# Opposition Brief — Southland Corp. v. Superior Court of the County of Alameda

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1988
- **Citation:** 486 U.S. 1056

## Text

F) United States

OCTOBER TERM, 1987

THE SOUTHLAND CORPORATION, RAY BERRY, TAL COLSON,
KeitH JENKINS, ROBERT DUNCAN, JOHN P. THOMPSON,
Jere W. THOMPSON, WALTON GRAYSON III,
Joseru S. Harbin, R.G. SMITH, EUGENE PENDER,
S.R. DoLe, and Terry De BARD,

Petitioners,

¥.

RICHARD D. and DarRLA J. KEATING, MICHAEL M. AND
Goria G. Coy, and HARRY BATTERSBY on behalf of
themselves and all other persons similarly situated,
Respondents.

RESPONDENTS’ BRIEF IN OPPOSITION TO
PETITION FOR WRIT OF CERTIORARI

JOHN F. WELLS*

Davip A. SCHURICHT

STARK, WELLS, RAHL, FIELD &

SCHWARTZ

Lake Merritt Plaza
1999 Harrison Street, Suite 1300
Oakland, California 94612
Telephone: (415) 834-2200

Lise A. PEARLMAN
MILLER, STARR & REGALIA
One Kaiser Plaza, Suite 1600
Oakland, California 94612
Telephone: (415) 465-3800
Attorneys for Respondents

*Counsel of Record

May 1988

BOWNE OF SAN FRANCISCO. INC + 190 NINTH ST. « SF..CA 94103 + (415) 864-2300

TABLE OF CONTENTS

Page
I
PEE EEE S TET ECT TEETER TENET l
II
A PTET TTR COE RL TT TEE CERT TREE OTe 3
A. There Is No Jurisdictional Basis for the United States
Supreme Court to Review the Order............. 3

1. The California Superior Court did Not Reach
The Federal Issue Posed by Southland, But
Rested Its Decision Upon Adequate and Inde-
pendent State Grounds ..........0ssececeess 3

2. Southland Is Prohibited by California Law From
Changing Its Position From That Taken in the

ee ee ern 6
3. The Order Is Not Final for Purposes of United
States Supreme Court Review............... 9

B. The Question Does Not Merit Review by This Court 11

EARLE Wt, FO PEI RY CINE or EOI ae 13

ii

TABLE OF AUTHORITIES CITED

Cases
Page
American Pipe & Construction Co. v. Utah, 414 U.S. 538, |
38 L.Ed. 2d 713, 96 DAA. THR CIP cas bs vecscececus 12
Bailey v. Anderson, 326 U.S. 203, 90 L.Ed. 3, 66 S.Ct. 66 |
CBDRT) ona ccndsnnncssdsacdabenioaeaseeneal ee 4 |
Belknap, Inc. v. Hale, 463 U.S. 491 (1983) ............. 10
Cox Broadcasting Corp. v. Cohn, 420 U.S. 469, 43 L.Ed. 2d
328, $3 SE. MED CIDE) os vcs ackhvieniaesnnsesis 1]
Davis v. Edmonds, 218 Cal. 355, 23 P.2d 289 (1933)..... 7
Estate of Horman, 5 Cal.3d 62, 95 Cal.Rptr. 433, 485 P.2d
733 C1971) os ca cease ee ee 6
Gainey v. Occidental Land Research, 186 Cal.App.3d 1051,
231 Col Rawr. 30D (UGG oc 5 ie ida ees 9
Gen. Tel. Co. of Southwest v. Falcon, 457 U.S. 147, 72
L.Ed. 2d 740, 102 S.Ct. 2364 (1982) ................ 12
Gore v. Bingaman, 20 Cal.2d 118, 124 P.2d 17 (1942) ... 7
Gulf Oil Co. v. Bernard, 452 U.S. 98 (1981) ............ 12
Henry v. Mississippi, 379 U.S. 443, 13 L.Ed.2d 408, 85 S.Ct.
S66 (1GES) ook cdccciscsnsesee 7
Herb v. Pitcairn, 324 U.S. 117, 89 L.Ed. 789, 65 S.Ct. 459
CHDGR) oon ene kdekus ens 0k eee 4
Izzy v. Mesquite Country Club, 186 Cal.App.3d 1309, 231
Cal. Rawr. 315 (IGOR) «...6 oonnc ena ee ees 9
Keating v. Superior Court, 31 Cal.3d 584 (1982) ........ 7
Lewis v. Prudential-Bache Securities, 179 Cal.App.3d 935,
225 Cai Rew: @ (IRS) ss ccc vcik inane eee eave: 9
Memphis Nat. Gas Co. v. Beeler, 315 U.S. 649 86 L.Ed.
$006, 62 GL. O67 CO es ee 4
Morris v. Zuckerman, 257 Cal.App.2d 91 (1967) ........ 12
Mutual Life Ins. Co. v. McGrew, 188 U.S. 291, 47 L.Ed.
400, 23 B.C. 37S (IRE) ic. iteoe oe 4

