Document: 465 U.S. 1 104 S.Ct. 852 79 L.Ed.2d SOUTHLAND CORPORATION, et al., Appellantsv.Richard D. KEATING al. No. 82-500. Argued Oct. 4, 1983. Decided Jan. 23, 1984. Syllabus Appellant Southland Corp. (hereafter appellant) is the owner and franchisor of 7-Eleven convenience stores. Appellees are franchisees. Each franchise agreement between appellant appellees contains a clause requiring arbitration any controversy or claim arising out relating to breach thereof. Several filed individual actions against in California Superior Court, alleging fraud, misrepresentation, contract, fiduciary duty, violation disclosure requirements Franchise Investment Law. These were consolidated with subsequent class action by another appellee making substantially same claims. moved compel claims pursuant contract. The Court granted motion as all except those based on Law, did not pass appellees' request for certification. Appeal reversed trial court's refusal under construing require such holding that Law invalidate agreements if it rendered involving commerce unenforceable, would conflict § 2 United States Arbitration Act, which provides "a contract evidencing transaction settle . shall be valid, irrevocable, enforceable, save upon grounds exist at law equity revocation contract." court also directed conduct certification proceedings. Supreme ruling asserted arbitrable, interpreting 31512 Law—which renders void provision purporting bind franchisee waive compliance Law—to judicial consideration brought statute contravene federal Act. remanded case Held: 1. This has jurisdiction 28 U.S.C. 1257(2) decide whether Act pre-empts statute. Cox Broadcasting v. Cohn, 420 469, 95 1029, 43 328 (1975). To delay review state decision denying enforcement an until litigation run its course defeat core purpose On other hand, since does affirmatively appear was "drawn question" grounds, this without resolve question matter 1257(2). Pp. 6-9. 2. Section directly conflicts hence violates Supremacy Clause. 10-16. (a) In enacting Congress declared national policy favoring withdrew power states forum resolution contracting parties agreed arbitration. That resting Congress' authority Commerce Clause, creates body substantive applicable both courts. Moses H. Cone Memorial Hospital Mercury Construction Corp., 460 ----, 103 927, 74 765 (1983). confine Act's scope arbitrations sought enforced courts frustrate what intended broad enactment. 10-14. (b) If Congress, had create procedural rule only have limited contracts "involving commerce." 2's commerce" requirement viewed inexplicable limitation but necessary qualification apply well 14-15. (c) Court's interpretation encourage reward shopping. will attribute intent right enforce yet make dependent particular asserted. Since overwhelming proportion civil country courts, could limit disputes subject -court jurisdiction. creating foreclose legislative attempts undercut enforceability agreements. 15-16. dismissed part; 31 Cal.3d 584, 183 Cal.Rptr. 360, 645 P.2d 1192, part remanded. Mark J. Spooner, Washington, D.C., appellants. John F. Wells, Oakland, Cal., appellees. Chief Justice BURGER delivered opinion Court. We noted probable consider invalidates certain covered Federal Clause impaired when structure imposed process * Corporation Southland's standard each license use registered trademarks, lease sublease store owned leased Southland, inventory financing, assistance advertising merchandising. franchisees operate stores, supply bookkeeping data, pay fixed percentage gross profits. following arbitration: 3 "Any Agreement thereof settled accordance Rules American Association judgment award arbitrator may entered having thereof." 4 Between September 1975 January 1977, several alleging, among things, oral Cal.Corp.Code 31000 seq. (West 1977). answer, one actions, included affirmative defense failure arbitrate. 