The SCOTUS “Arbitration Quartet” – What You Need to Know


As our readers know, the Supreme Court just concluded a very busy Term that included an unprecedented five arbitration-centric decisions (all of which we have covered in detail).[1] Four of these decisions were released in a fairly compact time period in late May to mid-June 2022 (the fifth case was Badgerow v. Walters, No. 20-1143 (Mar. 31, 2022), where the Court ruled 8-1 that the “look through” doctrine does not apply to actions to confirm or vacate an arbitration award under sections 9 and 10 of the Federal Arbitration Act (“FAA”), even though it does for motions to compel arbitration under section 4.

Specifically, the Supreme Court: 1) on May 23 decided Morgan v. Sundance Inc.No. 21-328; 2) on June 6 decided Southwest Airlines Co. v. SaxonNo. 21-309; 3) on June 13 decided ZF Automotive US, Inc. v. Luxshare, Ltd., No. 21-401; and 4) on June 15 decided in Viking River Cruises, Inc. v. MorianaNo. 20-1573.[2] SCOTUS was evidently setting up another “Steelworkers Trilogy” scenario, similar to when the Court six decades ago simultaneously decided three landmark arbitration cases involving the United Steelworkers. The three cases, United Steelworkers v. American Manufacturing Co., 363 U.S. 564 (1960); United Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593 (1960); and United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574 (1960), were all heard the same week (April 27-28, 1960), and the decisions were all announced seriatim on the same day (June 20, 1960). This feature article aggregates from our past coverage the key things readers need to know about these four decisions we’ve termed the “Arbitration Quartet.”

Unanimous SCOTUS in Sundance: No Prejudice Requirement to Prove Waiver of Arbitration Rights

The Supreme Court on May 23 decided Morgan v. Sundance Inc., No. 21-328ruling unanimously that there is no prejudice requirement under the FAA for a court to find a waiver of arbitration rights.

The Court on November 15 agreed to review Morgan v. Sundance Inc., 992 F.3d 711 (8th Cir. 2021), a case we analyzed in SAA 2021-43 (Nov. 18). In the underlying case, the Eighth Circuit held that a party asserting another had waived its right to arbitrate has to prove prejudice. The Court heard oral argument on March 21 (the transcript is here; audio recording is here).

Case Below and Waiver of Arbitration Rights

Cases involving whether a party has waived its right to compel arbitration typically focus on whether that party participated in litigation and waited too long. The basic elements are whether the offending party: 1) had knowledge of its right to demand arbitration; 2) acted inconsistently with that right; and 3) thereby prejudiced the other party. The case below focused on the third element, with the Eighth Circuit majority holding that Sundance did not wait too long to press its arbitration rights and its conduct had not prejudiced Morgan:

“Utilizing this test, we conclude the district court erred in determining Sundance waived its right to arbitrate because Sundance’s conduct, even if inconsistent with its right to arbitration, did not materially prejudice Morgan.” What drove the Circuit Court’s thinking? “The district court found Morgan was prejudiced by having to respond to Sundance’s motion to dismiss over the eight-month span of litigation. We disagree. Four months of the delay entailed the parties waiting for disposition of Sundance’s motion to dismiss. No discovery was conducted. And, the record lacks any evidence that Morgan would have to duplicate her efforts during arbitration. Instead, most of Morgan’s work focused on the quasi-jurisdictional issue, not the merits of the case. For these reasons, we hold Morgan was not prejudiced by Sundance’s litigation strategy.[] In the absence of a showing of prejudice to Morgan, we conclude Sundance did not waive its contractual right to invoke arbitration.”

