Court Opinion

ID: 8981237
Source: CourtListenerOpinion
Date Created: 2022-11-27 11:22:08.701103+00
Date Added: 2024-06-11T17:10:40.034350
License: Public Domain

WIDENER, Circuit Judge,
dissenting:
In my opinion, the majority abandons the proper and appropriate preemption analysis and fails to take account of Virginia’s inherent right to protect her own citizens. Therefore, I respectfully dissent.
The various circumstances under which a federal statute may, by virtue of the supremacy clause, preempt state law are well settled: “when Congress ... expresses a clear intent to preempt state law, when there is outright or actual conflict between federal and state law, where compliance with both federal and state law is in effect physically impossible, where there is implicit in federal law a barrier to state regulation, where Congress has legislated comprehensively, thus occupying an entire field *728of regulation and leaving no room for the States to supplement federal law, or where the state law stands as an obstacle to the accomplishment and execution of the full objectives of Congress.” Louisiana Public Service Comm’n v. FCC, 476 U.S. 355, 368-69, 106 S.Ct. 1890, 1898-99, 90 L.Ed.2d 369 (1986) (citations omitted). It is at once apparent that the preemption varieties just mentioned are not equals, although the preemptive effect is the same if a category applies, but a sliding scale in which a finding of preemption becomes more difficult as the tension between state and federal enactments becomes more obscure.
The category of preemption the majority employs here, the “frustrate the federal policy” theory, 476 U.S. at 369, 106 S.Ct. at 1899, rests at the bottom of this scale because “preemption under a frustration of federal purpose theory is more an exercise of policy choices by a court than strict statutory construction. An independent judgment that federal purposes require preemption comes in the face of congressional silence, both express and implied, on the subject.” Abbot v. American Cyanamid Co., 844 F.2d 1108, 1113 (4th Cir.), cert. denied, 488 U.S. 908, 109 S.Ct. 260, 102 L.Ed.2d 248 (1988). In the face of Congressional silence, “there is a presumption against preemption.” Abbot, 844 F.2d at 1112. Moreover, because statutes that regulate the relationship between dealers and manufacturers in an attempt to equalize the parties’ respective bargaining power are a legitimate exercise of a state’s police powers, Boatland, Inc. v. Brunswick Corp., 558 F.2d 818, 823 (6th Cir.1977), “ ‘we start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.’ ” California v. ARC America Corp., — U.S.-,-, 109 S.Ct. 1661, 1663, 104 L.Ed.2d 86 (1989) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 1152, 91 L.Ed. 1447 (1947)).
Therefore, the appropriate starting point in examining the statute in question is not a “liberal federal policy favoring arbitration agreements,” as the majority would have it. Every federal statute presumably was enacted to further a strong or liberal federal policy in favor of or against something, but that does not lead inexorably to preemption of every state law that touches on the same subject matter. See Pacific Gas & Elec. Co. v. State Energy Resources Conservation & Dev. Comm’n, 461 U.S. 190, 103 S.Ct. 1713, 75 L.Ed.2d 752 (1983) (upholding state moratorium on construction of new nuclear power plants despite federal policy promoting nuclear power); Commonwealth Edison Co. v. Montana, 453 U.S. 609, 101 S.Ct. 2946, 69 L.Ed.2d 884 (1981) (upholding state’s coal severance tax despite federal policy favoring production and use of coal); see also L. Tribe, American Constitutional Law § 6-26, at 488 (1988) (“state laws that merely push against the grain of ‘general expressions of national policy’ in federal statutes will not, for that reason alone, be deemed to be preempted”). Instead, the proper analytical starting point is the presumption, double strength in this case to be sure, against preemption absent a clear and manifest Congressional intent to the contrary.
Applying the preceding principles to the Virginia statute is neither difficult nor lengthy, and requires a different decision than the majority obtains. First, “[t]he FAA contains no express pre-emptive provision, nor does it reflect a congressional intent to occupy the entire field of arbitration.” Volt Information Sciences, Inc. v. Board of Trustees, 489 U.S. 468,-, 109 S.Ct. 1248, 1251, 103 L.Ed.2d 488 (1989). To support a finding of preemption, therefore, the Virginia statute must in some way directly conflict with the FAA.