5 May Keating behalf assertedly includes approximately 800 Keating's principal After various consolidated, petitioned cases, 6 appealed from order insofar excluded petition writ mandamus prohibition arguing should proceed action. 7 109 Cal.App.3d 784, 167 481 (1980). interpreted construed arbitrate.1 Alternatively, concluded 9 (1976), therefore invalid 493-494. determined there no "insurmountable obstacle" conducting classwide basis, issued mandate directing Id., 492. 8 vote 4-2, arbitrable. 1192 (1982). 604, Cal.Rptr., 371-372, P.2d, 1203-1204. postponed pending argument merits. --- 721, 948 reverse dismiss part. II A. 10 Jurisdiction appeal final highest validity challenged sustained law. Here applied made Appellee argues respect "final decree" within meaning 11 Under 482-483, 1039-1040, (1975), judgments finally issue immediately appealable "the party seeking here might prevail [in court] merits nonfederal thus rendering unnecessary where reversal preclusive further relevant cause ." these circumstances, we resolved "if state-court seriously erode policy." 483, S.Ct., 1040. 12 reviewable Broadcasting, supra. Without immediate opportunity result "there remain effect unreviewed State Court" 485, 1041. setting terminate dispute. 13 Finally, accord "seriously Plainly nullify valid private they submit final, binding permits "parties arbitrable dispute [to move] into quickly easily possible." 940, 14 Contracts arbitrate avoided allowing ignore resort Such lead prolonged litigation, very risks parties, arbitration, eliminate. Bremen Zapata Off-Shore Co., 407 1, 12, 92 1907, 1914, 32 513 (1972), fixing 15 "was arm's-length negotiation experienced sophisticated businessmen, absent some compelling countervailing reason honored courts." 16 vital agreement, unrealistic think their negotiations, including monetary terms, consequences figuring prominently calculations." 14, 1915. 17 For us hold preempts B 18 propriety superimposing procedures raises questions. contend that, whether, imposition preempted When address controlled issue, responded permit Civil Procedure inapplicable, "could violate [federal] constitutional guaranty due process."2 required procedures, 19 argued neither nor authorized govern arbitrations. contended inapplicable pointed although provided basis Judicial Council acknowledged incompatibility arbitration." Petition Hearing 23. It opposed Court.3 Nor record show passed contrary Act.4 20 See Bailey Anderson, 326 203, 207, 66 66, 68, 90 L.Ed. (1945). III 21 provides: 22 condition, stipulation person acquiring hereunder void." 23 accordingly refused parties' So 24 25 "A written maritime thereafter transaction, perform whole thereof, writing existing refusal, (1976). 26 mandated 27 discern two limitations provisions governed Act: must "evidencing commerce"5 clauses revoked "grounds see nothing indicating principle additional rests enact rules Prima Paint Flood & Conklin Manufacturing 388 395, 87 1801, 1270 (1967), examined history "is incontestable foundations 'control over interstate admiralty.' " 405, 1806 (quoting H.R.Rep. 96, 68th Cong., 1st Sess. (1924)). Paint, here, contained clause. One alleged committed fraud inducement particular, adjudicated court. held notwithstanding rule, arbitrators courts," id., 400, 1804. relied fashion Clause.6 29 At least 1824 been plenary. Gibbons Ogden, 196, Wheat. (1824). words Marshall, regulate; is, prescribe governed." Ibid. statements exercise clearly implied As Black observed his dissent, exercises normally enforceable U.S., 420, 1814 (Black, J., dissenting). 30 ---- n. 32, 942 reaffirmed our view "creates law" expressly stated implicit i.e., created began District stayed concurrent suit. abused discretion, found showing exceptional circumstances justifying stay recognized presence federal-law issues" major weighing surrender [of jurisdiction]." 942. read underlying arbitrability law: "Federal terms governs either court." 