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AT&T Mobility, LLC v. Concepcion: What Would Cousin Vinny Have to Say About The Ninth Circuit’s Interpretation of the Equal Footing Principle?

December 10th, 2010 Arbitration Agreements, Arbitration Practice and Procedure, California State Courts, Class Action Arbitration, Class Action Waivers, Practice and Procedure, United States Court of Appeals for the Ninth Circuit, United States Supreme Court Comments Off on AT&T Mobility, LLC v. Concepcion: What Would Cousin Vinny Have to Say About The Ninth Circuit’s Interpretation of the Equal Footing Principle? By Philip J. Loree Jr.

One of my favorite scenes from the movie My Cousin Vinny (1992) is Vincent Laguardia Gambini’s (a/k/a “Vinny’s”) opening statement in the criminal trial of his cousin and cousin’s friend, both of whom were arrested and mistakenly charged for murder and robbery while driving through Alabama.  Vinny (played by Joe Pesci) — a native New Yorker who is as out of place in a rural Alabama courtroom as I suppose anyone could be — dozes off during the prosecution’s opening statement only to be jarred awake by his cousin — who is facing the death penalty — so that he can deliver an opening statement.  He saunters over to the jury, and says, gesturing at the prosecutor, “Everything that guy just said is bull$#!+.  Thank you.”  Then he returns to the defense table.  (Watch the scene here, which begins approximately three minutes and 33 seconds into the clip.)    

Lawyers who litigate generally find this scene particularly amusing because we know firsthand what goes into preparing and delivering an opening (or closing) statement, and Vinny mocks that process and all its formalities.  But more than that, Vinny distills to its essence (seven words, in fact) the central message of just about every argument:  What the other side is saying is simply not accurate.  Yet at the same time, he completely omits the sine qua non of a good argument — a reasoned basis for the conclusion it asks the decision maker to draw. 

Fortunately, neither party in AT&T Mobility, LLC v. Concepcion, No. 09-893, is represented by our fictional hero, Vinny.  Both sides are represented by very able counsel who have fully articulated the bases for their clients’ position in their briefs and argument in the United States Supreme Court

One of the key differences between the parties concerns the scope of Federal Arbitration Act Section 2’s savings clause, which saves from preemption state-law “grounds.  .  .  for the revocation of any contract.”  9 U.S.C. § 2 (emphasis added).  According to AT&T Mobility, the Discover Bank rule — unlike the general “shocks the conscience” standard California ordinarily applies to assess whether a contract of whatever kind is unconscionable — is not a “ground” “for the revocation of  any contract,” but a rule that discriminates against certain arbitration agreements and other forum selection agreements vis-à-vis all other contracts.  According to the Concepcions, the Discover Bank rule is simply an application of California’s general unconscionability standard, and, in any event, consistent with the United States Court of Appeals for the Ninth Circuit‘s analysis, the rule is not discriminatory because it “place[s] arbitration agreements with class action waivers on the exact same footing as contracts that bar class action litigation outside the context of arbitration.”  Shroyer v. New Cingular Wireless Serv., Inc., 498 F.3d 976, 990 (9th Cir. 2007) (citing Discover Bank v. Superior Court of Los Angeles, 36 Cal.4th 148,165-66 (2005)) (emphasis in original). 

When I first began to analyze AT&T Mobility, I thought that the Ninth Circuit’s “equal footing” interpretation made sense.  But as I delved a little deeper, studied Section 2’s text more carefully, reviewed (for the nth time) the Supreme Court’s cases bearing on Federal Arbitration Act preemption, studied the parties’ briefs, and reviewed the argument transcript, I became more and more convinced that the Ninth Circuit’s conclusion about the “equal footing” principle — while catchy, clever and creative — was simply wrong, and would, if adopted by the United States Supreme Court, effectively rewrite Section 2 and undermine Congress’ intent and purposes in enacting the Federal Arbitration Act.  

Were I our intrepid, over-confident and sometimes ethically-challenged hero, Vinny, my comments regarding the Ninth Circuit’s “equal footing” analysis might be summarized in seven words or so.  But Vinny’s approach to legal argument would not be very effective in a case like AT&T Mobility because to understand why the United States Supreme Court should reverse the Ninth Circuit, you really need to delve into the details a bit. 

To that end, I’ve set out to analyze AT&T Mobility in quite some detail, not only for those who believe AT&T Mobility is correct, but also for the benefit of those who do not.  I’d love to hear from anyone who disagrees with my analysis on legal — as distinguished from political or policy-oriented grounds. 

My good friends Karl Bayer and Beth Graham at the Disputing blog have been kind enough to publish my ongoing, multi-part series on AT&T Mobility case, which sets out my analysis.  So far we have published Parts I, II.A, and II.B, and while I have certainly not yet analyzed all of the issues, I have addressed pretty thoroughly the interpretation and construction of Section 2’s savings clause, and how I believe AT&T Mobility’s interpretation and construction best reflects not only Section 2’s text, but also Congress’ intent and purpose.  

