Filed 6/27/05
IN THE SUPREME COURT OF CALIFORNIA
DISCOVER BANK,
Petitioner,
S113725
v.
Ct.App. 2/1 B161305
SUPERIOR COURT OF LOS ANGELES, )
Los Angeles County
Respondent;
Super. Ct. No. BC 256167
CHRISTOPHER BOEHR,
Real Party in Interest.
This case concerns the validity of a provision in an arbitration agreement
between Discover Bank and a credit cardholder forbidding classwide arbitration.
The credit cardholder, a California resident, alleges that Discover Bank had a
practice of representing to cardholders that late payment fees would not be
assessed if payment was received by a certain date, whereas in actuality they were
assessed if payment was received after 1:00 p.m. on that date, thereby leading to
damages that were small as to individual consumers but large in the aggregate.
Plaintiff filed a complaint claiming damages for this alleged deceptive practice,
and Discover Bank successfully moved to compel arbitration pursuant to its
arbitration agreement with plaintiff.
1
Plaintiff now seeks to pursue a classwide arbitration, which is well accepted
under California law. (See Keating v. Superior Court (1982) 31 Cal.3d 584, 613-
614 (Keating), overruled on other grounds in Southland Corp. v. Keating (1984)
465 U.S. 1 (Southland).) But plaintiff’s arbitration agreement with Discover Bank
has a clause forbidding classwide arbitration. Moreover, the agreement has a
Delaware choice-of-law provision. Discover Bank argues that Delaware law
allows contracting parties to waive class action remedies. The trial court ruled that
the class arbitration waiver was unconscionable and enforced the arbitration
agreement with the proviso that plaintiff could seek classwide arbitration. The
Court of Appeal, without disputing that such class arbitration waivers may be
unconscionable under California law and without addressing the choice-of-law
issue, nonetheless held that the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et
seq.) preempts the state law rule that class arbitration waivers are unconscionable.
As explained below, we conclude that, at least under some circumstances,
the law in California is that class action waivers in consumer contracts of adhesion
are unenforceable, whether the consumer is being asked to waive the right to class
action litigation or the right to classwide arbitration. We further conclude that the
Court of Appeal is incorrect that the FAA preempts California law in this respect.
Finally, we will remand to the Court of Appeal to decide the choice-of-law issue.
I. FACTUAL AND PROCEDURAL BACKGROUND
The following undisputed facts are largely drawn from the Court of Appeal
opinion. Plaintiff Christopher Boehr obtained a credit card from defendant
Discover Bank in April 1986. The Discover Bank cardholder agreement
(agreement) governing plaintiff’s credit card account contained a choice-of-law
clause providing for the application of Delaware and federal law.
2
When plaintiff’s credit card was issued, the agreement did not contain an
arbitration clause. Discover Bank subsequently added the arbitration clause in
July 1999, pursuant to a change-of-terms provision in the agreement. Relying on
the change-of-terms provision, Discover Bank added the arbitration clause by
sending to its existing cardholders (including plaintiff) a notice that stated in
relevant part: “NOTICE OF AMENDMENT . . . WE ARE ADDING A NEW
ARBITRATION SECTION WHICH PROVIDES THAT IN THE EVENT YOU
OR WE ELECT TO RESOLVE ANY CLAIM OR DISPUTE BETWEEN US BY
ARBITRATION, NEITHER YOU NOR WE SHALL HAVE THE RIGHT TO
LITIGATE THAT CLAIM IN COURT OR TO HAVE A JURY TRIAL ON
THAT CLAIM. THIS ARBITRATION SECTION WILL NOT APPLY TO
LAWSUITS FILED BEFORE THE EFFECTIVE DATE.”
In addition, the arbitration clause precluded both sides from participating in
classwide arbitration, consolidating claims, or arbitrating claims as a
representative or in a private attorney general capacity: “. . . NEITHER YOU
NOR WE SHALL BE ENTITLED TO JOIN OR CONSOLIDATE CLAIMS IN
ARBITRATION BY OR AGAINST OTHER CARDMEMBERS WITH
RESPECT TO OTHER ACCOUNTS, OR ARBITRATE ANY CLAIM AS A
REPRESENTATIVE OR MEMBER OF A CLASS OR IN A PRIVATE
ATTORNEY GENERAL CAPACITY.”
The arbitration agreement also stated that the FAA would govern the
agreement: “Your Account involves interstate commerce, and this provision shall
be governed by the Federal Arbitration Act (FAA).” “The arbitrator shall follow
applicable substantive law to the extent consistent with the FAA and applicable
statutes of limitations and shall honor claims of privilege recognized at law.”
3
Existing cardholders were notified that if they did not wish to accept the new
arbitration clause, they must notify Discover Bank of their objections and cease
using their accounts. Their continued use of an account would be deemed to
constitute acceptance of the new terms. Plaintiff did not notify Discover Bank of
any objection to the arbitration clause or cease using his account before the stated
deadline.
On August 15, 2001, Boehr filed a putative class action complaint in
superior court against Discover Bank. Plaintiff alleged two causes of action ⎯
breach of contract and violation of the Delaware Consumer Fraud Act (Del. Code
Ann., tit. 6, §§ 2511-2527). The latter act in part prohibits misrepresentations “of
any material fact with intent that others rely upon such concealment, suppression
or omission in connection with the sale, lease or advertisement of any
merchandise.” (Id., § 2513.) He alleged that Discover Bank breached its
cardholder agreement by imposing a late fee of approximately $29 on payments
that were received on the payment due date, but after Discover Bank’s undisclosed
1:00 p.m. “cut-off time.” Discover Bank also allegedly imposed a periodic
finance charge (thereby disallowing a grace period) on new purchases when
payments were received on the payment due date, but after 1:00 p.m. The
complaint acknowledged that the contract with Discover Bank provided that the
contract was “governed by federal law and the law of Delaware.” Plaintiff
alleged, however, that “this choice of law provision applies only to plaintiff’s
substantive claims and not to other issues related to the contract, which plaintiff
contends are governed by California or other applicable law.”
Discover Bank moved to compel arbitration of plaintiff’s claim on an
individual basis and to dismiss the class action pursuant to the arbitration
agreement’s class action waiver.
4
Plaintiff opposed the motion, contending among other things that the class
action waiver was unconscionable and unenforceable under California law.1
Discover Bank, on the other hand, argued that the FAA requires the enforcement
of the express provisions of an arbitration clause, including class action waivers.
Discover Bank contended that under section 2 of the FAA, arbitration agreements
should not be singled out for suspect status under state laws applicable only to
arbitration provisions.
The trial court initially granted Discover Bank’s motion in its entirety under
Delaware law. After Discover Bank’s motion to compel arbitration was granted,
the Fourth District Court of Appeal decided Szetela v. Discover Bank (2002) 97
Cal.App.4th 1094 (Szetela), which held, for reasons explained below, that a
virtually identical class action waiver was unconscionable. Plaintiff, citing
Szetela, moved for reconsideration of that portion of the order enforcing the class
action waiver.
The lower court found Szetela constituted new and controlling authority for
the proposition that, under California law, an arbitration class action waiver is
unconscionable and, thus, unenforceable. The trial court further conducted a
choice-of-law analysis and concluded that enforcing the class action waiver under
Delaware law would violate a fundamental public policy under California law as
articulated in Szetela. Upon determining it would be proper to sever the class
1
Plaintiff also contended below that the unilateral addition of the arbitration
clause was unconscionable under California law. (See Badie v. Bank of America
(1998) 67 Cal.App.4th 779.) That contention was rejected by the trial court and
the Court of Appeal, and the issue was not raised in the petition for review.
