Amicus Curiae Brief — Directv, Inc. v. Imburgia, 135 S. Ct. 1547 (2015) (No. 14-462)

No. 14-462

Supreme Com, US.

FILED

JUN -5 2015

OFFICE OF THE CLERK

3n the Supreme Court of the Gnited States

DIRECTY, INC.,

Petitioner,

v.

AMY IMBURGIA, ETAL.,

Respondents.

On Writ of Certiorari to the

California Court of Appeal, Second District

BRIEF OF CHAMBER OF COMMERCE OF THE

UNITED STATES OF AMERICA, NATIONAL

ASSOCIATION OF MANUFACTURERS, AND

RETAIL LITIGATION CENTER, INC., AS AMICI

CURIAE IN SUPPORT OF PETITIONER

ANDREW J. PINCUS

Counsel of Record

ARCHIS A. PARASHARAMI

RICHARD B. KATSKEE

Mayer Brown LLP

1999 K Street, NW

Washington, DC 20006

(202) 263-3000

apincus@mayerbrown.com

Additional counsel listed on inside cover

KATE COMERFORD TODD LINDA E. KELLY

WARREN POSTMAN PATRICK N. FORREST

U.S. Chamber Litigation | Manufacturers’ Center

Center, Inc. for Legal Action

1615 H Street, NW 733 10th Street, NW

Washington, DC 20062 Suite 700

(202) 463-5337 Washington, DC 20001

for _ (202) 637-3000

of Commerce of the Counsel for National

United States of America Association of

Manufacturers

DEBORAH WHITE

Retail Litigation

Center, Inc.

1700 North Moore Street

Suite 2250

Arlington, VA 22209

(703) 841-2300

| for Retail

Litigation Center, Inc.

i

TABLE OF CONTENTS

Page

ne Ge ee IE IE sciceconcecccsccesscednacdoncsincceeses ii

INTEREST OF THE AMICI CURIAE ....................... 1

INTRODUCTION AND SUMMARY OF

(Se SER ESERIES UP RITE Oca a hee oT 3

REESE Pe eR an ars ET POE 5

A. The Decision Below Impermissibly

Discriminates Against Arbitration................... 6

B. The Decision Below Violates The Rule

That Contractual Ambiguities Should

Be Resolved In Favor Of Arbitration. ............ 12

ITI keccnissutisiehenesenidaiies ieadiuaiwicitioeoisatesiaiaite 16

ll

TABLE OF AUTHORITIES

CASES

Allied-Bruce Terminix Cos. v. Dobson,

RE Ae 6, 7,8

Arthur Andersen LLP v. Carlisle,

STE a ee Re 7

AT&T Mobility LLC v. Concepcion,

Eee passim

Buckeye Check Cashing, Inc. v. Cardegna,

ESAS as eee 7

Doctor’s Assocs. v. Casarotto,

Be I a cscnnneumononemnnene 6, 7, 8,9

EEOC v. Waffle House, Inc.,

I celiaamaainin 6

Fidelity Fed. Sav. & Loan

Ass'n v. de la Cuesta,

I esi 10

Marmet Heath Care Ctr., Inc. v. Brown,

132 S. Ct. 1201 (2012) (per curiam) ................. 7,8

Mastrobuono v. Shearson

Lehman Hutton, Inc.,

Mitsubishi Motors Corp. v. Soler

Chrysler-Plymouth, Inc.,

a reetalnaienn 12,15

Moses H. Cone Mem7 Hosp. v.

