Amicus Curiae Brief — Preston v. Ferrer

13

No. 06-1463

Jn the Supreme Court of the Gnited States

ARNOLD M. PRESTON,

Petitioner,

V.

ALEX E. FERRER

Respondent.

On Writ of Certiorari to

the Court of Appeal of the State of California,

Second Appellate District, Division One

BRIEF OF CTIA—THE WIRELESS

ASSOCIATION® AS AMICUS CURIAE IN

SUPPORT OF PETITIONER

MICHAEL F. ALTSCHUL ANDREW J. PINCUS

CTIA—The Wireless Counsel of Record

Association EVAN M. TAGER

1400 16th Street, NW DAVID M. Gossett

Suite 600 JACK L. WILSON

Washington, DC 20036 Mayer Brown LLP

(202) 785-0081 1909 K Street, NW

Washington, DC 20006

202) 263-3000

Counsel for Amicus Curtae

SS SAI 6 PT ET A SN SS SS SSSI EES

i

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ......................cccscscsccceeeees ll

INTEREST OF THE AMICUS CURIAE.................... 1

SUMMARY OF ARGUMENT. ........................ceceeeeeeeeee 2

P ___, IRIELANPE i cP DOE RSE Ne AN One RON Pe A: 4

A. The FAA Preempts Any State Law That

Either Imposes Special Requirements

On Arbitration Agreements Or Declares

Disputes Or Claims Non-Arbitrable. ............... 6

B. Only Congress, Not State Courts Or

Legislatures, Can Limit The Scope Of

aii siiakin iii cicietineriinianaeimnaiintandl 8

C. The CTAA’s Anti-Arbitration Provisions

Are Preempted By The FAA........................08 12

NT cesecciphesicecicissneicisnatiinlssichichitnicieepinendasamiineiaa 18

A

TABLE OF AUTHORITIES

Page(s)

CASES

Allied-Bruce Terminix Cos. v. Dobson,

I 3,8

Armendariz v. Found. Health Psychare Servs.,

i, Fae re es iirc ccbiincncccdccccscensnesstéeteel 5

Broughton v. Cigna Healthplans of Cal.,

Re Br ca Oe Es IID ccceerecesctccntccnceiececess 4,5, 10

Buckeye Check Cashing, Inc. v. Cardegna,

I cee cacemntitnclens 11, 17

Circuit City Stores, Inc. v. Adams,

ey ii iii crtiniedscopidesccugitenniia 10

Cruz v. Pacificare Health Sys., Inc.,

i GL Een ome nn 4,5

Doctor’s Assocs., Inc. v. Casarotto,

= fk a SS a 3, 8, 14

Gentry v. Superior Court, 165 P.3d 556

EAE em ew re EEO maT ae ER. 5

Gilmer v. Interstate/Johnson Lane Corp.,

«is Sl: | nae | a

Gonzalez v. Raich, 545 U.S. 1 (2005).........000..... 11, 12

Green Tree Fin. Corp. v. Randolph,

gk TERS Se Shee i)

Keating v. Superior Court. 645 P.2d 1192

I a al 6

Maryland v. Wirtz, 392 U.S. 183 (1968).................. 12

Mitsubishi Motors Corp. v. Soler-Chrvysler

Plymouth, Inc... 473 U.S. 614 (1985)............ passim

Moses H. Cone Mem'l Hosp. v. Mercury Constr.

A Se ie Se on 2.6.7

TABLE OF AUTHORITIES

(cont'd)

Page(s)

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

Rodriguez de Quijas v. Shearscn/Am. Express,

Us A A Me GI iced nscinscccheisdansninenniacennsnincnionl 9

Saturn Distrib. Corp. v. Paramount Saturn,

Ltd., 326 F.3d 684 (5th Cir. 2003)...............00..... 15

Shearson/Am. Express, Inc. v. McMahon,

Os I i centile 9,17

Southland Corp. v. Keating,

Le RD A a ee eee F passim

Styne v. Stevens, 26 P.3d 343 (Cal. 2001)................ 16

United States v. Darby, 312 U.S. 100 (1941)........... 12

Univ. Life Ins. Co. v. Unimarc Ltd.,

699 F.2d 846 (7th Cir. 1963B)...........00..000.0000000000-. 17

Volt Info. Scis. v. Bd. of Trs., Leland Stanford

Jr. Univ., 489 U.S. 468 (1989) .............ccceceeeeeeeees 14

STATUTES, RULES AND REGULATIONS

CAL. LABOR CODE § 1700.44-.45 ..................ccccscseseeee 13

LANES STORE, peer Saen We Res eerer te MWS si Pe 6.7.8

Be I I isi lsh cciinceeselipihabnagonandendanhinalalae 1

MISCELLANEOUS

Stephen P. Broome, An Unconscionable Applli-

cation of the Unconscitonability Doctrine:

