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

No. 14-462

IN THE

Supreme Court of the Anited States

DIRECTY, INc.,

Petitioner,

Vv.

AMY IMBURGIA, ET AL.,

Respondents.

On Writ of Certiorari to the

California Court of Appeal

BRIEF OF AMICUS CURIAE

PUBLIC CITIZEN, INC.,

IN SUPPORT OF RESPONDENTS

Scott L. NELSON

Counsel of Record

ALLISON M. ZIEVE

PUBLIC CITIZEN LITIGATION GROUP

1600 20th Street NW

Washington, DC 20009

(202) 588-1000

snelson@citizen.org

Attorneys for Amicus Curiae

July 2015

TABLE OF CONTENTS

TABLE OF AUTHORITIES ..............ccccccsesessseeeseerenes ii

INTEREST OF AMICUS CURIAE ...000.....ecccceceeeeee. 1

SUMMARY OF ARGUMENT ...............cccccccccseeeseeeeeees 2

GEIS setcteinnscncemnmnicemunnnmentmmmnnen 4

I. This case presents an issue of contract

construction that does not genuinely

implicate the Supremacy Clause. ........................... 4

II. The state court’s construction of the contract

is not foreclosed by federal preemption

TE sasnsticaininepeeseiisensteninintatiininaamenndanaineninineitineteiains 7

A. As a matter of common usage, a

preempted state law is law of the state. ........... 7

B. The Supremacy Clause and this Court’s

preemption jurisprudence presuppose that

state law may conflict with federal law,

and supply a rule of decision for resolving

ES cntensessscnnnesenteanmnnnenunimenn 10

C. The FAA does not bar parties from

choosing to apply otherwise-preempted

EL cnimiininctineninninrteinuecninebinnenatns ll

SIE cxncsanscensismmmncsonnntennepenemsemmamannnannenin 17

3

TABLE OF AUTHORITIES

Page(s)

Cases:

Arizona v. Inter Tribal Council of Ariz., Inc..,

ee By I ncicssicetciniaibeiniiniaitmsinsioiiniaiatiamnes 9

Armstrong v. Exceptional Child Care Ctr.,

Een 8, 10

Arthur Andersen LLP v. Carlisle,

I i nnesiitpntdasieneinneneitanniin 4

AT&T Mobility LLC v. Concepcion,

3 ER eee 5,9

City & County of San Francisco v. Sheehan,

ee ee i ictiiencedencninaneinsiincsansnniengonns 16

Crawford v. Weather Shield Mfg., Inc.,

ge | eee 8

Dan’s City Used Cars, Inc. v. Pelkey,

TT niciciniiatctipinsicmmnsndieninenaninnanies 9

Discover Bank v. Super. Ct.,

oie fo | ee 12

Doctor’s Assocs., Inc. v. Casarotto,

I aac 4

Gibbons v. Ogden,

Be ee Se Pa BCID cccinccctesccensnscscesodineenncse 10

Haywood v. Drown,

STITT Renee ete a He 11

Hillman v. Maretta,

alia deities 9

Howlett v. Rose,

Fe Cs re Ce cccnscevcvncvcscncocvncesesenevcensonevsoneees 11

Mastrobuono v. Shearson Lehman Hutton, inc.,

iii sins aia iecetcinaiitadatncomnies 6, 14, 15

Mondou v. N.Y., N.H. & H. R.R.,

EEE a eT a 9

Mut. Pharm. Co. v. Bartlett,

Us ac neetianiinaatl y

Northwest, Inc. v. Ginsburg,

| 8

Oneok, Inc. v. Learjet, Inc.,

I I saetietieitibamnonete 8

Perry v. Thomas,

al 5, 6, 7, 12

Shelby County v. Holder,

I i ilealile 8,9

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

A a 4

Volt Info. Scis., Inc. v. Bd. of Trustees of

Leland Stanford Jr. Univ.,

489 U.S. 468 (1989)................ 4,6,11, 12, 13, 14, 15

Wos v. E.M.A. ex rel. Johnson,

I aed )

Constitutional Provisions, Statutes, and Rules:

eR 8 8 ee 8, 10, 11

Federal Arbitration Act

SIAR eaisieenion teen reteset 12

a csccsssmsinmersiuiblal 12

i ee I a Se aticiiteicinrtnsiniannniseinsctensenvininanedianiceanies 8

iv

EEE TN ce een SOP ew eae 12

I 6, 7, 12

Other:

P. Butler & C. Drahozal, Contract and Choice,

ES EO ER 5, 6

C. Drahozal, Contracting Around Hall Street,

14 Lewis & Clark L. Rev. 905 (2010) ................. 5,6

INTEREST OF AMICUS CURIAE’

Public Citizen, Inc., is a consumer advocacy organ-

ization that appears on behalf of its members and

supporters nationwide before Congress, administra-

tive agencies, and courts on a wide range of issues,

and works for enactment and enforcement of laws

protecting consumers, workers, and the public.