Mercury Constr. Corp.,

EE A eer 12, 15

Murphy v. DIRECTV, Inc.,

724 F.3d 1218 (9th Cir. 2013) .............. 4,10, 11, 16

1

TABLE OF AUTHORITIES—continued

Page(s)

Nitro-Lift Techs., L.L.C. v. Howard,

133 S. Ct. 500 (2012) (per curiam) ..................... 16

California v. Sischo,

144 P.2d 785 (Cal. 1943) (per curiam)................ 10

Perry v. Thomas,

ESN EE a eT IS 6, 7, 8

Preston v. Ferrer,

seein 6, 7

Rent-A-Center, W., Inc. v. Jackson,

ST eee ee 7

Rivers v. Roadway Express, Inc.,

8 Ee Ne eee 16

Scherk v. Alberto-Culver Co.,

gE ERO ae 6, 7

Southland Corp. v. Keating,

LE ene 6, 7, 8

Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp.,

SERRE SEES Se eee ee 3

Volt Info. Scis., Inc. v. Board of Trs.

of Leland Stanford Jr. Univ.,

TREES NCC en eee an 7

CONSTITUTION AND STATUTES

2 RE Serer 10, 11, 16

Federal Arbitration Act, 9 U.S.C. §§ 1-16......... passim

BP ede WF Sirnccennnsseninseniicsunembinnenntuniasimeniantceimemasn 6, 8

BRIEF OF CHAMBER OF COMMERCE OF THE

UNITED STATES OF AMERICA, NATIONAL

ASSOCIATION OF MANUFACTURERS, AND

RETAIL LITIGATION CENTER, INC., AS AMICI

CURIAE IN SUPPORT OF PETITIONER

INTEREST OF THE AMICI CURIAE

The Chamber of Commerce of the United States

of America is the world’s largest business federation.

It represents 300,000 direct members and indirectly

represents the interests of more than three million

companies and professional organizations of every

size, in every industry sector, and from every region

of the country. An important function of the Chamber

is to represent the interests of its members in mat-

ters before the courts, Congress, and the Executive

Branch. !

The National Association of Manufacturers is the

nation’s largest industrial trade association, repre-

senting small and large manufacturers in every in-

dustrial sector and in all 50 states. Manufacturing

employs more than 12 million people, contributes

roughly $2.1 trillion to the national economy annua!-

ly, has the largest economic impact of any major sec-

tor, and accounts for two-thirds of private-sector re-

search and development. NAM’s mission is to en-

hance the competitiveness of manufacturers and im-

prove American living standards by shaping a

| Amici affirm that no counsel for a party authored this brief in

whole or in part and that no person other than amici, their

members, or their counsel made a monetary contribution in-

tended to fund the brief’s preparation or submission. The par-

ties’ consents to the filing of amicus briefs are on file with the

Clerk’s office.

2

legislative and regulatory environment conducive to

economic growth.

The Retail Litigation Center, Inc., is a public-

policy organization that identifies and contributes to

legal proceedings affecting the retail industry. The

RLC’s members include many of the country’s largest

and most innovative retailers. They employ millions

of workers throughout the United States, provide

goods and services to tens of millions of consumers,

and account for tens of billions of dollars in annual

sales. The RLC seeks to provide courts with retail-

industry perspectives on important legal issues af-

fecting its members, and to highlight the potential

industry-wide consequences of significant pending

cases.

Arbitration agreements allow the parties to re-

place expensive, time-consuming, and contentious in-

court litigation with speedy, inexpensive, fair, and of-

ten far less adversarial dispute-resolution proce-

dures. For these reasons, many of amici’s members

and affiliates routinely employ arbitration agree-

ments as a key element in millions of their contrac-

tual relationships. As Congress intended when it en-

acted the Federal Arbitration Act, 9 U.S.C. §§ 1-16,

the result has been not only conservation of judicial

resources but also substantial cost savings for the

parties, which in turn have allowed for lower prices

for consumers, higher wages for employees, and ben-

efits for the national economy as a whole.

The many benefits of arbitration agreements are

threatened when courts impose or enforce state-law

rules that do not apply uniformly to all contracts or

are inconsistent with the strong federal presumption

in favor of arbitrability. Although this Court has con-

sistently condemned such discriminatory rules, some

3

state courts persist in their determined efforts to cir-

cumvent federal law. Accordingly, amici have a

strong interest in ensuring that decisions like the

one here that are starkly inconsistent with this

Court’s FAA precedents are not allowed to stand.

