Petition for Writ of Certiorari — Discover Bank v. Szetela

Supreme Court brief2003

Ask Donna

What actually matters in this document.

Text

- Supreme Court, Us.

\) | ‘(£O

O2 829nov 27 2002

No. Orr ice OF JHE CLERK

IN THE

Supreme Court of the Anited States

DISCOVER BANK,

. Petitioner,

JOHN SZETELA,

: Respondent.

Petition for a Writ of Certiorari to the

California Court of Appeal,

Fourth Appellate District

PETITION FOR A WRIT OF CERTIORARI

JOEL A. FEUER JOHN G. ROBERTS, JR.*

THEODORE J. BOUTROUS, JR. CATHERINE E. STETSON

GIBSON, DUNN & CRUTCHER KEITH J. BENES

Laas HOGAN & HARTSON L.L.P.

333 South Grand Avenue, 555 Thirteenth Street, N.W.

47th Floor Washington, D.C. 20004

Los Angeles, California 90071 (202) 637-5810

(213) 229-7000

*Counsel of Record Counsel for Petitioner

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 - WASHINGTON, D. C. 20001

£0 pt

QUESTION PRESENTED

Whether the California Court of Appeal properly ruled—in

conflict with the Federal Arbitration Act, this Court’s prece-

dents, and the decisions of all the federal courts of appeal to

have addressed the issue—that parties to an arbitration

agreement can be forced to arbitrate as a class or not at all,

when their arbitration agreement expressly forecloses the use

of class arbitration.

PARTIES TO THE PROCEEDINGS

AND RULE 29.6 STATEMENT

Petitioner Discover Bank (“Discover”) was defendant,

appellee and petitioner below. Respondent John Szetela was

plaintiff, appellant and respondent below.

Pursuant to S. Ct. Rule 29.6, petitioner states that it is

wholly owned by Novus Credit Services, Inc., which is in

turn wholly owned by Morgan Stanley, a publicly traded

company.

TABLE OF CONTENTS

QUESTION PRESENTED .......cscsssssccssssssscesssssecesesen

PARTIES TO THE PROCEEDINGS AND RULE

DATE SUENINTTE seseinvssvicvectucecassenesessvenenecssnecseess

SE FF TREE Do serscinsneseiscsnscosessscccesesonnene

I IIT thsiniessintecshsceverevsnsesascessoccnersisncenes

II nihincuicclecshuiihieuesinibesiesahekiaeiensennvonsiecsevnenes

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED...........0ssscorsssssssssesseses

SRE EM rirtilee sacccoteniibetsniantnnsisernsenhesseseecaenees

STATEMENT OF THE CASE ...........0cscsesssssssesesesssees

REASONS FOR GRANTING THE WRIT................

I. THIS CASE SQUARELY PRESENTS

THE QUESTION TAKEN UP, BUT LEFT

UNRESOLVED, IN SOUTHLAND CORP.

Wi I earaticisitshittncinnsertnnssestascennssnnseses

Il. THE COURT OF APPEAL’S DECISION

CONFLICTS WITH THE DECISIONS OF

EVERY FEDERAL CIRCUIT TO HAVE

ADDRESSED THE ISSUE ..................cce0000

Ill. THE COURT OF APPEAL’S DECISION

~ CONFLICTS WITH THIS COURT’S

Page

TABLE OF CONTENTS—Continued

IV. THE QUESTION PRESENTED IS RE-

CURRING AND IMPORTANT AND

SHOULD BE DECIDED BY THIS

CAPEIDET sivientecseesipassatibanibegintonmnnentidebesiintanins

ID sicenevistvenininsdtieietninnmnesticenneiniisnntaitiletitaniinn

APPENDICES

APPENDIX A:

Opinion of the California Court of Appeal,

Tk eT EET

APPENDIX B:

Order of the California Court of Appeal deny-

ing rehearing, dated May 16, 2002..................

APPENDIX C:

Order of the California Supreme Court denying

petition for review, dated July 31, 2002..........

APPENDIX D:

Order Entered by Circuit Justice O’Connor ex-

tending time within which to file petition

for certiorari, dated October 21, 2002..............

Page

TABLE OF AUTHORITIES

Page

Cases:

Acorn v. Household Int'l, Inc., 211 F. Supp. 2d

Be ey Se Se aiahccininnteniateneitlinnatnarininitemnnente 19

Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 7

Be lititheiabininensunineitinienmninepsdniteiign 5,22

American Centennial Ins. Co. v. National Cas. Co., |

SSE FE TGF CECA, BSED scceicsssvciestcotenessesucovistone 17,18

Anesthesia Care Assocs. Med. Group, Inc.-v. Blue

Cross of Cal., 2002 WL 484662 (Cal. Super. Ct.

FOE, iy SNE Bneridiielitvindnctoenersntetblnlplitntistasiginbaccnendiqnnsane 11

Arriaga v. Cross Country Bank, 163 F. Supp. 2d

Re Gate IE idicinntiirsinensiciisnigninttoitiatinanses 16

Baesler v. Continental Grain Co., 900 F.2d 1193

CID, Fe vcdshscitiicineincoisnhininievciiniinaietraiditnindinans 17,18

Bazzle v. Green Tree Fin. Corp., 569 S.E.2d 349

(S.C. 2002), petition for cert. filed, 71 U.S.L.W.

3320 (Oct. 23, 2002) (No. 02-364)... ccceseereeeees 19,24,25

Bischoff v. DirectTV, Inc., 180 F. Supp. 2d 1097

Pi-allith GAIL AITITIE andciehticneniinestneehpeieuistobeiabtenianenesiesinpesn 16

Blue Cross of Cal. v. Superior Court, 78 Cal. Rptr.

2d 779 (Cal. Ct. App. 1998), cert. denied, 527

Ss Re iene th chitictaticiaaisicitinncenctmiicactsasenne 11

Burton v. Bush, 614 F.2d 389 (4th Cir. 1980)............. 14

Caudle v. American Arbitration Ass'n, 230 F.3d

Fe Rae stsctecinscdnintabisbinicinnintneinamedapecians 14

Champ v. Siegel Trading Co., 55 F.3d 269 (7th Cir.

POPE Diiiinscidiithcavinsttachiitiaabidsistpinininamenenjaniienmnipincesieenee passim

Clark v. Jeter, 486 U.S. 456 (1988)........cccccssssscseeeeees 12

Comb v. PayPal, Inc., 218 F. Supp. 2d 1165 (N.D.

CO eed eeedintetictnaibcsssscdeksreienieibelansitegnaiishentaihasnves 19

Connecticut General Life Ins. Co. v. Sun Life As-

surance Co. of Canada, 210 F.3d 771 (7th Cir.