Public Citizen has longstanding interests in pro-

moting the proper use of class actions to secure the

rights of large numbers of people who have suffered

legal wrongs, as well as in curbing misuse of class ac-

tions. Public Citizen is also concerned with the effects

of mandatory arbitration on the rights of consumers

and workers, particularly to the extent that arbitra-

tion agreements may prevent the effective pursuit of

class remedies. In addition, Public Citizen has ad-

dressed issues concerning federal preemption of state

law in a variety of contexts not limited to arbitration.

As a result of these interests, Public Citizen’s at-

torneys have participated, as counsel to parties or to

Public Citizen and other amici curiae, in many cases

involving class actions, arbitration, and preemption,

both in this Court and the lower federal and state

courts. These issues converge in this case, and Public

Citizen accordingly submits this brief to address fun-

damental misconceptions about the nature of federal

preemption, and in particular preemption under the

Federal Arbitration Act (FAA), that animate the posi-

tions asserted by DIRECTV and its amici curiae.

' This brief was not authored in whole or part by counsel for

a party. No one other than amicus curiae made a monetary con-

tribution to preparation or submission of this brief. Counsel for

all parties have filed letters of consent to filing.

2

SUMMARY OF ARGUMENT

This case presents only a question about how to

interpret a provision in a contract between the par-

ties. Under that provision, the contract does not per-

mit arbitration of any dispute between the parties if

“the law of [the consumer’s] state would find [the

contract’s] agreement to dispense with class arbitra-

tion procedures unenforceable.” Does the contract re-

fer to the state law that would apply in the absence of

preemption by the FAA? Or does it mean the law of

the state unless that law is preempted by the FAA?

The state court’s adoption of the former interpreta-

tion—which in this case bars arbitration because the

law of California would not allow enforcement of the

class-action ban—poses no genuine issue of federal

preemption, as the state court’s holding that arbitra-

tion may not proceed merely reflects the parties’

agreement as reflected in the words of their contract.

DIRECTV and its amici strain to transform the

contractual issue posed by the case into one of federal

preemption by suggesting that, as a matter of consti-

tutional law under the Supremacy Clause, the parties’

contract cannot be construed to refer to a preempted

state law. Indeed, they argue, it is meaningless to re-

fer to a conflict-preempted law as the law of the state,

because under the Supremacy Clause, state law in

conflict with federal law does not exist, and the

preemptive federal law is the law of the state.

Those arguments are wrong on three levels. First,

the status of state law under the Supremacy Clause

does not control the meaning of the words used by

parties to a contract. Rather, under the applicable

state-law principles of contract construction, those

words must be given their ordinary meaning. And the

3

ordinary meaning of “law of a state”—indeed, the

meaning used in the Supremacy Clause itself and in

innumerable opinions of this court—is the state’s own

law, not federal law that may supplant it under prin-

ciples of federal preemption.

Second, even as a matter of constitutional law, re-

ferring to a preempted state law as the law of the

state is not meaningless. The Constitution incorpo-

rates the assumption that the laws of the states may

at times be contrary to federal law, and it provides a

rule of decision in the event of such conflict: Federal

law applies. But that federal law renders a conflicting

state law ineffective does not change the fact that the

preempted law is a state law.

Third, the claim that state laws concerning arbi-

tration that are subject to conflict preemption by the

FAA do not exist is impossible to square with the lim-

its on FAA preemption. The FAA does not preempt

the field of arbitration regulation, and its application

is not universal. States may have and enforce laws—

even laws that resolve arbitration issues the opposite

way from the FAA—regulating arbitrations that fall

outside the FAA’s scope. Furthermore, parties to arbi-

tration agreements subject to the FAA may, as this

Court has held, choose to apply state-law principles

regarding arbitration that, but for the parties’ choice

to apply them, would conflict with the FAA. That op-

tion—exercised by the parties in this case—is incom-

patible with the proposition that a state law that may

come into conflict with the FAA is not the law of the

state.