Issue Before SCOTUS

The question presented in the August 2021 Certiorari Petition was: “Does the arbitration-specific requirement that the proponent of a contractual waiver defense prove prejudice violate this Court’s instruction that lower courts must ‘place arbitration agreements on an equal footing with other contracts?’ AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011).” The Petition notes that there is a significant split on the issue:

“This Court should grant certiorari to resolve a longstanding circuit split on the question whether a party asserting waiver of the right to arbitrate through inconsistent litigation conduct must prove prejudice, and if so, how much. This question not only divides the federal courts of appeals, but divides federal courts from geographically co-located state courts of last resort.…”

The Oral Argument

The oral argument took place as scheduled with eight Justices participating. As revealed in a Press ReleaseJustice Thomas was out ill. Chief Justice Roberts announced up front before the argument that he would: “participate in consideration and decision of the cases on the basis of the briefs and the transcripts of oral argument.” We had thought the issues were fairly simple as framed in the Petition: is this State rule of law, requiring a finding of prejudice, arbitration-specific and thus preempted by the FAA or does it apply to contracts in general and thus FAA compatible? But, the arguments were anything but simple.

The discussion at times was esoteric (ed: not just our view), with the meanings of waiver, estoppel, forfeiture, and laches being debated. The prejudice requirement was not covered until well into the argument. The debates settled down to whether the outcome was governed by FAA section 3 (“… providing the applicant for the stay [of litigation of an arbitrable matter] is not in default in proceeding with such arbitration”) or section 4 (“… if the jury find that an agreement for arbitration was made in writing and that there is a default in proceeding thereunder, the court shall make an order summarily directing the parties to proceed with the arbitration in accordance with the terms thereof”). At one point, there was a short colloquy about whether the Petition should be dismissed as improvidently granted – just as happened in Henry Schein, Inc. v. Archer and White Sales, Inc.No. 19-963.

Unanimous SCOTUS: No Prejudice Requirement

The unanimous Opinion by Justice Kagan holds that the pro-arbitration policy embodied by the FAA does not require a showing of prejudice:

“Most Courts of Appeals have answered that question [of waiver] by applying a rule of waiver specific to the arbitration context. Usually, a federal court deciding whether a litigant has waived a right does not ask if its actions caused harm. But when the right concerns arbitration, courts have held, a finding of harm is essential: A party can waive its arbitration right by litigating only when its conduct has prejudiced the other side. That special rule, the courts say, derives from the FAA’s ‘policy favoring arbitration.’[] We granted certiorari to decide whether the FAA authorizes federal courts to create such an arbitration-specific procedural rule. We hold it does not.”

FAA Does Not Support An Arbitration-Specific Rule

Justice Kagan adds that an arbitration-specific rule – even one fostering arbitration – is not supported by the FAA:

“[T]he FAA’s ‘policy favoring arbitration’ does not authorize federal courts to invent special, arbitration-preferring procedural rules…. And indeed, the text of the FAA makes clear that courts are not to create arbitration-specific procedural rules like the one we address here. Section 6 of the FAA provides that any application under the statute — including an application to stay litigation or compel arbitration — ‘shall be made and heard in the manner provided by law for the making and hearing of motions’ (unless the statute says otherwise). A directive to a federal court to treat arbitration applications ‘in the manner provided by law’ for all other motions is simply a command to apply the usual federal procedural rules, including any rules relating to a motion’s timeliness. Or put conversely, it is a bar on using custom-made rules, to tilt the playing field in favor of (or against) arbitration. As explained above, the usual federal rule of waiver does not include a prejudice requirement. So Section 6 instructs that prejudice is not a condition of finding that a party, by litigating too long, waived its right to stay litigation or compel arbitration under the FAA.”

Our commentary: *As described above, the briefs and oral argument featured many issues. The Court avoids them: “We decide today a single issue, responsive to the predominant analysis in the Courts of Appeals, rather than to all the arguments the parties have raised…. Our sole holding today is that it may not make up a new procedural rule based on the FAA’s ‘policy favoring arbitration.’” **The May 23 CPR Blog has a nice analysis: Supreme Court Rejects Prejudice Requirement for Defeating a Motion to Compel Arbitration. ***We eschewed predicting the outcome here, opining that the case was “too close to call.”

Unanimous SCOTUS in Southwest Goes with the Flow on “Engaged” in Interstate Commerce

The Supreme Court on June 6 decided Southwest Airlines Co. v. SaxonNo. 21-309ruling unanimously that that the FAA section 1 exemption of “workers engaged in foreign or interstate commerce” includes classes of workers who are part of the flow or stream of interstate commerce, and that there is no FAA requirement that these individuals actually cross state lines.