How California Courts Are Circumventing

the Federal Arbitration Act, 3 HASTINGS

SN, Teds. SP Te isinctscisiencstipsenimaencitiginctibinautibbiansaiiatite 4

Christopher R. Drahozal. Federal Arbitration

Act Preemption, 79 IND. L.J. 393 (2004)....... 12.14

BRIEF OF CTIA—THE WIRELESS

ASSOCIATION® AS AMICUS CURIAE

IN SUPPORT OF PETITIONER

CTIA—The Wireless Association® submits this

brief as amicus curiae in support of petitioner Arnold

M. Preston. !

INTEREST OF THE AMICUS CURIAE

CTIA—The Wireless Association®, formerly

known as the Cellular Telecommunications & Inter-

net Association (“CTIA”), represents all sectors of the

wireless communications industry. Members of CTIA

include service providers, manufacturers, wireless

data and internet companies, as well as other con-

tributors to the wireless universe. CTIA frequently

participates in regulatory and judicial proceedings

and coordinates efforts to educate government agen-

cies and the public about wireless issues.

Many of CTIA’s members have adopted as stan-

dard features of their business contracts provisions

that in appropriate circumstances mandate the arbi-

tration of disputes arising from or relating to those

contracts. They use arbitration because it is a prompt,

fair, inexpensive, and effective method of resolving

disputes. CTIA sponsored the Wireless Industry Ar-

bitration Rules (see http://www.adr.org/sp.asp?id=

22214), which are administered by the American Ar-

bitration Association and which have been incorpo-

Pursuant to Rule 37.6. amicus affirms that no counsel for a

party authored this brief in whole or in part and that no person

other than amicus. its members. and its counsel made a mone-

tary contribution to this briefs preparation or submission. The

parties letters consenting to the filing of this brief have been

filed with the Clerk's office

2

rated in the arbitration agreements of many mem-

bers of the industry.

CTIA is concerned about efforts by California

and other States to deem certain disputes or claims

to be non-arbitrable. Accordingly, CTIA has a strong

interest in urging this Court to make clear once and

for all that only Congress, not the States, may ex-

empt claims from the Federal Arbitration Act

(“FAA”) or impose pre-conditions to the enforcement

of agreements to arbitrate disputes.

SUMMARY OF ARGUMENT

The FAA establishes “a liberal federal policy fa-

voring arbitration agreements, notwithstanding any

state substantive or procedural policies to the con-

trary.” Moses H. Cone Mem'l Hosp. v. Mercury

Constr. Corp., 460 U.S. 1, 24 (1983). Despite the

longstanding existence of this liberal federal policy

and the numerous decisions of this Court applying it,

a number of States—most notably, California—

continue to construct obstacles to the enforcement of

private agreements. The California Talent Agencies

Act (“CTAA”) is but the latest such obstacle.

The CTAA specifies that cases arising under the

Act must first be submitted to the California Labor

Commissioner, whose decision will then be reviewed

de novo by the Superior Court. The statute allows

disputes to be arbitrated, but only if the parties’ arbi-

tration agreement (i) requires the parties to notify

the Labor Commissioner of the time and place of all

arbitration hearings and (ii) authorizes the Commis-

sioner to attend all hearings. These limitations on

the right to arbitrate cannot be reconciled with this

Court's clear holdings that States may not declare

disputes or claims off limits to arbitration (South-

3

land Corp. v. Keating, 465 U.S. 1, 10 (1984); Perry v.

Thomas, 482 U.S. 483, 491 (1987)) or condition the

enforceability of arbitration agreements on compli-

ance with special requirements that are not applica-

ble to contracts generally (Doctor's Assocs., Inc. v.