Accordingly, we do not address the issue and omit most of the discussion of the
proceedings pertaining to the issue in the courts below from our statement of facts.
5
action waiver clause from the rest of the arbitration agreement, the trial court
struck the class action waiver clause from the agreement, ordered plaintiff to
arbitrate his claims individually, and left open the possibility that plaintiff may
succeed in certifying an arbitration class under California law.
After the lower court granted plaintiff’s motion for reconsideration,
Discover Bank filed a writ petition seeking reinstatement of the lower court’s
original order enforcing the arbitration clause in its entirety by compelling plaintiff
to arbitrate on an individual basis and precluding him from participating in class
litigation or class arbitration. The Court of Appeal issued an order to show cause.
The Court of Appeal granted Discover Bank’s writ. It did not take issue
with the premise that class action waivers are unenforceable, at least under some
circumstances, under California law and that this rule could override the Delaware
choice-of-law provision. But the Court of Appeal held, for reasons elaborated
below, that any California rule prohibiting class action waivers was preempted by
the FAA, and that Szetela had failed to adequately analyze the federal preemption
issue. It therefore upheld the Discover Bank class action waiver. We granted
review.
II. DISCUSSION
A. Class Action Law Suits and Class Action Arbitration
Before addressing the questions at issue in this case, we first consider the
justifications for class action lawsuits. These justifications were set forth in
Justice Mosk’s oft-quoted majority opinion in Vasquez v. Superior Court (1971) 4
Cal.3d 800, 808 (Vasquez): “Frequently numerous consumers are exposed to the
same dubious practice by the same seller so that proof of the prevalence of the
practice as to one consumer would provide proof for all. Individual actions by
each of the defrauded consumers is often impracticable because the amount of
6
individual recovery would be insufficient to justify bringing a separate action; thus
an unscrupulous seller retains the benefits of its wrongful conduct. A class action
by consumers produces several salutary by-products, including a therapeutic effect
upon those sellers who indulge in fraudulent practices, aid to legitimate business
enterprises by curtailing illegitimate competition, and avoidance to the judicial
process of the burden of multiple litigation involving identical claims. The benefit
to the parties and the courts would, in many circumstances, be substantial.”
We quoted much of the above language with approval almost 30 years later
in Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 445 (Linder). We also quoted
with approval Justice Tobriner’s concurring opinion in Blue Chip Stamps v.
Superior Court (1976) 18 Cal.3d 381, 387. In the latter case, this court rejected a
class action certification against a trading stamp company that allegedly had
collected excess taxes, but had given over the excess tax collected to the public
treasury and had discontinued the practice before the suit was filed. “Although the
majority in Blue Chip Stamps placed utmost significance on the small amount of
potential individual recovery (18 Cal.3d at pp. 385-386), Justice Tobriner’s
separate opinion effectively clarified that trial courts remain under the obligation
to consider ‘the role of the class action in deterring and redressing wrongdoing.’
(18 Cal.3d at p. 387 (conc. opn. of Tobriner, J.).) Invoking settled principles,
Justice Tobriner emphasized: ‘A company which wrongfully exacts a dollar from
each of millions of customers will reap a handsome profit; the class action is often
the only effective way to halt and redress such exploitation. [Citations.] The
problems which arise in the management of a class action involving numerous
small claims do not justify a judicial policy that would permit the defendant to
retain the benefits of its wrongful conduct and to continue that conduct with
impunity.’ ” (Linder, supra, 23 Cal.4th at pp. 445-446.)
7
These same concerns were acknowledged by the United States Supreme
Court: “ ‘The policy at the very core of the class action mechanism is to overcome
the problem that small recoveries do not provide the incentive for any individual
to bring a solo action prosecuting his or her rights. A class action solves this
problem by aggregating the relatively paltry potential recoveries into something
worth someone’s (usually an attorney’s) labor.’ ” (Amchem Products, Inc. v.
Windsor (1997) 521 U.S. 591, 617.)
It is this important role of class action remedies in California law that led
this court to devise the hybrid procedure of classwide arbitration in Keating,
supra, 31 Cal.3d 584. In that case, plaintiff 7-Eleven franchisors sought to
invalidate an arbitration agreement between them and Southland Corporation and
proceed with class action litigation to redress Southland’s alleged systemic
misconduct. This court held that the arbitration agreement was enforceable for
most of the claims. In considering the impact that enforcement of the arbitration
agreement would have on class action claims, the Keating court stated: “This court
has repeatedly emphasized the importance of the class action device for
vindicating rights asserted by large groups of persons. We have observed that the
class suit ‘ “both eliminates the possibility of repetitious litigation and provides
small claimants with a method of obtaining redress for claims which would
otherwise be too small to warrant individual litigation. [Citation.]” ’ [Citation.]
Denial of a class action in cases where it is appropriate may have the effect of
allowing an unscrupulous wrongdoer to ‘retain[] the benefits of its wrongful
conduct.’ [Citation.] [Moreover,] ‘[c]ontroversies involving widely used
contracts of adhesion present ideal cases for class adjudication; the contracts are
uniform, the same principles of interpretation apply to each contract, and all
members of the class will share a common interest in the interpretation of an
8
agreement to which each is a party.’ ” (Keating, supra, 31 Cal.3d at p. 609, fn.
omitted.)
The
Keating court recognized that “[w]ithout doubt a judicially ordered
classwide arbitration would entail a greater degree of judicial involvement than is
normally associated with arbitration, ideally ‘ “a complete proceeding, without
resort to court facilities.” ’ [Citation.] The court would have to make initial
determinations regarding certification and notice to the class, and if classwide
arbitration proceeds it may be called upon to exercise a measure of external
supervision in order to safeguard the rights of absent class members to adequate
representation and in the event of dismissal or settlement. A good deal of care,
and ingenuity, would be required to avoid judicial intrusion upon the merits of the
dispute, or upon the conduct of the proceedings themselves and to minimize
complexity, costs, or delay. [Citation.] [¶] An adhesion contract is not a normal
arbitration setting, however, and what is at stake is not some abstract institutional
interest but the interests of the affected parties.” (Keating, supra, 31 Cal.3d at p.
613.) Keating’s endorsement of classwide arbitration has been echoed by
subsequent Court of Appeal decisions. (See, e.g., Sanders v. Kinko’s, Inc. (2002)
99 Cal.App.4th 1106; Blue Cross of California v. Superior Court (1998) 67
Cal.App.4th 42.)
B. The Enforceability of Class Action Waivers
Keating judicially authorized classwide arbitration in a case in which the
arbitration agreement at issue was silent on the matter. It did not answer directly
the question whether a class action waiver may be unenforceable as contrary to
public policy or unconscionable. Recent cases have addressed that question.
First, the Court of Appeal discussed the validity of a contractual class action
waiver outside the arbitration context in America Online, Inc. v. Superior Court
9
(2001) 90 Cal.App.4th 1 (AOL). Several former AOL subscribers alleged that
AOL had continued to debit their credit cards for monthly service fees after their
subscriptions had been canceled. (Id. at p. 5.) The plaintiffs filed a class action
lawsuit alleging violation of the Consumers Legal Remedies Act (CLRA) (Civ.
