Source: https://www.law.cornell.edu/supremecourt/text/06-1463
Timestamp: 2018-03-23 01:39:33
Document Index: 685642417

Matched Legal Cases: ['§1', '§2', '§2', '§2', '§2', '§1', '§1700', '§2', '§2', '§2', '§1700', '§1700', '§1700', '§1700', '§1281', '§1281', '§1']

552 U.S. 346 | US Law | LII / Legal Information Institute
552 U.S. 346
A contract between respondent Ferrer, who appears on television as Judge Alex, and petitioner Preston, an entertainment industry attorney, requires arbitration of any dispute … relating to the [contracts] terms … or the breach, validity, or legality thereof … in accordance with [American Arbitration Association (AAA)] rules. Preston invoked this provision to gain fees allegedly due under the contract. Ferrer thereupon petitioned the California Labor Commissioner (Labor Commissioner) for a determination that the contract was invalid and unenforceable under Californias Talent Agencies Act (TAA) because Preston had acted as a talent agent without the required license. After the Labor Commissioners hearing officer denied Ferrers motion to stay the arbitration, Ferrer filed suit in state court seeking to enjoin arbitration, and Preston moved to compel arbitration. The court denied Prestons motion and enjoined him from proceeding before the arbitrator unless and until the Labor Commissioner determined she lacked jurisdiction over the dispute. While Prestons appeal was pending, this Court held, in Buckeye Check Cashing, Inc. v. Cardegna, 546 U. S. 440, that challenges to the validity of a contract requiring arbitration of disputes ordinarily should … be considered by an arbitrator, not a court. Affirming the judgment below, the California Court of Appeal held that the TAA vested the Labor Commissioner with exclusive original jurisdiction over the dispute, and that Buckeye was inapposite because it did not involve an administrative agency with exclusive jurisdiction over a disputed issue.
Held: When parties agree to arbitrate all questions arising under a contract, the Federal Arbitration Act (FAA), 9 U. S. C. §1 et seq., supersedes state laws lodging primary jurisdiction in another forum, whether judicial or administrative. Pp. 416.
(b) FAA §2 declare[s] a national policy favoring arbitration when the parties contract for that mode of dispute resolution. Southland Corp. v. Keating, 465 U. S. 1, 10. That national policy appli[es] in state as well as federal courts and foreclose[s] state legislative attempts to undercut the enforceability of arbitration agreements. Id., at 16. The FAAs displacement of conflicting state law has been repeatedly reaffirmed. See, e.g., Buckeye, 546 U. S., at 445446; Allied-Bruce Terminix Cos. v. Dobson, 513 U. S. 265. A recurring question under §2 is who should decide whether grounds … exist at law or in equity to invalidate an arbitration agreement. In Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U. S. 395, which originated in federal court, this Court held that attacks on an entire contracts validity, as distinct from attacks on the arbitration clause alone, are within the arbitrators ken. Buckeye held that the same rule applies in state court. See 546 U. S., at 446.
Buckeye largely, if not entirely, resolves the present dispute. The contract at issue clearly evidenc[ed] a transaction involving commerce under §2, and Ferrer has never disputed that the contracts written arbitration provision falls within §2s purview. Ferrer sought invalidation of the contract as a whole. He made no discrete challenge to the validity of the arbitration clause, and thus sought to override that clause on a ground Buckeye requires the arbitrator to decide in the first instance. Pp. 56.
(c) Ferrer attempts to distinguish Buckeye, urging that the TAA merely requires exhaustion of administrative remedies before the parties proceed to arbitration. This argument is unconvincing. Pp. 612.
(1) Procedural prescriptions of the TAA conflict with the FAAs dispute resolution regime in two basic respects: (1) One TAA provision grants the Labor Commissioner exclusive jurisdiction to decide an issue that the parties agreed to arbitrate, see Buckeye, 546 U. S., at 446; (2) another imposes prerequisites to enforcement of an arbitration agreement that are not applicable to contracts generally, see Doctors Associates, Inc. v. Casarotto, 517 U. S. 681. Pp. 78.
(2) Ferrer contends that the TAA is compatible with the FAA because the TAA provision vesting exclusive jurisdiction in the Labor Commissioner merely postpones arbitration. That position is contrary to the one Ferrer took in the California courts and does not withstand examination. Arbitration, if it ever occurred following the Labor Commissioners decision, would likely be long delayed, in contravention of Congress intent to move the parties to an arbitrable dispute out of court and into arbitration as quickly and easily as possible. Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U. S. 1. Pp. 810.
