This is the second post in our series “The Supreme Court Preview,” view the first post here.
California state and federal courts have a rocky history with the U.S. Supreme Court, as the highest court in the land has repeatedly reversed the Ninth Circuit and California state courts in deciding cases under the Federal Arbitration Act like AT&T Mobility LLC v. Concepcion, Preston v. Ferrer, and Circuit City Stores, Inc. v. Adams. In what may be a continuation of that trend, the Court has teed up two more cases under the FAA, one from the Ninth Circuit, and one from California state courts, but both involving California’s reluctance to enforce arbitration agreements.
Based on oral argument, the case may turn on the balance the Supreme Court decides to strike between deference to state court interpretation of state court contract principles—which, even in the event of a bad interpretation (as the Justices generally agreed was the case with the California court’s opinion), the Supreme Court is loathe to second-guess—and ensuring that those state court interpretations do not undermine the staunchly pro-arbitration purpose of the FAA. While on its face this case is about class arbitration, the Court’s ruling could make it harder (or easier, for that matter) to use state contract law to fight enforcement of arbitration agreements generally.
MHN argues to the Supreme Court that California law regarding severability has singled out arbitration agreements, routinely ruling that they are unenforceable as a whole based on findings of more than one unlawful provision in those agreements, while applying a far more liberal standard to other types of agreements. Again, the Court’s decision—which, if history holds, is likely to reverse the Ninth Circuit—has the potential to further narrow the state-law grounds on which a party can resist enforcement of an arbitration agreement.