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

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No. 14-462

In the

Supreme Court of the Anited States

—¢>

DIRECTV, INC.,

Petitioner,

AMY IMBURGIA, et al.,

Respondents.

On Writ of Certiorari

to the Court of Appeal of the State of California

—

BRIEF AMICUS CURIAE OF PACIFIC LEGAL

FOUNDATION IN SUPPORT OF PETITIONER

—¢—

ERNESTO J. SANCHEZ DEBORAH J. LA FETRA

Law Offices of Counsel of Record

Ernesto J. Sanchez Pacific Legal Foundation

1530 Catalonia Avenue 930 G Street

Coral Gables, Florida 33134 Sacramento, California 95814

Telephone: (305) 215-3261 Telephone: (916) 419-7111

Facsimile: (916) 419-7747

E-mail: dlafetra@pacificlegal.org

Counsel for Amicus Curiae Pacific Legal Foundation

QUESTION PRESENTED

Whether the California Court of Appeal erred by

holding, in direct conflict with the Ninth Circuit, that

a reference to state law in an arbitration agreement

governed by the Federal Arbitration Act requires the

application of state law preempted by the Federal

Arbitration Act.

TABLE OF CONTENTS

Page

QUESTION PRESENTED i

TABLE OF AUTHORITIES iv

INTEREST OF AMICUS CURIAE . 1

INTRODUCTION AND

SUMMARY OF ARGUMENT 2

ARGUMENT 4

I. THE PREEMPTED DISCOVER

BANK RULE HAS NO LEGAL EFFECT

ON JUDICIAL CONSTRUCTION

OF ARBITRATION CONTRACTS 4

A. Preempted Common

Law Rules Are as Moribund

as Preempted Statutes;

They May Not Be Resurrected 4

1. The Meaning and

Effect of Preempted

State Common Law Rules 6

2. Other Preempted Common

Law Rules and Statutes

Are Considered Nullified,

Even by California Courts 10

B. California’s Discover Bank

Rule, Invalidating Class-Action

Waivers as “Unconscionable,” Can

Have No Effect in the Construction

of Any Arbitration Contract 15

ill

TABLE OF CONTENTS—Continued

Page

II. CALIFORNIA COURTS MUST

NOT ISOLATE THE STATE’S

RESIDENTS FROM THE BENEFITS

THEY SEEK TO OBTAIN FROM

THE FEDERAL ARBITRATION ACT 19

Ill. CALIFORNIA’S INTRANSIGENCE

INFECTS OTHER STATES 21

CONCLUSION 25

TABLE OF AUTHORITIES

Page

Cases

Abbott v. U.S.,

562 U.S. 8 (2010) 10

Abdullah v. American Airlines, Inc.,

181 F.3d 363 (3d Cir. 1999) 5

Aceros Prefabricados, S.A. v. TradeArbed, Inc.,

282 F.3d 92 (2d Cir. 2002) 18

Akopyan v. Wells Fargo Home Mortg., Inc.,

215 Cal. App. 4th 120 (2013),

rev. denied (Jun. 26, 2013) 13-14

American Exp. Co. v. Italian Colors Rest.,

133 S. Ct. 2304 (2013) 3, 4, 16, 20, 24

AT&T Mobility LLC v. Concepcion,

131 S. Ct. 1740 (2011) passim

Attocknie v. Carpenter Mfg., Inc.,

901 P.2d 221 (Okla. App. 1995) 6

Broughton v. Cigna Healthplans of Cal.,

21 Cal. 4th 1066 (1999) 15-16

Brown ex rel. Brown v. Genesis Healthcare Corp.,

228 W. Va. 646 (2011), judgment vacated sub

nom, Marmet Health Care Ctr., Inc. v.

Brown, 132 S. Ct. 1201 (2012) 22

California ARCO Distributors, Inc. v. Atlantic

Richfield Co., 158 Cal. App. 3d 349 (1984) 16

CarMax Auto Superstores Cal., LLC v. Fowler,

134 S. Ct. 1277 (2014) 20

TABLE OF AUTHORITIES—Continued

Page

Carter v. SSC Odin Operating Co., LLC,

237 Ill. 2d 30 (2010) 12

Cipollone v. Liggett Grp., Inc.,

789 F.2d 181 (3d Cir. 1986),

cert. denied, 479 U.S. 1043 (1987) 5

Clay v. Permanente Med. Grp., Inc.,

540 F. Supp. 2d 1101 (N.D. Cal. 2007) 9-10

Cleveland By and Through Cleveland v.

Piper Aircraft Corp.,

985 F.2d 1438 (10th Cir. 1993) 5

Cruz v. PacifiCare Health Sys, Inc.,

30 Cal. 4th 303 (2003) 15-16

De La Cuesta v. Fidelity Sav. & Loan Ass'n,

121 Cal. App. 3d 328 (1981) 11

Discover Bank v. Shea,

827 A.2d 358 (N.J. Super. Ct. Law Div.

2001), app. dismissed, 827 A.2d 292

(N.J. Super. App. Div. 2003) 22

Discover Bank v. Superior Court,

36 Cal. 4th 148 (2005) 2-4, 15, 17-18, 20

D’Antuono v. Serv. Rd. Corp.,

789 F. Supp. 2d 308 (D. Conn. 2011) 3

Episcopal Church in Micronesia v.

Chung Kuo Ins. Co., Ltd., No. 84-0001,

1985 WL 56588 (D. Guam June 28, 1985) 22

Farmers Educ. and Coop. Union of Am.,

N.D. Div. v. WDAY, Inc.,

360 U.S. 525 (1959) 8

TABLE OF AUTHORITIES—Continued

Feeney v. Dell Inc., 454 Mass. 192 (2009)

Feeney v. Dell Inc., 465 Mass. 470 (2013)

Feeney v. Dell Inc., 466 Mass. 1001 (2013)

Ferguson v. Corinthian Colleges, Inc.,

733 F.3d 928 (9th Cir. 2013)

Fidelity Fed. Sav. & Loan Ass'n v.

de la Cuesta, 458 U.S. 141 (1982)

First Gibraltar Bank, FSB v. Morales,

42 F.3d 895 (5th Cir. 1995)

Gentry v. Superior Court,

42 Cal. 4th 443 (2007)

Hall St. Assocs., L.L.C. v. Mattel, Inc.,

552 U.S. 576 (2008)

Hines v. Davidowitz, 312 U.S. 52 (1941)

Huntington Intl Corp. v. Armstrong

World Indus. Inc.,

981 F. Supp. 134 (E.D. N.Y. 1997)

Imburgia v. DIRECTV, Inc.,

225 Cal. App. 4th 338 (2014)

In re Farmers Markets, Inc.,

792 F.2d 1400 (9th Cir. 1986)

In re Schwartz-Tallard,

765 F.3d 1096 (9th Cir. 2014),

reh’g en banc granted, 774 F.3d 959 (2014)

In re Walsh,

219 B.R. 873 (9th Cir. B.A.P. 1998)

Page

10-11

TABLE OF AUTHORITIES—Continued

Page

Intl Paper Co. v. Ouellette,

479 U.S. 481 (1987) 5

Intl Union, United Auto., Aerospace & Agric.