(d) Ferrers reliance on Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U. S. 468, is misplaced for two reasons. First, arbitration was stayed in Volt to accommodate litigation involving third parties who were strangers to the arbitration agreement. Because the contract at issue in Volt did not address the order of proceedings and included a choice-of-law clause adopting California law, the Volt Court recognized as the gap filler a California statute authorizing the state court to stay either third-party court proceedings or arbitration proceedings to avoid the possibility of conflicting rulings on a common issue. Here, in contrast, the arbitration clause speaks to the matter in controversy; both parties are bound by the arbitration agreement; the question of Prestons status as a talent agent relates to the validity or legality of the contract; there is no risk that related litigation will yield conflicting rulings on common issues; and there is no other procedural void for the choice-of-law clause to fill. Second, the Court is guided by its decision in Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U. S. 52. Although the Volt contract provided for arbitration in accordance with AAA rules, 489 U. S., at 470, n. 1, Volt never argued that incorporation of those rules by reference trumped the contracts choice-of-law clause, so this Court never addressed the import of such incorporation. In Mastrobuono, the Court reached that open question, declaring that the best way to harmonize a New York choice-of-law clause and a clause providing for arbitration in accordance with privately promulgated arbitration rules was to read the choice-of-law clause to encompass substantive principles that New York courts would apply, but not to include [New Yorks] special rules limiting [arbitrators] authority. 514 U. S., at 6364. Similarly here, the best way to harmonize the Ferrer-Preston contracts adoption of the AAA rules and its selection of California law is to read the latter to encompass prescriptions governing the parties substantive rights and obligations, but not the States special rules limiting [arbitrators] authority. Ibid. Pp. 1215.
ARNOLD M. PRESTON, PETITIONER v. ALEX E.
As this Court recognized in Southland Corp. v. Keating, 465 U. S. 1 (1984) , the Federal Arbitration Act (FAA or Act), 9 U. S. C. §1 et seq. (2000 ed. and Supp. V), establishes a national policy favoring arbitration when the parties contract for that mode of dispute resolution. The Act, which rests on Congress authority under the Commerce Clause, supplies not simply a procedural framework applicable in federal courts; it also calls for the application, in state as well as federal courts, of federal substantive law regarding arbitration. 465 U. S., at 16. More recently, in Buckeye Check Cashing, Inc. v. Cardegna, 546 U. S. 440 (2006) , the Court clarified that, when parties agree to arbitrate all disputes arising under their contract, questions concerning the validity of the entire contract are to be resolved by the arbitrator in the first instance, not by a federal or state court.
Prestons demand for arbitration, made in June 2005, was countered a month later by Ferrers petition to the California Labor Commissioner charging that the contract was invalid and unenforceable under the California Talent Agencies Act (TAA), Cal. Lab. Code Ann. §1700 et seq. (West 2003 and Supp. 2008). Ferrer asserted that Preston acted as a talent agent without the license required by the TAA, and that Prestons unlicensed status rendered the entire contract void. 1
Section 2 declare[s] a national policy favoring arbitration of claims that parties contract to settle in that manner. Southland Corp., 465 U. S., at 10. That national policy, we held in Southland, appli[es] in state as well as federal courts and foreclose[s] state legislative attempts to undercut the enforceability of arbitration agreements. Id., at 16. The FAAs displacement of conflicting state law is now well-established, Allied-Bruce Terminix Cos. v. Dobson, 513 U. S. 265, 272 (1995) , and has been repeatedly reaffirmed, see, e.g., Buckeye, 546 U. S., at 445446; Doctors Associates, Inc. v. Casarotto, 517 U. S. 681, 684685 (1996) ; Perry v. Thomas, 482 U. S. 483, 489 (1987) . 2
A recurring question under §2 is who should decide whether grounds … exist at law or in equity to invalidate an arbitration agreement. In Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U. S. 395, 403404 (1967) , we held that attacks on the validity of an entire contract, as distinct from attacks aimed at the arbitration clause, are within the arbitrators ken.