Casarotto, 517 U.S. 681, 687 (1996)).

The premise of the California courts that States

may nonetheless make a dispute or claim non-

arbitrable whenever they decide that arbitration is

“inherently inconsistent” with the achievement of the

purposes of the statute is simply wrong. This Court

has said that Congress may make that judgment, but

it turns the Supremacy Clause on its head to suggest

that States may do so.

Indeed, this and other California decisions amply

demonstrate that the “longstanding judicial hostility

to arbitration” that the FAA was enacted to reverse

more than eighty years ago (Gilmer v. Inter-

state/Johnson Lane Corp., 500 U.S. 20, 24 (1991))

remains alive and well in that State. We accordingly

urge the Court to take this opportunity to reaffirm in

strong and clear terms that States have no power to

place any dispute or claim off limits to arbitration

and that the FAA preempts any state law that im-

poses special requirements or limitations on agree-

ments to arbitrate. A broad holding to that effect is

necessary to avoid repeated, burdensome litigation

over the validity of state statutes and common-law

doctrines that are contrary to the FAA but nonethe-

less remain in force in California and elsewhere. See

Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265,

275 (1995) (the FAA should be interpreted so as to

avoid “breeding litigation from a statute that seeks

to avoid it’).

4

ARGUMENT

The decision below is part of a much broader pat-

tern of attacks on arbitration in California. The Cali-

fornia Legislature and courts have for decades dem-

onstrated distrust of arbitration by seeking to de-

clare various disputes or claims to be non-arbitrable

or, as in this case, arbitrable only if certain onerous

conditions are satisfied.”

First, the California Legislature tried to make

claims under the Franchise Investment Law non-

arbitrable. This Court held that effort preempted by

the FAA. Southland, 465 U.S. at 10. Next, the Legis-

lature tried to place certain wage-collection claims

under the California Labor Code off limits to arbitra-

tion. This Court struck down that effort too. Perry,

482 U.S. at 491.

Undeterred, the California Supreme Court held

that claims for so-called “public” injunctive relief un-

der the Consumer Legal Remedies Act (“CLRA”) and

Unfair Competition Law (“UCL”) are non-arbitrable.

See Broughton v. Cigna Healthplans of Cal., 988

P.2d 67, 71 (Cal. 1999) (CLRA); Cruz v. Pacificare

Health Sys., Inc., 66 P.3d 1157, 1159 (Cal. 2003)

(UCL). And during the same time frame, it held that

discrimination claims brought under the Fair Em-

ployment and Housing Act are arbitrable only if the

arbitration agreement in question provides for, inter

alia, “more than minimal” discovery and a written

For a detailed discussion of Calitornia s hostility to arbitra-

tion. see Stephen Po Broome. .tn Unconscionable Application of

the Uneonscronability Doctrine: llou California Courts Are Cir-

cumventing the Federal Arbitration Act. 3 thasrincs Bus. Ld

39 ¢2006)

5

ruling. Armendariz v. Found. Health Psychare

Servs., Inc., 6 P.3d 669, 682-689 (Cal. 2000).

Most recently, the California Supreme Court

held that in cases seeking redress for the failure to

pay statutorily required overtime, courts should re-

fuse to enforce an arbitration provision calling for

individual arbitration of disputes “if a trial court de-

termines * * * that class arbitration would be a sig-

nificantly more effective way of vindicating the

rights of affected employees than individual arbitra-

tion.” Gentry v. Superior Court, 165 P.3d 556, 559

(Cal. 2007).

The same mistaken premise underlies Brough-

ton, Cruz, Armendariz, Gentry, and the decision be-

low: that the State is free to declare certain disputes

or claims to be non-arbitrable as a matter of public

policy or to impose conditions on the enforcement of

arbitration provisions whenever it believes that such

conditions are necessary to advance “unwaivable

statutory rights” (Gentry, 165 P.3d at 559). According

to the California Supreme Court, this Court has ac-

knowledged that if there is an “inherent conflict” be-

tween arbitration and a statute's underlying pur-

pose, a dispute or claim under that statute may be

declared non-arbitrable. Broughton, 988 P.2d at 73-

74. But this premise is valid only when the statute is

a federal one. The persistent failure of the California

courts to recognize that only Congress—not the State

of California—has the constitutional authority to

displace the FAA requires reversal of the decision be-

low and condemnation of the line of cases of which it

is part.