Be itictnistincllinvgetineteniuniteasilabiceetdiniaaneaiabiiseniptintelinin 18

TABLE OF AUTHORITIES—Continued

Page

Cases:

Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213

CRUE is cvrcsncevscessecincagneaitnis pininieanbaeiniianilabemmesnpianenntees 5,14,20

Deiulemar Compagnia de Navigazione S.p.A. v.

M/V Allegra, 198 F.3d 473 (4th Cir. 1999), cert.

denied, 529 U.S. 1109 (2000).............scssesssssssssseeees 15

Del E. Webb Constr. v. Richardson Hosp. Auth.,

SZ3 F.26 145 (SG Cat. 1967) nnccrccccorecccreessecscsovosessoses 17

Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681

* EDI scvctineiesssskconnsccuueteiiennsiibiidndibcealivaeieigatensibamseiait 12

Dominium Austin Partners, L.L.C. v. Emerson, 248

FE Fe ees CET riaeksdicersscicegeninmininaiatanannnses 3,14

Friedman's Inc. v. West Virginia, 71 US.L.W. .

3163 (Aug. 27, 2002) (No. 02-315)..........ccsscsseeseeeee 24

ammaro v. Thorp Consumer Discount Co., 828 F.

Supp. 673 (D. Minn. 1993), appeal dismissed, 15

FD Fae Ge Saale CI cendesiianenetisnensscinslioaneninnericense 16,18

Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. —

ee iiciediteceneatntnsdtentatndunenpainriidmnseniiinlatanpegatiiniin passim

Government of the United Kingdom v. Boeing Co.,

FOS Fe Se ie Cals Ce svecrniercerssnavesninmnpscenstnnenes 17,18

Gras v. Associates First Cap. Corp., 786 A.2d 886

(N.J. Super. Ct. App. Div. 2001), cert. denied,

TOR A GE veteran 16

Gray v. Conseco, Inc., 2001 WL 1081347 (C.D.

Coa, SRO, Gi, ie eB atanercererntntevenansinnnetibdicsibitdaninarnanes 16

Iowa Grain Co. v. Brown, 171 F.3d 504 (7th Cir.

FOI Picnisezinnseveruiepaetecehieniedibeniiabilaiaiiaiaaaiabaaiatanliphiliamaianes 15

Izzi v. Mesquite Country Club, 231 Cal. Rptr. 315

CEO. i, SRR, TD seseeciinesnissvnenensitiniesiniimeniviatines 11

Johnson v. West Suburban Bank, 225 F.3d 366 (3d

Cir. 2000), cert. denied, 531 U.S. 1145 (2001)......... 3,15,21

Keating v. Superior Court, 645 P.2d 1192 (Cal.

Vii

TABLE OF AUTHORITIES—Continued

Cases:

Leonard v. Terminix Int’! Co., __ So. 2d ___,

2002 WL 31341084 (Ala. Oct. 18, 2002).................

Lewis v. Prudential Bache Sec., Inc., 225 Cal. Rptr.

ee se ee aes

Lloyd v. MBNA Amer. Bank, 2001 WL 194300

(Del. Feb. 3, 2001), aff'd, 27 Fed. Appx. 82 (3d

CRs UU acsnissarehictndtvaresctcepegiossncshinaitinebicensevegeonscece

Lomax v. Woodmen of the World Life Ins. Soc., ___

F. Supp. ___, 2002 WL 31455600 (N.D. Ga.

BR Seis We sataccanianrectchuctaddbiactonephermatncnieseiecsdsxeese

Lozada v. Dale Baker Oldsmobile, Inc., 91 F. Supp.

BE TBST CW aes UNNTE, BOOED) covececesccccsincescesueccesesesseers

Lozano v. AT&T Wireless, 216 F. Supp. 2d 1071

Casey Seid GMI Sivdrdinscestbnsincsnanttiviabansstdstdbnenssennecesones

Luna vy. Household Fin. Corp., __ F. Supp. ___,

2002 WL 31487425 (W.D. Wash. Nov. 4, 2002).....

Mastrobuono v. Shearson Lehman Hutton, Inc.,

Fe is Fe LORE eet Prieerneeintiniereatinnentinneneie

McCarthy v. Providential Corp., 1994 WL 387852

(N.D. Cal. July 19, 1994), appeal dismissed, 122

F.3d 1242 (9th Cir. 1997), cert. denied, 525 U.S.

TE Ge Sa ORGe EC RE need

Med Center Cars, Inc. v. Smith, 727 So. 2d 9 (Ala.

Mitsubishi Motors Corp. v. Soler Chrysler-

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

Moses H. Cone Mem. Hosp. v. Mercury Const.

Citra, AODAI TE: LAGU) isisiaatieistcaeetisiccnsnrinns

New England Energy Inc. v. Keystone Shipping

Co., 855 F.2d 1 (ist Cir. 1988), cert. denied, 489

ibe WEF PUES OED vevsiscansitincriiatetentyniciohedenvbetnczeaneacoue

Nicholson v. CPC Int'l, Inc., 877 F.2d 221 (3d Cir.

Page

5,21

Vili

TABLE OF AUTHORITIES—Continued

Page

Cases:

Pacificare Health Systems, Inc. v. Book, 123 S. Ct.

Tr I ircicsiailiac iN 24

Perry v. Thomas, 482 U.S. 483 ET 5,12

Pick v. Discover Fin. Servs., 2001 WL 1180278 (D

Deel. Sept. 28, 2001) ......ceccssesessccccssecesevcseZerceoce a 16

Protective Life Ins. Corp. v. Lincoln Nat'l Life Ins.

Corp., 873 F.2d 281 (11th Cir. 1989) ......cccccccccssesese. 17

Pyburn v. Bill Heard Chevrolet, 63 S.W.3d 351

(Tenn. Ct. App.), appeal denied (Nov. 19, 2001)..... 16

Randolph v. Green Tree Fin. Corp.-Alabama, 244

OG SEG C8 UG Cie, BOG N) aceceecececcetdesevonsednoccosesgzezann 3,15,21

Sanders v. Kinko's Inc., 121 Cal. Rptr. 2d 766 (Cal.

2 SE RAEESINP LAER eco ll

Snowden v. Checkpoint Check Cashing, 290 F.3d

631 (4th Cir. 2002), petition for cert. filed, 71

U.S.L.W. 3191 (Sept. 12, 2002) (No. 02-424)......... 3,15,21

Southland Corp. v. Keating, 465 U.S. 1 (1984).......5.. passim

State ex rel. Dunlap v. Berger, 567 S.E.2d 265 (W.

Va. 2002), petition for cert. filed, 71 U.S.L.W.

3163 (Aug. 27, 2002) (No. 02-315) ....ceccccceccssesesese. 19

Stein v. Geonerco, Inc., 17 P.3d 1266 (Wash. Ct.

| TR UR eer eee 16

Ting v. AT&T, 182 F. Supp. 2d 902 (ND. Cal.

tag, ETERS SSN EAR CA 19

Vigil v. Sears Nat. Bank, 205 F. Supp. 2d 566 (E.D.

