Does the FAA Preempt California’s Judicial Hostility Towards Arbitration Agreements?

Judicial hostility towards arbitration has persisted despite the Federal Arbitration Act’s (FAA) protections for the right of individuals and entities to bind themselves into such agreements. In AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011), the Court held that the Federal Arbitration Act requires courts to “place arbitration agreements on an equal footing with other contracts.” 563 U.S. 333, 339 (2011). Courts may not apply “legal rules that ‘apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.’” Kindred Nursing Ctrs. Ltd. P’ship v. Clark, 137 S. Ct. 1421, 1426 (2017) (quoting Concepcion, 563 U.S. at 339).

In this case, the California courts, including the state’s supreme court, invalidated an arbitration agreement, reaffirming and applying  their own pre-Concepcion arbitration specific rules. Armendariz v. Foundation Health Psychare Services, Inc., 6 P.3d 669 (Cal. 2000). The California Courts have held that a term in an employment agreement arbitration provision is unconscionable per se if it fails to satisfy any of the arbitration-specific “minimum requirements” or otherwise fails to satisfy any number of ad hoc arbitration-specific rules designed to protect employees. If more than one term is held to be invalidated, then the entire agreement is presumptively invalid, which further contradicts Concepcion making arbitration agreements less severable than other contracts.

 

Issue Areas:

Free Enterprise, Individual Liberty

Case:

Winston & Strawn LLP v. Ramos, No.18-1437 (Supreme Court) (petition stage)

Read the Amicus Brief:
Question(s) Presented:

  1. Whether the adherence of California state courts to Armendariz v. Foundation Health Psychare Services, Inc., 6 P.3d 669 (Cal. 2000), disproportionately disadvantages arbitration in contravention of the Federal Arbitration Act (see Kindred Nursing Ctrs. Ltd. P’ship v. Clark, 137 S. Ct. 1421, 1426 (2017) (internal quotation marks omitted).
  2. Armendariz holds that when an arbitration provision has more than one invalid term, the whole provision is presumptively invalid. This presumption applies only to arbitration agreements. Is Armendariz’s requirement that courts apply a more rigid severability rule to arbitration agreements than to all other contracts preempted by the FAA?

 


ALF’s Amicus Brief:

ALF argues in an amicus brief that California courts should not be permitted to ignore the case law expounding upon the Supreme Court’s interpretation of the FAA, especially the jurisprudence stemming from Concepcion.  State legislative and judge made rules that derive their meaning from the fact that the issue at hand is arbitration violate the FAA and thereby the supremacy clause in the U.S. Constitution. Despite clear rulings from the Supreme Court that the FAA preempts state legislatures and courts, California courts have persisted in their defiant hostility towards arbitration agreements. FAA § 2, the “primary substantive provision of the Act,” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983), provides that arbitration agreements are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” ALF asks that the Supreme Court grant the petition for certiorari to affirm the rights of Americans to have their arbitration agreements enforced according to the unambiguous overarching federal policy. 

Status:

On October 7, 2019 the Supreme Court denied certiorari.

 

Date Originally Posted: June 17, 2019

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