Today in the Community: October 28, 2011
on Oct 28, 2011 at 9:44 am
Today in the Community we discuss Supreme Court clinics. In 2004, Stanford Law School created the first Supreme Court litigation clinic, allowing students to work with experienced Supreme Court practitioners on actual cases before the Court. Since then, a number of other schools have created similar clinics. The clinics have garnered praise for increasing the quality of representation for less affluent parties and leveling the playing field in a range of important areas. At the same time, some have criticized the clinics for inadvisedly taking up cases to the Court despite a significant risk of losing on the merits and creating bad law. In today’s Community topic, we discuss the pros and cons of Supreme Court litigation clinics as well as ideas about how such clinics should select cases and represent their clients.
Disclosure: The author of this post is an instructor in two Supreme Court litigation clinics, and several of the other regular contributors to the blog also play similar roles in Supreme Court Litigation clinics.
Five great comments from yesterday’s discussion on arbitration are below.
Terry Moritz –
CompuCredit Corp. v. Greenwood will it be AT&T II
The Supreme Court, in the landmark decision AT&T Mobility LLC v. Conception, 131 S. Ct. 1740 (2011), struck down barriers to waivers of class action based on state “unconscionability” principles. Given that AT&T Mobility arose in the consumer law context, the decision was particularly controversial because the arbitration agreement was within an adhesive contract that gave the consumer little or no bargaining power. Like AT&T Mobility, CompuCredit involves an arbitration dispute in the consumer law context, which could make the Court’s decision just as significant – and potentially as controversial – as AT&T Mobility. The Court heard oral arguments in CompuCredit on October 11, 2011.
The dispute in CompuCredit arose due to allegations by CompuCredit cardholders that CompuCredit violated the Credit Repair Organization Act (CROA) by failing to include various disclosures in its cardholder agreements as is required by the CROA. The CROA, enacted in 1996, was designed to ensure that consumers are provided with sufficient information to make an informed decision before purchasing credit repair services, and to protect the public from deceptive advertising and business practices by credit repair organizations. 15 U.S.C. 1679(b).
Specifically, the CROA requires, among other things, that credit repair organizations, such as CompuCredit, provide consumers with the following written statement: “You have a right to sue a credit repair organization that violates the Credit Repair Organizations Act.” 15 U.S.C. 1679(c). The CROA also includes an anti-waiver provision, which states that “[a]ny waiver by any consumer of any protection provided by or any right of the consumer under [the CROA] shall be treated as void.” 15 U.S.C. 1679f(a).
The central issue in the litigation became whether or not Congress intended to preclude all claims arising out of the CROA from arbitration. Both the district court and the Ninth Circuit held that the CROA’s anti-waiver and disclosure provisions, when taken together, afford consumers a non-waivable right to sue in court, thus voiding the arbitration clause included in the CompuCredit cardholder agreement. The Third and Eleventh Circuits had previously held that the CROA does not preclude the enforcement of agreements to arbitrate disputes arising under the CROA protection laws. Petitioner Brief at 19, citing, e.g., 7 U.S.C. §26(n)(2), 10 U.S.C. §987(e)(3), 12 U.S.C. §5567(d)(2), 15 U.S.C. §1226(a)(2), 15 U.S.C. §1639c(e)(1), 18 U.S.C. §1514A(e)(2).
Simply put, respondents argue that the phrase “right to sue” affords consumers with a right to sue in court, and that arbitration agreements between consumers and credit repair organizations are, in turn, a violation of the anti-waiver provision of the CROACompuCredit argues that the “right to sue” language in the disclosure provision merely establishes grounds for liability for CROA violations; it does not, however, create an exclusively judicial remedy. The purpose of the phrase “right to sue” in the disclosure provision was merely intended to inform consumers of their right to initiate a legal process to resolve a CROA dispute, which includes arbitration. Petitioner Brief, page 36-37. At oral argument, Justice Ginsburg voiced concerns that the interpretation of the phrase “right to sue” by “an ordinary person not schooled in the law” would mean “a right to sue in court.” In response, CompuCredit reminded the Court that workers in ADEA cases receive a right-to-sue letter, which the Court has previously found to be simply a reference to the worker’s cause of action in the event of discrimination. Oral Argument Transcript, page 5, lines 15-21.
How Might the Court Decide?