EARL; UE cosesenonectanenstablithoiapsaain leet fect Ak hs 16

Volt Info. Sciences, Inc. v. Board of Trustees of

Leland Stanford Junior Univ., 489 U.S. 468

CODD sicejichinishasabeostisteitiddhieaiitetiitiahe iii ae ta : 5

corte ea PINE ee Meds ES, AN COMA 17

Zawikowski v. Beneficial Nat'l Bank, 1999 WL

35304 (N.D. Il. Jan. 11, 1999)... cccccccccscccsesessseeeses 16

TABLE OF AUTHORITIES—Continued

Page

Constitution:

nena RTI PR id a ecilahileeins 2,5

Statutes:

Brie SEE II Unitek sidiinctscichcecatunactbupeibiecnésateubatenceiainsss 2,5

i Aailicsa A Tiles casthitissiceesladiencevahsnectbdindannlabesnnisbsscinebtbideennt 2,12

eee aa UE DUTT isaiciaissieshibnDaddaaabbdnsechasebieidavesanbinunicddeesss 2

Cal. Bus. & Prof. Code §§ 17200 ef Sq. .......s.s:ssesesse0 8

en scensatsteniveins 5

Rules:

os esemecsion anata 3

Bh a IE TITIITED itashatincissnonsctisedenteseedshvebtiebbiniiinneatiessuetins 3,20

Other Authorities:

Timothy J. Heinsz, The Revised Uniform Arbitra-

tion Act: Modernizing , Revising, and Clarifying

Arbitration Law, 2001 J. Disp. Resel. 1..............00 24

Alan S. Kaplinsky, Arbitration and Class Actions-A

Contradiction in Terms, 1302 PLY/Corp. 7 (2002)... 24

Carroll E. Neesemann, Should an Arbitration Pro-

vision Trump the Class Action? YES;

PERMITTING COURTS TO STRIKE BAR ON

CLASS ACTIONS IN OTHERWISE CLEAN

: CLAUSE WOULD DISCOURAGE USE OF

ARBITRATION, 8 No. 3 Disp. Resol. Mag. 13

co) | beitiachtabdbesetticaladesipiedabniadinlnchiieediipwsaieneces 24

AW LRN LE EMEP NE CI TES

TABLE OF AUTHORITIES—Continued

Page

Other Authorities:

Jean R. Sternlight, Should an Arbitration Provision

Trump the Class Action? NO: PERMITTING

COMPANIES TO SKIRT CLASS ACTIONS

THROUGH MANDATORY ARBITRATION

WOULD BE DANGEROUS AND UNWISE, 8

No. 3 Disp. Resol. Mag. 13 (2002).................ccccceeees 24

IN THE

Supreme Court of the Anited States

No. 02-

DISCOVER BANK,

Petitioner,

_ JOHN SZETELA,

Respondent.

Petition for a Writ of Certiorari to the

California Court of Appeal,

Fourth Appellate District

PETITION FOR A WRIT OF CERTIORARI

Discover Bank (“Discover”) respectfully petitions for a

writ of certiorari to review the judgment of the California

Court of Appeal, Fourth Appellate District, in this case.

OPINIONS BELOW

The opinion of the California Court of Appeal is reported

at 97 Cal. App. 4th 1094 and reprinted in the appendix hereto

(“App.”) at la. The order of the Supreme Court of California

denying Discover’s petition for review is unreported and

reprinted at App. 12a.

JURISDICTION

The California Court of Appeal issued its decision on April

22, 2002. App. la. Rehearing was denied on May 16, 2002.

App. 10a. The Supreme Court of California denied Dis-

cover’s petition for review on July 31, 2002. App. lla. On

October 21, 2002, Justice O’Connor entered an order extend-

ing the time within which to file this petition to and including

November 28, 2002. App. 12a. The jurisdiction of this

Court is invoked pursuant to 28 U.S.C. § 1257.

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The Supremacy Clause of the United States Constitution

provides in pertinent part:

This Constitution, and the Laws of the United States

which shall be made in Pursuance thereof * * * shall be

the supreme Law of the Land; and the Judges in every

State shall be bound thereby, any Thing in the Constitu-

tion or Laws of any State to the Contrary notwithstand-

ing. [U.S. Const., art. VI, cl. 2.]

Section 2 of the Federal Arbitration Act, 9 U.S.C. § 2,

provides in pertinent part:

A written provision in any * * * contract evidencing a

transaction involving interstate commerce to settle by

arbitration a controversy thereafter arising out of such

contract or transaction * * * shall be valid, irrevocable,

and enforceable, save upon such grounds as exist in law

or equity for the revocation of any contract.

INTRODUCTION

This case presents the question whether under the Federal

Arbitration Act, 9 U.S.C. §§ 1-16, a state court may require

parties to an arbitration agreement to proceed with class

arbitration or forgo arbitration altogether, when the terms of

their agreement to arbitrate expressly preclude a class arbitra-

tion procedure. It is also one of the unusual cases in which

all the customary criteria for certiorari are readily met.

First, the California Court of Appeal’s decision conflicts

with the decisions of the federal circuit courts to have con-

sidered the same issue. S. Ct. Rule 10(b). The Seventh

Circuit has held that courts are without authority to order

class-wide arbitration unless the parties have expressly

agreed to that procedure, Champ v. Siegel Trading Co., 55

F.3d 269, 276-277 (7th Cir. 1995), and the Third, Fourth,

Eighth, and Eleventh Circuits—unlike the court below—have

enforced arbitration agreements despite the unavailability of

class action procedures under those agreements. Snowden v.

Checkpoint Check Cashing, 290 F.3d 631, 638-639 (4th Cir.

2002), petition for cert. filed, 71 U.S.L.W. 3191 (Sept. 12,

2002) (No. 02-424); Dominium Austin Partners, L.L.C. v.

Emerson, 248 F.3d 720 (8th Cir. 2001); Randolph v. Green

Tree Fin. Corp., 244 F.3d 814, 817-818 (Llth Cir. 2001);

Johnson v. West Suburban Bank, 225-F.3d 366, 369 (3d Cir.

2000), cert. denied, 531 U.S. 1145 (2001). The decision

below likewise conflicts with the decisions of the Second,

Fifth, Sixth, Eighth, Ninth, and Eleventh Circuits, all of

which have reached the related conclusion that the Arbitra-

tion Act precludes courts from requiring consolidation of

arbitration proceedings unless the parties expressly provided

for such procedures in their arbitration agreements.

Second, the Court of Appeal’s decision squarely conflicts

with the decisions of this Court. S. Ct. Rule 10(c). This

Court has repeatedly emphasized the preemptive power of

the Arbitration Act, and has repeatedly admonished, as the

Act itself makes plain, that arbitration agreements must be

enforced according to their terms—even when enforcement

of the agreement results in piecemeal litigation of the con-

tracting parties’ claims. Indeed, this Court has previously

recognized that an arbitration agreement may be enforced

“even if the arbitration could not go forward as a class

action.” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S.

