California Mediation and Arbitration

Arbitration/Consumers/FAA/Unconscionability: 9th Circuit Holds Arbitration Clause In Consumer Credit Contract Lacking “Holder Rule” Language Is Not Unconscionable, And Doesn’t Fall Under “Public Injunction” Exception to Arb

Dissenting Judge Pregerson Attaches “Dense, Small Print, And Blurry Nine-Page Contract” As Appendix

     We posted on December 16, 2012 about the Kilgore v. Keybank oral argument to the Ninth Circuit, sitting en banc.  The case involves a putative class action by former students of a failed helicopter flight-training school seeking injunctive relief against the bank that originated their student loans and the loan servicer.  The complaint alleged defendants violated the California Unfair Competition Law (UCL), because the Note and contracts with students failed to include language required by the Federal Trade Commission’s “Holder Rule.”  This rule requires consumer credit contracts to include language that a holder of the consumer credit contract is subject to claims and defenses which the debtor could assert against the seller of goods or services.  In the case of the flight school, students took out loans that the lender quickly resold on the secondary market, and the students of the failed school were left “holding the bag.”  The district court found the contractual arbitration clause to be unconscionable.  The Court of Appeals, sitting en banc, has now reversed, holding that the arbitration requirement, which includes a class waiver, is not unconscionable, and does not fit into the narrow “public injunction” exception to the arbitration requirement.  Kilgore v. Keybank, No. 09-16703 (9th Cir. April 11, 2013) (Hurwitz, J., author) (for publication).

     The en banc majority rejected the argument that the Note’s ban on class arbitration is substantively unconscionable under California law; that issue was foreclosed by AT&T Moblility v. Concepcion, 131 S.Ct. 1740 (2011).  The risk that students will be saddled with prohibitive arbitration costs was rejected as “too speculative”.  The procedural unconscionability argument was also rejected, primarily because the arbitration clause allowed “students to reject arbitration within sixty days of signing the Note.” 

      A carve-out from the arbitration requirement has been judicially created in Broughton v. Cigna Healthplans of Cal., 988 P.2d 67 (Cal. 1999).  Where plaintiffs function as a private attorney general, enjoining future deceptive practices on behalf of the general public, injunction claims are not arbitrable.  The hot issue is whether Broughton has also been preempted by the Federal Arbitration Act and Concepcion.  However, the Court avoided deciding this important issue by determining that the students were acting to further their own interests, and the action complained about was past rather than prospective action.  

     Judge Pregerson, dissenting, attaches an an Appendix “the dense, small print, and blurry nine-page contract that Silver State thrust on the students at career fairs and open houses.” 

       Among the points made by Judge Pregerson are that this is a “take it or leave it” consumer contract introducing at least some procedural unconscionability under the circumstances.  Of course, there is the 60 day provision allowing for an opt-out – tough to get around, and never mind that students don’t read the provisions.  As to “substantive unconscionability”, a confidentiality provision requires the parties to maintain confidentiality of any claim they arbitrate.  This works against plaintiffs who can’t share information, and in favor of the defendant that gets to arbitrate separately with each plaintiff.  Filing a civil action costs less than $500; filing the same claim in arbitration runs more than $4000.  Finally – and this is interesting – one of the two arbitrators named in the contract ruled in favor of banks and credit card companies, and against consumers 94 % of the time.  Judge Pregerson is alone in his dissent.

Arbitration/Employment/Choice of Law/Preemption: Massachusetts Choice of Law Enables Court of Appeal to Uphold Denial of Petition to Arbitrate Employment Discrimination Claims

Waiver of Right to Trial of Employment Claims Was Not Clear and Unequivocal

     One of the hottest areas of contention concerning arbitration is the waiver of statutory rights through arbitration, and whether such a waiver is preempted under AT&T Mobility v. Concepcion, 131 S.Ct. 1740 (2011).  In Harris v. Bingham McCutchen, B240522 (2nd Dist. Div. 5 March 29, 2013) (O’Neill, J., author 3:0) (published), the Court held that Massachusetts choice of law, required by the employment contract, provided that waiver of the right to try an employment discrimination claim needed to be “clear and unequivocal.”  That’s the law in Massachusetts, and the contractual language did not meet that heightened standard.

