Chamber of Commerce of the U.S. v. Bonta
Decision Date | 15 September 2021 |
Docket Number | No. 20-15291,20-15291 |
Citation | 13 F.4th 766 |
Parties | CHAMBER OF COMMERCE OF the UNITED STATES of America ; California Chamber of Commerce; National Retail Federation; California Retailers Association; National Association of Security Companies ; Home Care Association of America; California Association for Health Services at Home, Plaintiffs-Appellees, v. Rob BONTA, in his official capacity as the Attorney General of the State of California; Lilia Garcia-Brower, in her official capacity as the Labor Commissioner of the State of California; Julie A. Su, in her official capacity as the Secretary of the California Labor and Workforce Development Agency; Kevin Richard Kish, in his official capacity as Director of the California Department of Fair Employment and Housing of the State of California, Defendants-Appellants. |
Court | U.S. Court of Appeals — Ninth Circuit |
Chad A. Stegeman (argued), Deputy Attorney General; Michelle M. Mitchell, Supervising Deputy Attorney; Thomas S. Patterson, Senior Assistant Attorney General; Rob Bonta, Attorney General; Office of the Attorney General, San Francisco, California; for Defendants-Appellants.
Andrew J. Pincus (argued), Archis A. Parasharami, and Daniel E. Jones, Mayer Brown LLP, Washington, D.C.; Bruce J. Sarchet and Maurice Baskin, Littler Mendelson PC, Sacramento, California; Donald M. Falk, Mayer Brown LLP, Palo Alto, California; Erika C. Frank, California Chamber of Commerce, Sacramento, California; Steven P. Lehotsky and Jonathan Urick, U.S. Chamber Litigation Center, Washington, D.C.; for Plaintiffs-Appellees.
Cliff Palefsky and Matt Koski, McGuinn Hillsman & Palefsky, San Francisco, California, for Amicus Curiae California Employment Lawyers Association.
Before: Carlos F. Lucero,** William A. Fletcher, and Sandra S. Ikuta, Circuit Judges.
The Federal Reporter is awash with descriptions of "judicial hostility" to arbitration that spurred enactment of the Federal Arbitration Act (FAA). Evolution of this "hostility" is traced not to the particular desires of individual judges but to two doctrines of English common law: ouster (which made illegal any agreement that lessened a statutory grant of judicial jurisdiction) and revocability (which allowed a party to withdraw consent to arbitrate at any point prior to the arbitrator's ruling). These two doctrines were followed for their "antiquity" rather than their "excellence or reason." See U.S. Asphalt Ref. Co. v. Trinidad Lake Petroleum Co. , 222 F. 1006, 1007 (S.D.N.Y. 1915). By the turn of the twentieth century, litigants, lawyers, and judges all agreed that the two doctrines should be sent hence from American jurisprudence.
This goal was achieved by enactment of the FAA, which intended "to make the contracting party live up to his agreement." H.R. Rep. No. 68-96, at 1 (1924). Following enactment of the FAA, parties could "no longer refuse to perform [their] contract when it [became] disadvantageous," ensuring that an arbitration agreement would be "placed upon the same footing as other contracts, where it belongs." Id. In furtherance of this congressional intent, the Court has repeatedly instructed that "the principal purpose of the FAA is to ensure that private arbitration agreements are enforced according to their terms." AT&T Mobility LLC v. Concepcion , 563 U.S. 333, 344, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) (cleaned up). Just as clearly, the Court has emphasized: "The first principle that underscores all of our arbitration decisions is that arbitration is strictly a matter of consent." Lamps Plus, Inc. v. Varela , ––– U.S. ––––, 139 S. Ct. 1407, 1415, 203 L.Ed.2d 636 (2019) (cleaned up). "[T]he FAA does not require parties to arbitrate when they have not agreed to do so." Volt Info. Scis., Inc. v. Bd. of Trustees of Leland Stanford Junior Univ. , 489 U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989).