20, 32 (1991) (quotation omitted).

Third, the conflict in this case concerns a matter of overrid-

ing national importance. S. Ct. Rule 10(c). The Court of

Appeal’s decision in this case contravenes the central pur-

pose of the Arbitration Act: enforcing arbitration agreements

according to their terms. And the conflict between Califor-

nia’s approach and that of the rest of the country plainly has

nationwide implications. Tens of thousands of standard

commercial and consumer contracts contain arbitration

provisions. In California and the smattering of other jurisdic-

tions adopting California’s minority view, the parties to an

arbitration agreement expressly precluding a class arbitration

procedure—or an agreement that is silent as to class arbitra-

tion—can nonetheless be forced either to arbitrate their

claims as a class, or not to arbitrate at all. In the rest of the

country, courts enforce arbitration agreements as written,

declining to rewrite them to include a class procedure for

which the contracting parties did uot provide. Thus, parties

to standard contracts containing standard arbitration provi-

sions face the prospect of starkly different proceedings -

arising from those contracts—all depending on whether they

sue or are sued in California, or somewhere else.

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

Court noted probable jurisdiction to determine whether the

-California Supreme Court’s ruling imposing a class action

structure on an-arbitration conflicted with the Federal Arbi-

tration Act. But after briefing and oral argument, this Court

concluded that it could not exercise jurisdiction over that

question because it had not been adequately raised below. Jd.

at 9. The question left open in Southland is squarely pre-

sented by this case, and the conflict between the California

Supreme Court’s approach and that of the overwhelming

majority of federal and state courts of appeal has only

deepened in the intervening years—as is evidenced by the

recent proliferation of petitions for certiorari on this and

related issues. Certiorari should be granted to resolve, at last,

‘this important question.

STATEMENT OF THE CASE

1. The Federal Arbitration Act, 9 U.S.C. §§ 1-16, “de-

clared a national policy favoring arbitration and withdrew the

power of the state to require a judicial forum for the resolu-

tion of claims which the contracting parties agreed to resolve

by arbitration.” Southland, 465 U.S. at 10. “[MlJotivated,

first and foremost, by a congressional desire to enforce

agreements into which parties had entered,” the Act was

passed to “ensure judicial enforcement of privately made

agreements to arbitrate,” placing arbitration agreements

“upon the same footing as other contracts.” Dean Witter

Reynolds Inc. v. Byrd, 470 U.S. 213, 219, 220 (1985); see

Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52,

53-54 (1995) (Arbitration Act’s “central purpose” is “to

ensure ‘that private agreements are enforced according to

their terms’ ”’) (quoting Volt Info. Sciences, Inc. v. Board of

-. Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 479

(1989)).

To carry out the Act’s central purpose, state and federal

courts are instructed to “rigorously enforce agreements to

arbitrate, even if the result is ‘piecemeal’ litigation.” Dean

Witter Reynolds, 470 U.S. at 221 (quoting Moses H. Cone

Mem. Hosp. v. Mercury Const. Corp., 460 U.S. 1, 20

(1983)); Perry v. Thomas, 482 U.S. 483, 489 (1987).' And

under the Supremacy Clause, state laws in conflict with the

Act’s strong policy in favor of arbitration must give way.

See, e.g., Perry, 482 U.S. at 484 (finding preempted a

California law allowing certain actions to be maintained in

court “ ‘without regard to the existence of any private agree-

ment to arbitrate’) (quoting Cal. Lab. Code Ann. § 229);

! The “liberal federal “policy favoring arbitration agreements”

embodied in Section 2 of the Act, Moses H. Cone Mem. Hosp.,

460 U.S. at 24, applies to state and federal courts alike. Southland,

465 U.S. at 11-12; Allied-Bruce Terminix Cos. v. Dobson, 513

US. 265, 272 (1995).

Southland, 465 U.S. at 11-12 (finding preempted a California

law interpreted by state courts to require judicial considera-

tion of claims). .

2. When respondent John Szetela opened a credit card

account with Discover in 1993, he entered into a Cardmem-

ber agreement with Discover governing the terms of their

relationship. In 1999, Discover sent Szetela a proposed

amendment to the Cardmember agreement, which provided

in pertinent part:

ARBITRATION OF DISPUTES. In the event of any

past, present or future claim or dispute (whether based

upon contract, tort, statute, common law or equity) be-

tween you and us arising from or relating to your Ac-

count, any prior account you have had with us, your ap-

plication, the relationships which result from your Ac-

count or the enforceability or scope of this arbitration

provision, of the Agreement or of any prior agreement,

you or we may elect to resolve the claim or dispute by

binding arbitration.

IF EITHER YOU OR WE ELECT ARBITRATION,

NEITHER YOU NOR WE SHALL HAVE THE RIGHT

TO LITIGATE THAT CLAIM IN COURT OR TO

HAVE A JURY TRIAL ON THAT CLAIM.

PRE-HEARING DISCOVERY RIGHTS AND

POST-HEARING APPEAL RIGHTS WILL BE

LIMITED. NEITHER YOU NOR WE SHALL BE

ENTITLED TO JOIN OR CONSOLIDATE CLAIMS IN

ARBITRATION BY OR AGAINST OTHER

CARDMEMBERS WITH RESPECT TO OTHER

ACCOUNTS, OR ARBITRATE ANY CLAIMS AS A

REPRESENTATIVE OR MEMBER OF A CLASS OR

IN A PRIVATE ATTORNEY GENERAL CAPACITY.

[App. 2a.]

The agreement entitled Szetela to arbitrate any claims

against Discover in the judicial district in which he resides

and to select between two nationally-known arbitration

providers. The agreement did not limit the remedies Szetela

could obtain in arbitration, and it required Discover, upon

Szetela’s request, to advance arbitration fees to Szetela. The

agreement also capped Szetela’s liability for arbitration fees,

so that his arbitration expenses would be no greater than if he

had brought his claims in court.

Szetela could have rejected the arbitration provision by

notifying Discover of his objection and canceling his Dis-

cover Card. He did neither. Nor did Szetela object to the

arbitration agreement in late 1999, when Discover upgraded

his Card to a Platinum Card and sent him a new Cardmember

agreement containing an identical arbitration provision.

3. In 2000, a New Jersey resident filed a putative class

action against Discover in California state court, raising

various tort and contract claims. The complaint was subse-

quently amended to add Szetela, a California resident, as an

additional named plaintiff. Invoking the arbitration agree-

ment, Discover moved to compel arbitration of Szetela’s

claim. The trial court granted the motion and compelled

Szetela to arbitrate his claims against Discover.

