Opinion ID: 1196210
Heading Depth: 1
Heading Rank: 4

Heading: under the majority's construction, the clra conflicts with the faa and> is unconstitutional in part.

Text: In enacting the FAA, Congress intended to `revers[e] centuries of judicial hostility to arbitration agreements,' [citation], by `plac[ing] [them] upon the same footing as other contracts.' ( Shearson/American Express Inc. v. McMahon (1987) 482 U.S. 220, 225-226, 107 S.Ct. 2332, 96 L.Ed.2d 185 ( Shearson ).) Section 2 of the FAA provides: A written provision in ... a contract evidencing a transaction involving [interstate] commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. (9 U.S.C. § 2.) This provision requires courts to enforce privately negotiated agreements to arbitrate, like other contracts, in accordance with their terms ( Volt Info. Sciences v. Leland Stanford Jr. U. (1989) 489 U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488 ( Volt )), and mandates enforcement of agreements to arbitrate, even if they include statutory claims. ( Shearson, supra, 482 U.S. at p. 226, 107 S.Ct. 2332.) The `liberal federal policy favoring arbitration agreements,' [citation], manifested by this provision and the [FAA] as a whole, is at bottom a policy guaranteeing the enforcement of private contractual arrangements: the [FAA] simply `creates a body of federal substantive law establishing and regulating the duty to honor an agreement to arbitrate.' [Citation.] ( Mitsubishi Motors v. Soler Chrysler-Plymouth (1985) 473 U.S. 614, 625, 105 S.Ct. 3346, 87 L.Ed.2d 444, fn. omitted ( Mitsubishi ).) The United States Supreme Court has demonstrated the primacy and scope of this duty by repeatedly invalidating, under the supremacy clause of the federal Constitution, state statutes that attempt to limit the enforceability of arbitration agreements. For example, in Perry v. Thomas (1987) 482 U.S. 483, 491, 107 S.Ct. 2520, 96 L.Ed.2d 426 ( Perry ), the court held the FAA preempts a California statute that prohibits enforcement of an agreement to arbitrate an action to collect wages. It reasoned in part that `[s]ection 2 [of the FAA] is a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary. ' ( Perry, supra, 482 U.S. at p. 489, 107 S.Ct. 2520, italics added.) And, in Southland Corp. v. Keating (1984) 465 U.S. 1, 16, 104 S.Ct. 852, 79 L.Ed.2d 1 ( Southland ), the high court invalidated a California statute that we had construed to prohibit arbitration of claims under the California Franchise Investment Law. According to the court, in enacting section 2 of the FAA, Congress intended to foreclose state legislative attempts to undercut the enforceability of arbitration agreements ( Southland, supra, 465 U.S. at p. 16, 104 S.Ct. 852, fn. omitted) and withdrew the power of the states to require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration. ( Id. at p. 10, 104 S.Ct. 852.) The court recently both reaffirmed Southland and heightened its impact by holding that the FAA's purpose and Congress's expansive intent require a broad reading of section 2 that extends the FAA's reach to the limits of congressional power under the commerce clause. ( Allied-Bruce Terminix Cos. v. Dobson (1995) 513 U.S. 265, 268-277, 115 S.Ct. 834, 130 L.Ed.2d 753 ( Allied-Bruce ).) The court then applied this broad reading of the FAA to nullify an Alabama statute that made predispute arbitration agreements invalid and unenforceable. ( Allied-Bruce, supra, 513 U.S. at pp. 268-277, 115 S.Ct. 834; see also Volt, supra, 489 U.S. at p. 478, 109 S.Ct. 1248 [FAA pre-empts state laws which `require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration.'].) In my view, the majority's conclusion that the CLRA prohibits enforcement of an agreement to arbitrate a CLRA injunction request runs afoul of these high court decisions. Under the majority's interpretation, the Legislature, through the CLRA, has singl[ed] out arbitration provisions for suspect status, which Congress, through the FAA, has specifically prohibited. ( Doctor's Associates, Inc. v. Casarotto (1996) 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902.) States may not decide that a contract is fair enough to enforce all its basic terms (price, service, credit), but not fair enough to enforce its arbitration clause. The [FAA] makes any such state policy unlawful, for that kind of policy would place arbitration clauses on an unequal `footing,' directly contrary to the [FAA's] language and Congress' intent. [Citation.] ( Allied-Bruce, supra, 513 U.S. at p. 281,115 S.Ct. 834.) Rejecting this conclusion, the majority maintains the FAA permits the Legislature to prohibit enforcement of an agreement to arbitrate a CLRA injunction request. Although acknowledging that the high court has stated generally that only Congress has this prohibitory power and has recognized