———e ll

ill

TABLE OF AUTHORITIES CITED

CASES ~

Page

Nevcal Enterprises, Inc. v. Cal-Neva Lodge, Inc., 217
oe 7,8

Northern Pacific R. Co. v. Ellis, 144 U.S. 458, 36 L.Ed. 504,
ed ns Gy ag os ann 46 Ka 6 44d een 4A 4,5

Organization for a Better Austin v. Keefe, 402 U.S. 415
ed ek ekg aay Nae ese a aw ae da 64d 4

Pennsylvania v. Ritchie, 480 U.S. ___., 94 L.Ed.2d 40, 51,
GE |) Ee Oe See ne 9,10

People v. Shuey, 13 Cal.3d 835, 120 Cal.Rptr. 83, 533 P.2d
EE a re 9

Perry v. Thomas, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987) 10
Richmond v. Dart Industries, Inc., 29 Cal.3d 462, 174

Calmoer. 315, 629, F.2d 23 (1961) .................. 12
Roberts v. Cooper, 61 U.S. 467, 15 L.Ed. 969, 20 How. 467
Re SE Se a ae 8
Roberts v. Northern Pacific R. Co., 158 U.S. 1, 39 L.Ed.
| Ea 5
Sanserino v. Shamberger, 245 Cal.App.2d 630........... 12
Southland Corp. v. Keating, 456 U.S. 1 (1984).......... 2,6
Street v. New York, 394 U.S. 576, 22 L.Ed.2d 572, 89 S.Ct.
re eae shes oS dn ko mks a ks 9 0 4
Tally v. Ganahl, 151 Cal. 418, 90 P. 1049 (1907) ........ 9
Zahn v. International Paper Co., 414 U.S. 291 (1973).... 12
Statutes
California Code of Civil Procedure:
ee le yn ews b 4 v6 adale kaw 12
ee ye dads kadivsebeve’ss 10
ele yey a kaescccuccaschviaces 9,10

iV
TABLE OF AUTHORITIES CITED

Texts
Page

Moore’s Federal Practice 0.404[1], pp. 117-120 (2d ed.

(REECE CT ECC P TT ETC TET: We er Cee ae 8
Moore’s Federal Practice 9 511.01, pp. 8-65—8.66 (2d ed.
ES ARUTCORSTUTVET CUT TT TT eer ee ec ere 4
9 Witkin, Cal. Procedure, Appeal (3d ed. 185):
® . reerrerrrerry re Pret err ye te eee 10
yok | Serer rrr errrr rrr rT preter ter. 10
yi 2 . Seprrrereerrrire?) yr i eero rer ere 9
4, 2: Ceererrrrerreer. Teer ert rir 7
5, SS: error e reer ee Pr trey rrr. et 7
Wright, Miller, Cooper & Grossman, Federal Practice and
Procedure: Jurisdiction § 4022, pp. 701-703 ........... 4

No. 87-1746

In the Supreme Court

OF THE

United Staies

OCTOBER TERM, 1987

THE SOUTHLAND CORPORATION, et al.,
Petitioners,
a
RICHARD D. KEATING, et al.,
Respondents.

