# Amicus Curiae Brief — Ernst & Young, LLP v. Morris, 138 S. Ct. 51 (2017) (No. 16-300)

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2017

## Text

No. 16-300

IN THE
Supreme Court of the Gnited States

ERNST & YOUNG LLP, ET AL.,
Petitioners,
v.
STEPHEN MORRIS, ET AL.,
Respondents.

On Petition For A Writ Of Certiorari
To The United States Court Of Appeals
For The Ninth Circuit

BRIEF OF AMICUS CURIAE
THE EMPLOYERS GROUP
IN SUPPORT OF PETITIONERS

GEORGE S. HOWARD, JR. BETH HEIFETZ

JONES DAY Counsel of Record

12265 El Camino Real ANTHONY J. DICK

Suite 200 JONES DAY

San Diego, CA 92130 51 Louisiana Ave., N.W.
Washington, D.C. 20001

STEVEN ZADRAVECZ (202) 879-3939

JONES DAY bheifetz@jonesday.com

3161 Michelson Dr.

Irvine, CA 92612

Counsel for Amicus Curiae The Employers Group

c “heer of Cong

STATEMENT OF INTEREST
SUMMARY OF ARGUMENT
ARGUMENT

I.

II.

Ill.

i

TABLE OF CONTENTS

Interpreting the NLRA to Displace the
FAA’s Protection of Individual Arbitration
Conflicts With the Decisions of This Court

and Other Circuits
A.

Interpreting the NLRA to Prohibit
Individual Arbitration Agreements
Would Repeal the FAA’s Protection of

Individual Arbitration ...........................

The NLRA Does Not Contain the
Requisite Clear Indication to Repeal
the FAA’s Protection of Individual

FEE ERENT EIN ESM coh ots et Poe

Chevron Deference Does Not Apply To
Agency Interpretations That Would

Repeal Prior Federal Law......................

California Employers Have an Especially
Acute Interest In Combating the Growing

Trend of Judicial Hostility to Arbitration

This Case Is the Best Vehicle to Resolve

the Acknowledged Circuit Split
CONCLUSION

eee Te eee Pee eee ee eee Pe eee ee Ss |

STEER RRC ee

eet wee eee ee een eeee

SRR REET OO eee ee eee ee

4

TABLE OF AUTHORITIES

CASES
Am. Exp. Co. v. Italian Colors Rest.,

RI COO, Fe Ge cicccccsinccscenscccccccscseses

AT&T Mobility LLC v. Concepcion,

BE Se Be GOED cncccccccesccccscscssccccssenecess

Carter v. Welles-Bowen Realty, Inc.,

736 F.3d 722 (6th Cir. 2013)..................+.

Cathedral Candle Co. v. U.S. Int'l Trade
Comm'n,

400 F.3d 1352 (Fed. Cir. 2005) ................

Cellular Sales of Mo., LLC v. NLRB,

824 F.3d 772 (8th Cir. 2016)..............-.-.....--..+

Chevron U.S.A. Inc. v. Nat. Res. Def.
Council, Inc.,

AGT U.S. 837 (1984) ....-.e.ceccecccesossesseseceeeee

Cipollone v. Liggett Grp., Inc.,

I Se Ce CEE eeerncccvecncccnscnccesoncvcescese

CompuCredit Corp. v. Greenwood,

LSS B. Cb. GSB GRORZ) .00cccecccccccocescocoseccceece

D.R. Horton, Inc. v. N.L.R.B.,

737 F.3d 344 (5th Cir. 2013) ........0.0.c00000.

DIRECTV, Inc. v. Imburgia,

136 S. Ct. 463 (2015) .....0....0e.ce-e0eceeceseeseeee

as passim

oasid passim

nl

TABLE OF AUTHORITIES
(continued)

FCC v. NextWave Pers. Commc’ns. Inc.,

637 U.S. 208 (BOOS) .............-.2...0.0.000-0:0-.

Gilmer v. Interstate/Johnson Lane
Corp.,

Be CR. BP CIB ED cece cccsesecscessccsescssescsesones

Hammon v. Barry,

826 F.2d 73 (D.C. Cir. 1987) .............2000+

Hoffman Plastic Compounds, Inc. v.
NLRB,

Re SE Be IED co cencsccnscccescosvesossccsscece

In Re D. R. Horton, Inc.,

367 N.L.R.B. 2277 (2012).............0.000e0c000

In re Stock Exchanges Options Trading
Antitrust Litig.,

317 F.3d 134 (2d Cir. 2003).................---.

INS v. St. Cyr,

RG SN ED senecisenccvesescecessvnvnbonnse

Iskanian v. CLS Transp. of Los Angeles,
LLC,
59 Cal. 4th 348 (2014), cert denied,

