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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2015

## Text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0356%3A14. Public record. Not legal advice.