Implement Workers of Am., UAW v. Johnson

Controls, Inc., 499 U.S. 187 (1991) 8

Iskanian v. CLS Transp. Los Angeles, LLC,

59 Cal. 4th 348 (2014), cert. denied,

135 S. Ct. 1155 (2015) 3

James v. Conceptus, Inc.,

851 F. Supp. 2d 1020 (S.D. Tex. 2012) 21

King v. Hoke,

825 F.2d 720 (2d Cir. 1987) )

Kristian v. Comcast Corp.,

446 F.3d 25 (1st Cir. 2006) 22

Linder & Assocs., Inc. v. Aetna Cas. &

Sur. Co., 166 F.3d 547 (3d Cir. 1999) 17

Little v. Auto Stiegler, Inc.,

29 Cal. 4th 1064 (2003) 20

Local 174, Teamsters, Chauffeurs,

Warehousemen & Helpers of Am. v.

Lucas Flour Co., 369 U.S. 95 (1962) 17

Maryland v. Louisiana,

451 U.S. 725 (1981) 7

Matter of Marlene Indus. Corp.

(Carnac Textiles), 45 N.Y.2d 327 (1978) 17-18

McCulloch v. Maryland,

4 Wheat. 316 (1819) 6-7

TABLE OF AUTHORITIES—Continued

Page

McGill v. CitiBank, N.A.,

345 P.3d 61 (Cal. 2015) 16

McKenzie Check Advance of Fla., LLC v.

Betts, 112 So. 3d 1176 (Fla. 2013) 3

Monarch Consulting, Inc. v.

Nat? Union Fire Ins. Co. of Pittsburgh,

2014 WL 4459129

(N.Y. App. Div. Sept. 11, 2014) 22

Murphy v. DirecTV, Inc.,

724 F.3d 1218 (9th Cir. 2013) 3

Mutual Pharm. Co., Inc. v. Bartlett,

133 S. Ct. 2466 (2013) 7

Naegele v. Albers,

940 F. Supp. 2d 1 (D.D.C. 2013) 22

Nat7 Basketball Ass'n v. Motorola, Inc..,

105 F.3d 841 (2d Cir. 1997) 8

Northeast Sav., FA. v. Dir.,

Office of Thrift Supervision,

770 F. Supp. 19 (D.C. D.C. 1991) 8

Northwest v. Ginsberg,

134 S. Ct. 1422 (2014) 4-5

Oneok, Inc. v. Learjet, Inc.,

2015 WL 1780926

(U.S. Supreme Ct. Apr. 21, 2015) g

Oxford Health Plans LLC v. Sutter,

133 S. Ct. 2064 (2013) 1

Perry v. Thomas, 482 U.S. 483 (1987) 20

TABLE OF AUTHORITIES—Continued

Page

Phillips Petroleum Co. v.

Arco Alaska, Inc., No. 7177,

1986 WL 7612 (Del. Ch. July 9, 1986) 22

Preston v. Ferrer, 552 U.S. 346 (2008) 1, 20

Progressive Cas. Ins. Co. v.

C.A. Reaseguradora Nacional De Venezuela,

991 F.2d 42 (2d Cir. 1993) 17

Pub. Utilities Comm'n of State of Cal. v. U.S.,

355 U.S. 534 (1958) 6

Quilloin v. Tenet HealthSystem Philadelphia, Inc..,

673 F.3d 221 (3d Cir. 2012) 18

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

561 U.S. 63 (2010) l

San Diego Bldg. Trades Council,

Miillmen’s Union, Local 2020 v. Garmon,

359 U.S. 236 (1959) 6

Sanchez v. Lindsey Morden Claims Services, Inc.,

72 Cal. App. 4th 249 (1999),

rev. denied (Jul. 28, 1999) 15

Schaeffer v. San Diego Yellow Cabs, Inc.,

462 F.2d 1002 (9th Cir. 1972) 9

Sec. Ins. Co. of Hartford v. TIG Ins. Co.,

360 F.3d 322 (2d Cir. 2004) 22

Sonic-Calabasas A, Inc. v. Moreno,

132 S. Ct. 496 (2011) 20

Southland Corp. v. Keating,

465 U.S. 1 (1984) 19

TABLE OF AUTHORITIES—Continued

Page

State v. Hobson, 218 Wis. 2d 350 (1998) 8

Sternberg v. Johnson,

595 F.3d 937 (9th Cir. 2010) )

Stolt-Nielsen S. A..v. AnimalFeeds Intl Corp.,

559 U.S. 662 (2010) l

Taylor v. Gen. Motors Corp.,

875 F.2d 816 (11th Cir. 1989),

cert. denied, 494 U.S. 1065 (1990) 5

Thibodeau v. Comcast Corp.,

912 A.2d 874 (Pa. Super. Ct. 2006) 18

Triad Sys. Fin. Corp. v.

Stewart’s Auto Supply, Inc.,

47 F. Supp. 2d 1332 (N.D. Ala. 1999) 21

U.S. v. Bryant,

769 F.3d 671 (9th Cir. 2014) 16

U.S. v. Sparks,

711 F.3d 58 (1st Cir.),

cert. denied, 134 S. Ct. 204 (2013) 10

U.S. v. Tejada,

631 F.3d 614 (2d Cir. 2011) 10

Wallace v. Ganley Auto Grp.,

2011-Ohio-2909 (Ohio App. 2011) 4

Wellenkamp v. Bank of Am..,

21 Cal. 3d 943 (1978) 10

Welton v. City of Los Angeles,

18 Cal. 3d 497 (1976) 16

TABLE OF AUTHORITIES—Continued

Yarick v. PacifiCare of Cal.,

179 Cal. App. 4th 1158 (2009)

Constitutions

U.S. Const., art. I, § 8, cl. 4

U.S. Const., art. VI, cl. 2

Statutes

42 U.S.C. § 1395w-26(b)(3)

Cal. Civ. Code § 1751

Rules

Sup. Ct. R. 37

Sup. Ct. R. 37.3(a)

Sup. Ct. R. 37.6

Miscellaneous

Black’s Law Dictionary (10th ed. 2014)

Rau, Alan Scott, Arbitral Power and

the Limits of Contract: The New Trilogy,

22 Am. Rev. Intl Arb. 435 (2011)

Page

12-13

INTEREST OF AMICUS CURIAE

Pursuant to Supreme Court Rule 37, Pacific Legal

Foundation respectfully submits this brief amicus

curiae in support of Petitioner, DIRECTV, Inc.’

