Enforcement of Arbitration Agreements at Issue
CHICAGO – (March 31, 2020)—DRI – The Voice of the Defense Bar has filed amicus curiae briefs supporting Supreme Court review of two cases in which the Ninth Circuit again applied California rules hostile to the enforcement of arbitration agreements notwithstanding the preemptive force of the Federal Arbitration Act (“FAA”). The brief was filed by DRI’s Center for Law and Public Policy.
In McArdle v. AT&T Mobility LLC, (9th Cir. 2019), and Tillage v. Comcast Corp., (9th Cir. 2019), the Ninth Circuit held the FAA did not preempt a California rule providing that arbitration agreements are unenforceable if they purport to bar public-injunction claims. This so-called “McGill rule,” from the California Supreme Court’s holding in McGill v. Citibank, (Cal. 2017), creates an easy way for plaintiffs to circumvent nearly all arbitration agreements. They need only allege a right to a public injunction in their requested relief.
DRI submitted amicus briefs in support of petitioners to encourage the Court to address whether a State may refuse to enforce an arbitration agreement based solely on a public policy in favor of public-injunction proceedings. DRI asserts that the Ninth Circuit’s holdings disregard long-standing Supreme Court precedent on FAA preemption, as well as the more recent AT&T Mobility LLC v. Concepcion, (2011), which took aim at a similar California “public policy” against arbitration. DRI also explains that these cases subject defendants to the very financial risks and burdens they sought to contain by contracting for arbitration in the first place. Like class arbitration, arbitration of public-injunction claims inherently involves protracted, complex, and expensive procedures—including mass discovery—that should not be forced on private parties who agreed to forego them. In fact, those procedures are inherently incompatible with traditional bilateral arbitration.
These Ninth Circuit decisions foster abuses like forum shopping and blackmail settlements, and they will impact millions of arbitration agreements, creating unpredictability for national and regional businesses. DRI is hopeful the Court will take up this issue and clarify the FAA’s preemptive effect in a way that avoids these negative consequences and restores predictability to the enforcement of arbitration agreements.
Brief co-authors Zach Chaffee-McClure of Shook Hardy & Bacon LLP and Elizabeth A. Hutchinson are available for interview or expert comment through the contact information listed above. For the full text of the amicus brief, click here.
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