135 S. Ct. 1155 (2015) ......eceeececcseseeeeseeees

J.I. Case Co. v. NLRB,

321 U.S. BBZ (1944) ......c.ccccccrcsossocererereeees

iv

TABLE OF AUTHORITIES
(continued)

King v. Burwell,

135 S. Ct. 2480 (2015) ....cccccccccsccscseeceeeees

Ledezma-Galicia v. Holder,

636 F.3d 1059 (9th Cir. 2010).................

Lewis v. Epic Sys. Corp.,

823 F.3d 1147 (7th Cir. 2016).................

Matsushita Elec. Indus. Co. v. Epstein,

SOG WB. BF CRD ccc evccsccecscsscsetorcssosecses

Morton v. Mancari,

GET Te I I ct erscccsscrececessevecneeniages

Nat'l Ass’n of Home Builders v. Defs. of
Wildlife,

GE. CAT. GEG GaP voccccncccnscnscese sscssvnscosies

NLRB v. Fin. Inst. Emps. of Am., Local
1182,

SF Ts FD Ga oveccccececcesvecetsocnentiwinies

Owen v. Bristol Care, Inc.,

702 F.3d 1050 (8th Cir. 2013) ............0

Perry v. Thomas,

BD Es Ge ED crccccresccccsnensiscotseniaionn

Posadas v. Nat'l City Bank of New York,

SED Be GG Ce crccerscnsossnccsesteenssbeqnesin

Preston v. Ferrer,

552 U.S. 346 (2008) ....ccccccsceccsesessesseseesen

Vv

TABLE OF AUTHORITIES
(continued)

Radzanower v. Touche Ross & Co..,

i ceicninscnanscesencaneseces

Sakkab v. Luxottica Retail N. Am., Inc.,

803 F.3d 425 (9th Cir. 2015)....................

Shearson/Am. Exp., Inc. vu. McMahon,

Be BE OD seccccesscosscccescccesccocesecers

Southern S.S. Co. v. NLRB,

a

Southland Corp. v. Keating,

ich ciics.nenestinnecsnovesencnssoese

Sutherland v. Ernst & Young LLP,
726 F.3d 290 (2d Cir. 2013)

EER

United States v. Borden Co..,

308 U.S. 188 (1939).....................0: slabclasisaad

Watt v. Alaska,

SE I I IID acccsccnccnsssscscsoccccsecesceses

STATUTES

witha passim

vi

TABLE OF AUTHORITIES
(continued)
Page(s)

OTHER AUTHORITIES

Stephen A. Broome, An Unconscionable
Application of the Unconscionability
Doctrine: How the California Courts
are Circumventing the Federal
Arbitration Act,
3 Hastings Bus. L. J. 39 (2006)......00000000.0000... eng ae

STATEMENT OF INTEREST

The Employers Group, a California non-profit
organization, is one of the nation’s oldest and largest
human-resources management organization for
employers. It represents nearly 3,500 California
employers of all sizes and every industry, which
collectively employ nearly 3 million employees. The
Employers Group also provides live helpline
assistance, online resources and tools, and in-
company human-resources consulting services and
support to its members. As part of its mission, the
Employers Group seeks to enhance the stability,
predictability, and fairness of the laws and decisions
regulating employment relationships. The Employers
Groups thus has a direct interest in the correct
interpretation and application of both the National
Labor Relations Act (NLRA) and the Federal
Arbitration Act (FAA).!

1 No party or counsel for a party authored or contributed
monetarily to the preparation or submission of any portion of
this brief. Counsel of record for all parties received notice of the
Employers Group’s intention to file this brief more than 10 days
before it was due, and all parties have consented to its filing.

2

SUMMARY OF ARGUMENT

As petitioners have explained, this case squarely
presents an acknowledged circuit split on an
important and frequently recurring issue of federal]
law. That alone is reason enough to grant the
petition. Beyond that, however, review is also
urgently needed because the decision below is part of
an intensifying trend of precisely the type of “judicial
hostility to arbitration” that the FAA was enacted to
combat. CompuCredit Corp. v. Greenwood, 132 S. Ct.
665, 668 (2012). In recent years, this trend has
manifested itself in lower courts devising ever more
creative ways of distorting or outright defying this
Court’s precedents in order to impede _ the
enforcement of arbitration agreements “according to
their terms.” Jd. at 669. Here, the Ninth Circuit
continued that disturbing trend by following a
decision of the Seventh Circuit that serially violates
this Court’s precedents and creates a circuit split on
at least three important issues of federal law.

