such matters can and should be litigated on a case- by-case basis, and speculation about due process issues does not warrant reading into the FAA a preemptive rule that Congress did not adopt. Petitioner relatedly contends that class arbitration should be barred because it “cannot bind the non-representative class members.” Pet. Br. 45. That is not the case. The unnamed class members here, each of whom signed the same arbitration agreement as the class representatives, and each of whom elected not to opt out of the class, are validly subject to the decision by the arbitrator. These facts distinguish this case from EEOC v. Waffle House, 534 U.S. 279 (2002), on which petitioner principally relies. There, the Court correctly noted that agreements to arbitrate cannot bind parties, such as the EEOC in that case, who never agreed to arbitrate at all. Id. at 294. See also First Options 514 U.S. at 946. Here, however, all the unnamed class members did agree to final and binding arbitration on the same terms as did the class representatives, and acquiesced to arbitration before Judge Ervin. There is no reason to believe the final award here has less binding effect on the unnamed class members than any arbitral award has on parties to an arbitration. See, e.g., Waffle House, 534 U.S. at 297 (noting that “ordinary principles of . . . res judicata . . . may apply” to prevent the EEOC from obtaining victim-specific relief for an employee who already obtained relief through arbitration); S.C. Code. J.A. 21. It listed class counsel's toll-free number and directed class members to call if they had any questions. J.A. 22. 49 Ann. § 15-48-150 (1976 Supp. 2001) (arbitration awards shall be “enforced as any other judgment or decree”); cf FED. R. Civ. P. &(c) (specifying “arbitration and award” as an affirmative defense for pleading purposes). No member of the respondent class has sought relief in any further proceeding beyond what was obtained in this case, and there is no basis to believe that any South Carolina court would honor any such request. Petitioner’s real concern in opposing class arbitration is not to protect unnamed class members’ procedural rights, but to benefit from their lack of knowledge about their rights and the difficulty of securing counsel in light of the modest sums at issue. Far fewer claimants will ever sue individually in the absence of the ability to proceed as part of a class. It is the potential radically to reduce legal exposure that appeals to petitioner and its amici. Class action rules at the state as well at the federal level, however, serve the entirely valid objective of overcoming obstacles posed by lack of informa- tion or modest claim size in the interests of fuller and more efficient law enforcement.’’ From the perspective of absent class members, class arbitration is not more “complex, expensive and time-consuming” (Pet. Br. 40) than individual arbitration, but, on the contrary, captures efficiencies that ” This Court emphasized that very purpose in Shutts when it held that the Due Process Clause did not require “opt-in” rather than “opt-out” class procedures under the Kansas class action rule. Recognizing that a typical class member might not “file suit individually, nor would he affirmatively request inclusion in the class if such a request were required by the Constitution,” the Court rejected the defendant's argument that due process forecloses “opt-out” classes. 472 U.S. at 813; see Amchem Prods. v. Windsor, 521 U.S. 591, 617 (1997) (“The policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights.”); Deposit Guaranty Nat. Bank v. Roper, 446 U.S. 947 (1980). 50 often make the difference for them between some relief and none. Petitioner does not oppose class arbitration because it believes that there should have been 3,700 individual proceedings instead of one class arbitration. Green Tree and its amici, like other parties with potential exposure to large groups of people, oppose class arbitration in the knowledge that, “because many claims are not viable if brought individually, plaintiffs will often drop or fail to initiate claims once it is clear that class relief is unavailable.” Sternlight, Arbitration Meets the Class Action, 42 Wm. & Mary L. Rev. 1, 8 (2000). Nor is petitioner insisting, as does federal securities regulation, that rights to pursue class-wide relief in court must be preserved notwithstanding agreements to arbitrate.* Instead, petitioner and its amici “hope they have found a surreptitious way to defeat the feared class action,” id. at 5, by establishing a rule that standard-form arbitration contracts that do not expressly provide for class treatment implicitly waive any right to bring class claims. To that end, petitioner urges this Court to displace South Carolina law with a federal rule that would presumptively disfavor arbitration of class claims. It is petitioner’s proposal, not the decision below, that is hostile to arbitration. Petitioner has pointed to no evidence that Congress even sought to regulate state law on arbitral procedures, much less that it sought to bar class actions where state law permits them on a non- discriminatory basis in litigation and arbitration. CONCLUSION The judgment of the South Carolina Supreme Court should be affirmed. ** See NASD Code of Arbitration Procedure, § 10301(d)(3), (pro- hibiting arbitration of class claims even where putatively covered by arbitration agreement in favor of litigation all such claims). ———— el Al Ai i a, — a. MARY LEIGH ARNOLD MARY LEIGH ARNOLD, P.A. P.O. Box 265 Mt. Pleasant, SC 29465 STEVEN W. HAMM RICHARDSON, PLOWDEN, CARPENTER & ROBINSON, P.A. P.O. Drawer 7788 Columbia, SC 29202 BRADFORD P. SIMPSON D. MICHAEL KELLY B. RANDALL DONG SUGGS & KELLY LAWYERS, P.A. P.O. Box 8113 COLUMBIA, SC 29202-0008 T. ALEXANDER BEARD BEARD LAW FIRM 1002 ANNA KNAPP BLVD Respectfully submitted, CORNELIA T.L. PILLARD Counsel of Record GEORGETOWN UNIVERSITY LAW CENTER 600 New Jersey Ave, NW Washington, D.C. 20001 (202) 662-9391 CHARLES L.A. TERRENI P.O. Box 11904 COLUMBIA, SC 29211 DANIEL WEBSTER WILLIAMS BEDINGFIELD & WILLIAMS P.O. Box 616 BARNWELL, SC 29812 CHARLES RICHARD KELLY C. RICHARD KELLY, PA POsT OFFICE BOX 11648 MT. PLEASANT, SC 29464 COLUMBIA, SC 29211 CHARLES L. DIBBLE peo —— FRYAR DipBLe LAW OFFICES wo arms P.O. DRAWER 1240 COLUMBIA, COLUMBIA, SC 29202 Counsel for Respondents March 27, 2003 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0614%3A08. Public record. Not legal advice.