4

ARGUMENT

I. This case presents an issue of contract

construction that does not genuinely

implicate the Supremacy Clause.

Properly viewed, this case presents no preemption

issue, but only a question of contract construction:

What does the contract in this case mean when it pro-

vides that there is no agreement to arbitrate if “the

law of your state would find this agreement to dis-

pense with class arbitration procedures unenforcea-

ble”? That question, like questions of contract con-

struction generally, is fundamentally one of state law,

even as to agreements concerning arbitration. Stolt-

Nielsen, S.A. v. AnimalFeeds Int’l Corp., 559 U.S.

662, 681 (2010); Volt Info. Scis., Inc. v. Bd. of Trustees

of Leland Stanford Jr. Univ., 489 U.S. 468, 474-76

(1989). Nothing in the FAA displaces “background

principles of state contract law regarding the scope of

agreements” about whether to arbitrate. Arthur An-

dersen LLP v. Carlisle, 556 U.S. 624, 630 (2009).

Principles of contract interpretation that reflect

hostility to or discrimination against arbitration may,

of course, be preempted by the FAA. See Doctor’s As-

socs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996). But

there is no serious argument that the principles ap-

plied by the state court here—giving effect to the nat-

ural meanings of words used in a contract, granting

specific language priority over more general provi-

sions, and construing language against the drafter of

a form contract—reflect the kind of hostility toward

arbitration that could require preemption by the FAA.

The court did not “construe th[e] agreement in a

manner different from that in which it otherwise con-

5

strues nonarbitration agreements under state law.”

Perry v. Thomas, 482 U.S. 483, 492 n.9 (1987).

Nonetheless, DIRECTV and its amici argue that

the state court improperly gave effect to state laws

that are preempted under this Court’s ruling in

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

(2011). That argument misconceives what the state

court did when it held that the parties’ contract did

not provide for arbitration of this case. Concepcion

held that state laws that refuse enforcement to arbi-

tration agreements forbidding plaintiffs to pursue

class actions are in conflict with the FAA and hence

cannot apply of their own force in cases subject to the

FAA. But the state court here did not hold that the

preempted state-law principles applied of their own

force: It gave effect to the parties’ agreement not to

arbitrate when the customer lives in a state under

whose law a class-action ban would be unenforceable

absent the FAA. In such a case, “it is the parties’

agreement, and not [state] law, that prevents arbitra-

tion.” C. Drahozal, Contracting Around Hall Street,

14 Lewis & Clark L. Rev. 905, 919 n.73 (2010). Hence

“there is nothing for the FAA to preempt.” Jd.

For example, “under well-settled preemption prin-

ciples, a state law that precludes arbitrators from re-

solving claims under a particular state statute (such

as a franchisee protection statute) would be preempt-

ed. But the FAA certainly does not preclude the par-

ties themselves from agreeing to exclude claims under

the state franchisee protection statute from their ar-

bitration agreement.” P Butler & C. Drahozal, Con-

tract and Choice, 2013 B.Y.U.L. Rev. 1, 26. And par-

ties may express such an agreement using language

that “incorporates by reference state arbitration law

6

to define its scope,” and if they do so, courts should

“enforce the agreement so construed.” Jd.

Moreover, should the parties express an agree-

ment not to arbitrate, or to limit the scope of arbitra-

tion, by incorporating state-law provisions or princi-

ples by reference, the possibility that the state law in

question might itself reflect hostility toward or dis-

crimination against arbitration should have no bear-

ing on the enforceability of the parties’ agreement. C.

Drahozal, supra, at 919 n.74. State laws that are hos-

tile to arbitration may be unenforceable in cases in-

volving agreements subject to the FAA, but no princi-

ple of law forbids the enforcement of contracts that

reflect hostility toward or discrimination with respect

to arbitration. “{T]the FAA’s proarbitration policy

does not operate without regard to the wishes of the

contracting parties.” Mastrobuono v. Shearson Leh-

man Hutton, Inc., 514 U.S. 52, 57 (1995). As far as the

FAA is concerned, contracts may refrain from provid-

ing for arbitration of disputes—or “discriminate

against arbitration”—on any basis the parties choose.