     So why wasn’t this resulted preempted by the Federal Arbitration Act and Concepcion? After all, Concepcion invalidated a class action waiver that peculiarly burdened an arbitration provision in California.

     The answer is that the heightened waiver standard under Massachusetts law does not discriminate against arbitration, because it applies as well to any contractual provision that limits statutory rights in an employment discrimination case. “[The] rule states only that as a matter of the Commonwealth’s general law of contract, a private agreement that purports to waive or limit—whether in an arbitration clause or in some other contract provision—the employee’s otherwise available right to seek redress for employment discrimination through the remedial paths set out in [Massachusetts General Law chapter] 151B, must reflect that intent in unambiguous terms.” Warfield v. Beth Israel Deaconess Medical Center, Inc., 454 Mass. 390, 399-400 (Mass. 2009) (italics added by me for emphasis).

     TIP for California legislators:  A statute that provides a heightened standard for waiver of statutory rights might survive Concepcion if it applies to all contracts, not just to arbitration provisions.

    

    

Arbitration/Employment/Waiver/FAA: First District, Div. 1, Affirms Judgment Compelling Employee To Arbitrate, Alone, With Macy’s Department Stores, Inc.

Court of Appeal Is Skeptical About Gentry, But Avoids Addressing Gentry Factors, Because Record Was Lacking

 

    

Macy’s Department Store’s Flagship location in Manhattan, New York.  Carol M. Highsmith Collection.  Library of Congress.

     The issue of the enforceability of class action waivers and compulsory arbitration in employment disputes is before the California Supreme Court by virtue of its grant of review in Iskanian v. CLS Transportation Los Angeles, LLC, 206 Cal.App.4th 949 (2012) (review granted Sept. 6, 2012, S204032).  See my June 5, 2012 post on Iskanian.  Meanwhile, the Courts of Appeal must still deal with cases that present those issues, sometimes skirting the issues.  Our next case, Outland v. Macy’s Department Stores, Inc., A133589 (1st Dist. Div. 1 January 16, 2013) (Margulies, J., author) (unpublished), concerns a class action brought on behalf of California residents employed as group sales managers for Macy’s, alleging they were not compensated for overtime and for missed meal and rest periods, because they were improperly classified as exempt.

     The trial court granted Macy’s motion to enforce an arbitration agreement with a class action waiver.  Plaintiff appealed, contending that AT&T Mobility, LLC v. Concepcion, 131 S.Ct. 1740 (2011) was distinguishable, and that dismissal of her class claims could be avoid by relying upon Gentry v. Superior Court, 42 Cal.4th 443 (2007), and D.R. Horton, Inc., a decision of the National Labor Relations Board (NLRB).

     Courts that take the position that Gentry is still good law point out Gentry did not establish “a categorical rule that invalidates class action waivers – the type of rule that Concepcion condemned.”  Franco v. Arakelian Enterprises, Inc., 211 Cal.App.4th 314, 368 (2012).  See my November 27, 2012 post on Franco.  Unfortunately for plaintiff here, however, “plaintiff did not submit any evidence to the trial court concerning the Gentry factors.”  Thus, there was no basis on the record for finding the class action waiver unconscionable.

     The Court also says, somewhat cryptically, that notwithstanding another decision, Truly Nolen of America v. Superior Court, 208 Cal.App.4th 487 (2012), recognizing that Concepcion was inconsistent with Gentry, “we conclude we must follow Concepcion.”   See my August 13, 2012 post on Truly Nolen.  It is unclear how following Gentry is necessarily inconsistent with Concepcion, because Concepcion does not abolish unconscionability as a defense to arbitration.  In Outland, the Court explains that there is no basis in the record “for finding the class action waiver unconscionable.”  But if application of the Gentry factors, based on evidence, had led to a finding that the class action waiver was unconscionable, how would that be inconsistent with Concepcion?