Buckeye largely, if not entirely, resolves the dispute before us. The contract between Preston and Ferrer clearly evidenc[ed] a transaction involving commerce, 9 U. S. C. §2, and Ferrer has never disputed that the written arbitration provision in the contract falls within the purview of §2. Moreover, Ferrer sought invalidation of the contract as a whole. In the proceedings below, he made no discrete challenge to the validity of the arbitration clause. See 145 Cal. App. 4th, at 449, 51 Cal. Rptr. 3d, at 635 (Vogel, J., dissenting). 3 Ferrer thus urged the Labor Commissioner and California courts to override the contracts arbitration clause on a ground that Buckeye requires the arbitrator to decide in the first instance.
The TAA regulates talent agents and talent agency agreements. Talent agency is defined, with exceptions not relevant here, as a person or corporation who engages in the occupation of procuring, offering, promising, or attempting to procure employment or engagements for an artist or artists. Cal. Lab. Code Ann. §1700.4(a) (West 2003). The definition does not cover other services for which artists often contract, such as personal and career management (i.e., advice, direction, coordination, and oversight with respect to an artists career or personal or financial affairs). Styne v. Stevens, 26 Cal. 4th 42, 51, 26 P. 3d 343, 349 (2001) (emphasis deleted). The TAA requires talent agents to procure a license from the Labor Commissioner. §1700.5. In furtherance of the [TAAs] protective aims, an unlicensed persons contract with an artist to provide the services of a talent agency is illegal and void. Id., at 51, 26 P. 3d, at 349. 4
Absent a notice of appeal filed within ten days, the Labor Commissioners determination becomes final and binding on the parties. REO Broadcasting Consultants v. Martin, 69 Cal. App. 4th 489, 495, 81 Cal. Rptr. 2d 639, 642643 (1999). 5
Nor does Ferrers current argumentthat §1700.44(a) merely postpones arbitrationwithstand examination. Section 1700.44(a) provides for de novo review in Superior Court, not elsewhere. 6 Arbitration, if it ever occurred following the Labor Commissioners decision, would likely be long delayed, in contravention of Congress intent to move the parties to an arbitrable dispute out of court and into arbitration as quickly and easily as possible. Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U. S. 1, 22 (1983) . If Ferrer prevailed in the California courts, moreover, he would no doubt argue that judicial findings of fact and conclusions of law, made after a full and fair de novo hearing in court, are binding on the parties and preclude the arbitrator from making any contrary rulings.
A prime objective of an agreement to arbitrate is to achieve streamlined proceedings and expeditious results. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U. S. 614, 633 (1985) . See also Allied-Bruce Terminix Cos., 513 U. S., at 278; Southland Corp., 465 U. S., at 7. That objective would be frustrated even if Preston could compel arbitration in lieu of de novo Superior Court review. Requiring initial reference of the parties dispute to the Labor Commissioner would, at the least, hinder speedy resolution of the controversy.
In Gilmer v. Interstate/Johnson Lane Corp., 500 U. S. 20 (1991) , we considered and rejected a similar argument, namely, that arbitration of age discrimination claims would undermine the role of the Equal Employment Opportunity Commission (EEOC) in enforcing federal law. The mere involvement of an administrative agency in the enforcement of a statute, we held, does not limit private parties obligation to comply with their arbitration agreements. Id., at 2829.
Ferrer points to our holding in EEOC v. Waffle House, Inc., 534 U. S. 279, 293294 (2002) , that an arbitration agreement signed by an employee who becomes a discrimination complainant does not bar the EEOC from filing an enforcement suit in its own name. He further emphasizes our observation in Gilmer that individuals who agreed to arbitrate their discrimination claims would still be free to file a charge with the EEOC. 500 U. S., at 28. Consistent with these decisions, Ferrer argues, the arbitration clause in his contract with Preston leaves undisturbed the Labor Commissioners independent authority to enforce the TAA. See Brief for Respondent 4448. And so it may. 7 But in proceedings under §1700.44(a), the Labor Commissioner functions not as an advocate advancing a cause before a tribunal authorized to find the facts and apply the law; instead, the Commissioner serves as impartial arbiter. That role is just what the FAA-governed agreement between Ferrer and Preston reserves for the arbitrator. In contrast, in Waffle House and in the Gilmer aside Ferrer quotes, the Court addressed the role of an agency, not as adjudicator but as prosecutor, pursuing an enforcement action in its own name or reviewing a discrimination charge to determine whether to initiate judicial proceedings.