“(TJhe FAA does not require parties to arbitrate when

they have not agreed to do so, ... nor does it prevent

parties who do agree to arbitrate from excluding cer-

tain claims from the scope of their arbitration agree-

ment.” Volt, 489 U.S. at 478.

Thus, this Court held in Perry v. Thomas that Cal-

ifornia Labor Code § 229, which prohibits enforce-

ment of an agreement to arbitrate an action to collect

unpaid wages, cannot be applied to bar arbitration

under a contract governed by the FAA because the

statute conflicts with the FAA’s “clear federal policy”

that agreements to arbitrate be “rigorously en-

force[d].” 482 U.S. at 490-91. In contrast, the FAA

7

would not preempt enforcement of an agreement in

which the parties themselves excepted actions to col-

lect unpaid wages from an agreement to arbitrate. In-

deed, the FAA’s “clear federal policy” would demand

that the parties’ exception be “rigorously enforce[d).”

Id. The outcome should be the same whether the par-

ties set forth the exception by saying, “actions for un-

paid wages are not subject to arbitration under this

agreement,” or by stating that “claims that would fall

within the scope of California Labor Code § 229 are

not subject to.arbitration under this agreement.”

Il. The state court’s construction of the

contract is not foreclosed by federal

preemption principles.

Although the decision below rests on the construc-

tion and enforcement of a contract, DIRECTV and its

amici contend that preemption principles remain rel-

evant. They argue, in essence, that a preempted state

law is a nullity that ceases to exist—that is, that a

preempted state law is not a state law. Rather, they

argue, the preemptive federal law itself is the law of

the state. Pet. Br. 19; WLF Br. 6-7, 14-19; PLF Br. 3-

19. The argument is wrong as a matter of contract

construction, preemption doctrine generally, and FAA

preemption doctrine specifically.

A. As a matter of common usage, a

preempted state law is law of the state.

The issue here is what the contract means by ‘law

of your state,” not what the metaphysical status of

preempted state laws may be as a matter of Suprema-

cy Clause jurisprudence. Under California law, as un-

der the statutory and common law of the states gen-

erally, “(t/he words of a contract are to be understood

in their ordinary and popular sense, rather than ac-

8

cording to their strict legal meaning; unless used by

the parties in a technical sense, or unless a special

meaning is given to them by usage, in which case the

latter must be followed.” Cal. Civ. Code § 1644; see,

e.g., Crawford v. Weather Shield Mfg., Inc., 187 P.3d

424, 430 (Cal. 2008). In ordinary usage, the “law of a

state” refers to the state’s own common or statutory

law, not to federal laws that may preempt particular

applications of the state’s laws.

Indeed, the Supremacy Clause itself provides that

the Constitution and the laws of the United States

enacted thereunder are the supreme law of the land

and bind judges in the states, “any Thing in the Con-

stitution or Laws of any State to the Contrary not-

withstanding.” U.S. Const. art. VI, cl. 2 (emphasis

added). The Constitution itself thus refers to the con-

flicting state enactments that it preempts as the

“Laws of [a] State.” This Court’s preemption deci-

sions likewise regularly and consistently refer to state

enactments or common-law principles that are subject

to federal preemption as “state laws” or “laws of”

particular states.”

? Examples are too numerous to catalog. Some recent in-

stances (with emphasis added in each citation) include: On-ok,

Inc. v. Learjet, Inc., 135 S. Ct. 1591, 1595 (2015) (observing that

field preemption operates “irrespective of whether state law is

consistent or inconsistent with ‘federal standards,’” while con-

flict preemption exists where “compliance with both state and

federal law is impossible” or where “state law” is an obstacle to

federal policy); Armstrong v. Exceptional Child Care Ctr., 135 S.