an inherent conflict exception to the FAA only in determining whether Congress intended to preclude arbitration, the majority nevertheless asserts that the court has never directly decided whether a [state] legislature may restrict a private arbitration agreement when it inherently conflicts with a public statutory purpose that transcends private interests. (Maj. opn, ante, 90 Cal.Rptr.2d at p. 347, 988 P.2d at p. 78.) [I]t would be perverse, the majority reasons, to extend the policy [of enforcing arbitration agreements] so far as to preclude states from passing legislation the purposes of which make it incompatible with arbitration, or to compel states to permit the vitiation through arbitration of the substantive rights afforded by such legislation. ( Ibid. ) I conclude that binding federal authority forecloses the majority's attempt to base an FAA exception for state laws limiting enforcement of arbitration agreements on the inherent conflict analysis applicable to congressional action. As I have shown above, the high court's pronouncements regarding the preemptive effect of the FAA on such state laws have been broad and emphatic. They do not appear to permit any exception. But we need not speculate on that question, because in Southland the high court declared: We discern only two limitations on the enforceability of arbitration provisions governed by the [FAA]: they must be part of a written maritime contract or a contract `evidencing a transaction involving commerce' and such clauses may be revoked upon `grounds as exist at law or in equity for the revocation of any contract.' We see nothing in the [FAA] indicating that the broad principle of enforceability is subject to any additional limitations under state law.  ( Southland, supra, 465 U.S. at pp. 10-11, 104 S.Ct. 852, italics added, fn. omitted; see also Perry, supra, 482 U.S. at pp. 489-90, 107 S.Ct. 2520 [quoting Southland ].) Absent one of these two exceptions, we must enforce an agreement to arbitrate unless Congress itself has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue. ( Mitsubishi supra, 473 U.S. at p. 628, 105 S.Ct. 3346, italics added.) As the high court recently put it in simple, clear, and unequivocal terms, state courts cannot apply state statutes that invalidate arbitration agreements. ( Allied-Bruce, supra, 513 U.S. at p. 272, 115 S.Ct. 834.) The Supreme Court's view could hardly be clearer. Indeed, Southland belies the majority's assertion that the high court has never directly decided whether a legislature may restrict a private arbitration agreement when it inherently conflicts with a public statutory purpose that transcends private interests. (Maj. opn, ante, 90 Cal. Rptr.2d at p. 347, 988 P.2d at p. 78.) In Keating v. Superior Court (1982) 31 Cal.3d 584, 598-599, 183 Cal.Rptr. 360, 645 P.2d 1192 ( Keating ), we held that the Legislature, through Corporations Code section 31512, had prohibited enforcement of agreements to arbitrate claims under the California Franchise Investment Law. We also held that this statutory prohibition did not violate the FAA's general principle of arbitrability, which we construed to include an exception[] for state statutes expressing a legislative determination that the public interest is best served by maintaining access to the [judicial] remedies which the Legislature has provided. ( Keating, supra, 31 Cal.3d at p. 602, 183 Cal.Rptr. 360, 645 P.2d 1192.) In words reminiscent of the majority's, we reasoned: That Congress intended, through the FAA, to override state policies of that nature seems highly improbable. ( Ibid. ) In Southland, the high court rejected our reading of the FAA and held that, under our interpretation, the California statute directly conflicts with § 2 of the [FAA] and violates the Supremacy Clause. ( Southland, supra, 465 U.S. at p. 10, 104 S.Ct. 852.) Justice Stevens dissented from this part of the majority opinion in Southland, invoking the FAA exception to arbitrability based on `such grounds as exist at law or in equity for the revocation of any contract.' ( Southland, supra, 465 U.S. at p. 18, 104 S.Ct. 852 (cone, and dis. opn. of Stevens, J.).) He reasoned that, because a contract void as contrary to public policy is revocable at law or in equity, this exception leaves room for the implementation of certain substantive state policies that would be undermined by enforcing certain categories of arbitration clauses. ( Ibid. ) More specifically, he argued that, through Corporations Code section 31512, the Legislature had declared an agreement to arbitrate a claim under the Franchise Investment Law to be void as a matter of public policy and that this declaration of state policy [was] entitled to respect. ( Southland supra, 465 U.S. at p. 20, 104 S.Ct. 852 (cone, and dis. opn. of Stevens, J.).) He also