RESPONDENTS’ BRIEF IN OPPOSITION TO ee
PETITION FOR WRIT OF CERTIORARI TO THE
SUPERIOR COURT OF THE COUNTY OF
ALAMEDA, CALIFORNIA

I.
INTRODUCTION

Southland’s petition for certiorari completely distorts the pos-
ture of the case. The California courts have not “acted contrary to
this Court’s mandate” (Petition, p. 1), nor have respondents
“contradicted what they had represented to this Court” (Petition,
p. 7), engaged in a “ruse” (Petition, p. 12), or attempted tc
manipulate the Court’s procedures (Petition, p. 9). Briefly stated,
this is what happened:

On the first appeal, the parties were asked by the clerk of the
state court of appeal what law, state or federal, should govern the
issue of whether there can be classwide arbitration. Southland
responded that California law applied. Southland did not claim in
either that court or in the California Supreme Court that class-
wide arbitration was barred by the Federal Arbitration Act.

2

Southland raised that issue for the first time on certiorari to this
Court, which refused to hear it on the ground that it had not been
raised in or decided by the California courts.’ The case was
remanded “for further proceedings not inconsistent” with this
Court’s opinion. Southland Corp. v. Keating, 465 U.S. 1, 17
(1984).

On remand, the superior court refused to reconsider the propri-
ety of class arbitration as a federal issue instead of a state issue, on
the grounds that, under California law, Southland raised the
argument too late. The decision of the California Supreme Court
on the first appeal was now the law of the case. Under California
law, that doctrine applies not only to matters actually considered
and decided on a prior appeal, but to any matter essential to the
decision and in that sense “impliedly” decided. Having deliber-
ately chosen to rely solely on state law on the first appeal,
Southland was held barred on remand from recharacterizing the
issue as one of federal law. Applying California law as enunciated
by the California Supreme Court in its opinion on the first appeal,
the superior court ordered classwide arbitration. Southland’s ap-
peal from that decision was dismissed because the order, being
interlocutory, is nonappealable, and Southland’s application for a

' This Court’s decision expressly recognized that: .... Southland did
not contend in the California courts that, and the state courts did not
decide whether, state law imposing of class-action procedures was
preempted by federal law. When the California Court of Appeal directed
Southland to address the question whether state or federal law con-
trolled the class-action issue, Southland responded that state /aw did not
permit arbitrations to proceed as class actions, that the Federal Rules of
Civil Procedure were inapplicable, and that requiring arbitrations to
proceed as class actions ‘could well violate the [federal] constitutional
guaranty of procedural due process.’ Southland did not claim in the
Court of Appeal that if state law required class-action procedures, it
would conflict with the federal Act and thus violate the Supremacy
Clause.

Southland Corp. v. Keating, 465 U.S. 1, 8 (1984).

In the California Supreme Court, Southland likewise argued that
California law applied and did not oppose class certification on federal
grounds. /bid.

ln lea

3

writ was denied. The California Supreme Court declined discre-
tionary review.

In that posture, Southland once again seeks review of the same
federal question that this Court refused to hear the first time. It is
elementary that in order to maintain jurisdiction in this Court on
the ground that a state court has denied a federal right, it is
necessary to satisfy the requirements of state procedure for
presenting the federal question in a timely and proper fashion.
Ordinarily, the federal issue is presented too late in the state
courts if it is raised for the first time on appeal. A fortiori, it is too
late when raised for the first time on remand to the trial court
following appeal.

I
ARGUMENT

A. There Is No Jurisdictional Basis for the United States
Supreme Court to Review the Order

Southland’s petition for certiorari attempts to present the issue
whether California’s classwide arbitration procedure is preempted
by the Federal Arbitration Act. There are two reasons why that
issue may not be considered at this juncture: (1) the California
Superior Court did not decide the purported federal issue posed
by Southland but based its order upon adequate and independent
State grounds, and (2) the order is not final for purposes of United
States Supreme Court review.

