the first case are call of the docket today tuesday nov sixteenth two thousand and ten nine thirty am his agenda number eleven case number one zero nine four eight five william carr individually on behalf of all  may have pleased to report the issue here's may please i may be mistaken you state your name for the record i'm sorry i got ahead of myself my first time in the supreme court here my name is steven hogan represent the appellant and defendant gateway well that's fine because on my second week sitting in the spot as the the question before the court today is really does section five of the federal arbitration act mean what it says or is it largely a supreme flew a statute that congress put in for some instance and i think the answer to that is pretty straightforward and i think it could be found in section five itself section five provides for the circumstance that we have before us today it requires that the courts name the arbitrator where the parties agreed method of naming the arbitrator has failed congress obviously had supported that there would be circumstances where for any number of reasons including the un availability of the person the parties agreed to name the arbitrator where this would be an issue and instead of leaving it to the contracts of the parties congress took it into its own hands and acted section five and said when the agreed method fails the courts shell name the arbitrator loser organ then you have a fundamental problem with the proposition that if the agreement it is true as to who the arbitrator was to be was an integral part of the agreement itself that that would be controlling are you saying regardless of what the agreement provides section five would trump i believe that section five does trump that but i understand the the problem that happens in that rare instance where the parties have agreed to arbitrate only because a particular arbitrator was the one that they thought would have a case and i think that there is room and the can and the cases have recognized that there is room in those circumstances to to carve out an exception to the rule of section five which is it is the fact that the penalty provision in the a  and that's a fair question because if you agree if you look at that as if it is a penalty provision for not proceeding in front of the n e f i understand the the concern that that might indicate that that that this is a circumstance where the tech world i think that sends shows exactly the opposite i think that sentence shows that the parties anticipated that there may be times when would be proceeding outside of the day and it's critical that the penalty for the asian so called it uses the word maim and it only it may it's discretionary it would be  the other thing is the only sanction that the penalty is that the party who doesn't comply mami be required under the contract should the arbitrator so decide to pay the costs of enforcing the contract in this case the contracting parties anticipated d n a have would name the arbitrator the n e f is not available to do so so that provision does not empower the arbitrator that the court would appoint to do anything because there's there's no reasonable costs no reasonable attorneys fees that could be incurred to enforce the contract under that penalty provision under the excuse that well now here we are before an arbitrator that's not not in had anticipated the does who would name the arbitrator but it's not a penalty that says only the n e f and if for any reason were outside the any of the provision exception that the plaintiffs are urging it would be there as the people challenging the arbitration clause it would be their burden to establish that it was gateway's intent it to arbitrate it in in the any half before an arbitrator appointed by the any half and nobody else and on this record the plaintiffs point strictly to this the language of the contract which doesn't say that as so i don't think that they have have carried their bird the reason that i say that is that the language says and that it will be exclusively and finally resolved by arbitration exclusively and finally modify arbitration it says it will be administered by the ne alf which administered is more of an ancillary logistical concern it also says except as otherwise provided in the parties expressly agree to be bound by the federal arbitration act one section of which is section five which says if the n f is not available the court shall name the arbitrator so gateways intent is expressed in the contract it's contrary to the intent the plaintiffs have urged we have nothing in the record from the cars stating that the only reason they agreed to arbitrate is because it would be in the area in fact they would have been silent but their lawyers presumably with their lessee have argued from day one in the case until the n e f stopped doing consumer arbitration class action bar isn't forcible in an arbitration agreement and it was argued i believe last thursday it does not deal with section five directly  it it will would probably have an impact on this case at a later probably would it would probably have an impact on the parties in this case if at all at a later point but i don't think it impacts the decision before this court which is under section five does it does the court name an arbitrator or are we in that circumstance where the entire arbitration agreement has to with section five if it's the same case that i'm thinking you know your honor to follow up on justice garments question a little bit what do we look at in terms of whether this is an integral part of the agreement the contract only or the intent of the parties and you discussed or you alluded to gateways into the cards and is there a record to determine or from which we can determine what the role or merely logistical and and they agreed that it would be administered by the end they didn't name a specific arbitrator they didn't require that a specific arbitrator hear the case and they agreed that the federal arbitration act would govern which itself has section five to cover this circumstance that's the first place to look the plaintiffs are the ones who are in here arguing  that this is that rare case where section five should not apply because the intent of the parties to arbitrate in the ne at this integra ly think the first place to look then is for testimony from the plaintiffs that that in fact was true and we have none of that in the record in fact they have argued the offices then you would look to see if there's any indication that gateway had an intent that that the n e f was as important if not more so than the greenman to arbitrate we have nothing in this record that indicate that gateway had anything in mind other than providing the customer with the fast fair way to resolve fifteen hundred to one thousand dollars for a computer at the time best fair result through arbitration rather than going through what they were perceived as a more pursued expensive litigation process you won't find testimony from gateway on the on the issue primarily i think