Ct. 1378, 1384 (2015) (noting that “a court may not convict a

criminal defendant of violating a state law that federal law pro-

hibits”); Northwest, Inc. v. Ginsburg, 134 S. Ct. 1422, 1432

(2014) (“When the law of a State does not authorize parties to

free themselves from the covenant, a breach of covenant claim is

(Footnote continued)

9

The notion that referring in a contract to

preempted state law as the “law of a state” meaning-

lessly invokes something that “in legal contemplation

does not exist,” WLF Br. 16 (quoting Mondou v. New

York, N.H. & H. R.R., 223 U.S. 1, 57 (1912)), founders

on the fact that this Court’s opinions and the Su-

premacy Clause employ exactly that usage.

pre-empted ....”); Shelby County v. Holder, 133 S. Ct. 2612, 2623

(2013) (pointing out that the framers of the Constitution rejected

@ proposal to allow a federal veto of state laws “in favor of allow-

ing state laws to take effect, subject to later challenge under the

Supremacy Clause”); Mut. Pharm. Co. v. Bartlett, 133 S. Ct.

2466, 2473, 2476 (2013) (describing applicable “duties under

state law” before holding state law preempted because “state law

requires” actions that “federal law forbids”); Arizona v. Inter

Tribal Council of Ariz., Inc., 133 S. Ct. 2247, 2253 (2013) (hold-

ing that federal law “pre-empts Arizona’s state-law requirement”

that officials deny registration to voters usin» a federal registra-

tion form); Hillman v. Maretta, 133 S. Ct. 1943, 1952 (2013)

(finding preemption of state law concerning disposition of federal

employee insurance benefits because “applicable state law ‘sub-

stitutes the widow’ for the ‘beneficiary Congress directed ...’”);

Dan’s City Used Cars, Inc. v. Pelkey, 133 S. Ct. 1769, 1778 (2013)

(“The FAAAA’s preemption clause prohibits enforcement of state

laws ‘related to a price, route, or service of any motor carrier ...

with respect to the transportation of property.’”); Wos v. E.M.A.

ex rel. Johnson, 133 S. Ct. 1391, 1398 (2013) (observing that

preemption analysis requires analysis of “what the state law in

fact does”); Concepcion, 131 S. Ct. at 1753 (holding that “Cali-

fornia’s Discover Bank rule” is preempted).

10

B. The Supremacy Clause and this Court’s

preemption jurisprudence presuppose

that state law may conflict with federal

law, and supply a rule of decision for

resolving such conflicts.

The suggestion that it is meaningless to speak of a

preempted state law is also contrary to a proper un-

derstanding of Supremacy Clause doctrine. The text

of the Clause presupposes the possibility that federal

law may conflict with the law of a state—that is, that

there may be some “Thing” in a state’s law that is

“Contrary” to federal law. U.S. Const., art. VI, cl. 2.

As relevant here, the Clause prescribes a particular

consequence in the event of such a conflict: judges in

a state must apply federal law rather than the contra-

ry law of their own state. Jd. As this Court recently

put it, “(i]t is apparent that this Clause creates a rule

of decision” for a particular type of conflict of laws—

conflict between state and federal law. Armstrong,

135 S. Ct. at 1383. Thus, courts “must not give effect

to state laws that conflict with federal laws.” Jd. (em-

phasis added; citing Gibbons v. Ogden, 22 U.S. (9

Wheat.) 1, 210 (1824)). As the Court put the matter in

Gibbons itself, when a state’s law is “contrary to the

laws of Congress, made in pursuance of the constitu-

tion,” then “the act of Congress ... is supreme; and

the law of the State, though enacted in the exercise of

powers not controverted, must yield to it.” 22 U.S. (9

Wheat.) at 211 (emphasis added).

Preemption, then, does not rest on the fiction that

conflicting state law does not exist. Rather, preemp-

tion rests on the principle that, in the event of a con-

flict, both the governments and people of the United

States must follow, and courts must apply, federal law

11

rather than state law. As this Court has repeatedly

stated, federal laws are “laws in the States,” see, e.g.,

Howlett v. Rose, 496 U.S. 356, 367 (1990), and must

be followed in preference to state laws to the extent of

any conflict between the two.’ State laws are ineffec-

tive insofar as they may conflict with federal law, be-

cause “a valid federal law is substantively superior to

a state law,” Haywood, 556 U.S. at 751 (Thomas, J.,

dissenting)—but that does not make it improper or

meaningless to distinguish between state and federal

law or to refer to a preempted state law as state law.

C. The FAA does not bar parties from

choosing to apply otherwise-preempted

state laws.