Case Below: The Extent of the FAA Section 1 Exemption

The Court in December 2021 agreed to review Saxon v. Southwest Airlines Co., 993 F.3d 492 (7th Cir. 2021). FAA section 1 exempts from the Act: “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” As we have reported many times, there is a clear Circuit Court split on whether the FAA section 1 exemption embraces only workers actually moving goods or people in interstate commerce or is to be construed more broadly to cover a class of workers whose jobs are part of the “flow” or “stream” of interstate commerce. In the underlying case, a unanimous Seventh Circuit held:

“The act of loading cargo onto a vehicle to be transported interstate is itself commerce, as that term was understood at the time of the Arbitration Act’s enactment in 1925. Airplane cargo loaders, as a class, are engaged in that commerce, in much the way that seamen and railroad employees were, and Saxon and the ramp supervisors are members of that class. It therefore follows that they are transportation workers whose contracts of employment are exempted from the Arbitration Act.”

Issue Before SCOTUS

The question presented in the August 23 Petition is: “Whether workers who load or unload goods from vehicles that travel in interstate commerce, but do not physically transport such goods themselves, are interstate ‘transportation workers’ exempt from the Federal Arbitration Act.”

The Oral Argument

The oral argument took place March 28Justice Coney Barrett did not participate. While there was no explanation about her absence, we think it was because she authored the Opinion in Wallace v. Grubhub Holdings, Inc., 970 F.3d 798 (7th Cir. 2020). The unanimous Wallace Court had rejected the drivers’ argument that the FAA section 1 carveout covered workers moving goods that had in the past been transported in interstate commerce but who themselves did not regularly move goods or people in interstate commerce. The case was referred to several times during the argument. The oral argument discussion featured repeated references to: drayage; seamen; stevedores; and wharfage. There were also frequent mentions of Circuit City Stores v. Adams,532 U.S. 105 (2001) (FAA section 1 exemption for “workers engaged in interstate commerce” applies only to transportation workers) and New Prime Inc. v. Oliveira, 139 S.Ct. 532 (2019) (FAA section 1 covers independent contractors, not just “employees”). The discussion focused more on the narrow question of airline baggage handlers, and seemed to be saving for another day the broader issue of “last mile” or Uber/Lift drivers (spoiler alert: that turned out to be the case). Based on the questions from the pro-arbitration wing Justices, it seemed to us that a narrow “stream” or “flow” of FAA section 1 engaged in interstate commerce ruling was in the offing (spoiler alert: that turned out to be the case).

Unanimous SCOTUS: We Go with the Flow

The unanimous Opinion in Southwest was authored by Justice Thomas. In an 11-page Opinion, he writes:

“Latrice Saxon works for Southwest Airlines as a ramp supervisor. Her work frequently requires her to load and unload baggage, airmail, and commercial cargo on and off airplanes that travel across the country. The question presented is whether, under §1 of the Federal Arbitration Act, she belongs to a ‘class of workers engaged in foreign or interstate commerce’ that is exempted from the Act’s coverage. We hold that she does.”

The Opinion adds: “Thus, any class of workers directly involved in transporting goods across state or international borders falls within §1’s exemption. Airplane cargo loaders are such a class…. Put another way, transportation workers must be actively ‘engaged in transportation’ of those goods across borders via the channels of foreign or interstate commerce.” But crossing state lines is not required.

Narrow Decision

The Court makes clear that its holding is narrow, declining to adopt arguments proffered by each party based on the ejusdem generis principle (ed: we had to look up that one, too. It means: “where general words or phrases follow a number of specific words or phrases, the general words are specifically construed as limited and apply only to persons or things of the same kind or class as those expressly mentioned”)For example, the Justices reject Saxon’s assertion that “class of workers” includes: “all airline employees who carry out the ‘customary work of the airline, rather than cargo loaders more specifically.” Says the Opinion:

“We therefore reject Saxon’s argument that §1 exempts virtually all employees of major transportation providers.” Likewise, the Court was unpersuaded by Southwest’s argument that: “Only workers who physically move goods or people across foreign or international boundaries—pilots, ship crews, locomotive engineers, and the like—are ‘engaged in foreign or interstate commerce.’” Also, the Justices eschew taking on broader issues: “We recognize that the answer will not always be so plain when the class of workers carries out duties further removed from the channels of interstate commerce or the actual crossing of borders. Compare, e.g., Rittmann v., Inc., 971 F. 3d 904, 915 (CA9 2020) (holding that a class of ‘last leg’ delivery drivers falls within §1’s exemption), with, e.g., Wallace v. Grubhub Holdings, Inc., 970 F. 3d 798, 803 (CA7 2020) (holding that food delivery drivers do not). In any event, we need not address those questions to resolve this case.”

Our commentary: For an excellent analysis of this decision, see Supreme Court Backs Airport Worker, Applies Federal Arbitration Act Sec. 1 Exemption, and Sends Employment Dispute to Court in the June 6 CPR Blog.

ZF Automotive: Yet Another Unanimous Arbitration-Related Decision, This One Holding That Section 1782 Discovery in Foreign Arbitrations Applies Only to Governmental Tribunals

The Supreme Court on June 3 decided ZF Automotive US, Inc. v. Luxshare, Ltd., No. 21-401, ruling unanimously that 28 U.S.C. § 1782(a), which permits litigants to use American courts to obtain discovery in aid of “a foreign or international tribunal,” applies only to governmental fora and does not extend to private commercial arbitral tribunals.

Cases Below: The Extent of the Discovery in Foreign Arbitrations

The Supreme Court in December 2021 granted Certiorari in ZF Automotive, which had been consolidated with AlixPartners LLP v. The Fund for Protection of Investors’ Rights in Foreign States, No. 21-518. The September 2021 Petition in ZF Automotive asserts that the question before the Court:

“is substantively identical to the question presented in Servotronics, Inc. v. Rolls-Royce PLC, No. 20-794 (oral argument originally scheduled for Oct. 5, 2021; case removed from oral argument calendar Sept. 8, 2021): Whether 28 U.S.C. § 1782(a), which permits litigants to invoke the authority of United States courts to render assistance in gathering evidence for use in ‘a foreign or international tribunal,’ encompasses private commercial arbitral tribunals, as the U.S. Courts of Appeals for the Fourth and Sixth Circuits have held, or excludes such tribunals, as the U.S. Courts of Appeals for the Second, Fifth, and Seventh Circuits have held.”

The October 2021 Petition for Certiorari in AlixPartners, states:

“Whereas the arbitration in Servotronics was between two private parties, the arbitration here is between a private party and a foreign state — an application of Section 1782 upon which the United States has expressed ‘particular concern.’ The question presented is: Whether an ad hoc arbitration to resolve a commercial dispute between two parties is a ‘foreign or international tribunal’ under 28 U.S.C. § 1782(a) where the arbitral panel does not exercise any governmental or quasi-governmental authority.”

The Oral Argument: Several Attorneys Involved

The oral argument took place March 23 with all Justices participating. Justice Thomas was out ill, but Chief Justice Roberts again announced up front that he would: “participate in consideration and decision of the cases on the basis of the briefs and the transcripts of oral argument.” The transcript is here and the audio recording is here. As reported in SAA 2022-09 (Mar. 10), the Court’s February 28 Order List addressed oral argument time allocation: “the joint motion of the parties for divided argument and for enlargement of time for oral argument is granted. The motion of the Solicitor General for leave to participate in oral argument as amicus curiae, for divided argument, and for enlargement of time for oral argument is granted” (links added by the Alert). What were the specifics? The now-granted joint motion said: “[T]he parties believe that the overall argument time should be expanded to 80 minutes, with each side receiving 40 minutes. In that scenario, the ZF and AlixPartners petitioners agree that ZF should receive 15 minutes of argument time, AlixPartners should receive 10 minutes of argument time, and the United States should receive 15 minutes of argument time. And the ZF and AlixPartners respondents agree that Luxshare and the Fund should each receive 20 minutes of argument time.” The discussion here, with five attorneys presenting, consumed nearly two hours.