INTRODUCTION AND

SUMMARY OF ARGUMENT

This Court has observed that “the judicial hostil-

ity towards arbitration that prompted the FAA had

manifested itself in ‘a great variety’ of ‘devices and

formulas.” AT&T Mobility LLC v. Concepcion, 131 S.

Ct. 1740, 1747 (2011). The decision of the California

Court of Appeal in this case represents just such a

device—and one that poses a particularly troubling

threat to the uniform, consistent application of the

FAA and this Court’s precedents throughout the na-

tion.

The vast majority of arbitration agreements to-

day require that disputes be resolved on an individu-

al rather than classwide basis. That is because class

proceedings are irreconcilable with the simplicity, in-

formality, and expedition that are the hallmarks of

arbitration. Stolt-Nielsen S.A. v. AnimalFeeds Int’

Corp., 559 U.S. 662, 685-687 (2010); see also Concep-

cion, 131 S. Ct. at 1749-1753. The contract at issue

here, for example, specifies that the parties agree not

“to join or consolidate claims in arbitration * * * or

arbitrate any claim as a representative member of a

class or in a private attorney general capacity.” Pet.

App. 5a (internal quotation marks omitted).

That arbitration provision self-evidently was de-

signed to apply as part of a uniform contract in the

many states in which DIRECTV operated. It was

drafted before this Court issued its decision in Con-

4

cepcion, when some courts (especially in California)

not only refused to enforce agreements to arbitrate

on an individual basis, but also ordered—contrary to

the parties’ agreements—that arbitration take place

on a classwide basis. Recognizing that phenome-

non—and seeking to make doubly sure that arbitra-

tions would be conducted on an individual basis on-

ly—the arbitration agreement expressly provided

that if “the law of your state would find this agree-

ment to dispense with class arbitration procedures

unenforceable, then this entire [arbitration agree-

ment] is unenforceable.” Pet. App. 5a (internal quota-

tion marks omitted).

In a linguistic backflip that the Ninth Circuit

properly termed “nonsensical” (Murphy v. DIRECTV,

Inc., 724 F.3d 1218, 1226 (9th Cir. 2013)), the Cali-

fornia Court of Appeal here interpreted the parties’

additional safeguard not as an express statement of

intent to require individual arbitration and avoid

classwide arbitration, but instead as an agreement to

divert claims from individual arbitrations to judicial

class actions. Indeed, the court held that the safe-

guard applies even if the state-law rules requiring

class procedures are preempted by the FAA.

The California Court of Appeal adopted so tor-

tured a reading of clear contract language that its

conclusion can be explained only as the singling out

of the parties’ arbitration agreement for suspect sta-

tus. The court’s decision thus constitutes impermis-

sible discrimination against arbitration. Indeed, it

reflects the precise judicial hostility toward arbitra-

tion that Congress enacted the FAA to forestall.

The California Court of Appeal also violated the

principle that, as a matter of federal law, any ambi-

guities in arbitration agreements must be resolved in

5

favor of arbitration. The court concluded that the ar-

bitration provision here was subject to two possible

interpretations, and then, ignoring the FAA's re-

quirement that ambiguities in arbitration agree-

ments be construed in favor of arbitration, chose an

unnatural reading of the contract that disfavored ar-

bitration—interpreting the arbitration agreement in

a manner that served to void it.

The lower court’s failure to abide by these settled

principles reflects not only hostility toward arbitra-

tion, but also an effort to evade the FAA and this

Court’s precedents interpreting the statute. This

Court should reverse the holding below and reaffirm

the supremacy of federal law.

ARGUMENT

The rules for interpreting contracts are generally

the province of state law. With respect to arbitration

agreements, however, the FAA constrains state law.