Here’s an excerpt from Part II.B of the series, which summarizes some of the key points on that score:

Interpreting the savings clause to mean what it says best reflects Congress’ intent and advances its purposes.  Presumably every Justice would agree that Congress’ principal goal was to abrogate the “ouster” doctrine, at least in cases brought in federal court.  Likewise presumably every Justice would agree that construing the savings clause to save from preemption only state revocation laws applicable to all contracts accomplishes that goal.  If those relatively uncontroversial propositions are true, then – putting aside outcome-based political considerations – all Justices should agree that California must apply exactly the same standard for invalidating a class waiver in an arbitration agreement on unconscionability grounds as it would otherwise apply to invalidate a contract of whatever kind.

The Concepcions, however, contend that the savings clause should be interpreted to save the Discover Bank rule from preemption because it allegedly applies to class waivers in an arbitration clause in the same way it applies to waivers of class action proceedings in litigation.  Thus, a centerpiece of the Concepcions argument – and of those of commentators and amicus curiae that agree with the Concepcions– is the following, slogan-like proposition, endorsed by the Ninth Circuit:  the Discover Bank rule “placed arbitration agreements with class action waivers on the exact same footing as contracts that bar class action litigation outside the context of arbitration.”  Shroyer v. New Cingular Wireless Serv., Inc., 498 F.3d 976, 990 (9th Cir. 2007) (citing Discover Bank v. Superior Court of Los Angeles, 36 Cal.4th 148,165-66 (2005)).

Like many great slogans, the proposition has a rhetorical ring to it — as well as a ring of truth – but it wilts under scrutiny.  Even assuming the Discover Bank rule is the same one applied to class waivers outside the arbitration context (a question we will explore in one or more future installments), that doesn’t mean it is a rule that is applied to a contract of whatever kind.  Nor does it mean – or even purport to mean – that the Discover Bank rule places an adhesive arbitration agreement with a class waiver on the same footing with all other contracts.

Take, for example, a contract pursuant to which A sells B a tract of land and which is silent on arbitration or litigation.  Nobody would seriously contend that the Discover Bank rule has any application to such a contract, let alone provides any basis for not enforcing it.  Because the Discover Bank rule would render an adhesive arbitration agreement containing a class waiver unenforceable, but would not render our hypothetical, garden-variety real estate contract unenforceable, it places the adhesive arbitration agreement on a very different footing than that garden-variety contract.

But depending on the facts surrounding the formation of our hypothetical real estate contract, perhaps B might have a general defense to enforcement, such as fraud in the inducement or unconscionability.  Assuming the same legal standards apply to this defense as apply to all other contracts under applicable state law, applying that defense to arbitration agreements merely puts arbitration agreements on the same footing as all other contracts (including, of course, our hypothetical real estate contract).

All of this is consistent with a textual construction of Section 2’s savings clause, and serves to reinforce the validity of such a construction.  But there is more:  the Ninth Circuit’s narrow interpretation of the equal footing principle is inconsistent with one of the key goals of the Federal Arbitration Act – the elimination of the “ouster doctrine.”

Recall that the ouster doctrine rendered not only arbitration agreements, but non-arbitration forum selection clauses unenforceable.  In that sense it certainly did not discriminate between forum selection clauses in the arbitration context and forum selection clauses in the litigation context.  And to paraphrase the Ninth Circuit, the ouster doctrine unquestionably “placed arbitration agreements on the exact same footing as forum selection clauses outside the context of arbitration.”

But nobody says that Section 2’s equal footing principle was intended to save the ouster doctrine from preemption.  Since the Ninth Circuit’s narrow interpretation of that principle would do exactly that, it cannot possibly be the correct one from a purposive (or any other) perspective.

.  .  .  . 

The Ninth Circuit’s “equal footing” interpretation essentially echoes the position that [Associate] Justice [John Paul] Stevens unsuccessfully advanced in [Southland Corp. v. Keating, 465 U.S. 1 (1984)] more than 25 years ago.  Indeed, it would support the conclusion – soundly rejected by Southland — that the Federal Arbitration Act does not preempt the no-waiver provision of California’s Franchise Investment Law, because the no-waiver provision, to paraphrase the Ninth Circuit, “places arbitration agreements on the exact same footing as other contracts that purport to waive the protections of the Franchise Investment Law outside the context of arbitration.”

Finally, the Ninth Circuit’s interpretation of the equal footing principle would save from preemption any number of no-waiver rules that apply equally in the arbitration and litigation context.  For example, a state might conclude that, to ensure parties of lesser bargaining power receive a fundamentally fair hearing in a dispute with a more sophisticated party, the party with lesser bargaining power must have access to the same scope of document discovery permitted by state procedural rules, irrespective of whether the dispute is heard in state court or in arbitration.  It might, in turn, pass a statute that declares void against public policy any provision in a contract of adhesion that purports to waive a party’s right to the same scope of document discovery permitted by state procedural rules.

Once again, if the Court adopted the Ninth Circuit’s interpretation of the equal footing principle, this hypothetical state statute would not be preempted by the Federal Arbitration Act.   For it “places arbitration agreements waiving state court document discovery procedures on the exact same footing as contracts that bar such procedures outside the context of arbitration.”

In sum, an analysis of the intent and purpose of the savings clause simply underscores the necessity of interpreting Section 2 according to its plain meaning, and a purposive construction of the savings clause would thus be no different than the one a natural reading of the text requires.

Stayed tuned to Disputing and the Loree Reinsurance and Arbitration Law Forum for further coverage of the controversial AT&T Mobility case.  .  .  .

         

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