Ferrers final attempt to distinguish Buckeye relies on Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U. S. 468 (1989) . Volt involved a California statute dealing with cases in which [a] party to [an] arbitration agreement is also a party to a pending court action … [involving] a third party [not bound by the arbitration agreement], arising out of the same transaction or series of related transactions. Cal. Civ. Proc. Code Ann. §1281.2(c) (West 2007). To avoid the possibility of conflicting rulings on a common issue of law or fact, the statute gives the Superior Court authority, inter alia, to stay the court proceeding pending the outcome of the arbitration or to stay the arbitration pending the outcome of the court action. Ibid.
Volt Information Sciences and Stanford University were parties to a construction contract containing an arbitration clause. When a dispute arose and Volt demanded arbitration, Stanford sued Volt and two other companies involved in the construction project. Those other companies were not parties to the arbitration agreement; Stanford sought indemnification from them in the event that Volt prevailed against Stanford. At Stanfords request, the Superior Court stayed the arbitration. The California Court of Appeal affirmed the stay order. Volt and Stanford incorporated §1281.2(c) into their agreement, the appeals court held. They did so by stipulating that the contractotherwise silent on the priority of suits drawing in parties not subject to arbitrationwould be governed by California law. Board of Trustees of Leland Stanford Junior Univ. v. Volt Information Sciences, Inc., 240Cal. Rptr. 558, 561 (1987) (officially depublished). Relying on the Court of Appeals interpretation of the contract, we held that the FAA did not bar a stay of arbitration pending the resolution of Stanfords Superior Court suit against Volt and the two companies not bound by the arbitration agreement.
Second, we are guided by our more recent decision in Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U. S. 52 (1995) . Although the contract in Volt provided for arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association, 489 U. S., at 470, n. 1 (internal quotation marks omitted), Volt never argued that incorporation of those rules trumped the choice-of-law clause contained in the contract, see Brief for Appellant, and Reply Brief, in Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., O. T. 1987, No. 871318. Therefore, neither our decision in Volt nor the decision of the California appeals court in that case addressed the import of the contracts incorporation by reference of privately promulgated arbitration rules.
In Mastrobuono, we reached that open question while interpreting a contract with both a New York choice-of-law clause and a clause providing for arbitration in accordance with the rules of the National Association of Securities Dealers (NASD). 514 U. S., at 5859. 8 The best way to harmonize the two clauses, we held, was to read the choice-of-law clause to encompass substantive principles that New York courts would apply, but not to include [New Yorks] special rules limiting the authority of arbitrators. Id., at 6364.
2 Although Ferrer urges us to overrule Southland, he relies on the same arguments we considered and rejected in Allied-Bruce Terminix Cos. v. Dobson, 513 U. S. 265 (1995) . Compare Brief for Respondent 5559, with Brief for Attorney General of Alabama et al. as Amici Curiae in Allied-Bruce Terminix Cos. v. Dobson, O. T. 1993, No. 931001, pp. 1119. Adhering to precedent, we do not take up Ferrers invitation to overrule Southland.
8 The question in Mastrobuono was whether the arbitrator could award punitive damages. See Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U. S. 52, 5354 (1995) . New York law prohibited arbitrators, but not courts, from awarding such damages. Id., at 55. The NASD rules, in contrast, authorized damages and other relief, which, according to a NASD arbitration manual, included punitive damages. Id., at 61 (internal quotation marks omitted). Relying on Volt, respondents argued that the choice-of-law clause incorporated into the parties arbitration agreement New Yorks ban on arbitral awards of punitive damages. Opposing that argument, petitioners successfully urged that the agreement to arbitrate in accordance with the NASD rules controlled.
As I have stated on many previous occasions, I believe that the Federal Arbitration Act (FAA), 9 U. S. C. §1 et seq. (2000 ed. and Supp. V), does not apply to proceedings in state courts. See Allied-Bruce Terminix Cos. v. Dobson, 513 U. S. 265, 285297 (1995) (Thomas, J., dissenting); see also Buckeye Check Cashing, Inc. v. Cardegna, 546 U. S. 440, 449 (2006) (same); Green Tree Financial Corp. v. Bazzle, 539 U. S. 444, 460 (2003) (same); Doctors Associates, Inc. v. Casarotto, 517 U. S. 681, 689 (1996) (same). Thus, in state -court proceedings, the FAA cannot displace a state law that delays arbitration until administrative proceedings are completed. Accordingly, I would affirm the judgment of the Court of Appeals.