June 3, 2015

Putting the “Supreme” in Supremacy Clause

By Deborah J. La Fetra Senior Attorney

In 2011, the U.S. Supreme Court decided in AT&T Mobility v. Concepcion that California’s Discover Bank rule, which essentially forbade class-action waivers in consumer arbitration contracts, was preempted by the Federal Arbitration Act. Specifically, Concepcion concludes: “Because it ‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress,’ California’s Discover Bank rule is preempted by the FAA.” This Term, in DIRECTV v. Imburgia, the Court will decide what “preempted” means. You may think the answer is obvious: A preempted rule is ineffective, null, void, abrogated, not “good law.” It is, as John Cleese might say, an ex-rule. But the California Court of Appeal held that while preempted, Discover Bank is not dead yet.

When Amy Imburgia sued DirecTV to dispute early termination fees, her service contract explicitly said that any disputes would be resolved in individual (not class-action) arbitration, pursuant to the Federal Arbitration. The California court permitted her class-action lawsuit to continue in court, though. Why? Because a provision in the 2007 agreement says “if . . . the law of your state would find this agreement to dispense with class arbitration procedures unenforceable, the this entire [section] is unenforceable.” The court said that “law of your state” must be interpreted without regard to any preemptive effect of the FAA. A Ninth Circuit decision interpreting this same contract found this argument “nonsensical” because a preempted law—whether a statute or a common law rule—is a nullity; it cannot be “the law of your state” because once it is held preempted, it is not “the law.” PLF file this amicus brief arguing that under the Supremacy Clause, preemption does not merely inflict a flesh wound. Preempted state law must yield completely.

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