The Oral Argument: A Simpler Analysis

This argument to us was not nearly as esoteric as others in the Quartet, although the terms “comity” and “foreign tribunal” stole the spotlight. We concluded our analysis with a mild but prescient prediction: “The Court seems to be leaning against a more expansive application of section 1782 (just as asserted by the United States).” For a comprehensive “chapter-and-verse” analysis, we recommend that readers peruse these March 23 posts: 1) Supreme Court Hears Arguments on Whether Section 1782 Allows Discovery for Use Before International Arbitration Tribunals, offered in the CPR Blog; and 2) High Court Debates U.S. Discovery for Private Arbitration Abroadappearing in Bloomberg Law.

Unanimous SCOTUS: Section 1782 Limited to Governmental Tribunals

The unanimous Opinion in ZF Automotive was authored by Justice Coney Barrett. In a clear, well-reasoned 17-page Opinion, she writes:

“These consolidated cases require us to decide whether private adjudicatory bodies count as ‘foreign or international tribunals.’ They do not. The statute reaches only governmental or intergovernmental adjudicative bodies, and neither of the arbitral panels involved in these cases fits that bill…. In sum, we hold that §1782 requires a ‘foreign or international tribunal’ to be governmental or intergovernmental. Thus, a ‘foreign tribunal’ is one that exercises governmental authority conferred by a single nation, and an ‘international tribunal’ is one that exercises governmental authority conferred by two or more nations. Private adjudicatory bodies do not fall within §1782.”

Statutory Construction

In another decision citing general and law dictionaries, Justice Coney Barrett parses the verbiage in the statute and concludes that it, along with the FAA, require a narrow application:

“So understood, ‘foreign tribunal’ and ‘international tribunal’ complement one another; the former is a tribunal imbued with governmental authority by one nation, and the latter is a tribunal imbued with governmental authority by multiple nations.[] Section 1782’s focus on governmental and intergovernmental tribunals is confirmed by both the statute’s history and a comparison to the Federal Arbitration Act …. From the start, the statute has been about respecting foreign nations and the governmental and intergovernmental bodies they create.”

“Tension” with FAA

The Opinion also finds that a broader application of section 1782 would create a conflict with the FAA:

“Extending §1782 to include private bodies would also be in significant tension with the FAA, which governs domestic arbitration, because §1782 permits much broader discovery than the FAA allows…. [ed: see below for what we left out here]. Interpreting §1782 to reach private arbitration would therefore create a notable mismatch between foreign and domestic arbitration. And as the Seventh Circuit observed, ‘[i]t’s hard to conjure a rationale for giving parties to private foreign arbitrations such broad access to federal-court discovery assistance in the United States while precluding such discovery assistance for litigants in domestic arbitrations’” (citations omitted; brackets in original).

Involvement of Foreign Government As Party Makes No Difference

That AlixPartners involved a foreign government (Lithuania) as a party made for a more difficult analysis, but in the end, it didn’t matter; the focus is to be on the tribunal:

“None of this forecloses the possibility that sovereigns might imbue an ad hoc arbitration panel with official authority. Governmental and intergovernmental bodies may take many forms, and we do not attempt to prescribe how they should be structured. The point is only that a body does not possess governmental authority just because nations agree in a treaty to submit to arbitration before it. The relevant question is whether the nations intended that the ad hoc panel exercise governmental authority. And here, all indications are that they did not.”

The Bottom Line

“In sum, only a governmental or intergovernmental adjudicative body constitutes a ‘foreign or international tribunal’ under §1782. Such bodies are those that exercise governmental authority conferred by one nation or multiple nations. Neither the private commercial arbitral panel in the first case nor the ad hoc arbitration panel in the second case qualifies.”

Did SCOTUS Just Limit Discovery Under the FAA?

Over the years there have been conflicting lower court holdings on discovery in general under the FAA and prehearing discovery as well. It seems to us the Court in dicta just resolved some open issues. In the “tension with FAA” quote above, Justice Coney Barrett states matter-of-factly: “[T]he FAA permits only the arbitration panel to request discovery, see 9 U. S. C. §7, while district courts can entertain §1782 requests from foreign or international tribunals or any ‘interested person,’ 28 U. S. C. §1782(a). In addition, prearbitration discovery is off the table under the FAA but broadly available under §1782” (emphasis added). Seems pretty clear to us.