Based on the Justices’ focus during the oral arguments, the Court’s decision will likely hinge on whether the Court agrees with CompuCredit’s position that the phrase “right to sue” is synonymous with “cause of action.” In fact, respondent’s attorney conceded that if the statute stated “you have a cause of action,” respondents would lose their argument. Oral Argument Transcript, page 32, lines 1-2. Given the Court’s long-standing preference to enforce agreements to arbitrate federal statutory claims, and the Court’s recent decision in AT&T Mobility to enforce an arbitration agreement in an adhesive consumer contract, it seems more likely than not that the Court will find that the CROA does not bar arbitration agreements.
Jill Gross –
Despite the frequency with which the Court has been deciding FAA cases in the past few terms, many issues are still ripe for decision, particularly those at the “back end” of arbitration (vacatur stage). These include: (1) whether sections of the FAA other than section two apply in state court and thus preempt conflicting state law, such as section ten grounds for vacatur; (2) whether “manifest disregard of the law” survived Hall Street as a valid ground for vacatur within the overall framework of section ten; and (3) whether a party who demonstrates that the high costs of arbitration prevented that party from vindicating his or her statutory rights could be a ground for vacatur.
With respect to the first issue, I have argued previously that state courts “over-preempt” the FAA by applying FAA grounds for vacatur when they should be applying their own states’ grounds. This “overpreemption” exists in other contexts: sections four, twelve and sixteen are examples. The Court needs to clarify whether only section two, as the primary substantive section of the FAA, preempts conflicting state law, or whether other procedural sections of the Act also preempt conflicting state procedure.
As to the last two issues, the Court has severely circumscribed the ability of parties to get relief from the courts for arbitration process failures: if it further limits the “manifest disregard” or “vindicating rights” avenues for relief, arbitration may finally fall into disfavor.
Andrew McBride –
A important and recurring, yet unresolved, arbitration-related issue that could reach the Court in the next few years concerns what a district court may do upon finding an issue arbitrable.
Section 3 of the Federal Arbitration Act (FAA) instructs that, upon finding an issue in litigation arbitrable, a district court “shall . stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement.” 9 U.S.C. § 3. Despite the mandatory language of Section 3 (“shall . stay the trial of the action”), there is a deep split over whether the districts courts have discretion to order dismissal when all claims in the litigation are arbitrable. This is an important issue because Section 16 of the FAA expressly authorizes interlocutory appeals of decisions adverse to arbitration, whereas interlocutory appeals of decisions in favor of arbitration are prohibited. See 9 U.S.C. § 16. In other words, parties seeking to enforce an arbitration have an immediate right of review when a district court declines to refer an issue to arbitration, but if a district court stays an action pending arbitration, a party seeking to avoid arbitration must wait until the arbitration is over to appeal.
This split should be resolved in favor of the courts that interpret Section 3 to require district courts to stay litigation if any or all claims are arbitrable. The text, structure, legislative history, and purpose of the FAA all preclude interpreting Section 3 to afford district courts discretion to dismiss when all claims are arbitrable.
Text. Congress uses the term “shall” when it intends “to impose discretionless obligations.” Lopez v. Davis, 531 U.S. 230, 241 (2001); see also Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 35 (1998) (“[T]he mandatory ‘shall’ … normally creates an obligation impervious to judicial discretion.”). By using the term “shall” in Section 3, Congress imposed just such a discretionless obligation on federal district courts to “stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement,” 9 U.S.C. § 3. See Lloyd v. HOVENSA, LLC, 369 F.3d 263, 269 (3rd Cir. 2004) (“[T]he plain language of § 3 affords a district court no discretion to dismiss a case where one of the parties applies for a stay pending arbitration. The directive that the Court ‘shall’ enter a stay simply cannot be read to say that the Court shall enter a stay in all cases except those in which all claims are arbitrable and the Court finds dismissal to be the preferable approach.”)
Structure. Some have suggested that a district court should be afforded discretion to dismiss when all claims are arbitrable, on the theory that there is nothing left for a district court to do after referring the matter to arbitration. But the structure of the FAA indicates otherwise. Arbitrating parties may return to the district court to “designate and appoint an arbitrator” where there is a dispute regarding the appointment of an arbitrator or the filling of an arbitrator vacancy, 9 U.S.C. § 5; to “compel the attendance” of witnesses who refuse or neglect to obey a summons or to “punish [them] for contempt,” 9 U.S.C. § 7. In addition, after the entry of an arbitral award, the parties may seek relief in the District Court in the form of a judgment confirming the arbitral award or an order vacating or modifying the award. See 9 U.S.C. §§ 9, 10, 11.