6

A. The FAA Preempts Any State Law That

Either Imposes Special Requirements

On Arbitration Agreements Or Declares

Disputes Or Claims Non-Arbitrable.

As this Court has explained on several occasions,

Congress's purpose in enacting the FAA “was to re-

verse the longstanding judicial hostility to arbitra-

tion agreements that had existed at English common

law and had been adopted by American courts, and

to place arbitration agreements upon the same foot-

ing as other contracts.” Gilmer, 500 U.S. at 24.

Nearly a quarter of a century ago, this Court de-

clared that “Section 2 [of the FAA] is a congressional

declaration of a liberal federal policy favoring arbi-

tration agreements, notwithstanding any state sub-

stantive or procedural policies to the contrary.” Moses

H. Cone, 460 U.S. at 24 (emphasis added). Its “effect

* * * is to create a body of federal substantive law of

arbitrability, applicable to any arbitration agreement

within the coverage of the Act” and “to establish{]

that, as a matter of federal law, any doubts concern-

ing the scope of arbitrable issues should be resolved

in favor of arbitration.” /d. at 24-25.

Applying these principles, this Court has already

twice rejected efforts by the State of California to

render certain disputes non-arbitrable. In South-

land, the California Supreme Court had construed

the California Franchise Investment Law to render

claims under that law non-arbitrable. Aeating v. Su-

perior Court, 645 P.2d 1192, 1198-1203 (Cal. 1982).

This Court reversed. declaring that “|s]o interpreted

the California Franchise Investment Law directly

conflicts with § 2 of the Federal Arbitration Act and

violates the Supremacy Clause.” Southland. 465 U.S.

at 10. The Court explained that, “ijn enacting [Sec-

7

tion] 2 * * *, Congress * * * withdrew the power of

the States to require a judicial forum for the resolu-

tion of claims which the contracting parties agreed to

resolve by arbitration.” Jbid. In doing so, Congress

“intended to foreclose state legislative attempts to

undercut the enforceability of arbitration agree-

ments.” Jd. at 16. Thus, whenever an arbitration

agreement involves interstate commerce and does

not implicate a ground that existed at law or equity

for the revocation of “any contract,” Section 2’s

“broad principle of enforceability” is not “subject to

any additional limitations under state law.” Id. at

10-11.

Just three years later, the Court was again called

on to review an attempt by California to make cer-

tain claims non-arbitrable—this time, claims under

the wage-collection provisions of the California Labor

Code. Perry, 482 U.S. 483. The Court forcefully reit-

erated the “clear federal policy” established in, inter

alia, Moses H. Cone and Southland (Perry, 482 U.S.

at 489-90) and held that “[t]his clear federal policy

places [the FAA] in unmistakable conflict with” Cali-

fornia’s “requirement that litigants be provided a ju-

dicial forum for resolving wage disputes” (id. at 491).

“Therefore, under the Supremacy Clause, the state

statute [had to] give way.” /bid. In the concluding

footnote of its opinion, the Court emphasized that

“state law, whether of legislative or judicial origin is

applicable if that law arose to govern issues concern-

ing the validity. revocability, and enforceability of

contracts generally.” Jd. at 493 n.9 (emphasis by the

Court). However, “[a] state law-principle that takes

its meaning precisely from the fact that a contract to

8

arbitrate is at issue does not comport with * * * [Sec-

tion] 2.” Ibid.”

The Court’s subsequent decisions have also made

clear that the FAA’s preemptive scope is not limited

to state statutes that render certain claims or dis-

putes per se non-arbitrable. Rather, Section 2 also

preempts laws that “condition[] the enforceability of

arbitration agreements on compliance with special

*** requirement|[s] not applicable to contracts gen-

erally.” Casarotto, 517 U.S. at 687. Citing Perry, the

Casarotto Court again emphasized that courts sim-

ply “may not * * * invalidate arbitration agreements

under state laws applicable only to arbitration provi-

sions.” [bid. (emphasis by the Court). Applying these

principles, the Court struck down a Montana statute

that made arbitration provisions unenforceable

unless notice of the provision was typed in under-

lined capital letters on the first page of the parties’

agreement. Jd. at 683, 688.