Because the FAA “[b]y its terms, does not apply until the arbitration clause in question is determined to be part of the contract,” Supak & Sons Mfg. Co. v. Pervel Indus., 593 F.2d 135, 137 (4th Cir.1979), virtually every reported case in which a court has determined that the FAA preempts state law has dealt with the enforceability of otherwise valid arbitration agreements. The Virginia statute in issue deals not with the enforceability of arbitration agreements, however, but with their *729formation. As interpreted by the Commissioner, the statute only precludes Saturn from unilaterally imposing agreements to arbitrate upon its dealers. If a dealer agrees to arbitrate, the Virginia statute is no impediment to the agreement’s enforceability. Because there is no direct conflict between the state statute and the FAA, this should end the inquiry under a proper preemption analysis. Because I believe the majority also errs by failing to recognize the significance of the Dealer’s Day in Court Act (DDCA), 15 U.S.C. §§ 1221-1225, however, I will address that issue.
The majority recognizes that “[a]n exception to federal preemption exists if Congress has overridden the FAA by indicating its intent to preclude waiver of the judicial forum for a particular statutory right.” Op. at 722, n. 2. Although refusing to decide whether DDCA claims may be arbitrated, the majority notes that “the DDCA does not evince clear Congressional intent to override the FAA_” I disagree.
A Congressional intent to preclude waiver of a judicial forum for a particular statutory right “will be deducible from text or legislative history.” Mitsubishi Motors v. Soler Chrysler-Plymouth, 473 U.S. 614, 628, 105 S.Ct. 3346, 3354, 87 L.Ed.2d 444 (1985). The legislative history of the DDCA, written some thirty years after the FAA was enacted in 1925, could not be more clear: “The bill creates a cause of action where none previously existed in that, irrespective of contractual provisions, it grants a right of review in the Federal courts of disputes between automobile manufacturers and their dealers_” H.R.Rep. No. 2850, 84th Cong., 2d Sess., reprinted in 3 U.S.Code Cong. & Ad.News 4596, 4596 (1956) (italics added); see Blenke Brothers Co. v. Ford Motor Co., 217 F.Supp. 459, 463-64 (N.D.Ind.1963) (dealer may pursue DDCA claim despite failing to comply with contractual provision requiring notice to defendant’s Dealer Policy Board).
Perhaps mindful of the DDCA’s legislative history, the majority declines to decide “whether all DDCA claims may be arbitrated.” Instead, the majority invalidates the Virginia statute because it “also preclude^] some waivers of a judicial forum for the enforcement of non-DDCA claims.” In my view, this both mischaracterizes the Virginia statute and understates the significance of the DDCA’s legislative history.
First, as noted earlier, the Virginia statute not only does not preclude waiver of a judicial forum for non-DDCA claims, it does not preclude waiver of a judicial forum for any claim. The statute merely ensures that, if a waiver occurs, the waiver is a voluntary choice on the part of the dealer and is not extracted by the manufacturer as part of a nonnegotiable contract of adhesion.
Second, the DDCA in terms supplies an automobile dealer with an action for the failure of an automobile manufacturer “to act in good faith in performing or complying with any of the terms or provisions of the franchise, or in terminating, canceling, or not renewing the franchise.” 15 U.S.C. § 1222. This broad private action, which could extend to disputes over every aspect of the franchise relationship, was enacted for much the same reasons as the Virginia statute:
Concentration of economic power in the automobile manufacturing industry of the United States has developed to the point where legislation is required to remedy the manifest disparity in the ability of franchised dealers of automotive vehicles to bargain with their manufacturers .... The bill as amended proceeds from the conclusion that in the automobile industry concentration of economic power has increased to the degree that traditional contractual concepts are no longer adequate to protect the automobile dealers under their franchises.
H.R.Rep. No. 2850, 3 U.S.Code Cong. & Ad. News at 4596-97 (1956). Moreover, the DDCA explicitly does not preempt state law on the subject unless there is an express and direct conflict between state and federal statutes. 15 U.S.C. § 1225.