First, the decision ignored this Court’s holding that
the FAA protects the right of individual arbitration,
and that refusing to enforce an agreement to
arbitrate on an individual basis is therefore
“inconsistent with the FAA.” AT&T Mobility LLC v.
Concepcion, 563 U.S. 333, 344 (2011).

Second, the decision distorted this Court's
precedent by diluting the level of clarity required for
a later statute such as the NLRA to displace an
earlier statute such as the FAA.

Third, the decision violated this Court’s teaching
that an agency interpretation is not entitled to

3

Chevron deference if it would bring one federal
statute into conflict with another.

On all three of these issues, the Ninth Circuit
broke from precedent in order to evade the venerable
canon against implied repeals, which prohibits
interpreting a statute such as the NLRA to displace
an older statute such as the FAA absent clear
congressional intent. Resolving these issues is thus
crucially important not only to the specific issue of
arbitration as it affects the nation’s employers, but
also to the integrity and predictability of the law
more broadly.

As between this and the other petitions currently
pending on the same issue, this case is the better
vehicle: It arises from California, which is ground
zero for judicial hostility to arbitration; it contains a
thorough dissenting opinion, which minimizes the
risk of vehicle problems; and it embodies a perfectly
square split with the Second Circuit, which upheld
precisely the same arbitration agreement that the
Ninth Circuit invalidated here.

ARGUMENT

l. Interpreting the NLRA to Displace the
FAA’s Protection of Individual Arbitration
Conflicts With the Decisions of This Court
and Other Circuits

The NLRA was enacted in 1935, and for the next
80 years “no court decision” ever “held that the
Section 7 right to engage in ‘concerted activities’ .. .
prohibited class action waivers in arbitration
agreements.” D.R. Horton, Inc. v. N.L.R.B., 737 F.3d
344, 356 (5th Cir. 2013). To the contrary, the NLRA
was enacted against the backdrop of the FAA, which

4

affirmatively protects the right of individual
arbitration, such that+ refusing to enforce an
agreement to arbitrate on an individual basis is
“inconsistent with the FAA.” Concepcion, 563 U.S. at
344. The year after Concepcion was decided, however,
the National Labor Relations Board moved to
undermine that decision by announcing a novel
reinterpretation of the NLRA, which carried
sweeping implications for every employer in the
country: It proclaimed that, “notwithstanding the
[FAA],” agreements to arbitrate on an individual
basis (and waiving the right to proceed on a class or
collective basis) are now prohibited in any
employment contract involving interstate commerce.
In Re D. R. Horton, Inc., 357 N.L.R.B. 2277, 2277
(2012). In other words, despite the fact that
individual arbitration agreements have long been a
common feature of the American employment
landscape, the Board suddenly declared that such
agreements have been illegal for eight decades—
without anybody ever noticing before.

Three circuits promptly rejected the Board’s novel
interpretation, but the Seventh and Ninth Circuits
have now embraced it. See Pet. 11-14. In doing so,
they have displayed an abject disregard for the
venerable canon against the “implied repeal of
statutes,” which serves the dual values of “stability
and predictability” in the law. Hammon v. Barry, 826
F.2d 73, 80 (D.C. Cir. 1987). Under this canon, a
federal statute such as the NLRA cannot be
construed to displace any part of an “earlier” statute
such as the FAA unless it contains a “clearly
expressed congressional intention” to effectuate the
repeal. Morton v. Mancari, 417 U.S. 535, 550-51

5

(1974). This is a “relatively stringent standard,”
which is “rarfely]” satisfied. Matsushita Elec. Indus.
Co. v. Epstein, 516 U.S. 367, 381 (1996). Indeed, the
canon has even greater force here, in the context of
the arbitration-specific provisions of the FAA,
because such “specific” provisions cannot readily be
“controlled or nullified” by a more “general” statute
such as the NLRA, which refers generally to
“concerted activities” among a wide range of other
subjects, but which says nothing about arbitration.
Morton, 471 U.S. at 550—51.

Rather than following the canon against implied
repeals, however, the Seventh and Ninth Circuits
chose to evade it. In the process, they made three
glaring errors that conflict with the decisions of this
Court and other circuits: First, they denied that
prohibiting individual arbitration agreements under
the NLRA creates any conflict with the FAA. Second,
they claimed that the NLRA’s general reference to
“concerted activities” contains the type of “clear”
statement necessary to prohibit individual
arbitration agreements. And third, they concluded
that the Board’s interpretation of the NLRA is
entitled to controlling deference. This Court’s
intervention is urgently needed on all three issues.