1. The California Superior Court Did Not Reach The Fed-
eral Issue Posed by Southland, But Rested Its Decision
Upon Adequate and Independent State Grounds

In its statement of decision issued with its order, the superior
court held as follows:

Southland has argued to this court that the permissibility
of class arbitration is governed by the Federal Arbitration
Act. The court declines to consider this argument because
the doctrines of invited error and law of the case preclude
Southland from raising such argument at this point in these

4

proceedings. This court has therefor determined the propri-
ety of class arbitration under state law.

It is a fundamental rule that this Court will not review state
court judgments that rest on adequate and independent state
grounds. Herb v. Pitcairn, 324 U.S. 117, 125, 89 L.Ed. 789, 794,
65 S.Ct. 459 (1944); see 12 Moore’s Federal Practice, J 511.01,
pp. 8-65—8-66 (2d ed. 1982), and cases there cited. In order to
maintain jurisdiction on the ground that a state court has denied a
federal right, it is necessary to satisfy the requirements of state
procedure for presenting the federal question at the right time and
in the right way. “[W]hen. .. the highest state court has failed to
pass upon a federal question, it will be assumed that the omission
was due to want of proper presentation in the state courts, unless
the aggrieved party in this Court can affirmatively show the
contrary.” Street v. New York, 394 U.S. 576, 582, 22 L.Ed. 2d
572, 579, 89 S.Ct. 1354 (1969).

Ordinarily the federal issue is presented too late if it is raised
for the first time on appeal. Bailey v. Anderson, 326 U.S. 203,
205-207, 90 L.Ed. 3, 66 S.Ct. 66, 68 (1945); Memphis Nat. Gas
Co. v. Beeler, 315 U.S. 649, 650-651, 86 L.Ed. 1090, 62 S.Ct. 857,
859-860 (1942); Mutual Life Ins. Co. v. McGrew, 188 U.S. 291,
47 L.Ed. 480, 23 S.Ct. 375 (1903); see discussion in Wright,
Miller, Cooper & Grossman, Federal Practice and Procedure:
Jurisdiction § 4022, pp. 701-703. This is an fortiori case because
Southland raised the federal preemption issue in the California
courts for the first time on remand after the first appeal. At that
time it was clearly too late.

An almost identical situation was presented in Northern Pacific
R. Co. v. Ellis, 144 U.S. 458, 36 L.Ed. 504, 12 S.Ct. 724 (1891).
In that case, plaintiff Ellis had sued the railroad in Wisconsin
state court to quiet title to a parcel of real estate on the basis that
a deed from the county to the railroad was void as an ultra vires
gift. The Supreme Court of Wisconsin affirmed a judgment for
plaintiff. On remand for further proceedings in the trial court, the
railroad sought to rely as a defense upon a recent decision of a
federal court on the same issue between the same parties, but
affecting a different parcel of land. Relying on federal law, that
court had found that a similar deed from the county to the

ST

5

railroad was valid. Roberts v. Northern Pacific R. Co., 158 U.S. 1,
39 L.Ed. 873 15 S.Ct. 756 (1894). The Wisconsin trial court
refused to consider that federal issue, and entered judgment in
favor of Ellis. The railroad company again appealed to the
Wisconsin Supreme Court, which affirmed on the ground that its
prior decision (in which the federal issue had not been raised)
was now the law of the case. The railroad petitioned the Supreme
Court of the United States for a writ of error. The Supreme Court
dismissed the writ. Chief Justice Fuller wrote:

the decision of the Supreme Court of Wisconsin rested upon
an independent ground not involving a federal question and
broad enough to maintain the judgment. [ Citation. ]

The Supreme Court held that by reason of its decision [on
the first appeal]..., the rights of the parties were res
adjudicata, and that it was itself, as the parties were, bound
by its own former judgment. Its conclusion had been an-
nounced and its mandate had gone down, and it had no
power upon a second appeal to review that judgment....
Under these circumstances the judgment of the [ Wisconsin ]
Supreme Court is not subject to review here.

... The judgment before us was rendered in accordance
with well settled principles of general law, not involving any
Federal question, ....