Founded in 1973, Pacific Legal Foundation (PLF) is

widely recognized as the largest and most experienced

nonprofit legal foundation of its kind. PLF’s Free

Enterprise Project defends the freedom of contract,

including the right of parties to agree by contract to

the process for resolving disputes that might arise

between them. To that end, PLF has participated as

amicus curiae in many important cases in this Court,

the California courts, and many other state supreme

courts involving the Federal Arbitration Act (FAA) and

contractual arbitration in general. See, e.g., Oxford

Health Plans LLC v. Sutter, 133 S. Ct. 2064 (2013);

AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740

(2011); Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63

(2010); Stolt-Nielsen S. A. v. AnimalFeeds Intl Corp.,

559 U.S. 662 (2010); Hall Street Assocs., L.L.C. v.

Mattel, Inc., 552 U.S. 576 (2008); and Preston v. Ferrer,

552 U.S. 346 (2008).

' Pursuant to this Court’s Rule 37.3(a), all parties have consented

to the filing of this brief. Letters evidencing such consent have

been filed with the Clerk of the Court.

Pursuant to Rule 37.6, Amicus Curiae affirms that no counse)

for any party authored this brief in whole or in part, and no

counsel or party made a monetary contribution intended to fund

the preparation or submission of this brief. No person other than

Amicus Curiae, its members, or its counsel made a monetary

contribution to its preparation or submission.

INTRODUCTION AND

SUMMARY OF ARGUMENT

Amy Imburgia’s contract with DIRECTV included

a provision that any disputes would be resolved “only

by binding arbitration” and that the parties would not

“arbitrate any claim as a representative member of a

class or in a private attorney general capacity.” It

further stated that “[i]f, however, the law of your state

would find this agreement to dispense with class action

procedures unenforceable, then this entire Section

[providing for arbitration] is unenforceable.” Finally,

it states that the arbitration provisions “shall be

governed by the Federal Arbitration Act.” Imburgia v.

DIRECTV, Inc., 225 Cal. App. 4th 338, 341-42 (2014).

In 2008, Imburgia filed a putative class action

against DIRECTV, claiming violations of various

California laws related to DIRECTV’s assessment of

early termination fees. Jd. at 340. At that time, the

rule created by the California Supreme Court in

Discover Bank v. Superior Court, 36 Cal. 4th 148

(2005), was effectively invalidating all class action

waivers in consumer contracts, deeming them

unconscionable. DIRECTV did not move to compel

arbitration, as it would have been futile under

California law. In 2011, the legal landscape changed

dramatically when this Court held the Discover Bank

rule preempted in Concepcion, 131 S. Ct. 1740.

DIRECTV immediately moved to compel arbitration,

Imburgia, 225 Cal. App. 4th at 341, but the trial court

denied the motion, based on the contract’s “law of your

state” provision above. The court of appeal affirmed,

holding that it had to consider the law of the state,

without regard to whether it was preempted. Jd. at

347.

In so doing, the court below fundamentally

misunderstood the meaning and effect of federal

preemption. Under the Supremacy Clause, state

law—whether statutory or common law—must yield

completely when it is preempted by federal law. U.S.

Const., art. VI, cl. 2 (the laws of the United States

“shall be the supreme Law of the Land any Thing

in the Constitution or Laws of any State to the

Contrary notwithstanding.” In Concepcion, this Court

expressly held the Discover Bank rule preempted,

rendering it a legal nullity upon which no court or

party may rely. As the Ninth Circuit held in Murphy

v. DirecTV, Inc., 724 F.3d 1218, 1226 (9th Cir. 2013),

“Section 2 of the FAA, which under Concepcion

requires the enforcement of arbitration agreements

that ban class procedures, is the law of California and

of every other state.”

* The court below did not explicitly rest its decision on Discover

Bank, citing both that case as well as an anti-waiver provision in

the Consumers Legal Remedies Act, Cal. Civ. Code § 1751.

Amicus does not address that statute directly because the

Question Presented in this case focuses on the lower court’s broad

holding that it must review contract language referring to state

law without regard to whether that state law is preempted. In any

event, Concepcton’s holding has already been held, even in

California, to apply to class action waivers outside the consumer

context presented in that case and in Discover Bank. See, e.g.,

Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348, 364

(2014), cert. denied, 135 S. Ct. 1155 (2015) (“Under the logic of

Concepcion, the FAA preempts Gentry’s rule against employment

class waivers.); McKenzie Check Advance of Florida, LLC v. Betts,

112 So. 3d 1176, 1183, 1188 (Fla. 2013) (consumers’ claims

brought under a variety of consumer protection statutes, all of

which permit class actions, nonetheless must be pursued through

individual arbitration, per Concepcion); D’Antuono v. Service Rd.

Corp., 789 F. Supp. 2d 308, 322, 331 (D. Conn. 2011) (pre-Italian

Colors case that relies on the fundamental principles set forth in

(continued...)

ARGUMENT

THE PREEMPTED DISCOVER

BANK RULE HAS NO LEGAL

EFFECT ON JUDICIAL CONSTRUCTION

OF ARBITRATION CONTRACTS

A. Preempted Common

Law Rules Are as Moribund

as Preempted Statutes;

They May Not Be Resurrected

A state cannot accomplish by common law what it

would be forbidden to accomplish by statute. In

Northwest v. Ginsberg, 134 S. Ct. 1422 (2014), this

Court held that a claim for breach of the implied

covenant of good faith and fair dealing based on

Minnesota state law is preempted by the Airline

Deregulation Act because “it seeks to enlarge the

contractual obligations that the parties voluntarily

adopt.” The Airline Deregulation Act’s “aim can be

undermined just as surely by a state common-law rule

as it can by a state statute or regulation.” Jd. at 1430.

Parallel to the Federal Arbitration Act’s promotion of

? (...continued)

Concepcion to question the continued validity of the Second Circuit

case later overruled in Jtalian Colors and holds, “this Court reads

the AT & T Mobility decision as casting sigificant doubt on

virtually any ‘device [or] formula’ which might be a vehicle for

‘judicial hostility toward arbitration’”) (citing Concepcion, 131 S.

Ct. at 1747); Wallace v. Ganley Auto Grp., 2011-Ohio-2909 4 19

(Ohio App. 2011) (Concepcion demands courts uphold arbitration

agreements even when they include statutory consumer protection

claims that the state believes should be litigated as class action).