941. Although ambiguities, strong indications mind something more than House Report plainly suggests comprehensive objectives: "The bill enforcible admiralty, (1924) (Emphasis added.) 33 broader can inferred reality less likely problem whose impact confined large significance field commerce. "overcome equity, specifically agreement." S. 4214 Before Subcomm. Senate Comm. Judiciary, 67th 4th (1923) ("Senate Hearing") (remarks Sen. Walsh). accompanying stated: 34 "[t]he need arises jealousy English own survived so lon[g] period became firmly embedded common adopted felt precedent too strongly overturned supra, 1-2 (1924). 35 Surely makes clear contemplated reach unencumbered constraints. Metro Industrial Painting Terminal 287 F.2d 382, 387 (CA2 1961) (Lumbard, Judge, concurring), act assure who desired related expectations undermined judges, legislatures." showed awareness widespread unwillingness agreements, e.g., Hearing, 8, bound laws inadequately providing 36 "technical which, you agree method statute, statute[;] [the statutes] ha[d] do validating arbitrate." 37 problems faced twofold: old hostility toward statutes believe enactment appropriate meet addressing. 38 O'CONNOR "as Post, 25. correct remedy explanation express example, procedure Courts Appeals, Courts, bankruptcy causes See, §§ 2072, 2075, 2076 expect thought transactions call Yet time, 2, 39 urged O'CONNOR, raised beyond suit diversity district court, enforceable.7 given unwilling intent, drawing powers And courts,8 cannot jurisdiction.9 Congressional place "[a]n footing contracts, belongs." 40 courts,10 agreements.11 IV 41 reversed; precludes issues time. latter issues, proceedings inconsistent opinion. 42 ordered. STEVENS, concurring dissenting 44 holds equally I conclusion. O'CONNOR'S demonstrates 1925 enacted essentially nature, am persuaded intervening developments conclusion reached. nevertheless troubled aspect seems trouble none my colleagues. 45 me "clear enforceable." Ante, 15. general prescribed however, exception "such leaves room implementation policies enforcing categories clauses. 46 traditionally occupied deemed unless manifest Congress. Ray Atlantic Richfield 435 151, 157, 98 988, 994, 55 179 (1978); generally, Hamilton, Federalist, 300 (Van Doren Ed.1945). Moreover, even displace authority, "rarely occupies legal completely, totally excluding participation systems states. legislation, whole, conceived drafted ad hoc accomplish objectives. builds relationships established states, altering supplanting them far special purpose." P. Bator, Mishkin, Shapiro, Wechsler, Hart Wechsler's System 470-471 (2d ed. 1973). 47 objective abrogate specific S.Rep. 536, Sess., 2-3 (1924), merely codified rule—either employing prior doctrine revocability indirectly declaring However, conclusion, compelled language concerning means entirely field. Indeed, while understatement say reveals little affected," surely true lack extent decisions superseded, cautious lest excessively encroach policy, Constitution, reserve states." 386 C.J., concurring). 48 textual avoiding encroachment define permissible, judiciary Cf. Textile Workers Lincoln Mills, 353 448, 77 912, 972 (1957). doing so, first recognize 'saving clause' indicates, so." Mfg. 404 (1967); also, existence enunciating necessarily inexorable application uniform differing conditions regardless exert police deem best welfare citizens. Wallis Pan Petroleum 384 63, 69, 86 1301, 1304, 369 (1966); Wilson Omaha Indian Tribe, 442 653, 671-672, 99 2529, 2539-2540, 61 153 (1979); Kimbell Foods, Inc., 440 715, 1448, 59 711 Clearfield Trust Co. States, 318 363, 63 573, 838 (1943). lower generally look regarding questions formation see, Comprehensive Merchandising Cat. Inc. Madison Sales 521 1210 (CA7 1975), long 49 A revocable legislature protections Disclosure provisions, public policy. Given importance relationships, relative disparity bargaining positions franchisee, remedial purposes declaration entitled respect. 