Code, § 1750 et seq.), the Unfair Business Practices Act and several common law
causes of action. The subscription contracts contained Virginia forum selection
and choice-of-law provisions. Because Virginia law did not permit consumer
class action lawsuits, those provisions were the “functional equivalent” of a waiver
of class action lawsuits. (Ibid.)
The
AOL court held the forum selection and choice-of-law provisions to be
unenforceable. As to the latter, the court stated: “ ‘While “California does not
have any public policy against a choice of law provision, where it is otherwise
appropriate” [citation] and “choice of law provisions are usually respected by
California courts . . .” [citation] “an agreement designating [a foreign] law will not
be given effect if it would violate a strong California public policy . . . [or] ‘result
in an evasion of . . . a statute of the forum protecting its citizens.’ ” [Citation.]’ ”
(AOL, supra, 90 Cal.App.4th at p. 13, quoting Hall v. Superior Court (1983) 150
Cal.App.3d 411, 416-417; see also Nedlloyd Lines B.V. v. Superior Court (1992) 3
Cal.4th 459, 466 (Nedlloyd) [an arm’s length choice-of-law provision between
commercial entities will not be enforced if it violates a fundamental California
public policy and California has materially greater interests than the chosen state].)
The
AOL court found in the CLRA a statute that overrode the choice-of-law
provision. The court noted that the statute contained an antiwaiver provision,
Civil Code section 1751, which states: “Any waiver by a consumer of the
provisions of this title is contrary to public policy and shall be unenforceable and
void.” The court reasoned that following Virginia law would result in a waiver of
10
the CLRA in light of the fact that the equivalent Virginia consumer protection
statute, the Virginia Consumer Protection Act of 1977 (Va. Code Ann. § 59.1-
196), was significantly weaker. (AOL, supra, 90 Cal.App.4th at pp. 15-16.)
Among the most important differences between the two statutes was the lack of a
provision permitting class action relief in the Virginia statute. (Id. at p. 17.) After
quoting the passage in Vasquez, supra, 4 Cal.3d at page 808, regarding the
importance of class actions in vindicating consumer rights quoted above (ante, at
pp. 6-7), the court stated: “That this view has endured over the last 30 years is of
little surprise given the importance class action consumer litigation has come to
play in this state. In light of that history, we cannot accept AOL’s assertion that
the elimination of class actions for consumer remedies if the forum selection
clause is enforced is a matter of insubstantial moment. The unavailability of class
action relief in this context is sufficient in and by itself to preclude enforcement of
the . . . forum selection clause.” (AOL, supra, 90 Cal.App.4th at pp. 17-18, fn.
omitted.)
In
Szetela, supra, 97 Cal.App.4th at page 1097, the court considered a class
arbitration waiver. Plaintiff was a member of a class of credit cardholders seeking
action against Discover Bank for improperly charging fees for exceeding their
credit limits and imposing other penalties. He sued for breach of contract, breach
of the covenant of good faith and fair dealing, fraudulent or negligent
misrepresentation, and deceptive business practices. The arbitration clause and
class arbitration waiver were very similar to those at issue in the present case. The
trial court granted Discover Bank’s motion for arbitration. Plaintiff recovered $29
in an individual arbitration and then appealed the trial court order compelling
arbitration.
11
The court held that the class arbitration waiver was unenforceable. It first
recognized that unconscionability was one reason to refuse to enforce an
arbitration waiver. (Szetela, supra, 97 Cal.App.4th at p. 1099.) It found
procedural unconscionability in the adhesive nature of the contract. (Id. at
p. 1100.) The court also found substantive unconscionability in the imposition of
a one-sided and oppressive class action waiver provision. “This provision is
clearly meant to prevent customers, such as Szetela and those he seeks to
represent, from seeking redress for relatively small amounts of money, such as the
$29 sought by Szetela. Fully aware that few customers will go to the time and
trouble of suing in small claims court, Discover has instead sought to create for
itself virtual immunity from class or representative actions despite their potential
merit, while suffering no similar detriment to its own rights. [¶] . . . The clause is
not only harsh and unfair to Discover customers who might be owed a relatively
small sum of money, but it also serves as a disincentive for Discover to avoid the
type of conduct that might lead to class action litigation in the first place. By
imposing this clause on its customers, Discover has essentially granted itself a
license to push the boundaries of good business practices to their furthest limits,
fully aware that relatively few, if any, customers will seek legal remedies, and that
any remedies obtained will only pertain to that single customer without collateral
estoppel effect. The potential for millions of customers to be overcharged small
amounts without an effective method of redress cannot be ignored. Therefore, the
provision violates fundamental notions of fairness. [¶] . . . This is not only
substantively unconscionable, it violates public policy by granting Discover a ‘get
out of jail free’ card while compromising important consumer rights.” (Szetela,
supra, 97 Cal.App.4th at p. 1101; see also Ting v. AT&T (9th Cir. 2003) 319 F.3d
1126, 1151 [concluding class action waivers in CLRA claim violated California
12
law, relying in part on Szetela]; Ingle v. Circuit City Stores, Inc. (9th Cir. 2003)
328 F.3d 1165, 1176 [same].)
Turning to the present case, we note that plaintiff does not plead a CLRA
cause of action and so does not invoke its antiwaiver provision2; nor does he seek
recovery under any other California statute as to which a class action remedy is
essential. (See Armendariz v. Foundation Health Psychcare Services, Inc. (2000)
24 Cal.4th 83, 100-101 (Armendariz).) Rather, plaintiff contends that class action
or arbitration waivers in consumer contracts, and in this particular contract, should
be invalidated as unconscionable under California law.
“To briefly recapitulate the principles of unconscionability, the doctrine has
‘ “both a ‘procedural’ and a ‘substantive’ element,” the former focusing on
“ ‘oppression’ ” or “ ‘surprise’ ” due to unequal bargaining power, the latter on
“ ‘overly harsh’ ” ‘or “ ‘one-sided’ ” results.’ [Citation.] The procedural element
of an unconscionable contract generally takes the form of a contract of adhesion,
‘ “which, imposed and drafted by the party of superior bargaining strength,
relegates to the subscribing party only the opportunity to adhere to the contract or
reject it.” ’ . . . [¶] Substantively unconscionable terms may take various forms,
but may generally be described as unfairly one-sided.” (Little v. Auto Stiegler,
Inc. (2003) 29 Cal.4th 1064, 1071 (Little), cert. den. sub nom. Auto Stiegler, Inc. v.
Little (2003) 540 U.S. 818.)
We agree that at least some class action waivers in consumer contracts are
unconscionable under California law. First, when, a consumer is given an
2
Plaintiff’s counsel clarified at oral argument that plaintiff did not plead a
CLRA cause of action because he would be ultimately seeking to certify a national
class, and therefore did not wish to rely on a California statute.
13
amendment to its cardholder agreement in the form of a “bill stuffer” that he
would be deemed to accept if he did not close his account, an element of
procedural unconscionability is present. (Szetela, supra, 97 Cal.App.4th at p.
1100.) Moreover, although adhesive contracts are generally enforced (Graham v.
Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 817-818), class action waivers found in
such contracts may also be substantively unconscionable inasmuch as they may
operate effectively as exculpatory contract clauses that are contrary to public
policy. As stated in Civil Code section 1668: “All contracts which have for their
object, directly or indirectly, to exempt anyone from responsibility for his own
fraud, or willful injury to the person or property of another, or violation of law,
whether willful or negligent, are against the policy of the law.” (Italics added.)
Class action and arbitration waivers are not, in the abstract, exculpatory
clauses. But because, as discussed above, damages in consumer cases are often
small and because “ ‘[a] company which wrongfully exacts a dollar from each of
millions of customers will reap a handsome profit’ ” (Linder, supra, 23 Cal.4th at
p. 446), “ ‘the class action is often the only effective way to halt and redress such
exploitation.’ ” (Ibid.) Moreover, such class action or arbitration waivers are
indisputably one-sided. “Although styled as a mutual prohibition on
representative or class actions, it is difficult to envision the circumstances under
which the provision might negatively impact Discover [Bank], because credit card
companies typically do not sue their customers in class-action lawsuits.” (Szetela,
supra, 97 Cal.App.4th at p. 1101.) Such one-sided, exculpatory contracts in a
contract of adhesion, at least to the extent they operate to insulate a party from
liability that otherwise would be imposed under California law, are generally
unconscionable.
14
We acknowledge that other courts disagree. Some courts have viewed class
actions or arbitrations as a merely procedural right, the waiver of which is not
unconscionable. (See, e.g., Strand v. U.S. Bank National Association ND (N.D.
2005) 693 N.W.2d 918, 926 (Strand); Blaz v. Belfer (5th Cir. 2004) 368 F.3d 501,
504-505; Johnson v. West Suburban Bank (3d Cir. 2000) 225 F.3d 366, 369;
Champ v. Single Trading Co, Inc. (1995) 55 F.3d 269, 277; but see Leonard v.
Terminex Intern. Co. L.P. (Ala. 2002) 854 So.2d 529, 538 [class action waiver
together with limitation of damages clause in adhesive consumer arbitration
agreement deprives plaintiffs of a “meaningful remedy” and is therefore
unconscionable]; State v. Berger (W.Va. 2002) 567 S.E.2d 265, 278 [holding
contract provision limiting class action rights unconscionable]; Powertel v. Bexley
(Fla.Dist.Ct.App. 1999) 743 So.2d 570, 576 [same].) But as the above cited cases
of this court have continually affirmed, class actions and arbitrations are,
particularly in the consumer context, often inextricably linked to the vindication of
substantive rights. Affixing the “procedural” label on such devices understates
their importance and is not helpful in resolving the unconscionability issue. 3
3
Discover Bank argues that Washington Mutual Bank v. Superior Court
(2001) 24 Cal.4th 906 (Washington Mutual Bank) supports the conclusion that
class actions are a mere procedural device the waiver of which is not substantively
unconscionable. We disagree. No class action waiver was at issue Washington
Mutual Bank. Rather, the case involved an attempt to certify a nationwide class
action suit in which the defendant mortgage lender had entered into agreements
with class members providing that the agreement would be governed by the law of
the jurisdiction in which the property was located. Because class action
proponents have the burden of demonstrating a predominance of common issues,
we held that the proponent must demonstrate that the variations in state law
incorporated into prospective class members’ contracts “will not swamp common
issues and defeat predominance.” (Washington Mutual Bank, supra, 24 Cal.4th at
p. 926.) In arriving at that holding, we rejected “the Court of Appeal’s suggestion
that California businesses dealing with mass groups of consumers should not be
(footnote continued on next page)
15
Nor are we persuaded by the rationale stated by some courts that the
potential availability of attorney fees to the prevailing party in arbitration or
litigation ameliorates the problem posed by such class action waivers. (Strand,
supra, 693 N.W.2d at p. 926; Snowden v. Checkpoint Check Cashing (4th Cir.
2002) 290 F.3d 631, 638.) There is no indication other than these courts’
unsupported assertions that, in the case of small individual recovery, attorney fees
(footnote continued from previous page)
permitted to rely on choice-of-law clauses as a means of avoiding involvement in
a nationwide class action.” (Id. at p. 918.) As we stated: “ ‘Class actions are
provided only as a means to enforce substantive law. Altering the substantive law
to accommodate procedure would be to confuse the means with the ends — to
sacrifice the goal for the going.’ [Citations.] Consequently, an otherwise
enforceable choice-of-law agreement may not be disregarded merely because it
may hinder the prosecution of a multistate or nationwide class action or result in
the exclusion of nonresident consumers from a California-based class action.”
(Ibid.)
Our conclusion that the defendant was not precluded from varying the state
law that would control its agreements “merely because it may hinder the
prosecution of a multistate or nationwide class action” is a long way from
categorically approving class action waivers. It is one thing to hold that class
action waivers are unenforceable under certain circumstances, and quite another to
require companies to structure their agreements so as to optimize the chance that
those who litigate against them will be able to obtain nationwide class
certification. Moreover, the Washington Mutual Bank court did not foreclose the
possibility of class certification in the case before it. Nor did it express any views
on the choice-of-law provision before it, affirming the conclusion of Restatement
Second of Conflict of Laws, section 187, comment b, that in the case of contracts
of adhesion “ ‘the forum will scrutinize such contracts with care and will refuse to
apply any choice-of-law provision they may contain if to do so would result in
substantial injustice to the adherent.’ ” (Washington Mutual Bank, supra, at
p. 918, fn. 6.) Nothing in Washington Mutual Bank can be interpreted to suggest a
view, one way or the other, on the enforceability of class action waivers in
contracts of adhesion.
16
are an adequate substitute for the class action or arbitration mechanism. Nor do
we agree with the concurring and dissenting opinion that small claims litigation,
government prosecution, or informal resolution are adequate substitutes.
We do not hold that all class action waivers are necessarily unconscionable.
But when the waiver is found in a consumer contract of adhesion in a setting in
which disputes between the contracting parties predictably involve small amounts
of damages, and when it is alleged that the party with the superior bargaining
power has carried out a scheme to deliberately cheat large numbers of consumers
out of individually small sums of money, then, at least to the extent the obligation
at issue is governed by California law, the waiver becomes in practice the
exemption of the party “from responsibility for [its] own fraud, or willful injury to
the person or property of another.” (Civ. Code, § 1668.) Under these
circumstances, such waivers are unconscionable under California law and should
not be enforced.
C. FAA Preemption of California Rules Against Class Action Waivers
1. The Court of Appeal Opinion
The Court of Appeal did not dispute the conclusions of AOL and Szetela
that, at least under some circumstances, a class action waiver would be
unconscionable or contrary to public policy. The court concluded, however, that
when class action waivers are contained in arbitration agreements, California law
prohibiting such waivers is preempted by section 2 of the FAA (9 U.S.C. § 2). We
conclude the Court of Appeal erred.
We begin by reviewing some basic principles pertaining to the enforcement
of arbitration agreements. “California law, like federal law, favors enforcement of
valid arbitration agreements. [Citation.] . . . . Thus, under both federal and
California law, arbitration agreements are valid, irrevocable, and enforceable, save
17
upon such grounds as exist at law or in equity for the revocation of any contract.”