A. Interpreting the NLRA to Prohibit
Individual Arbitration Agreements
Would Repeal the FAA’s Protection of
Individual Arbitration

In Concepcion, this Court squarely held that

refusing to enforce an _ individual arbitration

agreement—i.e., an agreement to arbitrate on an
individual basis instead of a class or collective basis—

6

is “inconsistent with the FAA.” 563 U.S. at 344.
Where the parties have agreed to arbitrate on an
individual basis, the imposition of collective
proceedings “interferes with fundamental attributes
of arbitration.” Jd. At the same time, the Court
specifically held that the FAA’s savings clause does
not alter this conclusion: Because the FAA's
affirmative provisions presuppose the availability of
individual arbitration, it would be “absolutely
inconsistent” to read the savings clause to authorize
a ban on individual arbitration. Jd. at 343. In other
words, the savings clause “cannot in reason be
construed” to allow the imposition of class
proceedings in contravention of a class waiver,
because that would violate the basic principle that
“the [statute] cannot be held to destroy itself.” Jd.
(citation omitted).

As Concepcion explained, the entire “point” of the
FAA is “to allow for efficient, streamlined
procedures,” which “reducfe] the cost and increasfe]
the speed of dispute resolution.” Jd. at 344-45. Such
“streamlined procedures” are possible in individual
arbitration. but “imposing class procedures” would
“sacrifice([] the principal advantage of arbitration—its
informality—and makes the process slower, more
costly, and more likely to generate procedural morass
than final judgment.” Jd. at 344, 347-48 (emphasis
added). Moreover, the lack of appellate review in
arbitration makes it “poorly suited to the highf]
stakes of class litigation,” where “damages allegedly
owed to tens of thousands of potential claimants are
aggregated and decided at once.” Jd. at 350. Without
appellate review of a collective damages award, “the
risk of an error’ becomes “unacceptable,” which

7

effectively precludes arbitration as a viable option:
few if any defendants will choose to “bet the company
with no effective means of review.” Id. at 350-51. In
short, giving defendants the choice of arbitrating only
on a class basis is really no choice at all, and banning
individual arbitration agreements effectively bans
arbitration altogether.

For these reasons, the FAA creates a “substantive
right” to enforce agreements to arbitrate on an
individual basis, and “invalidating private arbitration
agreements denying class adjudication, would be an
abridgment . . . of [that] substantive right.” Am. Exp.
Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2309-10
(2013) (alteration omitted). Consequently, there is a
clear and direct conflict between the FAA and any
rule prohibiting agreements to arbitrate on an
individual basis. Indeed, in Concepcion, that conflict
was sufficiently clear for the FAA to preempt the law
of a sovereign state, which occurs only if there is a
“clear and manifest” conflict between state and
federal law. See Cipollone v. Liggett Grp., Inc., 505
U.S. 504, 516 (1992). Accordingly, there can be no
doubt that interpreting the NLRA to prohibit
individual arbitration agreements would equally
create a “square and manifest” conflict with the FAA.

The Seventh and Ninth Circuits flatly defied
Concepcion: The Ninth Circuit held that the Board’s
interpretation of the NLRA as prohibiting individual
arbitration agreements creates “no inherent conflict
[with] the FAA,” Pet. App. 18a n.13, and the Seventh
Circuit likewise found “no conflict.” Lewis v. Epic Sys.
Corp., 823 F.3d 1147, 1157 (7th Cir. 2016). But
neither court explained how this “no conflict” theory
makes any sense given Concepcion’s holding that

8

banning individual arbitration agreements is
“inconsistent with the FAA.” 563 U.S. at 344. No
explanation is possible, other than outright defiance
of Concepcion.

In defying Concepcion, the Seventh and Ninth
Circuits also created a conflict with three other
circuits, all of which have recognized that the FAA
protects the right to enforce individual arbitration
agreements, and that the NLRA cannot override this
right unless it contains a “contrary congressional
command.” Owen v. Bristol Care, Inc., 702 F.3d 1050,
1052 (8th Cir. 2013); Cellular Sales of Mo., LLC v.
NLRB, 824 F.3d 772, 775-76 (8th Cir. 2016);
Sutherland v. Ernst & Young LLP, 726 F.3d 290, 295
(2d Cir. 2013) (per curiam); D.R. Horton, Inc. v.
NLRB, 737 F.3d 344, 359-60 (5th Cir. 2013)
(expressly recognizing that Concepcion “leads to the
conclusion that the Board’s rule” conflicts with the
FAA, and “does not fit” within the FAA’s saving
clause). As a result, the decision below implicates a
square circuit split over whether interpreting the
NLRA to prohibit individual arbitration agreements
conflicts with the FAA.