144 US. at 464-465.

The only difference between that situation and the case at hand
is that here there was a petition to the United States Supreme
Court after the first appeal as well as after the second. In other
respects, the posture of the cases appears to be identical. The
Supreme Court will not consider a federal issue which the state
courts have never considered because of their own application of
the doctrine of the law of the case. This limitation on Supreme
Court review is clearly applicable here.

6

2. Southland Is Prohibited by California Law From
Changing Its Position From That Taken in the First

Appeal

Southland argues that the federal question was properly raised,
and that the superior court erred in its application of the law of
the case doctrine.” This argument is premised upon the assertion
that plaintiffs have changed their position from contending, when
the case was previously before this Court, that the California
courts did not decide the federal preemption issue to now con-
tending, under the law of the case doctrine, that it was decided.
Petition, pp. 11-14. This is a fallacious argument based upon a
distortion of what occurred and a misrepresentation of plaintiffs’
position.

Plaintiffs have never contended that the California courts in
fact decided the federal preemption issue during the first appeal.
The California courts clearly did not consider the question for the
reason that Southland never raised it and, when asked, advised
the California courts that state law prevented classwide arbitra-
tion and that the Federal Rules of Civil Procedure did not apply.
Southland Corp. v. Keating, supra, 465 U.S. at 8; footnote 1,
supra.

What plaintiffs have said is that the California law of the case
doctrine applies not only to questions expressly decided on a prior
appeal, but to those that were essential to the decision and in that
sense “impliedly” decided. See plaintiffs’ Reply to Defendant's
Opposition to Motion for Class Certification, August 22, 1986,
p. 4, citing Estate of Horman, 5 Cal. 3d 62, 73, 95 Cal. Rptr. 433,
443, 485 P.2d 735 (1971). There is no inconsistency between the
indisputable proposition that the California courts did not decide
the federal preemption issue on the first round of appeals (be-
Cause it was not raised) and the contention that the law of the
case doctrine now bars Southland from raising the issue because
it was essential to the California Supreme Court’s first decision.

* Whether this is so is, of course, a question of state law which has yet
to be addressed by the California appellate courts.

7

The California Supreme Court held on the first appeal that,
provided certain criteria were met, arbitration proceedings could
be conducted in this case on a classwide basis. Keating v. Superior
Court, 31 Cal. 3d 584, 613-614 (1982). It was essential to that
holding that classwide arbitration was not somehow barred by
federal law. The law of the case doctrine under California law
applies to matters which were essential to the decision even
though not raised. Gore v. Bingaman, 20 Cal. 2d 118, 124 P.2d 17
(1942); Davis v. Edmonds, 218 Cal. 355, 23 P.2d 289 (1933);
Nevcal Enterprises, Inc. v. Cal-Neva Lodge, Inc., 217 Cal. App.
2d 799, 804-805 (1963); see cases collected at 9 Witkin, Cal.
Procedure, Appeal, § 754, p. 722 (3d ed. 1985).° The superior
court therefore was correct in ruling that the doctrine bars
Southland from raising a federal preemption issue that it had the
opportunity to raise, but did not raise, on the previous appeal.”

California unquestionably has a legitimate interest in applying
its law of the case doctrine. The doctrine has also generally been
followed in the federal courts, where it is thought to serve “the
dual pupose of: (1) protecting against the agitation of settled

> Southland’s exposition of California Taw at page 12 of its Petition is
superficial. While it is the general rule that the law of the case doctrine
does not extend to matters which might have been but were not
presented and determined on a prior appeal (9 Witkin, Cal. Procedure,
Appeal, § 753, p. 721 (3d ed. 1985)), that general rule is subject to an
important exception where the particular point was essential to the
decision. Id., § 754, p. 722. The Gore, Davis and Nevcal cases cited in
the text above are cases applying that exception. Southland relies on the
general rule without even mentioning the exception, or attempting to
distinguish those cases, although plaintiffs have relied upon the excep-
tion at each stage of these proceedings.