Our commentary: For an excellent analysis of this decision, see Supreme Court Bars Discovery Assistance for Private Overseas Arbitration Panels Under U.S. Lawand More on Section 1782: Why the U.S. Supreme Court Says the Law Doesn’t Permit Discovery Requests from International Arbitrations, both in the June 13 CPR Blog.

Viking River: California’s PAGA is Partially Preempted by the FAA

In the second arbitration-related decision of the week, the Court on June 15 held 8-1 in Viking River Cruises, Inc. v. MorianaNo. 20-1573, that California’s Private Attorney General Act (“PAGA”) was in part preempted by the FAA, insofar as PAGA allowed employees to evade bilateral predispute arbitration agreements (“PDAA”). The lone dissenter was Justice Thomas, who held to his long-standing view that the FAA does not apply in state courts.

Case Below: The Extent of the FAA Preemption of State Laws

The Supreme Court on December 15, 2021 granted Certiorari in Viking River Cruises, Inc. v. Moriana, No. 20-1573Specifically, the Court agreed to review Moriana v. Viking River Cruises, Inc., No. B297327 (Cal. Ct. App. 2020), pet. for review den., No. S265257 (Cal. 2020). To review, we have reported many times on Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348, 327 P.3d 129 (Calif. 2014), Cert. den., 135 S.Ct. 1155 (2015), where a divided 4-3 California Supreme Court – complete with partial concurrences and dissents – held that an employee could pursue claims against their employer under the California Private Attorneys General Act, despite the existence of an arbitration agreement waiving such claims (see, for example, SAA 2015-01 and SAAs 2014-41 & -24).

But did the U.S. Supreme Court’s subsequent decision in Epic Systems Corp. v. Lewis, 138 S.Ct. 1612 (2018), holding that class or collective action waivers are enforceable under the FAA, implicitly overrule Iskanian? In the case below, the Court of Appeal held:

“…. Epic’s warning about impermissible devices to get around otherwise valid agreements to individually arbitrate claims notwithstanding, Iskanian remains good law. We therefore reject Viking’s characterization of PAGA claims as a transparent device to preclude individualized arbitration proceedings and follow Iskanian, which instead viewed predispute PAGA waivers precluding PAGA actions in any forum as attempts to exempt employers from responsibility for violations of the Labor Code” (footnote omitted).

Issue Before SCOTUS

The May 2021 Petition in Viking River asked: “Whether the Federal Arbitration Act requires enforcement of a bilateral arbitration agreement providing that an employee cannot raise representative claims, including under PAGA.”

The Oral Argument

With a full complement of Justices, the March 30 argument (the transcript is here; audio recording is here) focused squarely on the preemptive effect of the FAA as defined by Concepcion, Epic Systems, and Lamps Plus, versus California’s right to enforce its labor laws via private attorneys general using PAGA. The Court’s pro-arbitration wing was very quiet, with the bulk of the questions coming from Justices Breyer, Kagan and Sotomayor. Our prescient editorial comment was: “This might just mean that there are enough votes to find PAGA is preempted by the FAA, so the pro-PDAA Justices saw no need to jump in (although Justice Thomas posed his usual question about the applicability of the FAA in State courts).” Justice Sotomayor observed that PAGA was enacted before (ed: in 2004) the decisions in Concepcion, Epic Systems, and Lamps Plus, thus undermining any argument that PAGA was enacted to work around those holdings. Viking’s counsel Paul D. Clement responded that PAGA was moribund before the SCOTUS rulings, and that PAGA use exploded thereafter with 17 such cases now being filed every day. He also raised an interesting point: if PAGA-type laws were important to the states as an effective labor law enforcement mechanism, why did no other states file Amicus Briefs? He described the law as an “outlier” – a point that seemed to resonate with Justice Gorsuch. For a comprehensive “chapter-and-verse” analysis, we recommend that readers peruse these March 30 posts: Adding a Claim, and Avoiding Arbitration: The Supreme Court Reviews California’s Private Attorneys General Actappearing in the CPR Blog; and Supreme Court Weighs Employer’s Challenge to California Labor Law in the LA Times.