B. Only Congress, Not State Courts Or Leg-

islatures, Can Limit The Scope Of FAA

Preemption.

Over the past two decades, plaintiffs have argued

that claims under a wide range of federal statutes

are non-arbitrable. This Court never once has agreed

See also. e.g... Allied-Bruce. 513 U.S. at 281 Gnvernal quota-

tion marks omitted):

States may regulate contracts. including arbitration clauses.

under general contract law principles * * *. What States may

not do is decile that a contract is fair enough to enforce all

its basi terms (price. service. credit), but not fair enough to

enforce its arbitration clause. The Act makes anv such state

poliey unlawful. for that kind of poles would place arbura-

tion clauses on an unequal footing. directly contrary to the

Act's language and Congress intent

9

that the policies underlying the particular statute at

issue could not be adequately vindicated in arbitra-

tion. Instead, the Court has consistently held that

arbitration is a favored method of resolving “even

claims arising under * * * statute[s] designed to fur-

ther important social policies.” Green Tree Fin. Corp.

v. Randolph, 531 U.S. 79, 90 (2001) (holding that

claims under the Truth in Lending Act are arbitra-

ble). This is because, “[b]y agreeing to arbitrate a

statutory claim, a party does not forgo the substan-

tive rights afforded by the statute; it only submits to

their resolution in an arbitral, rather than a judicial,

forum.” Mitsubishi Motors Corp. v. Soler-Chrysler

Plymouth, Inc., 473 U.S. 614, 628 (1985) (holding

that claims under the Sherman Act are arbitrable).

It is also because generalized “suspicion of arbitra-

tion as a method of weakening the protections af-

forded in the substantive law” has “fallen far out of

step with [the Court's] current strong endorsement”

of arbitration. Rodriguez de Quijas v. Shearson/Am.

Express, Inc., 490 U.S. 477, 481 (1989) (holding that

claims under the Securities Act of 1933 are arbitra-

ble).

The Court has, of course, acknowledged that,

“[llike any statutory directive, the [FAA’s] mandate

can be overridden by a contrary congressional com-

mand.” Shearson/Am. Express, Inc. v. McMahon, 482

U.S. 220, 226 (1987) (emphasis added) (holding that

RICO claims and claims under the Securities Ex-

change Act of 1934 are arbitrable). Nonetheless.

“{hjaving made the bargain to arbitrate, [a] party

should be held to it unless Congress itself has evinced

an intention to preclude a waiver of judicial remedies

for the statutory rights at issue” Mifsubishi. 473

U.S. at 628 (emphasis added): accord Randolph. 531

U.S. at 90 (‘statutory claims may be arbitrated”

10

unless “Congress has evinced an intention to pre-

clude a waiver of judicial remedies”) (emphasis

added); Gilmer, 500 U.S. at 26 (“the burden is on [the

party resisting arbitration] to show that Congress in-

tended to preclude a waiver of a judicial forum”)

(emphasis added).

Overlooking basic principles of federal suprem-

acy, the California Supreme Court asserted in

Broughton that this Court “has never directly de-

cided whether a [state] legislature may restrict a

private arbitration agreement when it inherently

conflicts with a public statutory purpose that tran-

scends private interests.” 988 P.2d at 78. Having

concluded that the issue remained open, the

Broughton court proceeded to declare it “perverse to

extend the policy [favoring enforcement of arbitra-

tion provisions] so far as to preclude states from

passing legislation the purposes of which make it in-

compatible with arbitration, or to compel states to

permit the vitiation through arbitration of the sub-

stantive rights afforded by such legislation.” Jd. at

79. The California courts accordingly have felt them-

selves free to find “inherent conflicts” and to displace

the FAA in case after case. See pages 4-5, supra; cf.

Pet. App. 11 (holding that the FAA does not preempt

a state “statute vesting [a state] agency with exclu-

sive original jurisdiction to decide a challenge based

on specific grounds’).