because it came up after all argument at the appellate court indeed but on the other side of the coin the plaintiffs are the ones who are urging that this exception to the rule of section and so if they had needed to augment the record in that regard the time to request it was back then or at least before today a couple points is this exception that we talk about the in and arbitration that they agreed would be in iran could be moved to an excuse to move to a different place by the court section five does not empower a court to move the site of an agreed agreed side of arbitration it does however power the court to name an arbitrator when the agreed method is failed that kind of exception has kind of  brown recognise that and i agree that there may be cases where section five should not apply but we don't need to decide that here because this is not one of those cases where a specific arbitrator was identified as perhaps the most knowledgeable person on pentiums and so any disputes over pentiums would be decided by him so the co when the courts lose track of the first aspect which is section five doesn't apply if the parties agreed method is still available it just doesn't apply not because it's for any other reason except that the agreed method has not failed when the agreed method fails however section five does apply and i would submit that this exception that we're talking about the entire grove versus absa larry logistical is a heavy burden by the party who is trying to avoid the agreed contract term controlling law under i believe the illinois cases supreme court cases bush that when it's a federal statute then the illinois courts will look to the federal circuit courts of appeal to as as governing law on construing the federal statute and brown and read them and solomon are the three confused by relying on a bunch of cases where the agreed method and not failed so section five did not apply solomon court didn't appreciate that therefore said well section five does not we get back to it section five itself answers of question it's that congress created an exception to the rule that says that that the courts must live must in force only the parties contract agreed terms this is a special case a special term where congress saw that there would be times when the read method to name an arbitrator failed them they said the policy here  encourage in and make sure that arbitration goes forward so if that happens we're going to empower the courts to do that the plaintiffs have requested additional that the court look at additional it's an unpublished decision and they're correct that at least in the circuit courts of appeal you may cite two unpublished decisions but under the fifth circu rule and i believe it is twenty seven point five point four an unpublished decision is not precedent so to the extent the court considers that i don't  it is not precedent is therefore not binding on this ford that leaves us with brown and read them as the controlling authority with solomon being the i see my time is almost up versus eighteen team ability with education and you say and not on the issue that's before the court now the california supreme court in a case found that a class action waiver that was in a contract imposed by eighteen to mobility was unconscionable under california law and struck the provision that's been taken up to the u s supreme court to determine whether or not the exception in the f a a on such other grounds at common law which allows for have to consider the u s supreme court's decision in concepcion however i don't think that's going to be necessary because i think what we have here is a clear case where a drafter could not do much more to find a are or to to have to pay our fees and making you go to the end and i have when you look at the case saw i think it to some unquestionable the question here today is not i think how mr hogan phrased it whether or not section five is applicable the question is whether section four and the cases interpreting section five and section four are to be ignored section four  a requires courts to only enforce arbitration clauses to the extent that the contract calls for and you saw this very recently in the us supreme court case don't kneel sit where the u s supreme court found that they could not enforce a class action in arbitration because the contract was silent on that section four is the section of the f a a there requires that this is a matter of contract and we can't go beyond that it's section five cannot be read without consideration of section four like i said and as a result courts of limited section five to the instances that mr hogan discussed section five has been limited only to those instances where the court can say with assurance that the selection of the foreign selection clause was not in or gold of the contract and therefore the court can enforce the contract someplace else without doing harm to the contract fact that opposing counsel mention that the attorneys in this case indicated that this particular arbitration clause regarding any with them in the worst position and therefore their intent would never be only have t anymore that was a real issue for the plaintiffs in the trial court one that was pointed out we didn't say we'll go anywhere but the and yeah by the same token you can't wait and that never once offered since the n f is so bad and you have such a hard time with doing below was third party discovery with the an idea which required oppositions and subpoenas and such of form arbitrator's they wait resisted that discovery the entire time  and said and you know all of this is irrelevant you know if it's fair and great and wonderful and never once said it was just cut to the chase all we want is arbitration we don't care where that's not what they did what they did was they said this is our contracts and it needs to be enforced and as a matter of fact they took the position both in the trial court and in the appellate court but this was a gateway dispute that's unfortunately for this case but what that means is that what the court was allowed to decide to decide under section four was only whether the contract was entered into freely and now in unconscionable and if it is  let's turn back to the test the test of whether or not it's ensure goal or not there are number of federal circuit court decisions that address this issue and in applying the tests they reach different conclusions based on different facts that's how every test works pick one i'll pick one and then they'll pick a third those are not in recall there are other cases where the arbitration provision specifies the rules only we will arbitrate under the rules of the aaa and we want to trade in the rules of the national inform where the n a s d the case is looking at those instances are split but for the most part have found that the rules are not enough however the cases where they where they have both the wounds and the form where they say it will be administered by form x and we will follow their rules the case is looking at those instances like we