     Finally, like a number of other courts (including the Iskanian court) that have considered the issue, the Court of Appeal was not persuaded by the ruling in D.R. Horton., a case that held that the NLRA barred mandatory waivers of class arbitration over wages, hours, and working conditions.  A ruling by the NLRB was not binding on the California courts.  Nor did the Court of Appeal believe that the NLRB has any special expertise in the area of arbitration and class action waivers.

     Judgment affirmed.

Arbitration/Consumers/Class Actions/FAA: Second District, Division 8 Rules That Consumer Legal Remedies Act’s Prohibition Against Class Waivers Is Preempted By The Federal Arbitration Act

“Saving Clause” of the FAA Doesn’t Save Consumer’s Unwaivable Statutory Rights Here

     A hot arbitration topic is whether in various circumstances the Federal Arbitration Act (FAA) preempts “unwaivable statutory rights” under state law.  That was an important question in Flores v. West Covina Auto Group, Case No. B238265 (2nd Dist. Div. 8 January 11, 2013) (Flier, J., author) (unpublished).  The lawsuit arose from the purchase of a previously owned automobile from West Covina Auto Group, LLC (WCT).  WCT successfully moved to compel arbitration based on an arbitration provision in the auto sales contact, and the consumer appealed.

     The consumer argued that arbitration was inappropriate:  “(1) a ‘poison pill’ provision in the arbitration clause prohibits arbitration; (2) WCT waived its right to arbitration; (3) the arbitration clause is unconscionable; (4) there was no meeting of the minds or mutual consent regarding the arbitration clause; and (5) as an unexpected term in an [sic] contract of adhesion, the arbitration clause is unenforceable.”  All the arguments went down in flames.

     The Federal Arbitration Act provides arbitration agreements “shall be valid, irrevocable, and enforceable,” except on “such grounds as exist at law or in equity for the revocation of any contract” – the last phrase being the so-called “saving clause” of the Act.  The consumers here argued, in effect, that their unwaivable statutory rights under the CLRA constituted grounds under the savings clause to avoid arbitration.  But the savings clause of the Act was not enough to save them from arbitration here.

     Significantly, the Court of Appeal held that the ruling in Fisher v. DCH Temecula Imports LLC, 187 Cal.App.4th 601 (2010), holding that the right to a class action lawsuit or classwide arbitration was an unwaivable statutory right under the California Consumer Legal Remedies Act, has been preempted by the Federal Arbitration Act, following the Supreme Court’s ruling in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011).

     No waiver by the auto dealer of the right to arbitrate was found to have occurred, despite extensive litigation.  Here, timing was important:  Fisher was decided just after the plaintiffs filed their original complaint, precluding arbitration, and within two weeks after the filing of Concepcion, the auto dealer informed the trial court that it intended to compel arbitration.  In concluding that the auto dealer had not waived its right to arbitrate, the Court “decline[d] to establish a rule that WCT should have done everything possible to compel arbitration, no matter how futile, expensive, or protracted the process.”

     Despite the fact that the contract contained a number of clauses that other courts have found to be one-sided, prejudicial, and unconscionable, the Court here found no prejudice or unconscionability.  I note the Court stated, “appellants have not shown prejudice” – and therein lies a clue as to how consumers must attack such arbitration clauses if they are to have any hope of avoiding arbitration.  They must make particularized showings, based on admissible evidence, that in their case, the contractual provisions are unduly prejudicial or unconscionable.  Given the post-Concepcion legal trend, a general argument that waiver of a statutory right to a class action is unconscionable, without a particularized showing based on evidence, is going to be a tough, if not impossible, argument to win.