(Armendariz, supra, 24 Cal.4th at pp. 97-98, fn. omitted; see also 9 U.S.C. § 2;
Code Civ. Proc., § 1281.) In other words, although under federal and California
law, arbitration agreements are enforced “in accordance with their terms” (Volt
Info. Sciences v. Leland Stanford Jr. U. (1989) 489 U.S. 468 (Volt)), such
enforcement is limited by certain general contract principles “at law or in equity
for the revocation of any contract.”
At the outset of our discussion, we note that the FAA is silent on the matter
of class actions and class action arbitration. Indeed, not only is classwide
arbitration a relatively recent development, but class action litigation for damages
was for the most part unknown in federal jurisdictions at the time the FAA was
enacted in 1925. (Act of Feb. 12, 1925, ch. 213, 43 Stat. 883.)4 The Congress that
enacted the FAA therefore cannot be said to have contemplated the issues before
us. Accordingly, our conclusions with respect to FAA preemption must come
from the United States Supreme Court’s articulation of general principles
regarding such preemption.
In support of its conclusion, the Court of Appeal cited Perry v. Thomas
(1987) 482 U.S. 483 (Perry), in which the United States Supreme Court concluded
4
“It was not until the promulgation of the original Rule 23 and the first
Federal Rules of Civil Procedure in 1938 that law and equity were merged and
class suits for damages in the United States first became available.” (1 Conte &
Newberg, Newberg on Class Actions (4th ed. 2002) § 1:9, p. 32.) Even under the
original rule 23, class actions did not come into their own. “[M]odern class action
practice emerged in the 1966 revision of Rule 23.” (Ortiz v. Fibreboard Corp.
(1999) 527 U.S. 815, 833.) This revision gave class actions their “current shape,”
in part by authorizing “class actions for damages designed to secure judgments
binding all class members save those who affirmatively elected to be excluded.”
(Amchem Products, Inc. v. Windsor, supra, 521 U.S. at pp. 613-614.)
18
that section 2 of the FAA preempted California Labor Code section 229, which
authorizes an action for the collection of wages “ ‘without regard to the existence
of any private agreement to arbitrate.’ ” (Perry, supra, 482 U.S. at p. 484.) As
Perry stated, the FAA “embodies Congress’ intent to provide for the enforcement
of arbitration agreements within the full reach of the Commerce Clause. Its
general applicability reflects that ‘[t]he preeminent concern of Congress in passing
the Act was to enforce private agreements into which parties had entered . . . .
This clear federal policy places § 2 of the Act in unmistakable conflict with
California’s § 229 requirement that litigants be provided a judicial forum for
resolving wage disputes. Therefore, under the Supremacy Clause, the state statute
must give way.” (Perry, supra, 482 U.S. at pp. 490-491.)
The Court of Appeal observed that the court in Perry did not address
whether the contract was unconscionable, because this issue had not been
addressed in the lower courts. But while noting that the issue may be considered
on remand, the Perry court clarified the limits the FAA imposed on the
unconscionability defense: “We note . . . the choice-of-law issue that arises when
defenses such as [plaintiff’s] so-called ‘standing’ and unconscionability arguments
are asserted. In instances such as these, the text of § 2 provides the touchstone for
choosing between state-law principles and the principles of federal common law
envisioned by the passage of that statute: An agreement to arbitrate is valid,
irrevocable, and enforceable, as a matter of federal law [citation], ‘save upon such
grounds as exist at law or in equity for the revocation of any contract.’ 9 U.S.C.
§ 2 [italics omitted]. Thus state law, whether of legislative or judicial origin, is
applicable if that law arose to govern issues concerning the validity, revocability,
and enforceability of contracts generally. A state-law principle that takes its
meaning precisely from the fact that a contract to arbitrate is at issue does not
19
comport with this requirement of § 2. [Citations.] A court may not, then, in
assessing the rights of litigants to enforce an arbitration agreement, construe that
agreement in a manner different from that in which it otherwise construes
nonarbitration agreements under state law. Nor may a court rely on the
uniqueness of an agreement to arbitrate as a basis for a state-law holding that
enforcement would be unconscionable, for this would enable the court to effect
what we hold today the state legislature cannot.” (Perry, supra, 482 U.S. at
pp. 492-493, fn. 9, italics added.) The Court of Appeal quoted the above language
and also noted similar reasoning in the seminal case of Southland, supra, 465 U.S.
at page 16, in which the Supreme Court held that a California statute prohibiting
arbitration of certain claims under the Franchise Investment Law was preempted
by the FAA.5
Based on the above, the Court of Appeal concluded: “While a state may
prohibit the contractual waiver of statutory consumer remedies, including the right
to seek relief in a class action, such protections fall by the wayside when the
waiver is contained in a validly formed arbitration agreement governed by the
FAA. The antiwaiver provisions in statutes such as section 229 of the Labor Code
. . . are preempted by section 2 of the FAA. Similarly, we conclude the antiwaiver
language found in judicial decisions such as AOL and Szetela also has been
preempted by section 2 of the FAA.”
5
We note that although the Southland court overruled the portion of our
Keating decision holding that the statute was not preempted by the FAA, it
expressly declined to rule on the portion of the Keating decision regarding
classwide arbitrations, concluding the issue had not been properly raised below.
(Southland, supra, 465 U.S. at p. 17.)
20
The Court of Appeal’s conclusion is puzzling, because it ignores the critical
distinction made by the Perry court between a “state-law principle that takes its
meaning precisely from the fact that a contract to arbitrate is at issue,” which is
preempted by section 2 of the FAA, and a state law that “govern[s] issues
concerning the validity, revocability, and enforceability of contracts generally,”
which is not. (Perry, supra, 482 U.S. at p. 493, fn. 9.) “[U]nder section 2 of the
FAA, a state court may refuse to enforce an arbitration agreement based on
‘generally applicable contract defenses, such as fraud, duress, or
unconscionability.’ ” (Little, supra, 29 Cal.4th at p. 1079, quoting Doctor’s
Associates, Inc. v. Casarotto (1996) 517 U.S. 681, 687.) In the present case, the
principle that class action waivers are, under certain circumstances,
unconscionable as unlawfully exculpatory is a principle of California law that does
not specifically apply to arbitration agreements, but to contracts generally. In
other words, it applies equally to class action litigation waivers in contracts
without arbitration agreements as it does to class arbitration waivers in contracts
with such agreements. (See AOL, supra, 90 Cal.App.4th at pp. 17-18.) In that
important respect it differs from the provision under consideration in Perry, which
singled out certain arbitration agreements as unenforceable.
The Court of Appeal also relied on statements found in Volt, supra, 489
U.S. 468. In Volt, the parties agreed to arbitrate under California law, which
permitted a stay of arbitration proceedings while litigation was pending. (See
Code Civ. Proc., § 1281.2, subd. (c).) Such a stay would not have been allowed
under the relevant parts of the FAA. (9 U.S.C. §§ 3, 4; Volt, supra, 489 U.S. at
pp. 471-472 & fn. 2.) The Volt court rejected the federal preemption argument
and affirmed the parties’ right to structure its arbitration agreement according to
California rules. It stated, in a passage quoted by the Court of Appeal below, that
21
the FAA’s “primary purpose [is to] ensur[e] that private agreements to arbitrate
are enforced according to their terms. Arbitration under the Act is a matter of
consent, not coercion, and parties are generally free to structure their arbitration
agreements as they see fit. Just as they may limit by contract the issues which
they will arbitrate [citation], so too may they specify by contract the rules under
which that arbitration will be conducted.” (Volt, supra, 489 U.S. at p. 479.)