have here the overwhelming weight of authority finds that on the both of those instances in this case we have both the rules and we have the form and then we have the penalty provision it goes much further than any of these other case  as as my opponent mentioned it is designated as unpublished but a couple of years ago one of the first things that justice roberts that it did once he came in as the chief justice was to amend the federal rules of the public procedure so that unpublished in the federal rules doesn't mean not presidential so as far as the u s supreme court is concerned the fifth circuit has spoken on this and they found that when you name the n e f is your form and you say you will arbitrate under the n f l rules that's interval the contract and that clause cannot be enforced and something else that's important here we heard quite a bit about one of the who bears the burden here and then it was brief they mention both they mentioned a number of cases and as putting the burden on the plaintiffs but i'm unfortunately in reading those cases i've been found and the same references in in my review the cases i found the only case that and they had a arbitration clause with the distributor of that oil which required that all disputes be resolved in iran but when they came and tr enforce that arbitration provision the defendants who owed them two hundred three million dollars did not want to go to a ram they turn to the federal courts and national running oil there said fine don't send destroy iran we don't care send this to dallas we'll go there and the fifth circuit court of appeal said they could not do that that national iranian oil as the proponents of striking the form selection clause or the burden and therefore as national iranian oil is burdened to show that the foreign selection clause in that instance was only and celery and not integral to the contract and because anywhere i think that's a very very simple important case here now my opponent also tries to distinguish a case from the on the fact that it deals with scientists and not a selection of a form than a month and a half ago explicitly endorses that reasoning and says that we agree with the second search the second circuits enforcement of national r section five language about you for any other reason should be a lapse trader so i don't think so your honor and the and the reason being is because as gateway pointed out  this court has decided that federal law on this issue should control and the courts have already interpreted that both with national radio and resell them and then resell it is really the case that goes the furthest with that and it looks to you what does lapse mean and has several paragraphs on what you believe to lapse means and really what that means are examples i gave earlier where the arbitration clause says the plentiful pick one arbitrator of the definit will pick one arbitrator and then each of those arbitrators will pick a third and for whatever reason those two arbitrators can't pick a third well then you go to the court because there's a lapse in the court can fill the gap  would like to address three primary points and i'll do so quickly the first point that the plaintiffs urged was that section four should control the decision here and not section five i restate he didn't say it exactly that way but that's really the message i think there are giving and i think that is a very important point because that's where a lot of these  corsica get confused get it wrong section four does say that the courts should enforce the agreements to arbitrate according to their terms and many of the cases pick up on that language including the cases that the plaintiff aside it's you today what they don't appreciate is that congress enact it section five which follows section four immediately as a very specific statute dealing with a very specific circumstance and that is where the agreed means of naming an arbitrator has failed our case here and in that case congress decided that the courts would be  powered to and shall name the arbitrator regardless of because the parties agreed method has failed so section five actually says the court has to do something to parties didn't agree to because it only comes up when that fails the other question is the the recent ransey decision fifth circuit decision the plaintiffs attributed to the tenth in their briefing i misspoke from memory but the fifth circuit court of appeal rule forty seven point five point four and forty seven point five point three are the ones that the court should look at to determine whether or not this case is precedential federal rules of  procedure thirty two point one permits anybody in the federal appellate court to cite any decision published unpublished they got tired of deciding what could be side and what couldn't but the fifth circuit has determined that cases like ramsey decided after to january one two thousand and seven that they have deemed unpublished are not so i don't as i see it we're still with the three cases brown read and the second circuit is decision of solomon as the federal precedent the final point national iranian oil figure prominently in my opponent's argument and i encourage the court to look at that case because the issue there was whether the court could had the power to substitute its own determination of where the arbitration would occur situs they had agreed to do it in iran there were all sorts of good reasons to move it out of iran the court correctly held that the f a a does not have a section five for inconvenient situs if the parties agreed to do it in iran the court couldn't substitute its judgment that is a very different circumstance from what we have here loose use of the word flora leads to equating situs to well we have here which is a service provider who the anticipated would name the arbitrator section five empowers a court to step in when that agreed method fails section five was not discussed nor was it available to the parties in national raney and oil because the issue there was not who was going to name the arbitrator it was we can't get to ron or we will go there we want the court to move it to a more neutral site of the conflict and it goes forward from that case on through even the cases i rely on brown and read section five itself does not recogniz exception if the agreed method fails it says the court shall name of the traitor i agree that there might be a case out there word is so obvious that it would be inherently wrong to do that that this integra old versus merely ancillary analysis becomes critical this is not a case where looking strictly at the words of the contract because of the plaintiff has bro arbitrate only if it would be in the ne out mr ziglar got the burden switched he claims the law is that you only bring section five and if it can be said with positive assurance that it should apply to case as directly contrary section five applies and if an opponent wants to defeat it then he has to come in and clearly show that it's to feed thank you very much for your time your patience