SCOTUS Majority: FAA Partially Preempts PAGA

The Opinion at first blush seems murky, starting out with: “ALITO, J., delivered the opinion of the Court, in which BREYER, SOTOMAYOR, KAGAN, and GORSUCH, JJ., joined, in which ROBERTS, C. J., joined as to Parts I and III, and in which KAVANAUGH and BARRETT, JJ., joined as to Part III. SOTOMAYOR, J., filed a concurring opinion. BARRETT, J., filed an opinion concurring in part and concurring in the judgment, in which KAVANAUGH, J., joined, and in which ROBERTS, C. J, joined as to all but the footnote. THOMAS, J., filed a dissenting opinion.” We’ll help readers grasp the core holdings (it’s not as confusing as it first seems), but we encourage readers to read the Opinion and peruse some of the many excellent commentaries and analyses.

The majority Opinion in Viking River was authored by Justice Alito. The Opinion has several parts, with shifting groups of Justices signing on in part. There are also concurrences and as mentioned above, the expected Thomas dissent. But here’s the bottom line on FAA preemption of PAGA: five Justices find that the part of the California statute allowing employees to avoid individual bilateral PDAAs is preempted by the FAA:

“We hold that the FAA preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate. This holding compels reversal in this case.” But PAGA is not completely preempted: “The agreement between Viking and Moriana purported to waive ‘representative’ PAGA claims. Under Iskanian, this provision was invalid if construed as a wholesale waiver of PAGA claims. And under our holding, that aspect of Iskanian is not preempted by the FAA, so the agreement remains invalid insofar as it is interpreted in that manner.”

Eight Justices agreed to this language:

Iskanian’s indivisibility rule effectively coerces parties to opt for a judicial forum rather than ‘forgo[ing] the procedural rigor and appellate review of the courts in order to realize the benefits of private dispute resolution.’ Stolt-Nielsen, 559 U. S., at 685; see also Concepcion, 563 U. S., at 350–351. This result is incompatible with the FAA.”

Our commentary: *The Court noted that California is free to amend PAGA to conform to the Viking River holding. **For two excellent analyses of this decision, see these June 15 blog posts: Supreme Court Holds That The Federal Arbitration Act Requires Enforcement Of Agreements To Arbitrate Individual Claims Under California’s Labor Code Private Attorneys General Act, Gibson Dunn Blog; and Supreme Court Limits California’s PAGA Law on Employment Claims, Preempting It in Part under the Federal Arbitration Act, CPR Blog.


The last time SCOTUS agreed to hear several cases involving arbitration was the 2018-19 Term, when the Court accepted for review: Henry Schein, Inc. v. Archer & White Sales, Inc., No. 17-1272; Lamps Plus v. Varela, No. 17-988; and New Prime, Inc. v. Oliveira, No. 17-340. The four nearly unanimous rulings in the Quartet, by which the Court addressed several long-standing splits on the issues, were a nice break from the usual 5-4 or 6-3 decisions split along ideological lines. There are a bunch of Certiorari Petitions still pending that involve arbitration-related issues. Time will tell if another Quartet is in the offing.



[1] See Friedman, George, After a Lull in 2021, a Busy Year Ahead Arbitration-wise for SCOTUS2021:48 Sec. Arb. Alert 1 (Dec. 23, 2021).

[2] Putting it all together very nicely is CPR, which on June 16 released a half-hour podcast, 2021-2022 SCOTUS Arbitration Wrap-Up.

This article first appeared on the Securities Arbitration Alert Blog, here.


George Friedman

George H. Friedman is the publisher and Editor-in-Chief of the Securities Arbitration Alert, a weekly online publication covering the latest developments in financial services arbitration and mediation. He is also the principal of George H. Friedman Consulting, LLC, providing expert advice on arbitration and mediation in general and the FINRA…

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