That said, California courts continue to go to great lengths to

cabin Concepcion, as discussed in Section II, infra.

the freedom of parties to contract for dispute resolution

in the ways that best suits them, the Court noted that

the federal policy promoted by the Airline Deregulation

Act with regard to frequent flyer programs is to allow

the free market to operate. Id. at 1433.

Ginsberg followed a long line of cases consistently

holding that federal law preempts state law when the

state law “interferes with the methods by which the

federal statute was designed to reach [its] goal,”

International Paper Co. v. Quellette, 479 U.S. 481, 494

(1987), whether the state law is rooted in a statute,

regulation, or common law rule. Cipollone v. Liggett

Group, Inc., 789 F.2d 181, 187 (8d Cir. 1986), cert.

denied, 479 U.S. 1043 (1987) (“the duties imposed

through state common law damage actions have the

effect of requirements that are capable of creating ‘an

obstacle to the accomplishment and execution of the

full purposes and objectives of Congress’ ”) (citation

omitted). See also Taylor v. General Motors Corp., 875

F.2d 816, 826 (11th Cir. 1989), cert. denied, 494 U.S.

1065 (1990) (The principle of preemption “applies

whether the federal law is embodied in a statute or

regulation, and whether the state law is rooted in

a statute, regulation, or common law rule.”); Abdullah

vu. American Airlines, Inc., 181 F.3d 363, 367 n.4 (3d

Cir. 1999) (“State common law rules may be preempted

in the same ways as state statutes or regulations.”).

In short, the meaning of “state law” in preemption

analysis includes not only the positive enactments of a

state but also common law rules of liability as

determined by state judicial decisions. Cleveland By

and Through Cleveland v. Piper Aircraft Corporation,

985 F.2d 1438, 1441 (10th Cir. 1993). The reason

statutes and common law rules are treated as

equivalent for purposes of preemption analysis is

because both reflect public policy and both are

intended to govern conduct. San Diego Building

Trades Council, Millmen’s Union, Local 2020 v.

Garmon, 359 U.S. 236, 247 (1959) (“[R)]egulation can be

as effectively exerted through an award of damages as

through some form of preventive relief. The obligation

to pay compensation is designed to be, a potent

method of governing conduct and controlling policy.”);

Attocknie v. Carpenter Mfg., Inc., 901 P.2d 221, 224 n.3

(Okla. App. 1995) (“[Al successful common-law tort

action could have the effect of establishing a safety

standard applicable to the same aspect of performance

of a motor vehicle or item of motor vehicle equipment

as that addressed by a federal standard.”).

1. The Meaning and

Effect of Preempted

State Common Law Rules

The doctrine of federal preemption gives force to

the Supremacy Clause of the Constitution by nullifying

state laws that conflict with federal law. U.S. Const.

art. VI, cl. 2. The very essence of supremacy removes

all obstacles to its action within its own sphere, and

thereby modifies every power vested in subordinate

governments as to exempt federal operations from the

states’ influence. Public Utilities Commission of State

of Cal. v. U.S., 355 U.S. 534, 544 (1958) (citing

McCulloch v. Maryland, 4 Wheat. 316, 427 (1819)).

The meaning and effect of federal preemption has been

phrased in a variety of ways, with the common theme

that the preempted law or rule or statute is rendered

ineffective.

In general, all state provisions that conflict with

federal law are “without effect” or, in other words, a

“state statute is void to the extent it conflicts with a

federal statute.” Maryland v. Louisiana, 451 U.S. 725,

746-47 (1981) (citing McCulloch, 4 Wheat. at 427;

Hines v. Davidowitz, 312 U.S. 52 (1941)). The Court

applied this “without effect” definition in Mutual

Pharmaceutical Co., Inc. v. Bartlett, 133 S. Ct. 2466,

2473 (2013). That case did not involve a statute; it

involved New Hampshire’s application of the common

law tort duty to warn. The plaintiff sought to employ

the state’s “risk-utility approach” to determine whether

a product is unreasonably dangerous as designed. Id.

at 2473. Under the state’s approach, a pharmaceutical

manufacturer would be required to strengthen the

warning on the generic drug at issue in the case. Jd. at

2475. However, federal law prevents generic drug

manufacturers from changing their labels. Jd. at 2476.

“Because it is impossible for Mutual and other

similarly situated manufacturers to comply with both

state and federal law, New Hampshire’s warning-based

design-defect cause of action is pre-empted with

respect to FDA-approved drugs sold in interstate

commerce.” Id. at 2477 Importantly, the court found

no relevance in the fact that the state law was of

common law origin, instead of a statute: “In violating

a common-law duty, as surely as by violating a

statutory duty, a party contravenes the law.” Jd. at

2479. Because the state law duty to warn was

preempted, the generic drug manufacturer had no need

to alter its warnings to comply with it.

Similarly, some courts explain that a state rule

that is preempted is no longer “good law.” For

example, the Second Circuit explained that federal

decisions that relied upon state contract principles in

conflict with the legislation, and, as such, those state

contract principles could no longer be considered “good

law” on which parties could rely. Nat? Basketball

Ass'n v. Motorola, Inc., 105 F.3d 841, 852 (2d Cir. 1997)

(“[M]ost of the broadcast cases relied upon by the NBA

are simply not good law. Those cases were decided at

a time when simultaneously-recorded broadcasts were

not protected under the Copyright Act and when the

state law claims they fashioned were not subject to

federal preemption.”).

Preempted state rules may also be described as

“abrogated.” In International Union, United

Automobile, Aerospace and Agricultural Implement

Workers of America, UAW v. Johnson Controls, Inc.,

499 U.S. 187 (1991), this Court stated that “we have

not hesitated to abrogate state law where satisfied that

its enforcement would stand as an obstacle to the

accomplishment and execution of the full purposes and

objectives of Congress.” Jd. at 209-10 (internal

quotation marks omitted). Abrogate means “To abolish

(a law or custom) by formal! or authoritative action; to

annul or repeal.” Black’s Law Dictionary (10th ed.

2014); Northeast Sav., FA. v. Director, Office of Thrift

Supervision, 770 F. Supp. 19, 23 n.3 (D.C. D.C. 1991)

(abrogate means “to repeal, abolish, annul, cancel”);

State v. Hobson, 218 Wis. 2d 350, 353 n.1 (1998)

(same). This Court also used the word “abrogation” in

the preemption context in Farmers Educational and

Coop. Union of America, N.D. Div. v. WDAY, Inc., 360

U.S. 525, 535 (1959): “[C]auses of action for libel are

widely recognized throughout the states. But we have

not hesitated to abrogate state law where satisfied that

its enforcement would stand ‘as an obstacle to the

accomplishment and execution of the full purposes and

objectives of Congress.’” (Citations omitted.). The

Ninth Circuit has done so as well, in the context of

federal bankruptcy law. For example, in /n re

Schwartz-Tallard, 765 F.3d 1096, 1102 n.5 (9th Cir.