This attempted end run around Southland and

Perry is fundamentally wrongheaded. Indeed, South-

land and Perry necessarily rejected fhe Yretion that

the States have the power to trump the FAA. See

Crreuit City Stores, Inc. v. Adams, 532 U.S. 105, 123-

124 (2001) (T]he argument here is that a state

statute ought not be denied state judicial enforce-

11

ment while awaiting the outcome of arbitration. That

matter, though, was addressed in Southland and AI-

lied-Bruce, and we do not revisit the question here.”);

see also Buckeye Check Cashing, Inc. v. Cardegna,

546 U.S. 440, 446 (2005) (Southland “rejected the

proposition that the enforceability of the arbitration

agreement turned on the state legislature’s judgment

concerning the forum for enforcement of the state-

law cause of action”); Mitsubishi, 473 U.S. at 623

n.10 (‘any contention that the local antitrust claims

[arising under Puerto Rico law] are nonarbitrable

would be foreclosed by this Court’s decision in South-

land * * *, where we held that the Federal Arbitra-

tion Act ‘withdrew the power of the states to require

a judicial forum for the resolution of claims which

the contracting parties agreed to resolve by arbitra-

tion”) (citation omitted). The contrary view—that

States retain some measure of discretion to place

certain issues or disputes beyond the FAA's reach or

otherwise to regulate arbitration agreements—has

not prevailed. See, e.g., Perry, 482 U.S. at 494-495

(O'Connor, J., dissenting); Southland, 465 U.S. at 18,

20-21 (Stevens, J., concurring in part and dissenting

in part).

Southland and Perry aside, the notion that

States can “surgically excise[]” particular categories

of arbitration agreements from the coverage of the

FAA so as to put them “beyond congressional reach”

is inconsistent with the fundamental nature of pre-

emption of state law under the Supremacy Clause.

Gonzalez yv. Raich, 545 U.S. 1, 29-30 (2095). “The Su-

premacy Clause unambiguously pre.ides that if

there is any conflict between federal and state law.

federal law shall prevail.” Jd. at 29 (emphasis added).

Thus, “[i]t is bevond peradventure that federal power

over commerce is superior to that of the States to

12

provide for the welfare or necessities of their inhabi-

tants, however legitimate or dire those necessities

may be.” Ibid. (citations and internal quotation

marks omitted). '

As one academic who focuses on arbitration is-

sues has tersely put it, “[t]he difference between the

federal and state source of rights is not mere hap-

penstance, but is the centerpiece of federal preemp-

tion doctrine under the Supremacy Clause.” Christo-

pher R. Drahozal, Federal Arbitration Act Preemp-

tion, 79 IND. L.J. 393, 416 (2004). Therefore, only

Congress, not California or any other State, has the

power to create exceptions to the FAA by declaring

certain claims or disputes to be non-arbitrable.

Likewise, the FAA withdraws the States’ authority

to condition the enforcement of arbitration agree-

ments on compliance with special requirements that

are not applicable to contracts generally.

C. The CTAA’s Anti-Arbitration Provisions

Are Preempted By The FAA.

As just discussed, the implicit premise of the de-

cision below—that California may arrogate to itself

the power to displace the FAA—is manifestly false. It

follows inexorably that the decision below is unsus-

There are. of course, Commerce Clause limitations on Con-

gresss power. but “[jJust as state acquiescence to federal regu-

lation cannot expand the bounds of the Commerce Clause. so

too state action cannot circumseribe Congress plenary com-

merce power” Raich, 515 US. at 29 (citation omitted): accord

United States vo Darby. 312 US. 100. 114 C1941) (he commerce

“power can neither be enlarged nor diminished by the exercise

or non-exereise of state power ): cf. Maryland v. Wirtz, 302 U.S.

P83. 1960-07 C1968) Cvahd general regulations of commerce do

not cease to be regulations of commerce because a State is in-

volved?)

13

tainable and that the FAA requires enforcement of

the parties’ agreement to arbitrate.

The CTAA provides that agreements to arbitrate

disputes under that law are enforceable only if they

require the parties to notify the California Labor

Commissioner of the time and place of all arbitration

hearings and authorize the Commissioner to attend

(and presumably play a role in) all hearings. Pet.