B. The NLRA Does Not Contain the
Requisite Clear Indication to Repeal the
FAA’s Protection of Individual
Arbitration

The decision below also implicates a square split
over whether the NLRA contains the type of “clear”
indication necessary to overturn the FAA’s protection
of the right to individual arbitration. The answer to
that question is no, and by holding otherwise, the

9

Ninth Circuit contradicted multiple decisions of this
Court and other circuits.

Of course, “[ljike any statutory directive,” the FAA
“may be overridden by a contrary congressional
command.” Shearson/Am. Exp., Inc. v. McMahon,
482 U.S. 220, 226 (1987). But in order for the FAA’s
protection of individual arbitration to be repealed,
“the intention of the legislature . . . must be clear and
manifest.” Posadas v. Natl City Bank of New York,
296 U.S. 497, 503 (1936). As this Court has
repeatedly emphasized, this is a “stringent standard”
that is “rar[ely]” satisfied. Matsushita, 516 U.S. at
381 (1996). There is no mistaking the level of clarity
that this Court has required: the conflict must be
“clear and manifest,” Watt v. Alaska, 451 U.S. 259,
267 (1981), “clearly expressed,” Morton, 417 U.S. at
551, and “irreconcilable,” Radzanower v. Touche Ross
& Co., 426 U.S. 148, 154 (1976) (“irreconcilable”); see
also United States v. Borden Co., 308 U.S. 188, 198
(1939) (“clear and manifest”). Under this stringent
standard, this Court “will not infer a statutory repeal
unless the later statute expressly contradicts the
original act or unless such a construction is
absolutely necessary in order that the words of the
later statute shall have any meaning at all.” Nat’
Ass’n of Home Builders v. Defs. of Wildlife, 551 U.S.
644, 662 (2007) (alterations omitted).

Importantly, the canon against implied repeal is
sensitive to the order of statutory enactments, as one
of its purposes is to avoid displacing “earlier”
statutes, thereby lending stability to the law and
protecting reliance interests. Morton, 417 U.S. at 550.
The canon also recognizes that it is even more
difficult for “specific” statutory provisions to be

10

“controlled or nullified” by the later enactment of
more “general” provisions. Jd. at 550—51.

In the specific context of the FAA, this Court has
consistently applied the rule that subsequent
statutes must speak with “clarity” in order to
displace the FAA’s requirement that arbitration
agreements be enforced “according to [their] terms.”
CompuCredit, 132 S. Ct. at 672—73. Unless a statute
contains a “contrary congressional command” that
overrides the FAA, the statute must be read to
comport with the FAA. Italian Colors, 133 S. Ct. at
2309. Thus, for example, this Court “had no qualms
in enforcing a class waiver in an arbitration
agreement even though the federal statute at issue

. expressly permitted collective actions.” Jd. ai
2311 (citing Gilmer v. Interstate/Johnson Lane Corp.,
500 U.S. 20, 28 (1991)). Although the statute at issue
in Gilmer (the ADEA) expressly conferred a right to
collective action, it gave no indication that this was a
non-waivable right, and thus it was not sufficiently
clear to override the FAA’s policy that individuals
must be left free to enter agreements to arbitrate on
an individual basis.

These principles are dispositive here. The NLRA
easily can be read to coexist with individual
arbitration agreements, and indeed that is the way
everyone always did read the statute from its
enactment in 1935 until the Board decided D.R.
Horton in 2012.

At the outset, the NLRA does not mention the
procedural mechanism of class litigation, and the
term “concerted activities” can be read in any number
of ways that have nothing to do with class actions.

11

The term most naturally refers to activities directly
related to unionization and collective bargaining,
which are the NLRA’s clear focus. And an employee’s
agreement to arbitrate individually does not remotely
“impede” employees’ efforts to unionize, “to bargain
collectively,” or to engage in like activities, which is
what the NLRA protects. J.J. Case Co. v. NLRB, 321
U.S. 332, 334 (1944). The Board’s contrary reading
would dramatically expand the reach of the NLRA to
encompass the procedural right of class litigation
without any connection to bargaining activity,
contrary to the way the statute has been understood
for eight decades.

Moreover, even assuming the NLRA could be
reinterpreted to create a novel “right” to class-action
proceedings, the statute contains no clear indication
that this hypothetical right would be non-waivable.
Indeed, even if the right were non-waivable outside of
arbitration, the FAA provides that class-action rights
are presumptively waivable in the specific context of
arbitration agreements. Thus, even when federal law
expressly creates a right for plaintiffs to use a “class
mechanism,” the Supreme Court has “rejected th[e]
proposition” that this right is “nonwaivable ... in
arbitration.” Italian Colors, 133 S. Ct. at 2310; see
also Gilmer, 500 U.S. at 32 (“[T]he fact that the
[statute] provides for the possibility of bringing a
collective action does not mean that individual
attempts at conciliation were intended to be
barred.”). The same conclusion has even greater force
here, where the NLRA does not even mention cle .-
action rights, much less clearly override the FAA's
specific rule that such rights can be waived in
arbitration agreements. To the contrary, the NLRA

12

indisputably allows individual employees to opt out of
class actions, and it would be anomalous to treat
arbitration agreements as a disfavored means of
opting out.