2014), reh'g en banc granted, 774 F.3d 959 (2014), the

Ninth Circuit heard an appeal from a Bankruptcy

Appellate Panel, and noted that the BAP had relied on

a case (In re Walsh, 219 B.R. 873 (9th Cir. B.A.P

1998)) that was rejected in a later case (Sternberg v.

Johnson, 595 F.3d 937 (9th Cir. 2010)), and that such

reliance on the earlier case was “improper.” The

Circuit panel specifically disclaimed any reliance on

the “partially abrogated Walsh decision.” See also In re

Farmers Markets, Inc., 792 F.2d 1400, 1403 (9th Cir.

1986) (“Congress may, within its constitutional

limitations, abrogate state law entitlements in

bankruptcy pursuant to its Bankruptcy Clause power,

U.S. Const. art. I, § 8, cl. 4.”).

Most recently, this Court used the word

“invalidate” to describe the effect of preemption on a

state law. Oneok, Inc. v. Learjet, Inc., 2015 WL

1780926, *4 (U.S. Supreme Ct. Apr. 21, 2015)

(“Congress may consequently pre-empt, i.e., invalidate,

a state law through federal legislation. It may do so

through express language in a statute. But even

where, as here, a statute does not refer expressly to

pre-emption, Congress may implicitly pre-empt a state

law, rule, or other state action.”) (citation omitted). A

statute that is invalid, for whatever reason, could not

be relied upon by either parties to litigation or by a

court. See Schaeffer v. San Diego Yellow Cabs, Inc.,

462 F.2d 1002, 1006-07 (9th Cir. 1972) (reliance on an

invalid state statute is not a defense to a Title VII

suit); King v. Hoke, 825 F.2d 720, 724 (2d Cir. 1987)

(sentencing judge’s reliance on repealed sentencing

statute is an error of law requiring reversal for

resentencing); Clay v. Permanente Medical Group, Inc.,

540 F. Supp. 2d 1101, 1109-10 (N.D. Cal. 2007)

(arguments fail that rely on older, non-current versions

of a statute). This rule extends to the common law.

U.S. v. Sparks, 711 F.3d 58, 64 n.3 (1st Cir.), cert.

denied, 134 S. Ct. 204 (2013) (Reliance on a clear and

well-defined judicial rule that is later abrogated is

analogous to reliance on a subsequently invalidated

statute.); U.S. v. Tejada, 631 F.3d 614, 619 (2d Cir.

2011) (Court rejected criminal] defendant’s challenge to

his sentence in reliance on Circuit cases that were

“abrogated by the Supreme Court’s decision in Abbott

v. United States, 562 U.S. 8 (2 :i0),” because the

abrogated cases were of no legal effect.).

2. Other Preempted Common

Law Rules and Statutes

Are Considered Nullified,

Even by California Courts

In Fidelity Federal Savings & Loan Association v.

de la Cuesta, 458 U.S. 141 (1982), this Court previously

considered the relationship between federal

preemption and California’s common law. The case

involved a federal regulation that granted federal

savings and loan associations an option to include a

due-on-sale clause in loan instruments. Jd. at 144.

When the defendant federal savings and loan

association exercised its option to include the clause,

three borrowers sued, claiming that the due-on-sale

clause was unenforceable under a California common

law rule announced in Wellenkamp v. Bank of America,

21 Cal. 3d 943 (1978), which held that a due-on-sale

clause violates the state’s prohibition of unreasonable

restrains on alienation. The California Court of Appeal

in de la Cuesta described this rule as “a substantive

rule of California property and mortgage law,” not

specifically intended to regulate federal savings and

loan associations. de la Cuesta, 458 U.S. at 150 (citing

De La Cuesta v. Fidelity Sav. & Loan Ass’n, 121 Cal.

App. 3d 328, 339 (1981)). This Court analyzed the

issue as a matter of “conflict” or “obstacle” preemption,

as the statute lacked an express provision preempting

state law. Id. at 153. The fact that a conflict existed

was, as in this case, indisputable; the question was

how that conflict affected continued application of the

state rule.

The conflict does not evaporate because the

Board’s regulation simply permits, but does

not compel, federal savings and loans to

include due-on-sale clauses in their contracts

and to enforce those provisions when the

security property is transferred. The Board

consciously has chosen not to mandate use of

due-on-sale clauses “because [it] desires to

afford associations the flexibility to

accommodate special situations and

circumstances.” Although compliance with

both [the federal regulation] and the [state

common law] rule may not be “a physical

impossibility,” the California courts have

forbidden a federal savings and loan to

enforce a due-on-sale clause solely “at its

option” and have deprived the lender of the

“flexibility” given it by the Board.

Id. at 155. (footnote and citations omitted). Therefore,

because the state rule limited an “option the Board

considers essential to the economic soundness of the

thrift industry,” the state rule acted as an “obstacle” to

the federal regulation and was preempted. /d. at 156.

As a result, the loan instruments could include a due-

on-sale clause, regardless of contrary California

common law and policy. See also Carter v. SSC Odin

Operating Co., LLC, 237 Ill. 2d 30, 39 (2010) (“[S]tate

law is null and void if it conflicts with federal law.”).

Outside the context of arbitration, California

courts acknowledge the invalidating effect of a

preemption holding. For example, in Yarick uv.

PacifiCare of California, 179 Cal. App. 4th 1158, 1162

(2009), the California Court of Appeal considered the

preemptive effect of the Federal 2003 Medicare

Prescription Drug, Improvement and Modernization

Act, 42 U.S.C. § 1395w-26(b)(3) (also known as

Medicare Advantage), on the plaintiff's state common

law claims for negligence, elder abuse, and wrongful

death. The plaintiff (decedent’s administrator), argued

that the financial incentive structure of the Medicare

Advantage (MA) statute led the healthcare facilities

that cared for the decedent to fail in their duties to

exercise due diligence to ensure adequate care, and to

establish an ongoing quality assurance program to

ensure that healthcare benefits would not be delayed

or denied to patients. Jd. at 1164. The court

considered PacifiCare’s claims of both express and

implied preemption. Some of Yarick’s claims were

premised on the state statutory standards for HMO

organizations, id. at 1166, and these were held to be

expressly preempted by the federal statute, that is,

“superceded,” with the result that those “sections

cannot supply the standard of care for duties upon the

respondent.” Jd. at 1167. “Obstacle” preemption

eliminated the rest of Yarick’s claims that were based

on common law tort duties, rather than alleged

violations of state statutes: “If state common law

judgments were permitted to impose damages on the

basis of these federally approved contracts and quality

assurance programs, the federal authorities would lose

control of the regulatory authority that is at the very

core of Medicare generally and the MA program

specifically.” Jd. at 1167-68. Thus, the state laws were

nullified and ineffective for establishing any standard

of care with which the defendant had to comply.