It prescribes two federal-law principles to prevent

courts from manipulating state law to undermine

private parties’ federal right to agree to resolve their

disputes efficiently and fairly through arbitration.

First, state law must not discriminate against arbi-

tration or be applied in a manner that disfavors arbi-

tration agreements. Second, any ambiguity in the

terms of an arbitration agreement must be resolved

in favor of arbitration.

The decision below violates both principles. And

it does so in a particularly pernicious way, by con-

struing the plain language of an arbitration agree-

ment in an idiosyncratic manner to circumvent this

Court’s binding FAA precedents and thereby frus-

trate Congress’s intent to promote the use of arbitra-

tion to resolve disputes. The Court should make

6

clear—once again—that state-law determinations vi-

olating these principles are preempted by the FAA.

A. The Decision Below Impermissibly Dis-

criminates Against Arbitration.

1. Congress enacted the FAA to “reverse the

longstanding judicial hostility to arbitration agree-

ments,” “to place [these] agreements upon the same

footing as other contracts,” and to “manifest a liberal

federal policy favoring arbitration agreements.”

EEOC v. Waffle House, Inc., 534 U.S. 279, 289 (2002)

(internal quotation marks omitted); see also, e.g.,

Preston v. Ferrer, §52 U.S. 346, 353 (2008) (“Section 2

‘declare[s] a natioriat . policy favoring arbitration’ of

claims that parties contract to settle in that man-

ner.”) (quoting Southland Corp. v. Keating, 465 U.S.

1, 10 (1984)); Allied-Bruce Terminix Cos. v. Dobson,

513 U.S. 265, 272 (1995) (FAA “seeks broadly to over-

come judicial hostility to arbitration agreements’).

At the heart of the FAA is Section 2, which “em-

bodies a clear federal policy of requiring arbitration

unless the agreement to arbitrate * * * is revocable

‘upon such grounds as exist at law or in equity for

the revocation of any contract.” Perry v. Thomas, 482

U.S. 483, 489 (1987) (emphasis added) (quoting 9

U.S.C. § 2). “By enacting § 2, * * * Congress preclud-

ed States from singling out arbitration provisions for

suspect status, requiring instead that such provi-

sions be placed ‘upon the same footing as other con-

tracts.” Doctor’s Assocs. v. Casarotto, 517 U.S. 681,

687 (1996) (quoting Scherk v. Alberto-Culver Co., 417

7

U.S. 506, 511 (1974)). State-law rules that discrimi-

nate against arbitration are flatly forbidden.”

In Casarotto, for example, this Court held that

“threshold limitations placed specifically and solely

on arbitration provisions” are unenforceable because

they are “antithetical to” the “goals and policies’ of

the FAA” to promote arbitration by treating arbitra-

tion agreements as favorably as any other contract.

517 U.S. at 688. Thus, the Court concluded that the

FAA preempted a Montana statute requiring special

notice of an arbitration provision on the first page of

a contract, because the statute “singl[ed] out arbitra-

tion provisions for suspect status.” Jd. at 687.

The Court refused to excuse this special notice

requirement as a particular application of a general

state policy that unexpected contract terms must be

conspicuous, and instead reiterated that “a court

may not ‘rely on the uniqueness of an agreement to

arbitrate as a basis for a state-law holding that en-

forcement would be unconscionable, for this would

enable the court to effect what ___ the state legisla-

ture cannot.” Casarotto, 517 U.S. at 687 n.3 (quoting

Perry, 482 U.S. at 492 n.9).

