November 1, 2012

Arbitration appeals in the California Supreme Court

Last year, the United States Supreme Court’s landmark decision in AT&T Mobility LLC v. Concepcion held that the Federal Arbitration Act (FAA) preempts both (1) state rules that prohibit outright the arbitration of particular claims and (2) generally applicable state contract defenses that interfere with fundamental attributes of arbitration. Subsequently, the Court issued two further decisions — Marmet Health Care Center v. Brown and CompuCredit Corp. v. Greenwood — that further reinforce the limits the FAA places on rules that circumscribe the enforcement of arbitration agreements. (In Marmet, the Court determined that the FAA preempted a state judicial precedent that, for public policy reasons, prohibited outright the arbitration of certain state claims; in CompuCredit, the Court held that the FAA “requires courts to enforce agreements to arbitrate according to their terms” even when the claims at issue were statutory “unless the FAA’s mandate has been ‘overridden by a contrary congressional command.’ ”)

California’s appellate courts have disagreed about the impact of these decisions. The California Supreme Court may resolve several of those disagreements in three significant arbitration appeals pending before the court: Sonic-Calabasas A v. Moreno, Sanchez v. Valencia Holding Co., and Iskanian v. CLS Transportation of Los Angeles. As both Kim Kralowec at the UCL Practitioner and we have pointed out, the Supreme Court has also granted review in several additional arbitration appeals that implicate Concepcion’s impact — Buzenes v. Nuvell Financial Services, Mayers v. Volt Management, and Caron v. Mercedes Benz Financial Services USA — and is holding those appeals pending its resolution of Sanchez or Iskanian. Moreover, as the UCL Practitioner suggests, the Supreme Court may yet issue further “grant-and-hold” orders in other arbitration appeals as California’s Courts of Appeal continue to weigh in on Concepcion’s impact. (Interestingly, the Supreme Court denied review yesterday in Nelsen v. Legacy Partners Residential even though several of the issues addressed by the Court of Appeal’s opinion in Nelsen — for example, the impact of the National Labor Relations Act on the enforceability of arbitration agreements in light of Concepcion and CompuCredit — might be resolved by the Supreme Court in Iskanian.)

With at least three cases concerning Concepcion’s impact already pending before the Supreme Court, it will be interesting to see whether the Supreme Court will choose to hear oral argument in these three companion cases on the same day. Sonic-Calabasas, Sanchez, and Iskanian could each be decided on different grounds — including on grounds that have little if any bearing on Concepcion. But the common question of Concepcion’s potential impact runs through all three cases. It would therefore make sense for the Court to hear oral argument in all three cases on the same day, to allow it to fully explore that common topic. Indeed, when similar companion cases have come before the Supreme Court over the years — for example, in (1) Simon v. San Paolo U.S. Holding Co. and Johnson v. Ford Motor Co., (2) Arias v. Superior Court and Amalgamated Transit Union v. Superior Court, (3) Kraus v. Trinity Management Services and Cortez v. Purolator Air Filtration Products Co., (4) Morris v. De La Torre and Delgado v. Trax Bar & Grill, (5) Hooker v. Department of Transportation and McKown v. Wal-Mart Stores, and (6) Knight v. Jewett and Ford v. Gouin — the Supreme Court heard oral argument in each pairing of companion cases on the same day. The Supreme Court also subsequently issued its opinion in each of these pairings on the same day. It would therefore be consistent for the Court to follow the same approach with Sonic-Calabasas, Sanchez, and Iskanian.

[Full disclosure: Horvitz & Levy LLP has filed amicus curiae briefs in support of the defendants in Sonic-Calabasas and Sanchez.]

4 Responses to “Arbitration appeals in the California Supreme Court”

  1. That would mean a very long additional delay in Sonic-Calabasas, which has already been delayed for years. But you may be right.

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