Arbitration/Federal Arbitration Act: District Two, Division Three Holds Section 9 Of The Federal Arbitration Act Is Not An Impediment To Enforcement Of Award In State Court

 

Beware of 9 U.S.C. Section 9:  It Provides For Judicial Confirmation Of Arbitral Awards Only Upon Consent Of The Parties

     Swissmex-Rapid S.A. de C.V. and SP Systems, LLC arbitrated a commercial dispute concerning backpack agricultural sprayers manufactured by Swissmex, a Mexican corporation.  The arbitration resulted in a net award in favor of Swissmex in the amount of of $1,424,039, which award was confirmed by the trial court.  SP appealed, arguing “that the parties did not agree in their arbitration agreement that the award could be judicially confirmed, and therefore the trial court erred in confirming the award.”  Swissmex-Rapid S.A. de C.V. v. SP Systems, LLC, Case No. B238054 (2nd Dist. Div. 3 Dec. 28, 2012) (Klein, J., author) (published).

     Why, you may well ask, is this even a problem?  After all, the trial court has statutory jurisdiction to enforce an arbitration agreement entered into in California, and that includes entering judgment on an award under the agreement.  Code of Civil Procedure section 1293.  Alas, the Federal Arbitration Act (FAA) works differently.  Because this matter involved international commerce, it implicated the FAA.  Unlike the California Arbitration Act (CAA), the FAA provides for judicial confirmation of arbitral awards only upon consent of the parties. 

     Thus, the questions presented in Swissmex are whether the FAA rule, requiring consent of the parties for judicial enforcement of an arbitral award, preempts California law, and if so, whether the parties had in fact consented to judicial confirmation of the arbitral award.

       First, the Court of Appeal held that Section 9 of the FAA is procedural and therefore inapplicable to state court proceedings (the procedural rule would only apply in federal court).  The fundamental substantive rule of the FAA is that courts are to enforce arbitration agreements, and that fundamental substantive rule preempts state law.  But purely procedural aspects of the FAA, which apply in federal court, do not preempt. In footnote 6 of the Swissmex opinion, the Court of Appeal notes that “various other courts have characterized section 9 of the FAA as ‘substantive.’ . . . . However, those decisions are not binding on this court.”  Given this footnote, it would seem prudent to cover the bases and consider the consequences if Section 9 of the FAA is viewed as substantive and preemptive of state law, rather than as merely procedural.  That is exactly what the Court did next.  

     Second, the Court of Appeal considered the possibility that Section 9 of the FAA was applicable, and concluded the result would be the same, because here the parties agreed to submit to the Commercial Arbitration rules of the American Arbitration Association.  Under Rule R-48(c) the parties are deemed to consent to judicial confirmation of an award.  Idea Nuova, Inc. v. GM Licensing Group, Inc., 617 F.3d 177 (2d Cir. 2010) “is on point.”

     That left just one last hurdle (or maybe pebble) to get over.  The matter was administered by the International Centre for Dispute Resolution (ICDR) of the AAA.  SP contended the arbitration was conducted in accordance with the AAA’s International Dispute Resolution Procedures, not the Commercial Arbitration Rules allowing for judicial enforcement of the arbitral award.  The Court of Appeal resolved this last conundrum by focusing on the ICDR’s notification to the parties “that the matter would be ‘administered under the International Dispute Resolution Procedures . . . unless the parties agree otherwise.’”  Here, the parties did “agree otherwise” by incorporating the Commercial Arbitration Rules.  Thus, the matter could be administered by the ICDR, but arbitrated under the Commercial Arbitration Rules allowing for judicial enforcement of the arbitral award.

      Presto!  Judgment affirmed.

      Drafting tip:  If the arbitration is likely to be covered by the FAA, expressly provide that the arbitral award can be enforced in state or federal courts of competent jurisdiction.

      

Arbitration/Employment/Enforceability/FAA/CCP 1281.8: Second District, Div. 1 Reverses Order Denying Motion To Compel Arbitration – Mutuality Of Employer/Employee Provisions Is Key

“In particular, we do not find unconscionable a provision in the arbitration agreement allowing either party to seek provisional remedies . . . “

     For the practitioner, Baltazar v. Forever 21, Inc., Case No. B237173 (2nd Dist. Div. 1 Dec. 20, 2012) (Mallano, J.) (published), is worth reading because it provides employers and employees with an example of a “final and binding” arbitration provision that survives various challenges and passes muster with the Court of Appeal.