*The superior court in this case based its refusal to consider the
federal preemption issue on the doctrines of law of the case and invited
error. It was probably also justified on the basis that Southland’s conduct
in the state court of appeal during the first appeal constituted a waiver of
any claim that the Federal Arbitration Act prevented classwide arbitra-
tion. See, e.g., Davis v. Edmonds, supra, 218 Cal. 355, 358, and Henry v.
Mississippi, 379 U.S. 443, 450, 13 L.Ed. 2d 408, 414, 85 S.Ct. 564
(1965).

8

issues; and (2) assuring the obedience of inferior courts to
decisions of superior courts.” 1B Moore’s Federal Practice
§ 0.404[1], pp. 117-120 (2d ed. 1984), and cases there cited. As
in the California courts, the federal law of the case doctrine
prohibits a party who omits argument on a point of law necessarily
involved in the disposition of an appeal from presenting it on a
second appeal. /bid, 4 0.404[1], p. 120, n. 15. As this Court
observed long ago, “To allow a second wnit of error or appeal to a
court of last resort on the same questions which were open to
dispute on the first, would lead to endless litigation.” Roberts v.
Cooper, 61 U.S. 467, 15 L.Ed. 969, 973-974, 20 How. 467, 481
(1858).

The same point has been made more recently by a California
appellate court in applying the law of the case doctrine:

Furthermore, it is of no consequence that the point in
question was not raised by counsel on the prior appeal or
expressly mentioned. [Citations] ... [I]t becomes immate-
rial that the lower court upon the first trial did not choose to
determine the precise legal issue. The controlling factor here
is that the reviewing court did so choose—impliedly at the
very least, if not expressly—in order to reach the result which
it did.

NevCal Enterprises v. Cal-Neva Lodge, Inc., supra, 217 Cal. App.

2d at 805.

There is thus no inconsistency between plaintiffs’ representa-
tion to this Court on the first appeal that the California courts did
not consider the federal preemption issue and their position that
the law of the case doctrine bars Southland from raising it now.
After inviting the California courts to treat the class arbitration
issue as one of state procedure and then losing on that issue,
Southland may not now claim that the issue should have been
decided under federal law. It is Southland, not plaintiffs, that has
done “a 180 degree turn” (Petition, p. 11) and seeks to “have it
both ways (Petition, p. 13).””

* Southland makes several other specious arguments as to why the law
of the case doctrine does not apply or is not a bar to review by this Court.

9

3. The Order Is Not Final for Purposes of United States
Supreme Court Review

Under 28 U.S.C. § 1257, this Court has jurisdiction to review
only final judgments or decrees rendered by the highest court of a
state in which a decision can be had.° The finality requirement
normally is not satisfied if the state courts still must conduct
further substantive proceedings before the parties’ nights as to
federal issues are resolved, and this Court ordinarily has no
jurisdiction to review an interlocutory judgment. Pennsylvania v.

First, Southland asserts that the doctrine is merely a “discretionary rule”
in California rather than a jurisdictional requirement. Petition, p. 13,
n. 11. The California Supreme Court has made it clear, however, that
state appellate courts are not free to disregard a prior appellate determi-
nation in the case unless it is at least demonstrated that such would
result in a “manifest misapplication of existing principles resulting in
substantial injustice.” People v. Shuey, 13 Cal. 3d 835, 846, 120 Cal.
Rptr. 83, 533 P.2d 211 (1975). Southland also suggests that the doctrine
is not to be applied to “pure questions of law.” Petition, p. 13. However,
principles of law are exactly what the law of the case doctrine does apply
to. Tally v. Ganahi, 151 Cal. 418, 421, 90 P. 1049 (1907). See 9 Witkin,
Cal. Procedure, Appeal, § 737, pp. 705-706 (3d ed. 1985). Finally,
Southland says that the doctrine is inapplicable here because intervening
cases have changed or significantly clarified tha law. Petition, p. 13, n.
12. However, the California Supreme Court’s decision in this case on
the permissibility of classwide arbitration has not been changed or
clarified; to the contrary (as Southland itself acknowledges in its
Petition), the prior decision has been followed and applied by the
California appellate courts. /zzy v. Mesquite Country Club, 186 Cal.
App. 3d 1309, 231 Cal. Rptr. 315 (1986); Gainey v. Occidental Land
Research, 186 Cal. App. 3d 1051, 231 Cal. Rptr. 249 (1986); Lewis v.
Prudential-Bache Securities, 179 Cal. App. 3d 935, 225 Cal. Rptr. 69
(1986).