Szetela prevailed at arbitration. He also appealed the trial

court’s order compelling arbitration to the California Court of

Appeal, arguing that the arbitration agreement’s preclusion of

class-wide arbitration should have been stricken. Discover

responded, among other things, that the Federal Arbitration

Act required courts to enforce agreements according to their

terms, even if the result was to preclude parties from bringing

or participating in class actions. Resp. Br. 8, 13-15 & n.8,

30.

4. The California Court of Appeal treated Szetela’s appeal

as a petition for a writ of mandate. App. la. Invoking

California law, the court considered whether the Cardmem-

ber agreement’s arbitration provision was procedurally and

substantively unconscionable. /d. at 6a-9a. Despite evidence

that there were hundreds of credit card issuers in California

from whom Szetela could have obtained a credit card—many

of whom offered credit cards without arbitration provi-

sions—the Court of Appeal found the arbitration agreement

to be procedurally unconscionable because it was presented

to Szetela on a “take it or leave it” basis. Jd. at 7a.

The court next concluded that the arbitration agreement’s

class action prohibition was substantively unconscionable,

because it “contradict[ed] the California Legislature’s stated

policy of discouraging unfair and unlawful business prac-

tices, and of creating a mechanism for a representative to

seek relief on behalf of the general public as a private attor-

ney general.” Jd. at 8a (citing Cal. Bus. & Prof. Code

§§ 17200 et seq.). Taking “exception” to the unavailability

of the class action procedure, the court opined that the no-

class-action provision “was meant to prevent customers, such

as Szetela and those he seeks to represent, from seeking

redress for relatively small amounts of money.” App. 7a-8a._

Without a class action procedure available in arbitration, the

court went on, “relatively few, if any, customers will seek

legal remedies, and * * * any remedies obtained will only

pertain to that single customer without collateral estoppel

effect.” Jd. at 8a. The Court of Appeal also concluded that

the arbitration agreement’s no-class-action provision violated

the public policy underlying class actions—“to promote

judicial economy and streamline the litigation proc-

ess”—because it “allow[ed] litigants to contract away the

court’s ability to use a procedural mechanism that benefits

the court system as a whole.” Jd. at 9a.

Because the Court of Appeal did not address Discover’s

argument that compelling class arbitration contrary to the

terms of the parties’ arbitration agreement would violate the

Federal Arbitration Act, Discover petitioned for rehearing,

again arguing that compelling class arbitration in these

circumstances would violate the Act. Rehearing was denied.

App. 10a.

5. Discover then filed a Petition for Review with the Su-

preme Court of California, arguing-that the Court of Appeal’s

decision violated the Federal Arbitration Act. Discover

argued, as it had below, that by requiring parties to arbitrate

on a Class-wide basis, regardless of the terms of the arbitra-

tion agreement, the Court of Appeal had created a rule that

conflicted with, and was preempted by, the Arbitration Act’s

admonition that agreements be enforced according to their

terms. Pet. for Rev. 2, 20-28.

The Supreme Court of California denied Discover’s peti-

tion for review on July 31, 2002. App. lla. Rather than be

forced to conduct a complicated “class arbitration” on terms

to which it had not agreed, Discover proceeded with class

litigation in trial court.*

2 It is difficult to conceive how “class arbitration” could be

accomplished without the extensive involvement of a trial judge.

A judge must, among other things, define the class, rule on the best

form of notice to the class, allow the class to opt out, and monitor

the proceedings to ensure that the class is adequately represented

and that the issues in play are common to the class. See Keating v.

Superior Court, 645 P.2d 1192, 1209 (Cal. 1982) (acknowledging

that court, and not arbitrators, would conduct “arbitral class”

certification procedures, monitor representation, approve proposed

settlements, and the like), rev'd in part, Southland Corp. v.

Keating, 465 U.S. 1 (1984). Because the benefits of arbitra-

tion—speed, informality, and efficiency—do not attach when

“class arbitration” has been ordered, Discover—rather than

straddle arbitral and judicial fora to resolve the claims of the

plaintiff class—opted to defend against the class claims in just one

forum: state court. E

10 "

REASONS FOR GRANTING THE WRIT

I. THIS CASE SQUARELY PRESENTS THE

QUESTION TAKEN UP, BUT LEFT

UNRESOLVED, IN SOUTHLAND CORP. v.

KEATING.

1. In Keating v. Superior Court, 645 P.2d 1192, 1195 (Cal.

1982), the plaintiff franchisees brought a class action against

their franchisor alleging numerous state law claims. The trial

court granted Southland’s motion to compel arbitration of the

plaintiffs’ claims and ordered that the arbitration proceed as a

“class arbiwration”—even though the parties’ agreement did

not specify that a class procedure was available in arbitration.

The California Supreme Court granted review of the question

whether the trial court could impose class action procedures

on the parties. Advancing the same policy rationales the

Court of Appeal identified in this case, the California Su-

preme Court concluded that the arbitration could go forward

as a class proceeding, if the trial court concluded on remand

that “gross unfairness” would otherwise result. Jd. at 1209.

Three justices dissented, observing that “[aJrbitration is a

matter of agreement,” and that the parties’ arbitration con-

tracts “do not provide for class arbitration, nor have the

parties subsequently agreed thereto.” Jd. at 1214.

This Court noted probable jurisdiction over the question

“whether arbitration under the federal Act is impaired when a

class-action structure is imposed on the process by the state

courts.” Southland, 465 U.S. at 3.3 But after briefing and

argument, this Court dismissed that question for lack of

3 The Court reversed the California Supreme Court on the sec-

ond of the two questions over which the Court had noted probable

jurisdiction: whether California’s Franchise Investment Law

precluded parties from arbitrating claims arising under the law.

The California Supreme Court had held in Keating that it did;

invoking again the preemptive force of the Act’s animating

purpose, this Court held in Southland that it did not.

jurisdiction, finding that the class arbitration procedure had

been challenged below on state law grounds only. /d. at9. -

In the intervening two decades, California courts have built

on the California Supreme Court’s decision in Keating,

regularly imposing classwide arbitration without regard to

the terms of the parties’ arbitration agreements.* The federal

courts of appeal—along with the great majority of federal

district courts and state appellate courts—have in the mean-

time taken a different path. See infra at 13-20.

2. This case raises the same question left unanswered in

Southland—with an even more compelling twist. The

parties’ arbitration agreement in Southland was silent as to

whether class action procedures were available in arbitration.

Discover’s arbitration agreement with Szetela expressly

precluded class action procedures. - The California Court of

Appeal therefore did not just import new procedural terms

into the agreement, as in Keating; it struck and rewrote the

terms that were already there. Thus, under California’s

Keating rule as expanded by Szetela, class arbitration is

available in California whenever the parties agree to arbitrate,

whatever their agreement actually says about arbitral proce-

dures. California accordingly requires parties to an arbitra-

tion agreement to submit to class-wide or representative

arbitration, regardless of what their contract says—or forgo

arbitration altogether.