The proposition that preempted state law cannot

be referred to as the “law of the state” is particularly

hard to square with the limited scope of preemption

under the FAA. As this Court has emphasized, “[t]he

FAA contains no express pre-emptive provision, nor

does it reflect a congressional intent to occupy the en-

tire field of arbitration.” Volt, 489 U.S. at 477. Federal

law thus “has not completely displaced state regula-

tion” of arbitration, and preempts state arbitration

law only “to the extent that it actually conflicts with

federal law.” Id.

* Haywood v. Drown, 556 U.S. 729, 734 (2009), is a unusual

instance of the Court’s referring to federal law as law “of” the

states, but that usage does not appear to have been critical to the

Court’s holding, which was an application of longstanding case

law providing that state courts must give effect to federal rights

of action because, under the Supremacy Clause, federal Jaw must

be applied by “Judges in every State.” U.S. Const., art. VI, cl. 2.

12

State law can “conflict” with the FAA, of course,

only where the FAA applies. The FAA is limited by its

terms to arbitration agreements in contracts involv-

ing transactions in interstate commerce, 9 U.S.C. § 2,

and it excludes employment contracts involving sea-

men, railroad employees, and other transportation

workers. 9 U.S.C. § 1. States are entirely free to regu-

late, limit, or even prohibit arbitration agreements

that are not subject to the FAA in whatever way they

wish (subject, of course, to constitutional constraints

and the possibility of preemption by laws other than

the FAA), regardless of whether their laws would con-

flict with the FAA if applied to contracts within the

FAA’s scope.

Thus, for example, California Labor Code § 229’s

prohibition of compelied arbitration of actions for un-

paid wages, held preempted by the FAA in Perry v.

Thomas, 483 U.S. 483, remains applicable to claims of

transportation workers, as their employment con-

tracts are not covered by the FAA. Likewise, the Cali-

fornia Supreme Court’s ruling in Discover Bank v.

Superior Ct., 113 P.3d 1100 (Cal. 2005), and Califor-

nia’s statutory prohibition on waiver of the right to

bring class actions under the Consumers Legal Reme-

dies Act, Cal. Civ. Code § 1751, remain effective as to

arbitration agreements outside the FAA’s scope.

Moreover, as this Court emphasized in Volt, the

fundamental policy of the FAA—that arbitration

agreements be enforced “according to their terms,”

489 U.S. at 476—places important limitations on the

law’s preemptive effect. As Volt illustrates, one conse-

quence of that policy is that parties are free to choose

to have their agreements concerning arbitration gov-

erned by state laws even when, absent that choice, the

13

FAA would require a result different from the state

laws chosen by the parties. See id. at 479.

In Volt, a state court had construed the parties’

arbitration agreement to call for the application of the

California Arbitration Act rather than the FAA. The

result was that arbitration was stayed under Califor-

nia law under circumstances where the party seeking

arbitration claimed that the FAA would require an

order staying litigation pending arbitration. See id. at

471-72. That is, Volt involved a situation where a par-

ty claimed that federal and state law required opposite

results as to whether arbitration would occur, so that

absent the parties’ agreement to the application of

state law, federal law (if applicable) would necessarily

preempt application of state law. This Court noted

that the parties did not dispute that the FAA applied

to their agreement, which involved a transaction in

interstate commerce, and the Court assumed that the

party seeking to arbitrate was correct in asserting

that, but for the parties’ agreement to apply state law,

the FAA would forbid staying the arbitration. Jd. at

476-77. The Court held, however, that far from

preempting the application of the conflicting state-law

rule agreed to by the parties, the FAA allowed the

state court to give effect to the parties’ choice. See id.

at 475-78.

Indeed, the Court explained that giving effect to

the parties’ dgreement promoted the fundamental

policy of the FAA:

Where, as here, the parties have agreed to abide

by state rules of arbitration, enforcing those

rules according to the terms of the agreement is

fully consistent with the goals of the FAA, even if

the result is that arbitration is stayed where the

14

Act would otherwise permit it to go forward. By

permitting the courts to “rigorously enforce”

such agreements according to their terms, ... we

give effect to the contractual! rights and expecta-

tions of the parties, without doing violence to the

policies behind by the FAA.

Id. at 479.