* Contrary to Southland’s assertion at page 9 of its Petition, respon-
dents do not contend that the Court lacks jurisdiction merely because
the order at issue was entered by a tral court. Rather, respondents
contend that this Court lacks jurisdiction because the order was interloc-
utory, and because the California appellate courts, having declined to
review it for that reason, will have an opportunity to do so upon the
appeal that Southland will have the right to take from a judgment
confirming an arbitration award.

10

Ritchie, 480 U.S. __, 94 L.Ed. 2d 40, 51, 108 S.Ct. __
(1987).

As Southland acknowledges, the court of appeal granted plain-
tiffs’ motion to dismiss Southland’s appeal after plaintiffs pointed
out that orders directing parties to arbitrate are interlocutory and
nonappealable. See 9 Witkin, Cal. Procedure, Appeal, § 71, p. 95
(3d ed. 1985), and cases there cited. Under California law, such
orders are reviewable on appeal from a judgment confirming the
arbitration award. /d.; see Cal. Code Civ. Proc. §§ 1294, 1294.2.
On such an appeal, Southland would be entitled to challenge the
superior court’s application of the law of the case and invited error
doctrines and, should it agree with Southland’s position on these
state law issues, the California Court of Appeal presumably would
then consider the federal issue whether classwide arbitration is
preempted by federal law.’ Only such a decision would be final for
purposes of 28 U.S.C. § 1257. This Court Jacks jurisdiction—not
because the state appellate courts declined to review the order at
this juncture—but because under state procedure Southland has a
remaining appeal as of right.°

’ California Code of Civil Procedure, section 1294.2—which governs
appeals from judgments confirming arbitration awards—provides in part:
“Upon an appeal from any order or judgment under this title, the court
may review the decision and any intermediate ruling, proceeding, order
or decision which involves the merits or necessarily affects the order or
judgment appealed from, or which substantially affects the rights of a
party.”

*The cases cited by Southland at page 10 of its Petition are not
inconsistent with this proposition. In Perry v. Thomas, 107 S.Ct. 2520,
96 L.Ed. 2d 426 (1987), this Court reviewed a California Court of
Appeal’s decision affirming a superior court order denying a petition to
compel arbitration. Unlike orders directing parties to arbitrate, orders
denying petitions to compel arbitration .are appealable in California. 9
Witkin, Cal. Procedure, Appeal, § 72, p. 96 (3d ed. 1985), and authori-
ties there cited. Thus, once the California Supreme Court denied
discretionary review, the court of appeal’s decision in Perry was the
decision of the highest state court in which a decision could be had.
There is no indication in Belknap, Inc. v. Hale, 463 U.S. 491 (1983),
that the petitioner had a remaining appeal as of right to the state courts.

11

Southland to the contrary, this case does not come within the
exception described in Cox Broadcasting Corp. v. Cohn, 420 U.S.
469, at pages 482-485, 43 L.Ed.2d 328, 95 S.Ct. 1029 (1975).”
That exception applies to situations in which a state court has
written an opinion denying a federal right or claim, which opinion
would otherwise remain on the books as precedent unless imme-
diately reviewed by the United States Supreme Court, thus
eroding federal policy. /d. at 485. There is no such decision here.
The California courts have decided a procedural issue—the pro-
priety of classwide arbitration—under state law. The California
courts have not addressed the contention that the Federal Arbi-
tration Act prohibits classwide arbitration. That contention has
not been considered because under state law Southland is es-
topped to raise it. There is no precedent on the merits of the issue
which could “erode federal policy” and thus no basis for an
exception to the general rule that interlocutory judgments are not
reviewable by this Court.