Legislative History. In 1998, Congress added what is now 9 U.S.C. § 16 to the FAA (it was originally codified as 9 U.S.C. § 15) “in order to improve the appellate process in the Federal courts of appeals with respect to arbitration.” Under that Section, “interlocutory appeals are provided for when a trial court rejects a contention that a dispute is arbitrable under an agreement of the parties and instead requires the parties to litigate. In contrast, interlocutory appeals are specifically prohibited in new section 15 when the trial court finds that the parties have agreed to arbitrate and that the dispute comes within the arbitration agreement.” H.R. Rep. 100-889. Courts have properly read this section to “limit appeals from orders directing arbitration.” Bushley v. Credit Suisse First Boston, 360 F.3d 1149, 1153 (9th Cir. 2004) (quoting Augustea Impb Et Salvataggi v. Mitsuibishi Corp., 126 F.3d 96, 98 (2d Cir. 1997)). Interpreting Section 3 to require a stay rather than dismissal limits appeals from orders direction arbitration, consistent with the legislative history.
Purpose. The two purposes of the FAA are “enforcement of private agreements and encouragement of efficient and speedy dispute resolution.” AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740, 1749 (2011). “Congress’s clear intent, in the Arbitration Act, [was] to move the parties to an arbitrable dispute out of court and into arbitration as quickly and easily as possible.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Co., 460 U.S. 1, 22 (1983). The best way to vindicate this intent is to require district courts to stay the litigation even when all claims are arbitrable. Staying the litigation prohibits a party trying to avoid arbitration from seeking an immediate appeal that would delay arbitration and thus ensures that a party seeking arbitration will move “into arbitration as quickly and easily as possible.”
Thomas Carbonneau –
Granite Rock Co. v. Int’l Bro. Teamsters is an important case in terms of the doctrine on arbitration. To my knowledge, it is the first case in which the Court acknowledges the unitary character of its decisional law on arbitration. It posits the joinder of the legal principles applying to CBA and FAA arbitration, minimizing—even eliminating—the distinction between the two forms of arbitration. The majority opinion also resolves the issues under consideration by reference to generally applicable principles of arbitration as if a uniform architecture of substantive rules regulates all arbitration matters. The Court substantiates the foregoing development in two footnotes:
footnote 6: “We, like the Court of Appeals, discuss precedents applying the FAA because they employ the same rules of arbitrability that govern labor cases.… Indeed, the rule that arbitration is strictly a matter of consent—and thus that courts must typically decide any questions concerning the formation or scope of an arbitration agreement before ordering parties to comply with it—is the cornerstone of the framework the Court announced in the Steelworkers Trilogy for deciding arbitrability disputes in LMRA cases.…”
footnote 8: “that our labor arbitration precedents apply this rule [the finding of a valid agreement to arbitration precedes the application of the presumption of arbitrability] is hardly surprising. As noted above, … the rule is the foundation for the arbitrability framework this Court announced in the Steelworkers Trilogy.… Our use of the same rules in FAA cases is also unsurprising. The rules are suggested by the statute itself.… [Citation to FAA §§2 and 4.]”.
roxanne friedman –
The fundamental unfairness in the Court’s arbitration jurisprudence is exactly this uniformity. It is just as wrong to treat things that are different the same as it is to treat things which are the same differently.
Labor arbitration exists within a structure of union representation and collective bargaining surrounded with protection of workers’ rights and a duty to bargain in good faith on both sides of table. Commercial arbitration exists within a structure of negotiated contracts between parties with realistic alternatives to the deal. But when one gets to arbitration as a part of employment contracts, franchise agreements, shrink-wrap licensing, terms of use, and adhesion contracts, one is consigning these lopsided agreements to the see-no-evil-hear-no-evil unexaminable world of arbitration.
By extending compulsory arbitration to the field of employment discrimination and by eliminating the class action in arbitration (which it is also doing in the federal courts), the Court is leaving consumers and employees at the mercy of the corporations. Since the Burger Court, the primary tactic of the revanchist wing of the Court has been to cut back on remedies much more than it has been to cut back on rights. The Court is considered pro-business not so much because it always (or even where it counts) supports business interests, but because of the cumulative actual effect of its decisions on the ability of consumers and employees to vindicate those rights which they still retain.