4 See, e.g., Sanders v. Kinko's Inc., 121 Cal. Rptr. 2d 766 (Cal.

Ct. App. 2002); Blue Cross of Cal. v. Superior Court, 78 Cal. Rptr.

2d 779 (Cal. Ct. App. 1998), cert. denied, 527 U.S. 1003 (1999);

Izzi v. Mesquite Country Club, 231 Cal. Rptr. 315 (Cal. Ct. App.

1986); Lewis v. Prudential Bache Secs., Inc., 225 Cal. Rptr. 69

(Cal. Ct. App. 1986); Anesthesia Care Assocs. Med. Group, Inc. v.

Blue Cross of Cal., 2002 WL 484662 (Cal. Super. Ct. Feb. 25,

2002). |

This case does not suffer from the jurisdictional impedi-

ments to review that surfaced in Southland. The question

whether the Federal Arbitration Act precluded the state court

from engrafting class procedures onto the parties’ arbitration

agreement was raised below. The trial court concluded that

federal law supported its ruling compelling arbitration. See

Trial Tr. 15, lines 14-17 (May 1, 2001). On Szetela’s appeal,

Discover explained in its responsive brief that the Act

preempted the court from rewriting the parties’ arbitral

bargain. Resp. Br. 8, 13-15 & n.8, 30. When the Court of

Appeal ignored the issue in its opinion, Discover sought

rehearing on the federal question. Pet. for Reh. 3-16. When

the Court of Appeal denied rehearing, Discover filed a

petition for review with the California Supreme Court,

arguing, among other things, that the federal Act required the

state court to enforce the parties’ agreement according to its

' terms. Pet. for Rev. 2, 20-28. The issue was amply pre-

served for review. See Clark v. Jeter, 486 U.S. 456, 459-460

(1988). |

Nor does the Court of Appeal’s couching its ruling on

“unconscionability” grounds blunt the Arbitration Act’s

preemptive force. Section 2 of the Act provides that an

agreement to arbitrate “shall be valid, irrevocable, and

enforceable, save upon such grounds as exist at law or in

equity for the revocation of any contract.” 9 U.S.C. § 2; see

Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 686-687

(1996). But while the Arbitration Act permits parties to

resist enforcement of their arbitration agreements based upon

generally-applicable state-law contract defenses—including

unconscionability—it does not grant a state court license to

invalidate an agreement simply by declaring it to be in

tension with an otherwise-preempted state policy, and thus

“unconscionable.” Further, as the Court explained in Perry,

482 U.S. at 493 n.9, a court “may not * * * in assessing the

rights of litigants to enforce an arbitration agreement,

* * * rely on the uniqueness of an agreement to arbitrate as a

basis for a state-law holding that enforcement would be

unconscionable.” That is exactly what the California Court

of Appeal did here; it assessed the arbitration agreement’s

special procedures and the nonpreclusive effect of arbitral

rulings, and declared the agreement’s no-class-action provi-

sion “unconscionable” as against California policy. Section

2’s limited contract-law safe harbor does not apply here.

Il. THE COURT OF APPEAL’S DECISION

CONFLICTS WITH THE DECISIONS OF

EVERY FEDERAL CIRCUIT TO HAVE

ADDRESSED THE ISSUE.

The rule created by the California Court of Appeal—which

forces parties to an arbitration agreement, no matter what the

terms of the agreement, to arbitrate as a class or not at

all—squarely conflicts with the decisions of all the federal

courts of appeal to have considered the issue. Those deci-

sions uniformly have stated that courts may not impose class

arbitration unless the parties’ arbitration agreement expressly

provided for that procedure, and uniformly have enforced

arbitration agreements containing no-class-action provisions.

1. In Champ v. Siegel Trading Company, 55 F.3d at 271,

the Seventh Circuit held that “absent _a provision in the

parties’ arbitration agreement providing for class treatment of

disputes, a district court has no authority to certify class

arbitration.” Analogizing to multiple circuit court decisions

holding that a court may not order consolidated arbitration

where the parties’ arbitration agreement did not provide for

that procedure, see infra at 17-18, the court of appeals

concluded that it would not “order[] class arbitration where

the parties’ arbitration agreement is silent on the matter.” Jd.

at 275.

As the Champ court explained, parties to an arbitration

agreement “ ‘relinquish certain procedural niceties which are

normally associated with a formal trial.’ ” /d. at 276 (quoting

Burton v. Bush, 614 F.2d 389, 390 (4th Cir. 1980)). “One of

those ‘procedural niceties’ is the possibility of pursuing a

class action.” Champ, 55 F.3d at 276-277.5 The court of

appeals acknowledged the plaintiffs’ “complain{t] that

various inefficiencies and inequities will result from denying

them the opportunity to pursue arbitration on a class basis.”

Id. But it held that “[w]hile that may or may not be the

case, * * * the Supreme Court has repeatedly emphasized

that we must rigorously enforce the parties’ agreement as

they wrote it, ‘even if the result is piece-meal litigation.’ ”

Id. (quoting Dean Witter Reynolds, 470 U.S. at 221). Ac-

cordingly, the Seventh Circuit “enforce[d] the type of arbitra-

tion to which these parties agreed, which does not include

arbitration on a class basis.” Champ, 55 F.3d at 277.

2. The federal courts of appeal that have subsequently

spoken on the class arbitration issue all have followed

Champ’s lead. In Dominium Austin Partners, LLC v. Emer-

son, 248 F.3d at 728, for example, the court of appeals

affirmed a district court ruling compelling individual arbitra-

tion of the plaintiffs’ claims. Citing the same precedents on

which the Champ court relied, the Eighth Circuit acknowl-

edged that its ruling might not “effect the most expeditious

resolution of claims,” but it properly elevated the contracting

parties’ intent over its own notions of economy: where “the

partnership agreements make no provision for arbitration as a

class, the district court did not err by compelling appellants

to submit their claims to arbitration as individuals.” Jd. at

728-729.

5 Even the Court of Appeal in this case acknowledged that the

class action is a “procedural mechanism.” App. 9a. See also

Caudle v. American Arbitration Ass'n, 230 F.3d 920, 921 (7th Cir.

2000) (“A procedural device aggregating multiple persons’ claims

in litigation does not entitle anyone to be in litigation; a contract

promising to arbitrate the dispute removes the person from those

eligible to represent a class of litigants.”) (emphasis in original).

SAB RIES RO NEORNS Fey BONE HE

PGES ETL SERS

Similarly, in Johnson v. West Suburban Bank, 225 F.3d at

377 n.4, a case involving claims brought under the federal

Truth In Lending Act (TILA), the Third Circuit cited Champ

in observing that “it appears impossible [to pursue class

arbitration} unless the arbitration agreement contemplates

such a procedure.” Despite the presumed unavailability of

class procedures in arbitration, the court of appeals enforced

the parties’ arbitration agreement, reversing the contrary

decision of the district court. As the Third Circuit noted,

echoing Champ, “the right to proceed as a class * * * is

merely a procedural one * * * that may be waived by agree-

ing to an arbitration clause.” Jd. at 369.