The Court has likewise held, in a long string of

decisions, that the FAA preempts and forbids en-

2 See, e.g., Marmet Heath Care Ctr., Inc. v. Brown, 132 S. Ct.

1201, 1204 (2012) (per curiam); Concepcion, 131 S. Ct. at 1745;

Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 67-68 (2010); Ar-

thur Andersen LLP v. Carlisle, 556 U.S. 624, 630 (2009); Pres-

ton, 552 U.S. at 356; Buckeye Check Cashing, Inc. v. Cardegna,

546 U.S. 440, 443 (2006); Allied-Bruce, 513 U.S. at 270-271; Volt

Info. Scis., Inc. v. Board of Trs. of Leland Stanford Jr. Univ., 489

U.S. 468, 474 (1989); Perry, 482 U.S. at 492 n.9; Southland, 465

U.S. at 10-11 & 16 n.11.

8

forcement of state-law rules categorically “prohibit-

ing arbitration of a particular type of claim,” because

such state-law bars are “contrary to the terms and

coverage of the FAA.” Marmet Health Care Ctr., Inc.

v. Brown, 132 8. Ct. 1201, 1204 (2012) (per curiam)

(FAA preempted state-law ban on arbitration of

claims against nursing homes); see also Mastrobuono

v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 56

(1995) (FAA preempted state law requiring judicial

resolution of claims involving punitive damages);

Perry, 482 U.S. at 489-491 (FAA preempted state law

requiring that litigants be provided a judicial forum

for wage disputes); Southland, 465 U.S. at 10 (“In

enacting § 2 of the [FAA], Congress declared a na-

tional policy favoring arbitration and withdrew the

power of the states to require a judicial forum for the

resolution of claims which the contracting parties

agreed to resolve by arbitration,” including for claims

brought under state franchise-investment law).

2. The FAA permits states to apply general

state-law principles of contract interpretation to as-

certain the meaning of an agreement to arbitrate, as

long as those rules “govern * * * the validity, revoca-

bility, and enforceability of contracts generally.” Per-

ry, 482 U.S. at 492 n.9 (emphasis added). “A court

may not * * * construe [an arbitration] agreement in

a manner different from that in which it otherwise

construes nonarbitration agreements under state

law.” Ibid.; see also, e.g., Casarotto, 517 U.S. at 686-

688; Allied-Bruce, 513 U.S. at 281.

The California Court of Appeal in this case pro-

fessed to engage in ordinary contract interpretation,

but the tortured and illogical manner in which it did

so “singl[ed] out [the] arbitration provision[] for sus-

9

pect status” (Casarotto, 517 U.S. at 687), thereby im-

permissibly discriminating against arbitration.

As explained above (at 3-4), the arbitration

agreement here expressly required arbitrations to

take place on an individual rather than classwide

basis. Indeed, class arbitration was so antithetical

that the agreement invalidated itself if class arbitra-

tion were required by the governing law: “[I]f ‘the

law of your state would find this agreement to dis-

pense with class arbitration procedures unenforcea-

ble”—thereby permitting enforcement of the arbitra-

tion agreement only if class arbitration were availa-

ble—“then this entire [arbitration provision] is un-

enforceable.” Pet. App. 6a (quoting contract).

The parties also agreed that “[t]he interpretation

and enforcement of this Agreement shall be governed

by * * * applicable federal laws, and the laws of the

state and local area where Service is provided to

you,” and further specified that, “[n]otwithstanding

the foregoing, [the arbitration provision] shall be

governed by the Federal Arbitration Act.” Pet. App.

5a (quoting contract).

Despite the contract’s express designation of the

FAA to govern the arbitration provision, the Califor-

nia Court of Appeal interpreted the self-invalidation

clause—rendering the arbitration provision void if

“the law of your state” precluded class-arbitration

waivers—to be triggered by “the (nonfederal) law of

your state without considering the preemptive effect,

if any, of the FAA.” Pet. App. 13a-14a; see also id. at

8a.

The lower court’s analysis is starkly inconsistent

with generally applicable principles of contract in-

terpretation. Contractual provisions referring to the

10

“law of’ a particular state are commonplace, and

they are construed to incorporate both state and fed-

eral law—not to exclude application of federal law.