50 itself struck similar balance Securities 1933, 77n, find amend Rather, invalidating contexts reconciled Wilko Swan, 346 427, 182, 168 (1953). Repeals implication favored, suggest repeal modify passing Instead, exercised judgment, scrutinizing applicability context legislation inapplicable. cases focused sterile generalization, rather substance nature relationship regulatory scheme. Scherk Alberto-Culver 417 506, 94 2449, 270 (1974), rev'g, 484 611 1973); F.2d, 615-620 (Stevens, Circuit mean irrespective effect. Paramount Famous Lasky 282 30, 51 42, 75 145 (1930) (holding restraint trade). refuse independent simply because source attaches Government. evidence double apply, lightly impute 52 wage cf. Merrill Lynch, Pierce, Fenner Smith Ware, 414 117, 383, 348 (1973), protection franchisees, expressed California's impairing basic Like majority pre-emptive "so unyielding legislature, conformity analogous decided left enforcement." App. Juris. Statement 18a. 53 Thus, most reasoning jurisdictional holdings, respectfully dissent agreement. affirm 54 whom REHNQUIST joins, dissenting. (FAA), "shall contract."1 not, face, identify forums enforcement. FAA deals matters 4. 56 "If proceeding referable ."2 57 specifies aggrieved another's 58 "may Title 28, admiralty manner ."3 Today, takes facial silence declare addition, though spelled opinion, newly-discovered follow specified 3. impelled understandable desire utterly fails congressional FAA. federal, state, 60 (originally "United Act") 1925. demonstrated below, infra, 24-29, exercising dictate "general presented three 1938 Erie Railroad Tompkins, 304 64, 817, 82 1188. denied government solely virtue Article control Eighteen years later Bernhardt Polygraphic 350 198, 76 273, 100 199 (1956). duty outcome-determinative—i.e. "substantive"—and cases. 62 gave rise concern constitutionally law, cases.4 Conklin, 404-405, 1806-1807, addressed concern, court.5 covers affairs, "plainly legislate" area. 1807. Nevertheless, "carefully explicit endorsement embodied scope, sued 731-732 1973).6 Today's occasion determine applies statement (1983), involved proceeding; dictum wholly holding. 64 decides issues. First, rights Second, case, ante, 15-16, 9, invoking 1331. Third, reads using mimic conclusions unquestionably wrong statutory construction; second appears attempt damage done first; third unwise. 65 rarely finds unambiguous FAA's. establishes conclusively derived, believed, largely emphatically believed "procedure." hearings subcommittees told: theory tell how proceed."7 "Whether procedure. ."8 floor Congressman Graham assured fellow members 67 "does involve new provide simple give grants rights, commercial contracts."9 68 month after signed Bar Committee pressed passage wrote: 69 relate [W]hether wherein sought. distinguished courts."10 70 Bernhardt, characterized "substantive," here. But characterize 1956. procedure, courts.11 71 characterizing enough, draftsmen Report, early commentators flatly affect Mr. Cohen, member bill, joint hearings: 72 "Nor said ., infringe provinces prerogatives States. [T]he relates remedies changed enforced. There disposition bludgeon force submission enforcement."12 73 unambiguously "Before [arbitration] essential. declares States."13 indication intend grounded Congress's regulate extends areas. are, indeed, references corresponding powers. More numerous, pre-Erie courts.14 hearings, example: "Congress duties courts."15 Report: properly Whether made. ."16 Plainly, derived flight fancy foregoing "ambiguities" history. accurate entire ambiguity, single sentence cited 12-13. definitively elsewhere 27, throughout rest 78 runs reading today gives implementing refers court[s]," invoked Code. originally enacted, referred, "courts [or States."17 minor amendment 4's phrasing, change section's courts.18 None authoritatively otherwise. bears repeating litigation. before case. surprised today, 11, 12. His took pains point out: 80 judges effect—which leave up air—would flout intention framers Act." 424, 1816 dissenting) (footnotes omitted). 