In Akopyan vt Wells Fargo Home Mortgage, Inc.,

215 Cal. App. 4th 120, 129 (2013), rev. denied (Jun. 26,

2013), California residents sought to invoke state

contract law and the state’s Unfair Competition Law to

bring a class action lawsuit against federally regulated

loan servicing entities (a national bank and a “thrift

institution”) for their imposition of certain late fees.

The court had to determine whether the plaintiffs’

claims were preempted by the Federal National Bank

Act (NBA) and Home Owners Loan Act (HOLA). First,

the California court determined that federal law

intended to occupy the field of lending regulation. Jd.

at 143. The plaintiffs argued, however, that their

claims against the thrift were based on generally

applicable contract law that should prevail because

contract law is preempted from exemption where it

only incidentally affects lending operations or is

otherwise consistent with the Federal HOLA

regulations. Jd. at 143-44. The court rejected this

argument:

Appellants do not allege a routine breach of

contract claim that purports to enforce their

basic contract rights under the express terms

of the loan agreements. Instead, the effect of

implying a state substantive standard on

late fees into the loans serviced by Aurora is

to limit its ability to service the loans

according to their express terms and to

require that it service them in accordance

with the specific state statute that applies to

the loans. If this case is any indication, such

a claim exposes the federal thrift to the

additional expense of litigating which state

statutes apply to particular loans, as well as

to liability under a variety of state laws

specifically regulating loan-related fees. Its

effect is thus not to enforce a contractual

obligation, but “to open the door to state

regulation” of federal thrifts. In its final

rule, the [Office of Thrift Supervision]

expressly warned against the use of the

savings clause to such an end.

Id. at 147. The plaintiffs’ claims as to the bank were

preempted by the NBA, even though national banks

are “subject to state laws of general application”

because that rule applies only to the extent that such

laws “do not conflict with the letter or the general

purposes of the NBA.” Id. at 156 (citations omitted).

The court explained that the breach of contract claim

was not a run-of-the-mill application of contract

principles because California had multiple late fee

statutes, thus exposing Wells Fargo to the “expense

and uncertainty of litigating, in the first instance, what

statute applies to the loan it services.” The California

labyrinth of statutes also creates “diverse payment

application schemes _ despite the uniform payment

application terms of the mortgages it services.” Id. at

158. The court held this “inconsistent with the purpose

of the NBA to prevent the states from imposing

‘diverse and duplicative limitations and

restrictions’ on its power to engage in the business of

banking.” Jd. As such, the preempted California

contract law principles were ineffective, that is, they

could not govern the actions of the bank and thrift. See

also Sanchez v. Lindsey Morden Claims Services, Inc.,

72 Cal. App. 4th 249, 256 (1999), rev. denied (Jul. 28,

1999) (an abrogated common law duty is no duty at

all).

B. California’s Discover Bank

Rule, Invalidating Class-Action

Waivers as “Unconscionable,” Can

Have No Effect in the Construction

of Any Arbitration Contract

The Concepcion opinion concludes: “Because it

‘stands as an obstacle to the accomplishment and

execution of the full purposes and objectives of

Congress, California’s Discover Bank rule is

preempted by the FAA.” 131 S. Ct. at 1753 (citation

omitted). As shown above, common law rules and state

statutes are treated identically for purposes of federal

preemption analysis. The identical treatment is

particularly appropriate for the Discover Bank rule,

which was written so broadly “that it almost reads like

a legislative decree.” Alan Scott Rau, Arbitral Power

and the Limits of Contract: The New Trilogy, 22 Am.

Rev. Int'l Arb. 435, 544 (2011). As a tool for analyzing

arbitration contracts, the Discover Bank rule is a

nonentity that the court below never should have

invoked.

The Ninth Circuit’s reaction to Concepcion

demonstrates how a court assesses the practical matter

of dealing with preempted laws or abrogated cases.

For example, in Ferguson v. Corinthian Colleges, Inc.,

733 F.3d 928, 937 (9th Cir. 2013), the court of appeals

overruled circuit precedent applying the California

Supreme Court’s anti-arbitration Broughton-Cruz

doctrine’ because the doctrine was preempted by the

FAA. In so holding, the Ninth Circuit stated that it

was overruling its prior precedent because it “is clearly

irreconcilable with subsequent United States Supreme

Court decisions concerning the FAA,” such as

Concepcion, American Exp. Co. v. Italian Colors

Restaurant, 133 S. Ct. 2304 (2013), and others. /d. at

934-37.‘ As such, the plaintiffs could not rely on the

Broughton-Cruz doctrine as any type of authority

supporting their claims.

The California courts appear to understand the

nullifying effect of a preemption ruling in some

circumstances. For example, in California ARCO

Distributors, Inc. v. Atlantic Richfield Co., 158 Cal.

App. 3d 349, 363 (1984), the appellate court held that

a state statute was preempted by a federal law. State

courts were therefore forbidden to issue injunctions

based on that preempted statute. Jd. at 363-64. See

also Welton v. City of Los Angeles, 18 Cal. 3d 497, 507

(1976) (First Amendment case noting that “[a]n

* The doctrine holds arbitration provisions are unenforceable as

against public policy if they require arbitration of injunctive relief

claims brought for the public’s benefit. Broughton v. Cigna

Healthplans of Calif., 21 Cal. 4th 1066, 1083-84 (1999); Cruz v.

PacifiCare Health Systems, Inc., 30 Cal. 4th 303, 318-19 (2003).

The California Supreme Court granted review in McGill v.

CitiBank, N.A., 345 P.3d 61 (Cal. 2015), on April 1, 2015, to

answer the question of whether the Broughton-Cruz doctrine

survives Concepcion.

* Overruling a court’s own prior cases is appropriate when a

Supreme Court decision “must have undercut the theory or

reasoning underlying the prior circuit precedent in such a way

that the cases are clearly irreconcilable.” U.S. v. Bryant, 769 F.3d

671, 678 (9th Cir. 2014).

injunction based on an unconstitutional [law] exceeds

the issuing court’s jurisdiction.”)).