See Fidelity Fed. Sav. & Loan Ass’n v. de la Cuesta,

458 U.S. 141, 157 n.12 (1982) (“Paragraph 15 pro-

vides that the deed is to be governed by the ‘law of

the jurisdiction’ in which the property is located; but

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

state law.”). That general principle holds true in Cali-

fornia as well (at least outside the arbitration con-

text). See California v. Sischo, 144 P.2d 785, 791-792

(Cal. 1943) (per curiam) (“The Constitution of the

United States and all laws enacted pursuant to the

powers conferred by it on the Congress are the su-

preme law of the land *** to the same extent as

though expressly written into every state law.”) (em-

phasis added; citing Supremacy Clause, U.S. Const.

art. VI, cl. 2).

As the Ninth Circuit explained with respect to

the very provision at issue in this case:

The Customer Agreement’s reference to state

law “does not signify the inapplicability of

federal law, for ‘a fundamental principle in

our system of complex national polity’ man-

dates that ‘the Constitution, laws, and trea-

ties of the United States are as much a part

of the law of every State as its own local laws

and Constitution.”

Murphy, 724 F.3d at 1226 (quoting de la Cuesta, 458

U.S. at 157).

For that reason, Concepcion’s holding that the

FAA preempts the California state-law rule banning

class-arbitration waivers necessarily means that the

state ban “is not, and indeed never was, California

11

law.” Murphy, 724 F.3d at 1226. As a matter of feder-

al law and fundamental constitutional principles, the

“contention that the parties intended for state law to

govern the enforceability of DIRECTV’s arbitration

clause, even if the state law in question contravened

federal law, is nonsensical.” Ibid. And that is espe-

cially so given the arbitration provision’s express

statement that it is governed by the FAA.

Moreover, the Supremacy Clause demands as

much: “A contract cannot be unenforceable under

state law if federal law requires its enforcement, be-

cause federal law is ‘the supreme Law of the

Land _ , any Thing in the Constitution or Laws of

any State to the Contrary notwithstanding.” Mur-

phy, 724 F.3d at 1226 (quoting U.S. Const. art. VI, cl.

2). When the parties here agreed that disputes must

be arbitrated, and that the arbitrations must occur

on an individual basis unless “the law of your state”

forbids class-action waivers, the term “law of your

state” necessarily meant, and continues to mean,

“the valid, enforceable law of your state.”

Perhaps California could adopt a general princi-

ple of contract interpretation that—contrary to the

plain meaning of “the law of your state” or “the law

of the State of California”—such phrases must be in-

terpreted to mean “state law without consideration of

federal law.” That would mean that any contract ex-

pressly incorporating California state law would

have to be read to forbid application of conflicting

federal law, even if, as here, the contract on its face

also incorporates federal law. Such a generally appli-

cable state-law rule would upend the settled expecta-

tions of parties to an untold number of contracts af-

fecting citizens and businesses throughout Califor-

nia.

12

Unsurprisingly, there is absciutely no evidence

that California has adopted suc’ a rule in any other

context—much less one that would apply to all con-

tracts. For its part, the California Court of Appeal

did not identify any such authority. Rather, the in-

terpretive principle applied here was invented solely

to invalidate an arbitration agreement, and this ar-

bitration-specific rule therefore violates Section 2 of

the FAA.

B. The Decision Below Violates The Rule

That Contractual Ambiguities Should Be

Resolved In Favor Of Arbitration.

Even assuming for the sake of argument that the

meaning of the arbitration provision here was un-

clear, the decision below violates a second key princi-

ple of the FAA: In light of the statute’s “emphatic

federal policy in favor of arbitral dispute resolution”

(Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,

Inc., 473 U.S. 614, 631 (1985)), this Court has de-

clared that, “as a matter of federal law, any doubts

concerning the scope of arbitrable issues should be

resolved in favor of arbitration, whether the problem

at hand is the construction of the contract language

itself or an allegation of waiver, delay, or a like de-

fense to arbitrability” (Moses H. Cone Mem7 Hosp. v.

Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983) (em-

phasis added)).? The decision below does just the op-

posite.

1. The California Court of Appeal concluded that

the self-invalidation clause in the arbitration provi-

sion here was not “explicit” as to whether the parties

intended for state law to apply “to the extent [that] it

3 Accord Mitsubishi, 473 U.S. at 631.

13

is not preempted by the FAA” or whether they in-

stead intended for state law to apply “without con-

sidering the preemptive effect, if any, of the FAA.”

Pet. App. 8a (internal quotation marks omitted). As-

serting that the self-invalidation clause is for that

reason “ambiguous,” the court then invoked “the

common-law rule of contract interpretation that a

court should construe ambiguous language against

the interest of the party that drafted it” (id. at 10a

(quoting Mastrobuono, 514 U.S. at 62)).

Purporting to apply that principle, the court held

that because DIRECTV had drafted the contract and

had not expressly specified that controlling federal

precedent would apply, the contract should be con-

strued, against DIRECTV, to forbid application of

federal precedent. Pet. App. 10a-lla. The court fur-

ther reasoned that “it seems unlikely that’ plaintiffs

anticipated in 2007 that the Supreme Court would

hold in 2011 that the FAA preempts the Discover

Bank rule concerning the enforceability of class ac-

tion waivers in arbitration agreements.” Jd. at 11a.

The California Court of Appeal brushed aside the

parties’ express agreement that the FAA governed

the arbitration provision and refused to impute to

the parties the intent to apply binding interpreta-

tions of federal law. Pet. App. 11a. It therefore con-

cluded that the contract required it to treat this

Court’s decision in Concepcion (which had invalidat-

ed the state-law rule) as irrelevant and instead to

apply California’s ban on class-action waivers despite

the fact that this state-law rule is preempted by fed-

eral law.

2. The California Court of Appeal erred in con-

cluding that the arbitration agreement is ambiguous

14

about whether its self-invalidation mechanism incor-

porated federal as well as state law.

The parties expressly agreed that (1) “applicable

federal laws” do in fact apply, (2) the FAA is one of

those laws, and (3) the FAA governed the arbitration

provision over an@ above the parties’ general selec-

tion of local state law. See Pet. App. 5a (“The inter-

pretation and enforcement of this Agreement shall be

governed by *** applicable federal laws, and the

laws of the state and local area where Service is pro-

vided to you,” but “[njotwithstanding the foregoing,

[the arbitration provision] shall be governed by the

Federal Arbitration Act.”). Despite that clear lan-

guage, the California Court of Appeal treated the

parties’ agreement to require individual arbitration

and forbid class arbitration as instead foreclosing in-

dividual arbitration.

The court’s reading of the parties’ agreement—

transforming a contractual commitment to resolve

the parties’ disagreements through individual arbi-

tration into an agreement to eschew arbitration and

instead to resolve disputes through judicial class ac-

tions—comports with no rule of contract interpreta-

tion of which we are aware, in California or any-

where else. Rather, it stands the parties’ intent and

the ordinary rules of contract interpretation on their

head. The California Court of Appeal’s conclusion

that ambiguity existed in the arbitration provision’s

language is so inimical to settled rules of contract in-

terpretation that it cannot be explained except as the

product of judicial hostility toward arbitration—the

very thing that Congress meant to bar when it

passed the FAA.

3. Even if the contract’s reference to “the law of

your state” were ambiguous because it could plausi-

15

bly be read to include preempted state statutes and

court decisioris, the alternate reading—based on the

settled rule that preempted state law is a legal nulli-

ty—is undeniably plausible as well. Under such cir-

cumstances, this Court’s precedents are clear that

the FAA requires courts to resolve the contractual

ambiguity in favor of arbitration. “[A]s a matter of

federal law, any doubts concerning the scope of

arbitrable issues should be resolved in favor of arbi-

tration, whether the problem at hand is the construc-

tion of the contract language itself or an allegation of

waiver, delay, or a like defense to arbitrability.” Mo-

ses H. Cone, 460 U.S. at 24-25 (emphasis added); see

also Mitsubishi, 473 U.S. at 631.