Agreeing with the Third Circuit’s decision in Johnson, the

Eleventh Circuit in another TILA case, Randolph v. Green

Tree Financial Corp., 244 F.3d at 819, held that a “contrac-

tual provision to arbitrate TILA claims is enforceable even if

it precludes a plaintiff from utilizing class action proce-

dures.” See also Snowden v. Checkpoint Check Cashing,

Inc., 290 F.3d at 638-639 (citing Johnson, rejecting public

policy arguments against no-class-action provision in arbitra-

tion agreement, and finding provision not unconscionable);

Deiulemar Compagnia de Navigazione S.p.A. v. M/V Alle-

gra, 198 F.3d 473 (4th Cir. 1999) (finding that where the

parties’ agreement did not provide for class arbitration, “ ‘the

FAA has already provided the type of procedure to be

followed in this case, namely, nonclass arbitration’ ”) (quot-

ing Champ, 55 F.3d at 276), cert. denied, 529 U.S. 1109

~ (2000); Iowa Grain Co. v. Brown, 171 F.3d 504, 509 (7th

Cir. 1999) (citing Champ, and noting that “[b]ecause arbitra-

tion is based fundamentally on an agreement between the

parties, [a Rule 23 class action] is normally unavailable in

arbitration”).

Numerous federal district courts® and state courts of ap-

peal’ likewise have held, contrary to the California Court of

Appeal, that courts may not compel class arbitration where

6 See, eg., Gray v. Conseco, Inc., 2001 WL 1081347, at *3

(C.D. Cal. Sept. 6, 2001); Zawikowski v. Beneficial Nat'l Bank,

1999 WL 35304, at *2 (N.D. Ill. Jan. 11, 1999); McCarthy v.

Providential Corp., 1994 WL 387852, at *9 (N.D. Cal. July 19,

1994), appeal dismissed, 122 F.3d 1242 (9th Cir. 1997), cert.

denied, 525 U.S. 921 (1998); Gammaro v. Thorp Consumer

Discount Co., 828 F. Supp. 673, 674 (D. Minn. 1993), appeal

dismissed, 15 F.3d 93 (8th Cir. 1994).

The great majority of district courts have also rejected the notion

that a no-class-action provision renders an arbitration agreement

“unconscionable.” See, e.g., Lomax v. Woodmen of the World Life

Ins. Soc., __ F. Supp. ___, 2002 WL 31455600, at *3 (N.D. Ga.

July 16, 2002) (“Generally, prohibiting class-wide arbitration does

not render an otherwise valid arbitration clause unconscionable”)

(citing Gilmer, 500 U.S. at 32); Lozano v. AT&T Wireless, 216 F.

Supp. 2d 1071, 1076 (C.D. Cal. 2002); Bischoff v. DirectTV, Inc.,

180 F. Supp. 2d 1097, 1107-09 (C.D. Cal. 2002); Vigil v. Sears

Nat. Bank, 205 F. Supp. 2d 566, 573 (E.D. La. 2002); Arriaga v.

Cross Country Bank, 163 F. Supp. 2d 1189, 1194-95 (S.D. Cal.

2001); Pick v. Discover Fin. Servs., 2001 WL 1180278, at *5 (D.

Del. Sept. 28, 2001) (“it is generally accepted that arbitration

clauses are not unconscionable because they preclude class

actions”) (citing Gilmer, 500 U.S. at 32).

7 See, e.g., Gras v. Associates First Cap. Corp., 786 A.2d 886

(N.J. Super. Ct. App. Div. 2001) (enforcing “no class action”

provision in arbitration agreement), cert. denied, 794 A.2d 184

(N.J. 2002); Pyburn v. Bill Heard Chevrolet, 63 S.W.3d 351, 365

(Tenn. Ct. App.) (FAA preempts state law favoring class), appeal

denied (Nov. 19, 2001); Stein v. Geonerco, Inc., 17 P.3d 1266,

1271 (Wash. Ct. App. 2001)(relying on Champ and refusing to

compel class arbitration where parties’ agreement was silent); Med

Center Cars, Inc. v. Smith, 727 So. 2d 9, 20 (Ala. 1998) (“to

require class-wide arbitration would alter the agreements of the —

parties, whose arbitration agreements do not provide for class-wide

arbitration”).

PRES NI RC Patan iM ml GARR Re Sa rt darts H Guidccat Phi ile DORON ANS wate

the parties’ arbitration agreement did not provide for that

procedure.

3. The California Court of Appeal’s decision also conflicts

with the decisions of six circuits to have addressed the related

question whether arbitration proceedings can be consolidated

absent an express agreement to do so. The Second, Fifth,

Sixth, Eighth, Ninth, and Eleventh Circuits have held that a

court may not order consolidation of arbitration claims unless

the contract expressly permits that procedure.® Those

8 Government of the United Kingdom v. Boeing Co., 998 F.2d

68, 74 (2d Cir. 1993) (court cannot consolidate arbitration

proceedings ‘.bsent the parties’ agreement to allow such

consolidation”) American Centennial Ins. Co. v. National Cas.

Co., 951 F.2d 107, 108 (6th Cir. 1991) (“a district court is without

power to consolidate arbitration proceedings * * * when the

agreement is silent regarding consolidation”); Baesler v.

Continental Grain Co., 900 F.2d 1193, 1195 (8th Cir. 1990)

(“absent a provision in an arbitration agreement authorizing

consolidation, a_district-court is without power to consolidate

arbitration proceedings”); Protective Life Ins. Corp. v. Lincoln

Nat’l Life Ins. Corp., 873 F.2d 281, 282 (11th Cir. 1989) (“Parties

may negotiate for and include provisions for consolidation of

arbitration proceedings in their arbitration agreements, but if such

provisions are absent, federal courts may not read them in.”); see

also Del E. Webb Constr. v. Richardson Hosp. Auth., 823 F.2d

145, 150 (Sth Cir. 1987) (“under § 4 of the [FAA] the sole

question for the district court is whether there is a written

agreement among the parties providing for consolidated

arbitration”); Weyerhaeuser Co. v. Western Seas Shipping Co., 743

F.2d 635, 637 (9th Cir.) (noting that “the only issue properly

before this Court is whether [the parties] are parties to a written

agreement providing for consolidated arbitration,” and holding

consolidation is not allowed absent such agreement), cert. denied,

469 U.S. 1061 (1984). But cf Connecticut General Life Ins. Co. v.

Sun Life Assurance Co. of Canada, 210 F.3d 771, 776 (7th Cir.

