July 13, 2015

Tell me if you’ve heard this one…

By Deborah J. La Fetra Senior Attorney

Because the U.S. Supreme Court agrees to hear so few cases every year, cases raising important issues frequently are denied, and denied, and denied, until finally the Court says yes. And so, we have yet another cert petition seeking review of an anti-arbitration decision reflecting California courts’ hostility to the rights of adults to contract for alternate means of dispute resolution. In Zaborowski v. MHN Government Services, Inc., the Ninth Circuit Court of Appeals applied a severability rule created by the California Supreme Court in Armendariz v. Foundation Health Psychcare Services to invalidate an arbitration contract. Severability allows courts to line out provisions of contracts that are determined to be invalid. In California, state statutes specifically authorize courts to sever invalid provisions so long as they do not alter the fundamental nature of the agreement between the parties. Armendariz, however, says that if there is more than one invalid provision, those provisions are deemed to “permeate” the contract, requiring the court to strike it down in its entirety. This rule disproportionately—and adversely—affects arbitration contracts, in violation of the Federal Arbitration Act, which protects the freedom of contract.

Today, PLF filed an amicus brief supporting MHN’s petition for writ of certiorari. We urge the Court to grant the petition because, among other things, this problem is not limited to California and the Ninth Circuit. As a center of economic trade, contracts across the country often provide that California law controls. And California’s hostility to arbitration has considerable potential to influence other states. If the Court fails to address California’s widespread defiance, enabled and expanded by the Ninth Circuit, the rule of law itself suffers. We expect the Court to decide whether to take case shortly after it reconvenes in October.

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