This Court’s holding in Volt would make no sense

if preemption principles actually dictated that a con-

flict-preempted state law could not be treated as the

law of a state for any purpose, not even the construc-

tion of a contract referring to state law. If FAA

preemption had that effect, the Court in Volt would

have had to hold that the parties’ choice of “Califor-

nia” law to govern their arbitration required applica-

tion of the conflicting FAA rule because federal law,

not conflict-preempted state law, was actually the law

of California. Volt’s holding cannot be squared with

the assertion that it is meaningless or ineffectual for a

contract to refer to a state law whose application to

particular circumstances would be preempted by fed-

eral law as the law of the state.

The Court’s decision in Mastrobuono likewise

lends no support to the arguments of DIRECTV and

its amici. There, the Court assumed that the parties

could, if they chose, adopt New York state law’s pro-

hibition on the award of punitive damages, even

though the FAA would otherwise preempt a state’s

attempt to limit the matters that could be delegated

to an arbitrator. See 514 U.S. at 57-58. The Court

held, however, that the contract in question did not

select New York law to govern the remedies available

in arbitration. Rather, in light of the fact that the

contract specifically selected NASD rules (which al-

15

lowed punitive damages) to govern its arbitration

provision, the Court interpreted the broader, generic

choice-of-law provision referencing New York law as @

choice of substantive law rather than arbitration law.

See id. at 58-64.

Here, the situation is reversed: Although the con-

tract generically states that its section concerning ar-

bitration is governed by the FAA, it specifically pro-

vides that whether the provision may be enforced to

require arbitration as to any particular consumer de-

pends on whether the contract’s bar on class proceed-

ings would be enforceable under the law of the con-

sumer’s state. The critical contract construction prin-

ciples that the Court applied in Mastrobuono—giving

effect to all provisions of the contract, harmonizing

provisions by not applying a general provision to a

subject addressed directly by a more specific provi-

sion, and construing an agreement against its draft-

er—point to exactly the opposite result in this case

from that reached in Mastrobuono.

As the contrast between Mastrobuono and Volt il-

lustrates, this case does not really turn on whether

giving effect to a contract’s choice of otherwise con-

flict-preempted state law is contrary to—or somehow

rendered meaningless by—broad pprinciples of

preemption. The question presented is solely what the

terms of this contract mean when they refer to the

law of the state. Indeed, DIRECTV itself ultimately

admits that the preemption principles cited by it, and

discussed at greater length by its amici, are window-

dressing when it acknowledges that “[clontracting

parties can always choose, of course, to bind them-

selves by reference to state law that has been ‘nulli-

fied’ by federal law, just as they can choose to bind

16

themselves by reference to the rules of a board game.”

Pet. Br. 20. DIRECTV’s concession on this point ef-

fectively admits that what it described in its petition

for a writ of certiorari as the “first” reason the case

presented an issue of federal law meriting review—

that under the Supremacy Clause, “there is no such

thing as state law immune from the preemptive force

of federal law,” Pet. 10—is a red herring. Stripped of

its Supremacy Clause veneer, DIRECTV’s argument s

just that the state court “erred” in “interpret[ing)”

the idiosyncratic agreement in this case. Pet. Br. 11.

As respondents’ brief points out, that argument

poses the kind of state-law issue as to which this

Court generally lacks authority to second-guess a

state court, and DIRECTV has in any event failed to

demonstrate that the state court here erred in resolv-

ing it. In light of DIRECTV’s bait-and-switch substi-

tution of a garden-variety contract construction claim

for the constitutional issues touted in its petition, this

Court may wish to accept respondents’ suggestion

that it dismiss the writ as improvidently granted. Cf.

City & County of San Francisco v. Sheehan, 135 S. Ct.

1765, 1772-74 (2015); id. at 1778-80 (Scalia, J., con-

curring in part and dissenting in part). Alternatively,

this Court may see fit to decide the case either by con-

struing the contract itself or (more properly) adopting

the state court’s construction as authoritative in light

of the state-law nature of the issue of contract con-

struction. In no event, however, should the Court’s

disposition turn on the notion that the state court’s

resolution of this case is somehow contrary to funda-

mental Supremacy Clause principles.

17

CONCLUSION

The Court should affirm the decision of the Cali-

fornia Court of Appeal.

Respectfully submitted,

ScoTT L. NELSON

Counsel of Record

ALLISON M. ZIEVE

PUBLIC CITIZEN LITIGATION

GROUP

1600 20th Street NW

Washington, DC 20009

(202) 588-1000

snelson@citizen.org

Attorneys for Amicus Curiae

July 2015