The Court of Appeal in the present case concluded that, unlike in Volt, the
imposition of class action arbitration despite a class action waiver in the arbitration
agreement would defeat the purpose of the FAA because it would not be enforcing
the arbitration agreement according to its terms. We disagree. Volt’s dictum that
the primary purpose of the FAA is to “ensur[e] that private agreements to arbitrate
are enforced according to their terms” (Volt, supra, 489 U.S. at p. 479) was
intended to explain why the procedural rules provided in arbitration agreements
should be enforced, rather than imposing the rules contained in the FAA. (Id. at
pp. 478-479.) Nothing in Volt, nor any other Supreme Court case, however,
suggests that state courts are obliged to enforce contractual terms even if those
terms are found to be unconscionable or contrary to public policy under general
contract law principles. As discussed, section 2 of the FAA and cases interpreting
it make clear that state courts have no such obligation. Agreements to arbitrate
may not be used to “harbor terms, conditions and practices” that undermine public
policy. (Little, supra, 29 Cal.4th at p. 1079.)
Discover Bank cites various cases holding that the requirement of section 4
of the FAA that federal district courts petitioned to compel arbitration will do so
“in accordance with the terms of the agreement” precludes class action arbitration
when the agreement does not provide for it. (See, e.g., Champ v. Single Trading
Co., Inc., supra, 55 F.3d 269, 277.) But as we have recognized, section 4 does not
22
apply to state court proceedings. (Cronus Investments, Inc. v. Concierge Services,
LLC (2005) 35 Cal.4th 376, 388-389; see Blue Cross of California v. Superior
Court, supra, 67 Cal.App.4th 42, 62-64 [concluding that neither § 4 nor any other
part of the FAA precludes classwide arbitration].) Aside from that, there is no
suggestion that the quoted language in section 4 overrides the principle embodied
in section 2 that state courts can refuse to enforce arbitration agreements or
portions thereof based on general contract principles. As discussed, the FAA does
not federalize the law of unconscionability or related contract defenses except to
the extent that it forbids the use of such defenses to discriminate against arbitration
clauses. (See Perry, supra, 482 U.S. at p. 493, fn. 9.) There is no such
discrimination here with respect to California’s rule against class action waivers.
The Court of Appeal opinion below also relied on the supposed
shortcomings of arbitration to bolster its conclusion that a class action waiver is
enforceable under the FAA. As the court stated: “Although California courts
have recognized the consumer protection value of classwide arbitration, that is not
the sole consideration. Courts should also consider the ‘California rule which
prevents reweighing the merits of an arbitrator’s decision.’ [Citation.] The FAA
does not preempt this rule. [Citation.] As judicial review of the merits of an
arbitrator’s decision may not be had under California law, a multi-million dollar
class arbitration award entered on nothing more than mere whim cannot be
corrected under California law.”
Far from holding that the invalidation of a class action waiver discriminates
against arbitration, the Court of Appeal below reasoned in effect that arbitration is
an inferior forum and therefore cannot be entrusted with classwide claims. The
court’s conclusion regarding the unsuitability of arbitration to class actions
reflects, as we stated in the context of another proposed limitation on arbitration,
23
“the very mistrust of arbitration that has been repudiated by the United States
Supreme Court.” (Armendariz, supra, 24 Cal.4th at p. 120.) Moreover, as
explained below, there is nothing to indicate that class action and arbitration are
inherently incompatible.
2. Gilmer v. Interstate/Johnson Lane Corp.
Discover Bank and its amici curiae also argue that their position on FAA
preemption is supported by language in Gilmer v. Interstate/Johnson Lane Corp.
(1991) 500 U.S. 20. In that case, the court considered whether the Age
Discrimination in Employment Act (ADEA; 29 U.S.C. § 621 et seq.) precluded
arbitration of claims brought under that act. The court made clear that the inquiry
was into congressional intent to preclude arbitration, discoverable through the
language, legislative history, or through “an ‘inherent conflict’ between arbitration
and the ADEA’s underlying purposes.” (Gilmer, supra, 500 U.S. at p. 26.) The
Gilmer court rejected the argument that there was such an inherent conflict
because of the supposed lack of collective action mechanisms in the New York
Stock Exchange arbitration rules under which plaintiff’s arbitration was being
conducted. As the court stated: “The NYSE rules . . . provide for collective
proceedings. [Citation.] But ‘even if the arbitration could not go forward as a
class action or class relief could not be granted by the arbitrator, the fact that the
[ADEA] provides for the possibility of bringing a collective action does not mean
that individual attempts at conciliation were intended to be barred.’ ” (Gilmer,
supra, 500 U.S. at p. 32.)
The above passage does not support Discover Bank’s position. At most,
the Gilmer court can be understood to mean that a party can still vindicate his or
her rights under the ADEA even if no class action remedy is available. The
ADEA is an employment discrimination statute in which large individual awards
24
are commonplace. (See Carnahan, Removing the Scarlet A (Aug. 12, 2002)
Forbes, at p. 78 [reporting that the median award in employee age discrimination
suits is $269,000].) Under California law, classwide arbitration is only justified
when “gross unfairness would result from the denial of opportunity to proceed on
a classwide basis.” (Keating, supra, 31 Cal.3d at p. 613.)
Moreover,
in
Gilmer the plaintiff sought to use the supposed lack of a class
action remedy as a reason for invalidating the entire arbitration agreement. In the
present case, the enforceability of the arbitration agreement itself is not in
question, only enforcement of the class action waiver. Gilmer’s determination that
the lack of class action remedies does not give rise to an inherent conflict between
the ADEA and the FAA does not lend support to the proposition that the FAA
categorically precludes states from enforcing arbitration-neutral rules that prohibit
consumer class action waivers in some circumstances.6
6
Several federal cases, relying in part on Gilmer, have held that enforcement
of arbitration clauses prohibiting class actions did not inherently conflict with the
federal Truth in Lending Act (TILA; 15 U.S.C. § 1601 et seq.) (See Snowden v.
Checkpoint Check Cashing, supra, 290 F.3d at pp. 638-639; Randolph v. Green
Tree Fin. Corp. (11th Cir. 2001) 244 F.3d 814, 818 (Randolph); Johnson v. West
Suburban Bank, supra, 225 F.3d at p. 369.) These courts reasoned, inter alia, that
even without class actions, “the statute contains other incentives ⎯ statutory
damages and attorneys fees ⎯ for bringing TILA claims.” (Randolph, supra, at p.
818; see 15 U.S.C. § 1640(a)(2)(A) [providing $100 minimum statutory damages
for TILA violations].) These decisions, which address whether a federal statute
impliedly limits arbitration, are obviously not binding on this court when it
decides whether class arbitration waivers are unconscionable under state law
principles. Moreover, as discussed, there is no reason to believe that attorney fee
and minimal statutory damages remedies, in cases in which the amount of
individual damages are slight, are adequate substitutes for class actions in
vindicating consumer rights and deterring misconduct.
25
3. Green Tree Financial Corp. v. Bazzle
Discover Bank’s argues that Green Tree Financial Corp. v. Bazzle (2003)
539 U.S. 444 (Bazzle), issued after the filing of the Court of Appeal opinion,
supports the position that a state law rule against class arbitration waivers is
preempted by the FAA. We disagree.