Because Congress has expressed a clear intent to preclude a contractual requirement of waiver of a judicial forum for DDCA claims, the fact that the DDCA *730might not encompass every conceivable claim between manufacturer and dealer is of no consequence. I believe the DDCA is directly relevant not only to whether an exception to preemption exists, but, especially under a “frustrate the federal policy” theory, to whether preemption should apply in the first instance. Thus, the paramount question is revealed as not whether the DDCA immunizes a presumptively suspect state statute, but whether Congress has expressed a clear intent to preempt a presumptively valid state statute. Not only does the FAA fail to manifest such intent, but the DDCA, enacted thirty years after the FAA to advance exactly the same interests as the Virginia statute, appears to go even further than does the state statute. I believe that, if the most that can be said, as here, is that a presumptively valid state statute is in general tension with a federal statute of general application, and yet furthers precisely the same goals as another federal statute dealing with the specific subject in issue, the state enactment should stand until Congress says otherwise.
At bottom, the majority opinion rests on the one case in which a court determined that a state rule prohibiting unilateral imposition of arbitration agreements was preempted by the FAA, Securities Indus. Ass’n v. Connolly, 883 F.2d 1114 (1st Cir.1989). Even if we assume the FAA may preempt state rules of contract formation (an assumption with which it is at once apparent I do not agree),1 Connolly is unpersuasive for at least two reasons.
First, the underlying reasoning of Connolly is its concern with “[ijncreased resort to the courts, and the consequent tumefaction of already-swollen court calendars,” 883 F.2d at 1116, a consideration I think is impermissible in view of Article Ill’s command that Congress establish our jurisdiction. As well, Connolly relegates Massachusetts’ regulation of arbitration agreements for “the public weal” as “self-congratulatory casuistry [that] will not wash.” 883 F.2d at 1120. Such reliance, I suggest, only reveals the weakness of the position.
More to the point, Connolly is a securities case, and securities regulation is one area in which the Supreme Court has addressed the effect of the FAA. See Rodriguez de Quijas v. Shearson/American Express, Inc., — U.S. -, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989); Shearson/Ameri-can Express, Inc. v. McMahon, 482 U.S. 220, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987). Thus, although I disagree with the Connolly court’s analysis, it is at least understandable that, in light of Supreme Court precedent, that court found that “nothing in the Securities Act, the Exchange Act, or the grant of concurrent power to the states to regulate securities manifests a congressional intent to limit or prohibit waiver of a judicial forum ... or to abridge the sweep of the FAA.” Connolly, 883 F.2d at 1121. Even on that basis, however, the result the majority obtains here is not warranted. By contrast, the Virginia statute arises not from a grant of concurrent power, but from the State’s inherent police power, and Congress in the DDCA did manifest an intent to preclude waiver of a judicial forum for claims between automobile dealers and manufacturers.
Virginia has determined, as did Congress, that a manifest disparity in bargaining power exists between automobile dealers and their manufacturers. By precluding Saturn from making arbitration clauses nonnegotiable, Virginia is merely seeking to ensure that arbitration “is a matter of consent, not coercion....”2 Volt Infor*731mation Sciences, Inc. v. Board of Trustees, 489 U.S. 468, -, 109 S.Ct. 1248, 1251, 103 L.Ed.2d 488 (1989). Although Congress may have enacted the FAA to “revers[e] centuries of judicial hostility to arbitration agreements,” Scherk v. Alberto-Culver Co., 417 U.S. 506, 510, 94 S.Ct. 2449, 2452, 41 L.Ed.2d 270 (1974) (footnote omitted), I cannot believe that our federalism will tolerate replacing judicial hostility with judicial advocacy. We sit, after all, to do justice between man and man and citizen and sovereign, not to keep our dockets clear.

. The Eleventh Circuit has adhered to the FAA’s distinction between contract formation and contract enforcement even though the state rule of formation singled out arbitration clauses for somewhat less favorable treatment. See Eassa Properties v. Shearson Lehman Brothers, 851 F.2d 1301, 1304 n. 7 (11th Cir.1988) (upholding provision of Uniform Partnership Act which provided that all partners must agree to submit claim or liability to arbitration). I advocate, of course, that we should agree with Eassa rather than with Connolly.

. I take cold comfort in the majority’s "important" recognition of the fact that "no automobile dealer is required to contract with [Saturn]." Op. at 726, n. 6. No one is required in the legal sense to execute any contract of adhesion, or by definition a contract would not exist, yet that does not prevent courts and legislatures from designating certain contracts as adhesive. *731Moreover, it is equally true that General Motors is not required to sell Saturn automobiles in Virginia, as the Court indicated was the case with Audis or Volkswagens in World Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 287, 100 S.Ct. 559, 562, 62 L.Ed.2d 490 (1980).