B. The Question Does Not Merit Review by This Court

The California courts have not addressed the federal question ©
which Southland seeks to raise. Accordingly, this case does not
present any federal question at all. But even if the issue Southland
seeks to raise were present, it would not be a substantial issue.
Southland’s argument—that classwide arbitration is strictly pro-
hibited by the Federal Arbitration Act—is not based on any
language in that Act nor upon any federal case that has consid-
ered the point. Rather, it is a variant of the same argument that
Southland has made all along, namely, that there is something

Organization for a Better Austin v. Keefe, 402 U.S. 415 (1971), involved
a prior restraint on free speech, and first amendment rights would have
been irretrievably lost if the court had declined to review the ruling of
the highest Illinois court on the temporary injunction.

>The Cox case describes four categories of cases in which the
Supreme Court will review state court decisions on federal questions
even though further state court proceedings are pending. None of the
four is applicable here because each is predicated on there having been a
final determination of the federal issue by the state court. 420 U.S. 469,
477. That initial predicate is lacking here because the California courts
in this case have thus far declined to decide the federal issue.

12

fundamentally inconsistent between class action procedure and
arbitration, that like fire and water, they cannot coexist. The
California Supreme Court rejected that argument when it was
presented as a question of state law on the first appeal. Keating v.
Southland Corp., 31 Cal.3d 584 (1982). The argument is no more
persuasive when premised on the Federal Arbitration Act than on
California law. The California statute and policy is as pro-
arbitration as is the federal statute and policy.'°

There is no basis for this Court to declare that class action
procedure and arbitration are inherently irreconcilable in their
goals or implementation. Class actions are considered important
by both the federal and California courts.'’ Class actions serve an
important function in our system of civil justice by allowing
vindication of small claims which might otherwise go unprose-
cuted because the result would be consumed by the cost. Gulf Oil
Co. v. Bernard, 452 U.S. 89, 99 (1981). Class actions involving
such claims are of special concern to state courts since only those
individual claims exceeding $10,000 are within federal diversity
jurisdiction. Zahn v. International Paper Co., 414 U.S. 291
(1973).

Southland’s interpretation of the Federal Arbitration Act would
eliminate the class action device as a procedure for resolving
claims encompassed within standardized contracts containing an
arbitration clause. This would have far reaching effects. Any
corporation in interstate commerce could insulate itself from
liability for classwide wrongs simply by including an arbitration
clause in all of its contract forms. We do not believe that the

'°The California statute is set forth at California Code of Civil
Procedure, sections 1280 et. seq. See also Morris v. Zuckerman, 257
Cal. App. 2d 91, 95 (1967) [The arbitration statu’e “refle«*!s] the
strong legislative policy favoring arbitration” ]; Sanserino v. Shamberger,
245 Cal. App. 2d 630, 635 [“Since arbitration is favored... every
intendment will be indulged to give effect to such proceedings” J.

'' Gen. Tel. of Southwest v. Falcon, 457 U.S. 147, 72 L.Ed. 2d 740,
102 S.Ct. 2364 (1982); American Pipe & Construction Co. v. Utah, 414
U.S. 538, 551 (1974); Richmond v. Dart Industries, Inc., 29 Cal. 3d 462,
469, 174 Cal. Rptr. 515, 629, P.2d 23, 27 (1981).

13

Federal Arbitration Act was ever intended to be used by parties of
superior bargaining power to achieve such an unjust result. There
is nothing in the nature or purpose of the Act to prevent a state, in
managing its own dockets and procedures, from neutralizing such
an unfair tactic.

CONCLUSION 23

For the reasons stated above, Southland’s Petition should be
denied.

Respectfully submitted,

JOHN F. WELLS*
DaviDb A. SCHURICHT
STARK, WELLS, RAHL, FIELD
& SCHWARTZ
Lake Merritt Plaza
1999 Harrison Street, Suite i300
Oakland, California 94612
(415) 834-2200

LisE A. PEARLMAN

MILLER, STARR & REGALIA
‘One Kaiser Plaza, Suite 1600
Oakland, California 94612
(415) 465-3800

Attorneys for Respondents
*Counsel of Record

Dated: May 20, 1988

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385019_1649%3A3. Public record. Not legal advice.