App. 8a-9a & n.2 (describing CAL. LABOR CODE

§ 1700.45).° If an arbitration agreement does not

comply with these requirements, the parties must

litigate their dispute before two successive tribunals:

first, the California Labor Commissioner and, follow-

ing the Commissioner’s decision, the Superior Court,

“where the [case] shall be heard de novo.” CAL. La-

BOR CODE § 1700.44.

There can be no question that, standing alone,

the requirement that disputes arising under the

CTAA be adjudicated in an administrative agency

and then in court would be preempted by the FAA.

See pages 6-8, supra. The fact that California created

a limited exemption for arbitration agreements that

satisfy the statute's requirements changes nothing.

To begin with, an arbitration provision is en-

forceable under the CTAA only “[ilf [it] is contained

in a contract between a talent agency and’ an artist.

CAL. LABOR Cobre § 1700.45(a). Because petitioner

has consistently maintained that he is not a talent

agent and accordingly is not subject to the CTAA, the

statute puts him in a classic Catch-22: He can in-

voke his right to arbitrate only by making a judicial

If the Commissioner were to attend an arbitration hearing

and express a view on the merits. ios hard to imagime the arbi-

trator not being influenced thereby

rh

14

admission that is fatal on the merits. In other words,

in this case and all others like it, the exception is

meaningless and might as well not exist.

More fundamentally, the prerequisites to arbi-

tration imposed by the CTAA are not meaningfully

distinguishable from the notice requirement that this

Court held to be preempted in Casarotto. Indeed,

they are more burdensome and interfere to a signifi-

cantly greater extent with contracting parties’ free-

dom under the FAA “to structure their arbitration

agreements as they see fit.” Volt Info. Scis. v. Bd. of

Trs., Leland Stanford Jr. Univ., 489 U.S. 468, 479

(1989). Whereas the notice requirement at issue in

Casarotto merely required the inclusion of a boiler-

plate notice clause in the parties’ contact, the CTAA

directly regulates the arbitration proceeding itself,

conditioning the enforcement of the arbitration

agreement on the parties’ amenability to the State’s

presence (and presumably interference) at the arbi-

tration hearing. As such, there can be no doubt that

the CTAA “conditions the enforceability of arbitra-

tion agreements on compliance with special * * * re-

quirement[s] not applicable to contracts generally.”

Casarotto, 517 U.S. at 687. It is therefore in direct

conflict with this Court’s holding in Casarotto that

States “may not * * * invalidate arbitration agree-

ments under state laws applicable on/y to arbitration

provisions.” Jbid. (emphasis by the Court); see also

Drahozal, supra, 79 IND. L.J. at 425 (Some funda-

mental principles of FAA preemption are resolved:

State laws that single out arbitration are preempted

when they invalidate arbitration agreements[.]’).

The California Court of Appeal’s nullification of

the parties arbitration agreement on the ground

that this case “involve|s] an administrative agency

15

with exclusive jurisdiction over a disputed issue”

(Pet. App. 10a) is singularly unpersuasive. To begin

with, this Court has already held that “the mere in-

volvement of an administrative agency in the en-

forcement of a statute is not sufficient to preclude

arbitration.” Gilmer, 500 U.S. at 28-29; see also Sat-

urn Distrib. Corp. v. Paramount Saturn, Ltd., 326

F.3d 684, 687 (5th Cir. 2003) (“Even if [the state mo-

tor vehicle board had exclusive jurisdiction of auto-

mobile dealership franchise disputes], the strong

federal policy favoring arbitration preempts state

laws that act to limit the availability of arbitra-

tion.”).

Moreover, the theory that States can avoid FAA

preemption by assigning disputes to agencies rather

than courts is fundamentally devoid of logic. If, as is

now clear, the FAA preempts state statutes that pre-

clude arbitration and require litigation in state

courts, then it necessarily follows that it also pre-

empts statutes that preclude arbitration and require

litigation before state agencies. The federally pro-

tected right to arbitration is no less violated by the

former than by the latter; indeed, the violation is

greater. “By agreeing to arbitrate,” a party “trades

the procedures and opportunity for review of the

courtroom for the simplicity. informality, and expedi-

tion of arbitration.” Mitsubishi, 473 U.S. at 628. The

CTAA, however, thoroughly frustrates this tradeoff

by requiring not only litigation before the Labor

Commission but also a de novo hearing in the Supe-

rior Court.”