The jurisprudence surrounding the preemptive scope of the FAA has grown on the precedential trellis of these basic principles. Each time the Supreme Court has clarified the preemptive scope of the FAA, it has done so by ruling on the enforceability or validity of executed agreements to arbitrate, explaining that the FAA does not preempt the field of arbitration. Today we are asked to abandon the framework of FAA preemption of state rules that selectively invalidate or refuse to enforce arbitration agreements, ignore the holding of Volt , and nullify a California law enacted to codify what the enactors of the FAA took as a given: that arbitration is a matter of contract and agreements to arbitrate must be voluntary and consensual. As we read California Labor Code § 432.6, the state of California has chosen to assure that entry into an arbitration agreement by an employer and employee is mutually consensual and to declare that compelling an unwilling party to arbitrate is an unfair labor practice. We are asked by plaintiffs to hold that the FAA requires parties to arbitrate when but one party desires to do so. Our research leads to nothing in the statutory text of the FAA or Supreme Court precedent that authorizes or justifies such a departure from established jurisprudence, and we decline to so rule. Thus, we must reverse the judgment of the district court.
Yet operation of other provisions within the California code renders a violation of § 432.6 a misdemeanor offense and opens an employer to potential civil sanctions. The imposition of civil and criminal sanctions for the act of executing an arbitration agreement directly conflicts with the FAA and such an imposition of sanctions is indeed preempted. We therefore affirm the district court as to the application of Labor Code § 433 and Government Code § 12953 to arbitration agreements covered by § 1 of the FAA.
California Governor Gavin Newsom signed into law California Assembly Bill 51, 2019 Cal. Stats. Ch. 711 (AB 51), on October 10, 2019. Section 1 of AB 51 declares that "it is the policy of this state to ensure that all persons have the full benefit of the rights, forums, and procedures established in the California Fair Employment and Housing Act ... and the Labor Code." AB 51. Pursuant to this policy, AB 51 was enacted with the "purpose of ... ensur[ing] that individuals are not retaliated against for refusing to consent to the waiver of those rights and procedures and to ensure that any contract relating to those rights and procedures be entered into as a matter of voluntary consent, not coercion." Id. Arbitration is not singled out by AB 51. Rather, AB 51 covers a range of waivers, including non-disparagement clauses and non-disclosure agreements.
AB 51 added § 432.6 to the California Labor Code. That section provides:
Cal. Lab. Code § 432.6. Its placement in Article 3 of the Labor Code brings § 432.6 under Labor Code § 433, which states that "[a]ny person violating this article is guilty of a misdemeanor." This, in turn, makes a violation of § 432.6 "punishable by imprisonment in a county jail, not exceeding six months, or by a fine not exceeding one thousand dollars ($1,000), or both." Cal. Lab. Code § 23.
Finally, AB 51 also added § 12953 to the California Government Code. That section provides: "It is an unlawful employment practice for an employer to violate Section 432.6 of the Labor Code." Cal. Gov't Code § 12953. Other provisions within the Government Code create civil sanctions for "unlawful employment practices," including investigation by the Department of Fair Housing and Employment and potential civil litigation brought either by that Department on behalf of an aggrieved individual or, if the Department declines to initiate litigation, by the individual in a private suit. See Cal. Gov't Code §§ 12960 – 12965.
AB 51 was enacted with an effective date of January 1, 2020. Cal. Lab. Code § 432.6(h). On December 9, 2019, Appellees filed a complaint for declaratory and injunctive relief, seeking a declaration that AB 51 was preempted by the FAA and asking the court to preliminarily and permanently enjoin Appellants from enforcing the statute. The same day, Appellees filed a motion for a preliminary injunction. While the injunction motion was pending, Appellees filed a motion for a temporary restraining order, which was granted on December 30, 2019, two days before AB 51 was to take effect.
The trial court conducted a hearing on the motion for...
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