     Maribel Baltazar sued her former employer, Forever 21, Inc., for racial and sexual harassment and other employment-related wrongs.  Employer and two employees filed a motion to compel arbitration, which motion the employee opposed, arguing the arbitration agreement was unconscionable.  The trial court denied defendants’ motion, and defendants appealed.

     Agreeing that the “take it or leave it” employment contract was one of adhesion, the Court of Appeal nevertheless held that it was not substantively unconscionable. 

     Preliminarily, the Court of Appeal concluded that the agreement was governed by the California Arbitration Act, not the Federal Arbitration Act, because no evidence was offered that the employment or any pertinent transaction involved interstate commerce.  This preliminary conclusion supported the Court’s analysis that carving out provisional equitable relief from the arbitration agreement was entirely permissible.

     Because California Arbitration Act applied, Cal. Code of Civ. Proc. section 1281.8 necessarily applied to the agreement.  And section 1281.8 allows either party to the arbitration provision to apply to the court for a provisional remedy in connection with an arbitrable controversy.  (We note in passing that sometimes other contractual arbitration provisions include carve-outs for provisional relief.  Seeking provisional relief from an arbitrator may be unwieldy, because it must be enforced quickly and through a court.  For example, the standard California Association of Realtors contracts for the purchase and sale of real estate typically have ADR provisions requiring mediation and arbitration with a carve-out for provisional remedies, allowing recourse to the court).

      The Court also rejected the employee’s argument that the carve-out for provisional remedies did not result in a lack of mutuality.  Here, the carve-out did not exempt claims more likely to be brought only by the employer.  For example, of the employee’s nine claims, virtually all could be a source of injunctive relief.  Thus, while ‘[a]n arbitration agreement is substantively unconscionable if employees are required to submit their disputes to arbitration while the employer remains free to pursue its claims in any forum,” such was not the case here.

     The employee also argued that a provision allowing for all necessary steps to be taken to protect trade secrets and proprietary and confidential information from public disclosure was unduly harsh and one-sided.  One-sided, perhaps, but not unreasonable.  After all, the provision was limited to protecting trade secret or similar provision, “consistent with the duties imposed by the Uniform Trade Secrets Act (Civ. Code, sections 3426-3426.11)”.  Besides, “courts have upheld confidentiality and nondisclosure agreements of general application,” allowing the Court to invoke the maxim that “the greater contains the less.”

     Concluding that the agreement to arbitrate was not unconscionable, the Court of appeal reversed the order denying arbitration, ordering the trial court on remand to enter a new order granting the motion to compel arbitration.

FAA’s National Policy Favoring Arbitration Requires Arbitrator In First Instance To Determine If Noncompetition Agreements Are Null And Void

 

SCOTUS Smackdown of Supreme Court of Oklahoma

     On November 26, 2012, in Nitro-Lift Technologies, L.L.C. v. Howard, 568 U.S. _______ (2012) (per curiam), the Supreme Court of the United States found it necessary to remind the Supreme Court of Oklahoma that “[i]t is a matter of great importance . . . that state supreme courts adhere to a correct interpretation” of the Federal Arbitration Act (FAA).  “Here, the Oklahoma Supreme Court failed to do so.  By declaring the noncompetition agreements in two employment contracts null and void, rather than leaving that determination to the arbitrator in the first instance, the state court ignored a basic tenet of the Act’s substantive arbitration law.”  The Oklahoma decision was therefore vacated. 

     Consider for a moment how this would play out in California, a state with a strong public policy that protects employees from unlawful restraints of trade and promotes competition.  Cal. Bus. & Prof. Code section 16600.  As in Nitro-Lift Technologies, the issue would have to be decided by the arbitrator, assuming the arbitration provision is enforceable.  If the arbitrator incorrectly applied the law, that would ordinarily be no ground for judicially reversing the arbitrator’s award, notwithstanding the failure to carry out California’s strong public policy that protects employees and promotes competition. 