In
Bazzle, several customers sued Green Tree Financial Corp. (Green Tree),
alleging that the company failed to provide them with a form informing them of
their right to name their own lawyer and insurance agent, contrary to South
Carolina law. They sought class certification, and Green Tree sought to compel
arbitration pursuant to arbitration agreements with the plaintiffs. The trial court
both certified a class action and entered an order compelling arbitration. Two
class arbitration proceedings were conducted, and in both instances, the arbitrators
awarded the class several million dollars in statutory damages. The trial court
confirmed the awards. (Bazzle, supra, 539 U.S. at pp. 448-449.) Green Tree
challenged on appeal, among other things, the legality of the class arbitration. The
South Carolina Supreme Court held that the arbitration agreements were silent
with respect to classwide arbitration and that, under South Carolina law, silence
would be construed to permit such arbitration. (Id. at p. 450.)
The
Bazzle court addressed a narrow question: Green Tree disputed
whether the arbitration clause was silent on classwide arbitration, arguing that the
contract language in fact prohibited such arbitrations. As the court’s plurality
framed the issue: “[W]e must deal with that argument at the outset, for if it is
right, then the South Carolina court’s holding is flawed on its own terms; that
court neither said nor implied that it would have authorized class arbitration had
the parties’ arbitration agreement forbidden it.” (Bazzle, supra, 539 U.S. at p. 450
(plur. opn. of Breyer, J.).)
26
Even on this narrow issue, Bazzle produced no majority opinion. A
plurality of four justices held that the question whether the contract was in fact
silent on arbitration was for the arbitrator to decide, and remanded for an arbitral
determination. As the plurality stated: “In certain limited circumstances, courts
assume that the parties intended courts, not arbitrators, to decide a particular
arbitration-related matter (in the absence of ‘clea[r] and unmistakabl[e]’ evidence
to the contrary). [Citation.] These limited instances typically involve matters of a
kind that ‘contracting parties would likely have expected a court’ to decide.
[Citation.] They include certain gateway matters, such as whether the parties have
a valid arbitration agreement at all or whether a concededly binding arbitration
clause applies to a certain type of controversy. [Citations.] [¶] The question here
⎯ whether the contracts forbid class arbitration ⎯ does not fall into this narrow
exception. It concerns neither the validity of the arbitration clause nor its
applicability to the underlying dispute between the parties.” (Bazzle, supra, 539
U.S. at p. 452.)
Justice Stevens filed a concurring opinion that stated in part: “The
Supreme Court of South Carolina has held as a matter of state law that class-action
arbitrations are permissible if not prohibited by the applicable arbitration
agreement, and that the agreement between these parties is silent on the issue.
[Citation.] There is nothing in the Federal Arbitration Act that precludes either of
these determinations by the Supreme Court of South Carolina. See Volt
Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ.,
[supra], 489 U.S. 468, 475-476.
“Arguably the interpretation of the parties’ agreement should have been
made in the first instance by the arbitrator, rather than the court. [Citation.]
Because the decision to conduct a class-action arbitration was correct as a matter
27
of law, and because petitioner has merely challenged the merits of that decision
without claiming that it was made by the wrong decisionmaker, there is no need to
remand the case to correct that possible error. [¶] Accordingly, I would simply
affirm the judgment of the Supreme Court of South Carolina. Were I to adhere to
my preferred disposition of the case, however, there would be no controlling
judgment of the Court. In order to avoid that outcome, and because JUSTICE
BREYER’s opinion expresses a view of the case close to my own, I concur in the
judgment.” (Bazzle, supra, 539 U.S. at pp. 455-456 (conc. & dis. opn. of Stevens,
J.).)
Chief Justice Rehnquist, writing also for Justices Kennedy and O’Connor,
would have held that the question whether the agreement is silent on classwide
arbitration is for the court, rather than the arbitrator, to decide. (Bazzle, supra, 539
U.S. at pp. 457-458.) The dissent viewed the choice of class arbitration as relating
to the choice of arbitrator (Bazzle, supra, 539 U.S. at p. 456) and concluded that
this choice “is as important a component of the agreement to arbitrate as is the
choice of what is to be submitted [for arbitration].” (Id. at pp. 456-457.) On the
merits, the Chief Justice would have decided the contract interpretation in Green
Tree’s favor, i.e., that the contract forbade class action arbitration and that such
waiver is fully enforceable. (Id. at pp. 458-459.)
Justice Thomas adhered to his previous view that the FAA does not apply
to state court proceedings. (Bazzle, supra, 539 U.S. at p. 460 (dis. opn. of
Thomas, J.).)
Reading the plurality opinion together with Justice Stevens’s opinion, the
most that might be derived from Bazzle is a narrow holding: that when the
question of whether a class action arbitration is available depends on whether or
not the arbitration agreement is silent on the matter or expressly forbids class
28
action arbitration, then it is up to the arbitrator, not the court, to determine whether
the arbitration agreement is in fact silent.
More significant than Bazzle’s holding, for purposes of the present case, is
what it did not decide. The court did not address whether a state court can,
consistent with the FAA, hold a class action waiver appearing in a contract of
adhesion for arbitration unconscionable or contrary to public policy, as part of an
arbitration-neutral law that finds all such waivers unenforceable. As noted, the
plurality in framing the issue stated “that the [South Carolina Supreme Court]
neither said nor implied that it would have authorized class arbitration had the
parties’ arbitration agreement forbidden it.” (Bazzle, supra, 539 U.S. at p. 450
(plur. opn. of Breyer, J.).) Under California law, as discussed, class arbitration
may be authorized, even when a contract of adhesion forbids it, because a class
arbitration waiver may be unconscionable. Bazzle does not call into question the
principle that state courts may enforce general contract rules regarding
unconscionability and public policy that preclude class action waivers.
Nor did the court address the question whether that determination of
unconscionability should be made by a court or an arbitrator. The court was in
general agreement that courts should be left to decide certain “gateway matters”
(Bazzle, supra, 539 U.S. at p. 452 (plur. opn. of Breyer, J.)) or “fundamental”
matters such as the validity and scope of the arbitration agreement (id. at pp. 456-
457 (dis. opn. of Rehnquist, C. J.)). Under California law, the question whether
“grounds exist for the revocation of the [arbitration] agreement” based on
“grounds as exist for the revocation of any contract” is for the courts to decide, not
an arbitrator. (Code Civ. Proc., § 1281.2; see Engalla v. Permanente Medical
Group, Inc. (1997) 15 Cal.4th 951, 973.) This includes the determination of
whether arbitration agreements or portions thereof are deemed to be
29
unconscionable or contrary to public policy. (See, e.g., Little, supra, 29 Cal.4th at
p. 1076; Balandran v. Labor Ready, Inc. (2004) 124 Cal.App.4th 1522, 1530
[question of unconscionability of arbitration agreement a gateway issue to be
resolved by the court]; see also, e.g., Miller v. Drexel Burnham Lambert, Inc.
(11th Cir. 1986) 791 F.2d 850, 854; American General Finance, Inc. v. Branch
(Ala. 2001) 793 So.2d 738, 743; In re Arbitration Between Teleserve Systems, Inc.
& MCI Telecommunications Corp.(N.Y.App.Div.1997) 230 A.D.2d 585, 594.)
Nothing in Bazzle is to the contrary.