The fact that the Federal Arbitration Act

preempts the Discover Bank rule, limiting the scope of

state contract.law, is not unique. Many federal

statutes affect state contract law, rendering their

principles and remedies ineffective when they obstruct

or otherwise conflict with federal law. For example,

federal common and statutory law preempts state

principles of contract law for purposes of the

interpretation of policies issued pursuant to the

National Flood Insurance Act of 1968. Linder &

Associates, Inc. v. Aetna Cas. & Sur. Co., 166 F.3d 547,

550 (3d Cir. 1999). Similarly, federal common law

preempts state contract law for purposes of collective

bargaining interpretation and enforcement. Local 174,

Teamsters, Chauffeurs, Warehousemen & Helpers of

Am. v. Lucas Flour Co., 369 U.S. 95, 103-04 (1962).

California is not the only state to have common

law rules affecting arbitration agreements preempted

by the Federal Arbitration Act. For example, New

York had required that parties would not be bound to

an arbitration contract “in the absence of an express,

unequivocal agreement to that effect.” Matter of

Marlene Indus. Corp. (Carnac Textiles), 45 N.Y.2d 327,

333 (1978). The Second Circuit held that this rule,

because it applied only to arbitration contracts, was

preempted. Progressive Casualty Ins. Co. v. C.A.

Reaseguradora Nacional De Venezuela, 991 F.2d 42, 46

(2d Cir. 1993). Subsequent courts interpreting

arbitration agreements under New York law

disregarded the Marlene Industries rule, as it was

nullified and had no legal effect. See, e.g., Huntington

Intl Corp. v. Armstrong World Indus. Inc., 981 F.

Supp. 134, 138 (E.D. N.Y. 1997) (applying New York

law other than the anti-arbitration Marlene Industries

rule); Aceros Prefabricados, S.A. v. TradeArbed, Inc.,

282 F.3d 92, 100 (2d Cir. 2002) (disregarding effect of

Marlene Industries when interpreting an arbitration

contract).

Pennsylvania unconscionability law, like Discover

Bank, also served to invalidate otherwise valid

arbitration agreements. Thibodeau v. Comcast Corp.,

912 A.2d 874, 883-84 (Pa. Super. Ct. 2006) (class action

waivers are substantively unconscionable where “class

action litigation is the only effective remedy” such as

when “the high cost of arbitration compared with the

minimal potential value of individual damages denie[s]

every plaintiff a meaningful remedy”). Thibodeau is

now considered preempted by Concepcion. In Quilloin

uv. Tenet HealthSystem Philadelphia, Inc., 673 F.3d 221

(3d Cir. 2012), the Third Circuit explained that it

would apply the state law only “to the extent that such

law is not displaced” by the Federal Arbitration Act, id.

at 230, specifically, Concepcion. Id. at 233 (“The

Pennsylvania law is not substantively different from

the California law, which is unquestionably preempted

by the FAA.”). Therefore, although Thibodeau would

have invalidated the arbitration agreement because it

contained a class action waiver, the Quilloin court did

not find it unconscionable and held that the motion to

compel arbitration shculd have been granted. Jd. at

235.

Although Discover Bank remains in the law books,

and may be authority for propositions unrelated to the

interpretation of contracts governed by the Federal

Arbitration Act, the aspects of its holding preempted

by federal law are impotent with regard to the

unconscionability rule invalidated in Concepcion. See

First Gibraltar Bank, FSB v. Morales, 42 F.3d 895, 902

(5th Cir. 1995) (“Because the Texas homestead laws

had not been repealed, they were in effect on the date

of the Amendment, although they were arguably

impotent in the context of federal bank regulation”

which preempted the state laws prior to the federal

statute’s amendment.) (emphasis omitted).

CALIFORNIA COURTS MUST

NOT ISOLATE THE STATE’S

RESIDENTS FROM THE BENEFITS

THEY SEEK TO OBTAIN FROM THE

FEDERAL ARBITRATION ACT

The decision below continues a collision course

upon which California courts have embarked with this

Court’s decisions regarding FAA preemption.

Affirming the decision below would show state courts

how to make “end runs” around the FAA and

Concepcion via applicable state common law.

Certainly, California courts have demonstrated

marked persistence in light of this Court’s decisions

such that this Court may anticipate continued

recalcitrance.

Since 1984, this Court has been reversing

California court decisions that are based on distrust

and disapproval of arbitration. See Southland Corp. v.

Keating, 465 U.S. 1, 5, 7 (1984) (reversing the

California Supreme Court’s holding that the state

Franchise Investment Law required judicial resolution

rather than arbitral resolution because “[p]lainly the

effect of the judgment of the California court is to

nullify a valid contract made by private parties under

which they agreed to submit all contract disputes to

final, binding arbitration”); Perry v. Thomas, 482 U.S.

483, 491 (1987) (reversing California Court of Appeal

decision by holding that the FAA preempts a state

labor law authorizing wage collection actions

regardless of an agreement to arbitrate: “[U)nder the

Supremacy Clause, the state statute must give way.”);

Preston, 552 U.S. at 359 (reversing California Court of

Appeal and holding that the FAA’s protection of an

arbitration agreement vesting jurisdiction over all

disputes in an arbitral tribunal supersedes state laws

lodging dispute resolution jurisdiction in a different

judicial or administrative forum); Concepcion, 131 S.

Ct. at 1753 (reversing Ninth Circuit application of

California’s Discover Bank rule because “[s]tates

cannot require a procedure that is inconsistent with

the FAA, even if it is desirable for unrelated reasons”);

see also Sonic-Calabasas A, Inc. v. Moreno, 132 S. Ct.

496 (2011) (vacating and remanding California

Supreme Court decision in Sonic I, which categorically

forbade waiver of a Berman wage hearing prior to

arbitration, for reconsideration in light of Concepcion);

CarMax Auto Superstores California, LLC v. Fowler,

134 S. Ct. 1277 (2014) (vacating and remanding

California Court of Appeal decision invalidating an

arbitration contract on the “vindication of rights”

theory, for reconsideration in light of Am. Express Co.

v. Italian Colors Rest., 133 S. Ct. 2304 (2013)).

And as demonstrated by this case, each time this

Court upholds an arbitration contract because the

federal law requires it, California courts find new ways

to express their unrelieved hostility to arbitration.