     On March 27, 2012, we posted about Marmet Health Care Center, Inc. v. Brown, 565 U.S. ___ (2012) (per curiam).  The Supreme Court of West Virginia had refused enforcement of an arbitration clause because it violated the state's public policy against arbitrating personal injury or wrongful death claims against nursing homes.  The per curiam Nitro-Lift Technologies opinion quotes the per curiam Marmet opinion:  “[W]hen state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward:  The conflicting rule is displaced by the FAA.”  Hence, state law cannot prohibit outright the arbitration of a noncompete claim – the arbitrator decides the issue “in the first instance.”

     We would simply add that in the case of binding arbitration, “in the first instance” usually means “in the last instance” too! 

Pending Case: Ninth Circuit Holds En Banc Hearing In Kilgore v. KeyBank

Federal Preemption Of California’s Broughton-Cruz Rule Exempting Claims For Public Injunctive Relief Is At Issue

     On March 7, 2012, we posted about Kilgore v. KeyBank, 673 F.3d 947 (9^th Cir. March 7, 2012) (authored by Judge Trott).  Kilgore held that California’s Broughton-Cruz rule, which provides claims for public injunctive relief cannot be arbitrated, is preempted by the Federal Arbitration Act (FAA).  The case was heard en banc on December 11, 2012, and the video of the hearing is available online.

     Kilgore involved students of a private helicopter vocational school alleging the school had a preferred lender who knew the school was “a slowly unfolding disaster”, yet continued to make loans to the hapless students.  The students sought to have the loans declared unenforceable and to prevent the lender from reporting defaults to credit reporting agencies.  Because the students had to first get over the hurdle of an arbitration provision, the case presented the issue of whether the Broughton-Cruz rule provides a carve-out exception to arbitration on the facts here, and whether the rule is now preempted by the FAA.  In the opinion authored by Judge Trott earlier this year, the court found preemption.     

     The estimable Kimberly A. Kralowec has posted two reports of last week’s hearing on The UCL Practitioner, the first by Eric Kingsley of Kingsley & Kingsley in Encino, the second by Edie Mermelstein of the Offices of F. Edie Mermelstein in Huntington Beach. 

Arbitration/Employment/FAA/Class Action/Waiver: Second District, Division 1 Holds That Gentry Is Not Overruled By Concepcion or Stolt-Nielsen

Gentry Rides Again!

      Franco v. Arakelian Enterprises, Inc., Case No. B232583 (2nd Dist. Div. 1 Nov. 11, 2012) (Mallano, J.) (published) is a long, scholarly opinion, containing a probing analysis of what may now be the hottest arbitration issue: how to resolve the collision between a class action waiver in arbitration and vindication of unwaivable statutory rights.  Franco involves wage and hour, meal and rest period claims brought by an employee as a putative class action. 

      Gentry v. Superior Court, 42 Cal.4th 443 (2007) resolved the class action waiver issue with a multi-factor test, which when satisfied, results in the unenforceability under some circumstances of an arbitration agreement class action waiver, because the waiver would interfere with the employees’ ability to vindicate statutory rights.  (We note, as does Justice Mallano, that vindication of unwaivable statutory rights and unconscionability have resulted in the application of two lines of cases in California that may lead to unenforceability of a class action waiver).

     In Franco, the Court concludes, “that Gentry remains good law because, as required by Concepcion, it does not establish a categorical rule against class action waivers but, instead, sets forth several factors to be applied on a case-by-case basis to determine whether a class action waiver precludes employees from vindicating their statutory rights. And, as required by Stolt-Nielsen, when a class action waiver is unenforceable under Gentry, the plaintiff’s claims must be adjudicated in court, where the plaintiff may file a putative class action.” 