asserted that the FAA did not override public policy limits on enforcing arbitration agreements simply because the source of the public policy is a State rather than the Federal Government, and was not `so unyielding as to require enforcement of an agreement to arbitrate a dispute over the application of a regulatory statute which a state legislature ... has decided should be left to judicial enforcement.' ( Id. at p. 21, 104 S.Ct. 852 (cone, and dis. opn. of Stevens, J.).) The Southland majority disagreed with Justice Stevens, explaining: If we accepted this analysis, states could wholly eviscerate congressional intent to place arbitration agreements `upon the same footing as other contracts' [citation] simply by passing statutes such as the Franchise Investment Law. We have rejected this analysis because it is in conflict with the [FAA] and would permit states to override the declared policy requiring enforcement of arbitration agreements. ( Southland, supra, 465 U.S. at p. 17, fn. 11, 104 S.Ct. 852.) Southland thus establishes that the FAA invalidates a state statute that limits enforcement of arbitration agreements even where the state legislature expressly declares that arbitration inherently conflicts with a public statutory purpose that transcends private interests. (Maj. opn, ante, 90 Cal.Rptr.2d at p. 347, 988 P.2d at p. 78.) A fortiori, Southland also establishes that the FAA prohibits a court from refusing to enforce an agreement to arbitrate a CLRA injunction request by inferring, as the majority does, a legislative intent to prohibit arbitration based on a purported inherent conflict with the alleged public purpose of such a request. Southland is significant for another reason; the high court there refused to do precisely what the majority now does, i.e., apply legal principles for determining whether Congress established an FAA exception to validate state laws limiting enforcement of arbitration agreements. In Wilko v. Swan (1953) 346 U.S. 427, 437, 74 S.Ct. 182, 98 L.Ed. 168 ( Wilko ), overruled in Rodriguez de Quijas v. Shearson/Am. Exp. (1989) 490 U.S. 477, 484-486, 109 S.Ct. 1917, 104 L.Ed.2d 526, the Supreme Court concluded that, because the protective provisions of the [federal] Securities Act require the exercise of judicial discretion to fairly assure their effectiveness, ... Congress must have intended to prohibit enforcement of agreements to arbitrate securities claims. In reversing our Keating decision, the high court explained in Southland: The California Supreme Court justified its holding by reference to our conclusion in Wilko .... The analogy is unpersuasive. The question in Wilko was not whether a state legislature could create an exception to § 2 of the [FAA], but rather whether Congress, in subsequently enacting the Securities Act, had in fact created such an exception. ( Southland, supra, 465 U.S. at p. 16, fn. 11, 104 S.Ct. 852.) Thus, contrary to the majority's analysis, the Supreme Court in Southland told us that the legal principles governing the scope and exercise of Congress's authority to establish exceptions to the FAA may not serve as the basis for reading into the FAA an exception for state laws that limit enforcement of arbitration agreements. Finally, I note that federal appellate courts applying the inherent conflict analysis even in its proper context  to congressional conduct  have rejected the public injunction exception the majority now creates. In Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith (D.Mass. 1998) 995 F.Supp. 190, 212, a federal district court held that Congress intended to preclude enforcement of predispute agreements to arbitrate discrimination claims under title VII of the Civil Rights Act of 1964 (42 U.S.C. § 2000e et seq.). In reaching this conclusion, the court stressed the primacy of public rights under title VII, as evidenced by provisions that allow plaintiffs who would ... not be entitled to reinstatement or backpay nevertheless to vindicate the rights of others through seeking declaratory and injunctive relief and punitive damages. (995 F.Supp. at p. 205.) On appeal, the First Circuit Court of Appeals rejected the district court's analysis and conclusion, explaining that the district court [had] overlooked the high court's view that public rights may be enforced through arbitration. ( Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith (1st Cir.1999) 170 F.3d 1, 11, citing Gilmer v. Interstate/Johnson Lane Corp. (1991) 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 ( Gilmer ).) In my view, the majority's analysis suffers from the same analytical error; its holding puts the CLRA in conflict with the FAA's commands and renders the CLRA unconstitutional and unenforceable under the federal supremacy clause to the extent it prohibits arbitration of injunction requests.