81 Nothing contradicts statement. full precise original intent—it intervention FAA's restrictive focus decision, contrast, glosses careful crafting historical reasons necessary, intended.19 83 like FAA, whatsoever Assuming, contrary, enforce, nonetheless allowed, instance, right. Unfortunately, direct enforced; apparently permissible.20 84 honor federally unreasonably undermine local "[T]he assertion reasonably made, defeated name practice." Brown Western R., 338 294, 299, 105, 108, (1949). direction always permitted reasonable rights. undertake set complex mandatory brief language, minimum allow legislatures chance develop methods Some choose compensatory punitive damages agreement; costs remained willing arbitrate; "validity enforceability" ways. Any approaches vindicate fully consonant background provision.21 85 unelaborated certainly invite flexible many jurisdictions hostile Kulukundis Shipping Amtorg Trading 126 978, 982-984 1942). reflected different doctrines: "revocability," allowed repudiate time arbitrator's "invalidity" "unenforceability," equivalent rules22 ways—through damages, enforcement, sanctions trade associations violated agreements.23 "validity" "enforceability" previously rejected adequately protect treated subjected pro hac vice limitations. Minneapolis St. Louis R. Bombolis, 241 211, 221, 595, 598, 961 (1916). explained Professor Hart, bottomed deeply belief them. differences inescapable governments retain measure independence deciding justice administered. become conspicuous advance calculations outcome, induce undesirable shopping forums, lie sacrifice government. lies government, confident accessible litigants."24 summary, accept majority's disagree articulating discerns remand acted, heretofore, misapprehension determine, newly articulated Compare Missouri ex rel. Southern Mayfield, 340 5, 3, (1950). 88 rejects idea partly unfounded. Because dispute, possible construction faithful intent. controversies incomplete citizenship access possibility complete parties; gain advantage Even resisting initiates opposing invoke promptly secure Cone, 89 Ironically, rectify Swift Tyson, Pet. 865 (1842).25 By laws, cases.26 drafters anticipated adopt sat. deliberately chose approach. hearings,27 goal located drafters' plan maintaining harmony practices compliance, patterned New York's path-breaking statute,28 simultaneously press coordinated legislation. key Uniform Commercial was, accordingly, identical FAA.29 concerns connection distraction withstand scrutiny. ignores carefully devised dealing problems. V 91 adds chapter already colorful 1842 (1842), obstacle FAA; (1938), then (1956), significantly curtailed power. 1967 upheld Admiralty Today discovers enforce. Apparently competent devise protecting discovered right, summarily prescribes nowhere origins, follow. unfaithful unnecessary, and, light antecedents contraction power, inexplicable. worthy alternative today's revisionism goes far. dissent. Supplemental Memorandum Points Authorities Opposition Writs Mandate Prohibition 19-25. "[w]hether enter procedure." (1) State," 3; (2) complicate increase cost, supervision, "considerations [which] militate creation procedures," 22; (3) actions. According appellants, relied, procedures. "[a]nalogous authority" supporting consolidation E.g., Compania Espanola de Petroleos, S.A. Nereus Shipping, S.A., 527 966, 975 cert. denied, 426 936, 96 2650, (1976); re Czarnikow-Rionda 512 F.Supp. 1308, 1309 (SDNY 1981). This, along support conclude authorized: "It unlikely Legislature adopting authorizing proceedings, preclude ordering Cal.3d, 613, 377, 1209. ruled imposing permissible note defining "commerce" "nothing herein employment seamen, railroad employees, workers engaged foreign used note, considered arbitrator. clause, "any hereof," cover quoted above enough 403-404, 406, 1805-1806, 1807 (finding nearly induced fraud). estimated 2% Administrative Office Annual Director (1982) (206,000 filings twelve months ending June 1982, filings); Flango, Advance Report—The Latest Caseload Data, Journal, p. (Winter 1983) (approximately 13,600,000 during comparable period, traffic filings). While federal-question 1331 (1976) 32. "court pending" ordered parties." Ibid.; 24, dissenting); Krauss Bros. Lumber Bossert Sons, 1004, 1006 1933) (L. Hand, J.) contention "largely superfluous." 