The Cahtorma Court of Appeal stated that “[t]he fact that

the losing party will have a right to a de novo tearing [in the

Superior Court], involving additional time and money. does not

16

Indeed, because the Labor Commissioner’s deci-

sion is subject to de novo review, the Labor Commis-

sioner is the functional equivalent of a magistrate

judge issuing proposed findings and a recommended

ruling. Under Southland and Perry, there can be lit-

tle doubt that a state statute would be preempted if

it provided that statutory claims could not be arbi-

trated but instead must be heard by a magistrate

judge subject to de novo review in a court of general

jurisdiction. Because the process established by the

CTAA is functionally indistinguishable, the result

should be no different. Ultimately, if the Court were

to “accept[] [the Court of Appeal’s] analysis, states

could wholly eviscerate congressional intent to place

arbitration agreements upon the same footing as

other contracts simply by passing statutes such as

the [CTAA].” Southland, 465 U.S. at 17 n.11.

To the extent that the Court of Appeal’s decision

relies on the Labor Commissioner’s “expertise in ap-

plying the [CTAA]” (Pet. App. 7a (quoting Styne v.

Stevens, 26 P.3d 343, 354 (Cal. 2001)), it fails both

under this Court’s precedent and on its own terms.

“By agreeing to arbitrate,” the parties indicated that

the “simplicity, informality, and expedition of arbi-

tration” (Mitsubishi, 473 U.S. at 628) was more im-

portant to them than the expertise of the Labor

Commissioner, and federal law requires state courts

to respect and enforce that choice. In Southland, the

Court squarely “rejected the proposition that the en-

forceability of [an] arbitration agreement turn[s] on

excuse the defendant from the legal requirement to exhaust his

administrative remedies.” Pet. App. la. Nothing could more

clearly confirm the conflet between California law and the

PAA. But contrary to the Court of Appeals impheit assumption,

itis California law, not the FAA. that must give way

17

the state legislature’s judgment concerning the fo-

rum for enforcement of [a] state-law cause of action.”

Buckeye, 546 U.S. at 446. “In any event, adaptability

and access to expertise are hallmarks of arbitration.

The anticipated subject matter of the dispute may be

taken into account when the arbitrators are ap-

pointed, and arbitral rules typically provide for the

participation of experts either employed by the par-

ties or appointed by the tribunal.” Mitsubishi, 473

U.S. at 633.

Finally, the Court of Appeal’s attempt to frame

the issue in terms of “jurisdiction” is also unavailing.

To begin with, there can be no serious argument that

a state legislature may avoid this Court’s rulings in

Southland, Perry, and Buckeye simply by vesting “ex-

clusive jurisdiction” over the disputes in state courts.

Moreover, this Court has held that claims are arbi-

trable despite being subject to exclusive federal ju-

risdiction. See McMahon, 482 U.S. at 227-28; see also

Mitsubishi, 473 U.S. at 654 (Stevens, J., dissenting)

(“The determination that [Sherman Act claims] are

‘too important to be decided otherwise than by com-

petent tribunals surely cannot allow private arbitra-

tors to assume a jurisdiction that is denied to courts

of the sovereign States.”) (footnote omitted; quoting

Univ. Life Ins. Co. vy. Unimarc Ltd., 699 F.2d 846,

850-51 (7th Cir. 1983) (Posner, J.)).

In short. the CTAA’s requirement that disputes

arising under that statute must be brought first to

the Labor Commissioner and then to the Superior

Court is every bit as preempted by the FAA as were

California's previous efforts to put disputes off limits

to arbitration in Southland and Perry. The Court

should make clear yet again that California lacks

the constitutional authority to trump the FAA.

18

CONCLUSION

The decision of the Court of Appeal should be re-

versed.

Respectfully submitted.

MICHAEL F. ALTSCHUL ANDREW J. PINCUS

CTIA—The Wireless Counsel of Record

Association EVAN M. TAGER

1400 16th Street, NW DAVID M. GOSSETT

Suite 600 JACK L. WILSON

Washington, DC 20036 Mayer Brown LLP

202) 785-0081 1909 K Street, NW

Washington, DC 20006

(202) 263-3000

Counsel for Amicus Curiae

NOVEMBER 2007