     Because Gentry applies here to invalidate the class action waiver, it is obvious that here, “the parties have not agreed in any fashion to allow class arbitration.”  And because Stolt-Nielsen held that class arbitration is not permitted unless the parties expressly or implicitly agree to it, that is why Stolt-Nielsen requires hearing the case in court.

      The key to Franco is an individualized application of the multi-factor Gentry test, leading to the conclusion that under the circumstances of this case, employees could not vindicate their statutory rights.  This approach is to be distinguished from a categorical prohibition of class action waivers.

      Two tips, one for the class action plaintiff, the other for defendants.  The plaintiff needs to be prepared to present evidence through competent declarations that the multi-factor Gentry test for invalidating a class action waiver has been satisfied  – something the plaintiff did present here.  The tip for employers is that to survive the Gentry tests, the arbitration provisions would have to be fairly drafted in such a way that the employee could fully vindicate statutory rights in the arbitral forum – easier said than done.

     For other recent posts that relate to unwaivable statutory rights, see our November 13, 2012 post on Richey v. Autonation, Inc. and our November 20, 2012 post on American Express Company v. Italian Colors Restaurant.

Arbitration/Class Action/FAA/Waiver: United States Supreme Court Grants Certiorari In American Express Company v. Italian Colors Restaurant

 

Can An Arbitration Class Action Waiver Be Enforced If The Plaintiff Would Not Be Able To Effectively Vindicate Federal Statutory Rights Through Arbitration?

     The United States Supreme Court will soon decide whether its holding in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011), concerning the enforceability of a class action waiver through an agreement to arbitrate, can be extended, or is limited to the facts in AT&T Mobility.  American Express Company v. Italian Colors Restaurant, Case No. 12-133,  2012 WL 3096737 (U.S. Nov. 9, 2012) (“Amex”).  As reported by Debra Cassens Weiss in the ABA Journal on November 12, 2012, the Supreme Court granted cert to hear this case on November 9, 2012, with Justice Sonia Sotomayor recusing herself.

     Concepcion ruled that the Federal Arbitration Act pre-empted the rule existing in California (Discover Bank v. Superior Court, 134 Cal.App.4th 886 (2005))allowing consumers to avoid the contractual waiver of class-action rights by means of an agreement to arbitrate.  Concepcion involved contractual issues and consumers unhappy with their cell phone provider.

     Amex involves merchants unhappy with terms of allegedly burdensome credit cards issued by Amex that don’t require full payment, and that the merchants feel have been foisted upon them, in violation of the Sherman Anti-Trust Act.  The issue in Amex involves whether the class-action waiver found in the arbitration provision can be enforced when federal statutory rights are at stake and it would be prohibitively expensive to bear the costs of arbitrating anti-trust disputes in order to vindicate federal statutory rights.

     We found it interesting to see just how Amex and Italian Colors Restaurant had framed the issue for the Supreme Court.  As our law professors sometimes reminded us, “to ask the question is to answer it.”  Without comment, we quote the questions presented to the Supreme Court below.

     As framed by Amex: 

“Whether the Federal Arbitration Act permits courts,
invoking the ‘federal substantive law of arbitrability,’
to invalidate arbitration agreements on the ground
that they do not permit class arbitration of a federal law
claim.”

     As framed by respondent Italian Colors Restaurant:

“This Court has repeatedly recognized that federal
statutory claims may be appropriately resolved through
arbitration “so long as the prospective litigant effectively
may vindicate [its] statutory cause of action in the arbitral
forum.” Green Tree Fin. Corp.-Ala. v. Randolph, 531
U.S. 79, 90 (2000). The question presented—on which
there is no disagreement in the circuits—is whether an
arbitration clause should be enforced when there is no
dispute that a litigant has shown that it would be unable
effectively to vindicate its federal statutory rights in the
arbitral forum.”

     For a concise statement of what is at stake, we recommend the blog post of David Horton, Acting Professor of Law at U.C. Davis. 

     We note that Deepak Gupta, who represented Concepcion, now represents Italian Colors Restaurant.