Amicus Brief on Arbitration

Summary of Argument

Section 2 of the FAA, 9 U.S.C. § 2, provides thatarbitration agreements are “valid, irrevocable, andenforceable, save upon such grounds as exist at law orin equity for the revocation of any contract.” As thisCourt has repeatedly held, the FAA preempts statelaws, both judicial and legislative, that are inconsistent with the fundamental attributes of arbitration,that purport to carve out particular disputes from thescope of the FAA or that single out arbitration forspecial treatment. Indeed, all state and federal courts“must abide by the FAA, which is ‘the supreme Law ofthe Land,’ U.S. Const., Art. VI, cl. 2, and by theopinions of this Court interpreting that law.” NitroLift Techs., L.L.C. v. Howard, 568 U.S. 17, 18 (2012)(citations omitted).

Amici Members who utilize bilateral arbitrationagreements in their consumer banking and lending contracts rely upon the consistent and uniform application of these fundamental FAA principles. Regrettably, the McGill rule creates great uncertainty andconfusion because it creates a gaping “public injunctive relief” exception to the FAA in California. Underthat rule, arbitration agreements calling for individual resolution of disputes are unenforceable becausethey interfere with the allegedly non-waivable right topublic injunctive relief. The rule, a creature ofCalifornia public policy, now also binds Ninth Circuitfederal courts by virtue of Blair and its progeny,including the opinion herein. See, e.g., Roberts v.AT&T Mobility LLC, 801 F. App’x 492, 496 (9th Cir.2020) (“The arbitration clause here, like the one inBlair, prohibits public injunctive relief in any forum,including arbitration. As discussed previously, sucha clause is unenforceable in California under theMcGill rule. Because we are bound by our decision inBlair, we hold that AT&T’s arbitration agreementis unenforceable.”). The McGill rule—and the promiseof attorneys’ fees to a successful plaintiff—hasunleashed a torrent of public injunctive relief litigation against companies (including many Amici Members) that could drive at least some companies toabandon arbitration altogether since they are facedwith the prospect of having to maintain dual disputeresolution platforms: one to manage litigation ofpublic injunctive relief claims in court in addition to one for consumer arbitration.That would be mostunfortunate, since the public—the body supposedlyprotected by the McGill rule—would be deprivedof the many benefits of individual arbitration, asdocumented by a host of recent empirical studies.Individual arbitration benefits consumers with equitable claims, not just those with damages claims.Litigating an arbitrable claim in court causesirreparable harm, because the parties are “deprived ofthe inexpensive and expeditious means by which theparties had agreed to resolve their disputes.” , 727 F.2d 1419, 1422 (9th Cir.1984).

Review by this Court is necessary because the rule impairs the public interest by threateningto eliminate bilateral arbitration as a method forresolving consumer disputes. Review should alsobe granted so that this Court can reinforce that“[s]tate . . . courts must enforce the [FAA] . . . withrespect to all arbitration agreements covered by thatstatute.” Marmet Health Care Ctr., Inc. v. Brown,565 U.S. 530, 531 (2012); see also Mastrobuono v.Shearson Lehman Hutton, Inc., 514 U.S. 52, 62(1995) (state-law principles must be applied with“‘due regard . . . to the federal policy favoring arbitration’”) (citation omitted). In the absence of review, theMcGill rule and the Ninth Circuit’s opinions in Blair and this case will send a strong signal to other statecourts and legislatures that continue to harbor distrust of arbitrationthat they, too, can disregardthe FAA without consequence. See Concepcion, 563U.S. at 342 (judicial hostility towards arbitrationmanifests itself in “‘a great variety’ of ‘devices andformulas . . .’”) (citation omitted). The McGill ruleis quintessentially the type of “device” or “formula”described in Concepcion. It rests on the faulty premisethat California can evade the FAA simply by enactinga statute which it declares to be a “non-waivable”substantive right because it benefits the “public.”

However, rhetorical window-dressing cannot disguisethe fact that the McGill rule is an attempt to keeppublic injunctive relief claims in court and out ofarbitration every bit as much as if California hadexpressly carved out such claims from the operation ofthe FAA, which clearly is preempted.

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