2000) (authorizing consolidated arbitration based on “practical and

textual” considerations); New England Energy Inc. v. Keystone

Shipping Co., 855 F.2d 1, 6 (Ist Cir. 1988) (holding that arbitra-

tions may be consolidated when the agreement is silent on the

decisions uniformly recognize—just as the Champ line

does—that “‘a court is not permitted to interfere with private

arbitration arrangements in order to impose its own view of

speed and economy. This is the case even where the result

would be the possibly inefficient maintenance of separate

proceedings.” American Centennial Ins., 951 F.2d at 108;

see United Kingdom, 998 F.2d at 73 (same); Baesler, 900

F.2d at 1195. And as to the arguments that swayed the Court

of Appeal—that multiple arbitrations may result in inconsis-

tent determinations or cause other procedural prob-

lems—those decisions have responded that “[a]lthough these

concerns may be valid concerns of the [parties], they do not

provide us with the authority to reform the private contracts

which underlie this dispute.” United Kingdom, 998 F.2d at

74; American Centennial Ins., 951 F.2d at 108. The Seventh ~

Circuit relied on these authorities to reach its holding in

Champ, observing that there is no meaningful basis for

“distinguish[ing] between the failure [of an arbitration

agreement] to provide for consolidated arbitration and class

arbitration.” 55 F.3d at 275. See also Gammaro, 828 F.

Supp. at 674 (analogizing consolidated arbitration to class-

wide arbitration); McCarthy, 1994 WL 387852, at *9 (same).

issue and state law specifically provides for consolidation, over

dissenting Judge Selya’s objection that “[b]y fashioning an arbitral

clause which omits reference to consolidation, the parties have

made a choice. By imposing consolidation ab extra, the majority

trumps that choice.”), cert. denied, 489 U.S. 1077 (1989).

4. On the other side of the ledger, a few district courts? and

some state courts of appeal!® have adopted the California

view, imposing class action procedures on arbitration agree-

ments that are either silent as to such procedures or that

expressly preclude them. That minority approach reflects a

sharply divergent view of the policy behind and preemptive

force of the Arbitration Act. Under the view of Champ and

the many cases adopting its approach, the Arbitration Act’s

policy requiring enforcement of arbitration agreements

according to their terms precludes class-wide procedures

unless the parties expressly agree to them. Under the minor-

ity view, classwide arbitration procedures are always avail-

able—no matter what the parties’ contract says. The major-

ity approach furthers the Arbitration Act by enforcing the

parties’ choice of arbitral procedures; the minority approach

9 See Comb v. PayPal, Inc., 218 F. Supp. 2d 1165, 1175-76

(N.D. Cal. 2002) (citing Szetela); Acorn v. Household Int'l, Inc.,

211 F. Supp. 2d 1160, 1171 (N.D. Cal. 2002) (citing Szetela);

Luna v. Household Fin. Corp., __ F. Supp. 2d __, 2002 WL

31487425, at *8 (W.D. Wash. Nov. 4, 2002) (citing Szetela);

Lozada v. Dale Baker Oldsmobile, Inc., 91 F. Supp. 2d 1087,

1104-05 (W.D. Mich. 2000) (relying on district court decision in

Johnson, later reversed by the Third Circuit); cf. Ting v. AT&T,

182 F. Supp. 2d 902 (N.D. Cal. 2002) (finding no-class-action

provision unconscionable in case not implicating the Arbitration

Act).

10 See, e.g., Leonard v. Terminix Int'l Co.,__ So. 2d __, 2002

WL 31341084, at *5-6 (Ala. Oct. 18, 2002) (finding no-class-

action provision unconscionable and unenforceable, and citing

Keating), Bazzle v. Green Tree Fin. Corp., 569 S.E.2d 349, 360

(S.C. 2002) (“adoptfing] the approach taken by the California

courts” and approving class-wide arbitration), petition for cert.

filed, 71 U.S.L.W. 3320 (Oct. 23, 2002) (No. 02-364); State ex rel.

Dunlap vy. Berger, 567 S.E.2d 265, 280 (W. Va. 2002) (finding

“unconscionable” arbitration agreement’s prohibition on punitive

damages and class action relief), petition for cert. filed, 71

U.S.L.W. 3163 (Aug. 27, 2002) (No. 02-315).

undermines the animating intent of the Act by empowering

courts to impose arbitral procedures contrary to the will of

the contracting parties.

Ill. THE COURT OF APPEAL’S DECISION CON-

FLICTS WITH THIS COURT’S PRECEDENTS.

The need for plenary review of the Court of Appeal’s deci-

sion is heightened further by the fact that it conflicts with this

Court’s own decisions. See S. Ct. Rule 10(c). This Court

repeatedly has ruled in favor of enforcing agreements to

arbitrate—even when the result is “piecemeal” litigation.

Dean Witter Reynolds, 470 U.S. at 221 (quoting Moses H.

Cone Mem. Hosp., 460 U.S. at 20). In Dean Witter Rey-

nolds, this Court in plain terms “reject[ed] the suggestion that

the overriding goal of the Arbitration Act was to promote the

expeditious resolution of claims.” 470 U.S. at 219. The Act

mandates the enforcement of contracts to arbitrate, no more

and no less, and this Court has strongly cautioned more than

once that courts must not “allow the fortuitous impact of the

Act on efficient dispute resolution to overshadow” that

central purpose of the legislation. Jd. at 220. As the Court

put it in Moses H. Cone Memorial Hospital, “the relevant

federal law requires piecemeal resolution when necessary to

give effect to an arbitration agreement.” 460 U.S. at 20

(emphasis in original).

In keening with its repeated admonition that the intent of

the parties to an arbitration agreement trumps alleged notions

of procedural efficiency, this Court has strongly signaled its

preference for enforcing agreements to arbitrate, even if

enforcement results in the preclusion of a class action.

Gilmer, 500 U.S. at 32. The Gilmer Court addressed whether

claims arising under the Age Discrimination in Employment

Act (ADEA) could be arbitrated, and found that they could.

One of Gilmer’s arguments against arbitration of his ADEA

claims was that “arbitration procedures cannot adequately

further the purposes of the ADEA because they do not

provide for* ** class actions.” Jd. at 32. This Court

rejected that argument, observing that “ ‘even if the arbitra-

tion could not go forward as a class action or class relief

_ could not be granted by the arbitrator, the fact that the

[ADEA] provides for the possibility of bringing a collective

action does not mean that individual attempts at conciliation

were intended to be barred.’ ” Jd. (quoting Nicholson v. CPC

Int'l, Inc., 877 F.2d 221, 241 (3d Cir. 1989) (Becker, J.,

dissenting)). The lower courts since Gilmer that have

adopted the Champ majority view—declining to impose class

procedures on an arbitration where the parties’ agreement

provided for no such thing—repeatedly have invoked this

passage as additional support for their holding. See, e.g.,

Randolph, 244 F.3d at 816-817; Johnson, 225 F.3d at 377;