For these reasons, it is highly doubtful that the
NLRA even can be read to prohibit agreements to
arbitrate on an individual basis. But in any event, it
certainly does not contain the type of “clear and
manifest” indication that would be necessary to
overcome the protection that such agreements enjoy
under the FAA. Posadas, 296 U.S. at 503.

In holding otherwise, the decision below not only
defies the decisions of this Court, but also squarely
conflicts with three other circuits. On the specific
question presented here, the Eighth Circuit has
explained that the NLRA “falls short of the ‘contrary
congressional command’ required to override the
FAA.” Owen, 702 F.3d at 1052-54; Cellular Sales,
824 F.3d at 775-76. The Second Circuit has expressly
agreed, Sutherland, 726 F.3d at 297 n.8, as has the
Fifth Circuit. The Fifth Circuit, in particular, has
recognized that the “general language” of the NLRA
is not a sufficiently clear “congressional command” to
displace the FAA's protection of individual
arbitration agreements, given that “much more
explicit language has been rejected in the past.” D.R.
Horton, 737 F.3d at 360-61. The Fifth Circuit has
also recognized that the NLRA cannot be read to
create a non-waivable, “substantive right to proceed
collectively,” because any such right “has been
foreclosed by prior decisions.” Id. at 361 (citing
Gilmer, 500 U.S. at 32). Moreover, because the NLRA
was enacted “prior to the advent in 1966 of modern
class action practice,” it cannot easily be read to

13

“protect[] a right of access to a procedure that did not
exist” at the time. /d. at 362.

In contrast to these decisions, the Ninth Circuit
held in the decision below that the NLRA’s general
protection of “concerted activities” imposes a “clear”
and “unambiguous” ban on individual arbitration
agreements. Pet. App. 6a, lla. The Ninth Circuit’s
decision thus implicates a square split on this issue
too.

C. Chevron Deference Does Not Apply To
Agency Interpretations That Would
Repeal Prior Federal Law

As an alternative way to reach the same result,
both the Ninth Circuit and the Seventh Circuit
concluded that the Board is entitled to Chevron
deference in interpreting the NLRA to prohibit
individual arbitration agreements. See Lewis, 823
F.3d at 1153; Pet. App. lla n.5 (stating that the
Board's interpretation of the NLRA merits deference
because it “is a permissible construction” of the
statute). The Seventh Circuit held that “[t]he Board's
interpretation is, at a minimum, a sensible way to
understand the statutory language, and thus we
must follow it.” Lewis, 823 F.3d at 1153. Then, in
order to “harmonize the FAA and NLRA,” the court
held thet “the FAA’s saving clause” must be read to
accommodate the Board’s view of the NLRA. Id. at
1157-59.

This reasoning is exactly backwards because it
requires the FAA statute to give way to an agency
interpretation. On multiple occasions, this Court has
made clear that agencies are bound to follow statutes,
not the other way around. Consequently, in order to

14

be faithful to this Court’s decisions, the Board's
interpretation of the NLRA must be constrained by
the FAA, and cannot be transformed into an
authoritative basis to displace the FAA.

To determine whether an agency interpretation is
entitled to any deference, courts must first “apply[]
the normal ‘tools of statutory construction” to
determine whether the agency has any latitude to
construe the statute. INS v. St. Cyr, 533 U.S. 289,
320 n.45 (2001) (quoting Chevron U.S.A. Inc. v. Nat.
Res. Def. Council, Inc., 467 U.S. 837, 843 n.9 (1984)).
See also FCC v. NextWave Pers. Commce'ns. Inc., 537
U.S. 293, 304 (2003) (recognizing that interpretive
rules “circumscribe[]” the realm of “permissible
[agency] action” under Chevron). Here, the
dispositive “tool of statutory construction” is the
canon against implied repeals: because the NLRA
contains no clear indication that the NLRA was
intended to displace the FAA's protection of
individual arbitration agreements, the Board is not
permitted to achieve that result by administrative
fiat.?