The decision below (Pet. App. 10a) relied on this

Court’s decision in Mastrobuono to justify its reliance

on the common-law principle that contractual terms

are construed against the drafter, instead of follow-

ing the FAA’s requirement that ambiguities must be

resolved in favor of arbitration. But Mastrobuono did

not hold, or even suggest, that the Federal Arbitra-

tion Act takes a backseat to the state-law maxim.

That would be a surprising inversion of the Suprem-

acy Clause.

What Mastrobuono did was to decide the ques-

tion presented—whether the contract at issue au-

thorized arbitration of punitive-damages claims—by

applying the strong federal policy favoring arbitra-

tion. The Court first drew the pro-arbitration conclu-

sion that punitive-damages claims are arbitrable ab-

sent a clear statement of the parties’ contrary intent,

which the parties had not made. 514 U.S. at 57-62.

The Court then explained that (in the context of that

case) construing the language of the arbitration pro-

vision against the drafter lent further support to the

16

conclusion that the dispute was subject to arbitra-

tion. Id. at 62-63.

The Court did not so much as hint in

Mastrobuono that the common-law presumption

should trump the FAA’s presumption of arbitrability

when the two point in opposite directions—much less

that the former should trump the latter when, as

here, the supposed contractual ambiguity is starkly

at odds with the plain intent of the contract (to re-

quire individual arbitration), the Supremacy Clause,

and common sense. Cf. Murphy, 724 F.3d at 1225-

1226 (describing reasoning later adopted by court be-

low as “nonsensical”).

- * +

The California Court of Appeal’s ruling in this

case attempts a transparent end-run around the

FAA. As this Court has explained in the past, the

lower courts “must abide by the FAA, which is ‘the

supreme Law of the Land,’ U.S. Const., Art. VI, cl. 2,”

and must faithfully apply “the opinions of this Court

interpreting that law. “ * * [O)nce [this] Court has

spoken, it is the duty of other courts to respect that

understanding of the governing rule of law.” Nitro-

Lift Techs., L.L.C. v. Howard, 133 S. Ct. 500, 503

(2012) (per curiam) (quoting Rivers v. Roadway Ex-

press, Inc., 511 U.S. 298, 312 (1994)). Because “the

FAA forecloses precisely this type of ‘judicial hostility

towards arbitration” (ibid. (quoting Concepcion, 131

S. Ct. at 1747)), the decision below cannot stand.

CONCLUSION

The judgment of the California Court of Appeal

should be reversed and the case should be remanded

for enforcement of the arbitration agreement.

Respectfully submitted.

KATE COMERFORD TODD ANDREW J. PINCUS

WARREN POSTMAN Counsel of Record

U.S. Chamber Litigation ARCHIS A. PARASHARAMI

Center, Inc. RICHARD B. KATSKEE

1615 H Street, NW Mayer Brown LLP

Washington, DC 20062 1999 K Street, NW

(202) 463-5337 Washington, DC 20006

Counsel for Chamber (202) 263-3000

, |

of Commerce of the apincus@mayerbrown.com

United States of America Counsel for Amici Curiae

DEBORAH WHITE LINDA E. KELLY

Retail Litigation PATRICK N. FORREST

Center, Inc. Manufacturers’ Center for

1700 North Moore Street Legal Action

Suite 2250 733 10th Street, NW

Arlington, VA 22209 Suite 700

(703) 841-2300 Washington, DC 20001

Counsel for Retail oe

Litigation Center, Inc. Counsel for National

Association of

Manufacturers

JUNE 2015