31, 20. misreads withdraws justified reference (1953), nonbinding 1933. 602, 370, 1202-1203. analogy unpersuasive. subsequently fact exception. STEVENS dissents ground post, 19. agree, course, assert defenses avoid conclude, exists "for contract" view, statute." 21. accepted analysis, eviscerate "upon contracts," analysis override (emphasis added). addresses awards, relevant. Frankfurter precisely suggestion Bernhardt. 208, 279 (Frankfurter, Two circuits problem. Robert Lawrence Devonshire Fabrics, 271 402 1959), 362 909, 682, 618, counsel, 364 801, (1960); Airlines, Louisville Jefferson County Air Bd., 269 811 (CA6 1959). Lawrence, Second announced—in dictum, course—that 407. prepared wholesale Circuit's broadly 407, (Harlan, so. speaks loudly Interstate Disputes, H.R. 646 1005 Joint Subcommittees (hereinafter Hearing) (statement Association). Sell Foreign Commerce, Arbitration, Subcommittee Hearing). effect, York patterned, attack previous year Red Cross Line Fruit 264 109, 274, 582 Brandeis approval effected Cong.Rec. 1931 Trade Application, A.B.A.J. 153, 156 (1925). Cohen Dayton, Va.L.Rev. 265, 275-276 (1926). "substantive." Fed.Rule Civ.Proc. 81; Evid. 1101; Crim.Proc. 54. 39-40 primary Cohen). ("The follows lines applying fields jurisdiction"). Commentators uniformly reached A.B.A. "So present recognizing province 155. 276-277; Baum Pressman, Enforcement Agreements N.Y.U.L.Quart.Rev. 428, 459 (1931). Williston "Inasmuch acts procedural, G. Thompson, Treatise 5368 (Rev. 1938). recent students Note, Harv.L.Rev. 1382 Erie, Farrago Rights, Remedies, Right Remedy, Yale L.J. 847, 863 Scope Arbitration: Problems Federalism, Nw.U.L.Rev. 468, 492 (1963). 13, 1807, (majority opinion); 416-420, 1812-1814 38. 17, 37-38. Immediately "[The FAA] establish inferior power." 156. Numerous shortly passage, recently, statements. 275; 430-431; Harv.L.Rev., 1383; Nw.U.L.Rev., 481. sections natural: action; initiated provision. Phrasing differently sense. 1954, purely clerical change, inserted court" substitute States." Both Reports explained: 'United court' substituted 'court States' because, 1981, 83d 2d (1954); 2498, (1954). history, 3's States" term art unmistakable. "in" "of" Other designations found, 2201 (declaratory judgments); 501; Norris LaGuardia 104, Boys Markets, Retail Clerks Union, 398 235, 247, 1583, 1590, (1970) (Brennan, J.). References together "within" ("Judges every state"); 306; 2370(e)(2); 1738. W. Sturges, Awards 480, 937 (1930). suggests, rare grant construed. answer puzzle all. understanding correct, noted, 8-9, standing alone, superfluous. implicitly incorporates begins, why venue, personal jurisdiction, notice ends? other. L.J., 864-865; 1385; 493. 53-252 (1918); 15-17 (discussing "revocability"); (treating courts' declarations "contrary policy," "invalid," "not parties," "unenforceable," "void"). 1384. 22-24. Relations Colum.L.Rev. 489, 508 567-573. A.B.A.); 275-276; Sturges Murphy, Confusing Matters Relating L. Contemp.Prob. 580, 590 (1952). Line, 276 Fed. 319 1921), aff'd, 218 1924); Lappe Wilcox, 861 (NDNY 1926). 35. tracked "valid, enforceable" A.B.A.Reps. (1922). hoped pattern 28. 1953 reported "quite similar" Kochery, Courts: Corn.L.Q. 74, 76, Ludwig Mowinckels Rederi Dow Chemical N.Y.2d 576, 584-585, 307 N.Y.S.2d 660, 666, 255 N.E.2d 774, 778 (1970).

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