2 Other circuits, including the Ninth Circuit itself,
have recognized the same basic point: Where “the
presumption{}] . . . against implied repeals remove(s}
any potential ambiguity that an agency might
otherwise resolve, Chevron deference has no role to
play.” Ledezma-Galicia v. Holder, 636 F.3d 1059, 1075
(9th Cir. 2010). No “deference may be accorded to an
agency's view” of whether “one statutory scheme
supersedes the other.” In re Stock Exchanges Options
Trading Antitrust Litig., 317 F.3d 134, 149 (2d Cir.
2003) (citation omitted). See also Cathedral Candle Co.
v. U.S. Intl Trade Comm'n, 400 F.3d 1352, 1374 (Fed.

15

Applying the same logic, this Court has “never
deferred to the Board’s remedial preferences where
such preferences potentially trench upon federal
statutes and policies unrelated to the NLRA.”
Hoffman Plastic Compounds, Inc. v. NLRB, 535 U.S.
137, 144 (2002). “[T]he Board has not been
commissioned to effectuate the policies of the Labor
Relations Act so single-mindedly that it may wholly
ignore other and equally important Congressional
objectives.” Southern S.S. Co. v. NLRB, 316 U.S. 31,
47 (1942).

In light of these principles, each of the Second,
Fifth, and Eighth Circuits have recognized that
courts “owe no deference to [the Board’s] reasoning”
in construing the NLRA to displace the FAA by
prohibiting individual arbitration agreements.
Sutherland, 726 F.3d at 297 n.8; D.R. Horton, 737
F.3d at 356, 361; Owen, 702 F.3d at 1054. These
decisions squarely conflict with the conclusion below
that courts “must follow” the Board’s interpretation
of the NLRA. Lewis, 823 F.3d at 1153; Pet. App. lla

n.5.3

(continued...) _

Cir. 2005) (Dyk, J., dissenting) (A “policy-driven
interpretation under Chevron cannot override the clear
command of a conflicting statute”); Carter v. Welles-
Bowen Reality, Inc., 736 F.3d 722, 731 (6th Cir. 2013)
(Sutton, J., concurring) (“Rules of interpretation bind
all interpreters, administrative agencies included.”).

3 The Seventh Circuit stated as an alternative holding
that the Board’s interpretation is entitled to Chevron
deference. Lewis, 823 F.3d at 1153. The Ninth Circuit

16

Finally, the issue of Chevron deference makes this
case particularly worthy of review because it also
provides an opportunity for this Court to reaffirm the
crucial importance of the major-questions doctrine in
constraining the overreach of the NLRB. As this
Court has long recognized, “[djeference to the Board
cannot be allowed to slip into a judicial inertia which
results in the unauthorized assumption . . . of major
policy decisions properly made by Congress.” NLRB
vu. Fin. Inst. Emps. of Am., Local 1182, 475 U.S. 192,
202 (1986) (ellipsis in original); see generally King v.
Burwell, 135 S. Ct. 2480, 2489 (2015) (warning
against agency deference on “question(s] of deep
economic and political significance”). That principle
applies directly here, where the Board has attempted
to revolutionize the entire field of workplace relations
by suddenly reinterpreting the NLRA to prohibit
individual arbitration agreements in virtually every
employment relationship in the country for the first
time in the 80-year history of the statute. Putting
aside the inherent implausibility of such a significant
prohibition lying dormant in the NLRA for eight
decades without anybody noticing, such a sweeping

(continued...)

expressly agreed with that conclusion, despite
disclaiming any “need” to reach the issue. Pet. App. lla
& n.5. Moreover, as petitioners note, the Board
“participated in this case before the Ninth Circuit as an
amicus curiae, and would presumably continue to do so
in this Court if certiorari is granted” here. Pet. 22. The
circuit split on the Chevron issue will thus be fairly
presented and fully briefed if this Court grants review.

17

policy change cannot and should not be imposed at
the unilateral discretion of the executive branch.

Ill. California Employers Have an Especially
Acute Interest In Combating the Growing
Trend of Judicial Hostility to Arbitration

This case makes a fitting vehicle to review the
question presented because, out of all the states in
the union, California employers suffer uniquely from
the judicial hostility to arbitration exemplified by the
decision below. This hostility is reflected in, among
other things, this Court’s reversal of several
California decisions refusing to enforce arbitration
agreements under the FAA in recent years. See, e.g.,
DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463, 468
(2015); Concepcion, 563 U.S. at 341 (2011); Preston v.
Ferrer, 552 U.S. 346 (2008); Perry v. Thomas, 482
U.S. 483 (1987); Southland Corp. v. Keating, 465 U.S.
1 (1984); see also Stephen A. Broome, An
Unconscionable Application of the Unconscionability
Doctrine: How the California Courts’ are
Circumventing the Federal Arbitration Act, 3
Hastings Bus. L. J. 39, 54, 66 (2006).