See, e.g., Little v. Auto Stiegler, Inc., 29 Cal. 4th 1064,

1095 (2003) (Brown, J., concurring and dissenting)

(“(T]his court appears to be ‘chip[ping] away at’ United

States Supreme Court precedents broadly construing

the scope of the FAA ‘by indirection,’ despite the high

court’s admonition against doing so.”) (citation

omitted); Gentry v. Superior Court, 42 Cal. 4th 443,

473 (2007) (Baxter, J., dissenting) (noting the

California Supreme Court’s “continuing effort to limit

and restrict the terms of private arbitration

agreements, which enjoy special protection under both

state and federal law”); see also James v. Conceptus,

Inc., 851 F. Supp. 2d 1020, 1036-37 (S.D. Tex. 2012)

(applying California law; noting that some California

courts, even post-Concepcion, continue to find

arbitration forum-selection clauses unenforceable as

unconscionable, while applying a far less stringent

analysis to forum-selection clauses applicable to

litigation).

With their continuing hostility to arbitration

agreements, California state courts deprive the ability

of millions of Californians to take advantage of the

benefits of arbitration.

Ill

CALIFORNIA’S INTRANSIGENCE

INFECTS OTHER STATES

Magnifying the problems posed by these

challenges to the federal substantive law of arbitration,

freedom of contract, and the FAA is the fact that

California’s hostility to arbitration has considerable

potential to influence other states. As a center of

economic trade, contracts across the country often

provide that California law controls. See, e.g., Triad

Sys. Fin. Corp. v. Stewart’s Auto Supply, Inc., 47 F.

Supp. 2d 1332, 1334 (N.D. Ala. 1999) (Alabama

residents bound by contract that made California law

controlling); Sec. Ins. Co. of Hartford v. TIG Ins. Co..,

360 F.3d 322, 323 (2d Cir. 2004) (upholding

reinsurance agreement that designated California law

as controlling); Naegele v. Albers, 940 F. Supp. 2d 1,

8-9 (D.D.C. 2013) (relying on California arbitration law

and staying federal proceedings); Phillips Petroleum

Co. v. Arco Alaska, Inc., No. 7177, 1986 WL 7612, at

*6-7 (Del. Ch. July 9, 1986) (parties to oil and gas

leases in Prudhoe Bay, Alaska, agreed that California

law controlled their arbitration contract).

In addition to choice-of-law language in the

contract itself, some courts find California decisions

interpreting arbitration contracts persuasive authority

when interpreting challenges to arbitration contracts

under their own state laws. See Monarch Consulting,

Inc. v. Natl Union Fire Ins. Co. of Pittsburgh, 2014 WL

4459129, at *10(N.Y. App. Div. Sept. 11, 2014) (finding

persuasive an unpublished California Court of Appeal

decision that invalidated an arbitration contract as

incompatible with a state regulatory and statutory

scheme related to workers’ compensation); Kristian v.

Comcast Corp., 446 F.3d 25, 60 (1st Cir. 2006)

(adopting California approach to unconscionability that

prohibited a ban on classwide arbitration); Brown ex

rel. Brown v. Genesis Healthcare Corp., 228 W. Va. 646

(2011) (relying, in part, on California case law to

invalidate arbitration clause in nursing home

contract), judgment vacated sub nom. Marmet Health

Care Ctr., Inc. v. Brown, 132 S. Ct. 1201 (2012); see

also Episcopal Church in Micronesia v. Chung Kuo Ins.

Co., Ltd., No. 84-0001, 1985 WL 56588, at *2 (D. Guam

June 28, 1985) (Guam’s Arbitration Act is patterned

after California’s statutes and California law on the

subject is persuasive, although not binding.); Discover

Bank v. Shea, 827 A.2d 358, 362 (N.J. Super. Ct. Law

Div. 2001) (noting similarity of New Jersey and

California law with respect to arbitration), app.

dismissed, 827 A.2d 292 (N.J. Super. App. Div. 2003).

Indeed, California’s repeated intransigence may

serve as inspiration to other state courts that wish to

“resurrect” state common law displaced by the FAA,

especially other state courts that have made no secret

of their disapproval of this Court’s FAA jurisprudence.

The Massachusetts Supreme Judicial Court's

treatment of the consumer arbitration contract in the

thrice-considered Feeney v. Dell Inc. case provides a

salient example. In that case, consumers sued in a

purported class action challenging Dell’s allegedly

improper collection of sales tax on optional computer

service contracts for which (according to plaintiffs) no

sales tax was actually due. The service contracts

included an individual arbitration clause that waived

the ability to pursue class relief. In Feeney v. Dell Inc.,

454 Mass. 192, 209-10 (2009), the court declined to

enforce the class action waiver as a violation of

Massachusetts’ public policy in favor of class actions

for “consumer protection” claims. After this Court

decided Concepcion, Dell sought and received a

rehearing, and the Massachusetts court issued a

decision announcing a new reason for invalidating the

arbitration contract, holding that Concepcion barred a

court “from invalidating an arbitration agreement that

includes a class action waiver where a plaintiff can

demonstrate that he or she effectively cannot pursue a

claim against [aj] defendant in individual arbitration

according to the terms of the agreement, thus

rendering his or her claim nonremediable.” Feeney v.

Dell Inc., 465 Mass. 470, 472 (2013).

Eight days later, this Court rejected that exact

rationale in Italian Colors, 133 S. Ct. at 2312, n.5

(“(T]he FAA’s command to enforce arbitration

agreements trumps any interest in ensuring the

prosecution of low-value claims.”). Issuing its third

decision in the case, the Massachusetts court

grudgingly acknowledged the demise of Feeney II,

holding that

as long as an arbitration agreement does not

expressly “forbid[ ] the assertion of certain

[Federal] statutory rights” or “perhaps”

require the payment of “filing and

administrative fees attached to arbitration

that are so high as to make access to the

forum impracticable,” a plaintiff was not

deprived of his or her right to pursue

statutory remedies.

Feeney v. Dell Inc., 466 Mass. 1001, 1002-03 (2013)

(citation omitted). With a parting shot at this Court’s

holdings, the state court bitterly wrote: “Although we

regard as untenable the Supreme Court’s view we

are bound to accept that view as a controlling

statement of Federal law.” Jd. at 1003. Even so, the

court remanded the case to give the plaintiffs yet

another chance to come up with “alternative grounds”

to invalidate the contract. Id.

If this Court permits the California end-run to

stand, Massachusetts and other arbitration-hostile

jurisdictions will look to the decision below as a

blueprint to avoid this reach of the Federal Arbitration

Act and the federal substantive law of arbitration’s

commitment to freedom of contract.

—~—

CONCLUSION

The judgment of the California Court of Appeal

should be reversed.

DATED: June, 2015.

Respectfully submitted,

DEBORAH J. LA FETRA

Counsel of Record

Pacific Legal Foundation

930 G Street

Sacramento, California 95814

Telephone: (916) 419-7111

Facsimile: (916) 419-7747

E-mail: dlafetra@pacificlegal org

Counsel for Amicus Curiae Pacific Legal Foundation

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.