This Court’s decision in Concepcion has been a
special target of defiance in California. Just last year
in Imburgia, this Court admonished a California
appellate court that while “[ljower court judges are
certainly free to note their disagreement with the
decisions of this Court,” they may not “refus[e] to
recognize [its] superior authority.” 136 S. Ct. at 468.
“Concepcion is an authoritative interpretation of [the
FAA],” and, “[cjonsequently, the judges of [lower
courts] must follow it.” Id. “The fact that Concepcion
was a closely divided case, resulting in a decision

18

from which four Justices dissented, has no bearing on
that undisputed obligation.” Jd.

Another example of the defiance of Concepcion is
the recent decision of the California Supreme Court
in Iskanian v. CLS Transportation of Los Angeles,
LLC, 59 Cal. 4th 348 (2014), cert denied, 135 S. Ct.
1155 (2015). In that case, the court announced a new,
non-waivable right to bring “representative” actions
under the California Private Attorney Generals Act
(PAGA). This is a clear end-run around Concepcion
because it authorizes private class counsel to
disregard employees’ agreements to arbitrate on an
individual basis, and instead to seek mass awards for
alleged class-wide violations of the California Labor
Code. Even more distressingly, moreover, a divided
panel of the Ninth Circuit recently agreed with
Iskanian’s anti-arbitration holding, thus joining in
the effort to undermine Concepcion. See Sakkab v.
Luxottica Retail N. Am., Inc., 803 F.3d 425, 434 (9th
Cir. 2015). The decision below now adds yet another
example of the same.

California employers have for years struggled to
enforce valid arbitration agreements in the face of an
ingenious array of “devices and formulas” erected by
California state judges and legislators intent on
ignoring this Court’s jurisprudence. Concepcion, 563
U.S. at 342 (2011). But now, alarmingly, the Ninth
Circuit appears to be getting in on the game. This is
not just a problem for California, but for the entire
national economy: Like the Petitioner in this case,
many California-based employers do _ business
nationwide or in multiple states, and are thus subject
to differing outcomes when seeking to enforce their
arbitration agreements in different circuits. Other

19

national and international employers also have a
significant portion of their workforce in California,
and thus have no choice but to contend with the anti-
arbitration animus apparent in the decision below.
Accordingly, amicus the Employers Group submits
that granting review in the present case will send a
much-needed message to both state and federal
judges in California that this Court will continue to
enforce the authority of its FAA precedents without
flinching, and with a vigilant eye.

Ill. This Case Is the Best Vehicle to Resolve the

Acknowledged Circuit Split

Compared to the other petitions now pending in
Epic and Murphy Oil, Nos. 16-285 & 16-307, this case
is the better vehicle to resolve the question presented
for two reasons.

First, this case has a dissent. As a result, the law
and facts underpinning the majority’s decision have
already been carefully scrutinized in Judge Ikuta’s
thorough dissenting opinion, thus minimizing the
chance of a lurking vehicle problem. The extensive
back-and-forth between the dissent and the majority
help to ensure that all relevant issues have been fully
ventilated, and that the majority opinion presents the
best argument that can possibly be made in support
of its remarkable conclusion.

Second, this case embodies the squarest possible
split on the question presented, since the Second
Circuit has upheld the precise same arbitration
agreement that the Ninth Circuit invalidated in the
decision below. See Sutherland, 726 F.3d at 297 n.8;
Pet. 22-23. The presence of the same arbitration
agreement on both sides of the split ensures that

20

there is a square legal division among the circuits,
with no possible factual distinctions that could
explain the different outcomes. This is particularly
important since at least one member of this Court
has expressed the view that the permissibility of
invalidating an arbitration agreement under the FAA
may turn on whether there were any “defects in the
making of [the] agreement.” Concepcion, 563 U.S. at
353. (Thomas, J., concurring). Here, the “making of
[the] agreement” was the same as in Sutherland.

CONCLUSION

For the foregoing reasons, amicus supports
Petitioners’ petition for certiorari, and respectfully
requests that the petition be granted.

Respectfully submitted,

GEORGE S. HOWARD, JR. BETH HEIFETZ

JONES DAY Counsel of Record
12265 El Camino Real ANTHONY J. DICK

Suite 200 JONES DAY
San Diego, CA 92130 51 Louisiana Ave., N.W.
s a Washington, D.C. 20001
J eel DAY (202) 879-3939

3161 Michelson Dr. bheifetz@jonesday.com

Irvine, CA 92612
October 2016

Counsel for Amicus Curiae The Employers Group

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0701%3A07. Public record. Not legal advice.