Amicus curiae United States Chamber of Commerce argues that the
imposition of classwide arbitration undermines the purpose of the FAA by
drastically altering the rules by which the parties agreed to arbitrate, transforming
arbitration into a less efficient and less desirable mechanism of dispute resolution.
Bazzle lends no support to that position. On the contrary, although Bazzle could
have been disposed of easily if a majority had decided that arbitrations and class
actions were inherently incompatible, and that class action arbitration therefore
could not be instituted without an express agreement, the court did not take that
route. The fact that a majority of the court looked to state law rules to determine
whether class arbitration is authorized indicates its view that there is no such
incompatibility. The only justice to comment directly on this issue, Justice
Stevens, concluded that nothing in the FAA prohibits state courts from authorizing
classwide arbitration in agreements silent on the matter. (Bazzle, supra, 539 U.S.
at pp. 454-455 (conc. opn. of Stevens, J.).)
Nor are we directed to anything concrete that would cause us to reconsider
Keating’s holding over 20 years ago that classwide arbitrations are workable and
appropriate in some cases. (See Sternlight, As Mandatory Binding Arbitration
Meets the Class Action, Will the Class-action Survive? (2000) 42 Wm. & Mary
30
L.Rev. 1, 38-44 & fns. 148-151 [reporting, based on surveys of court decisions
and discussions with attorneys, that class action arbitration is rare but viable,
with trial courts acting to resolve class issues and other collateral matters]; see
also Bazzle v. Green Tree Financial Corp. (S.C. 2002) 569 S.E.2d 349, 360-361
& fn. 22 [adopting the California approach to classwide arbitration and
affirming its workability]; Dickler v. Shearson Lehman Hutton, Inc.
(Pa.Super.Ct. 1991) 596 A.2d 860, 862-863 [adopting classwide arbitration];
American Arb. Assn., Supplementary Rules for Class Arbitrations (Oct. 8, 2003).
<http://www.adr.org/sp.asp?id=21936> [as of June 27, 2005] [supplemental rules
for classwide arbitration]; JAMS, Class Arbitration Procedures (Feb. 2005)
<http://www.jamsadr.com/rules/class_action.asp> [as of June 27, 2005] [same].)
We reiterate what this court said over 20 years ago in Keating: “Classwide
arbitration, as Sir Winston Churchill said of democracy, must be evaluated, not in
relation to some ideal but in relation to its alternatives.” (Keating, 31 Cal.3d at p.
613.) We continue to believe that the alternatives ⎯ either not enforcing
arbitration agreements and requiring class action litigation, or allowing arbitration
agreements to be used as a means of completely inoculating parties against class
liability ⎯ are unacceptable. Nothing in the FAA nor in Bazzle requires us to
reconsider that assessment.7
7
Amicus curiae Ralphs Grocery Co. argues that section 5 of the FAA forbids
the enforcement of classwide arbitrations not consented to by the parties. Section
5 provides, in pertinent part: “If in the agreement provision be made for a method
of naming or appointing an arbitrator or arbitrators or an umpire, such method
shall be followed.” (9 U.S.C. § 5.) Amicus curiae contends that the imposition of
a class action is inconsistent with their right to choose a method of selecting
arbitrators under section 5.
(footnote continued on next page)
31
It may be the case that arbitration becomes a less desirable forum from
Discover Bank’s viewpoint if the arbitration must be conducted in a classwide
manner. But the fact that a court’s refusal to enforce an unconscionable term of an
arbitration agreement makes that agreement less desirable to the party imposing
the term does not argue in favor of its enforcement.8
D. Choice-of-Law Issue
Our holding that the FAA does not prohibit a California court from refusing
to enforce a class action waiver that is unconscionable does not bring a resolution
to this case. The agreement between Discover Bank and plaintiff has a Delaware
choice-of-law agreement and Discover Bank argues that under Delaware law, a
class arbitration waiver is enforceable. Because the Court of Appeal concluded
that any California rule against class arbitrations waivers was preempted by the
FAA, it did not address the question whether the Delaware choice-of-law
(footnote continued from previous page)
We reject Ralphs Grocery Co.’s argument. First, it is unclear whether
section 5 applies to state courts. (See Volt, supra, 489 U.S. at p. 477, fn. 6;
Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 407, fn.
6.) We need not resolve the issue here, however. As noted, section 2 of the FAA
requires that arbitration agreements be enforced according to their terms. (Volt,
supra, at p. 478.) Section 5 merely provides a specific application of that general
rule for arbitrator selection procedures. As such, reading section 2 and section 5
together, a party’s contract providing arbitrator-selection rules will be followed
unless those rules are otherwise unenforceable under general rules of contract. As
discussed above, a prohibition against class action waivers under some
circumstances is one such general rule of contract.
8
We note both parties agree that, in the event a classwide arbitration is
compelled, Discover Bank may waive the arbitration agreement and have the
matter brought in court.
32
provision requires the enforcement of the class arbitration waiver. It must do so
on remand. For the Court of Appeal’s guidance on remand, we offer these
comments.
We have summarized California’s choice-of-law provisions9 as follows: “If
the trial court finds that the . . . claims [at issue] fall within the scope of a choice-
of-law clause, it must next evaluate the clause’s enforceability pursuant to the
analytical approach reflected in section 187, subdivision (2) of the Restatement
Second of Conflict of Laws (Restatement). Under that approach, the court must
first determine: ‘(1) whether the chosen state has a substantial relationship to the
parties or their transaction, or (2) whether there is any other reasonable basis for
the parties’ choice of law. If neither of these tests is met, that is the end of the
inquiry, and the court need not enforce the parties’ choice of law. If, however,
either test is met, the court must next determine whether the chosen state’s law is
contrary to a fundamental policy of California. If there is no such conflict, the
court shall enforce the parties’ choice of law. If, however, there is a fundamental
conflict with California law, the court must then determine whether California has
a ‘materially greater interest than the chosen state in the determination of the
particular issue . . . .’ (Rest., § 187, subd. (2).) If California has a materially
greater interest than the chosen state, the choice of law shall not be enforced, for
the obvious reason that in such circumstance we will decline to enforce a law
9
Because the Delaware choice-of-law provision appears to apply to itself, we
would normally start by reviewing Delaware choice-of-law principles. (See
Nedlloyd, supra, 3 Cal.4th at p. 469, fn. 7.) In the present case, the parties do not
discuss Delaware choice-of-law rules nor argue they differ from California rules.
The question therefore becomes one of California law. (Ibid.)
33
contrary to this state’s fundamental policy.’ ” Washington Mutual Bank, supra, 24
Cal.4th at pp. 916-917, fns. and italics omitted.)
Assuming that Discover Bank establishes the “substantial relationship” and
“reasonable basis” prongs of the choice-of-law analysis, and assuming that
Delaware law regarding class arbitration waivers is contrary to California law, the
court must then resolve whether and to what extent Delaware law should apply.
As reviewed above, in AOL the court concluded that a Virginia choice-of-law
provision that would have compelled waiver of plaintiff’s right to bring a class
action lawsuit under the CLRA would not be enforced against a California
resident, concluding that the CLRA class action remedy furthered a “strong public
policy of the state.” (AOL, supra, 90 Cal.App.4th at p. 15.) The present case
differs from AOL in that plaintiff is not invoking the anti-waiver provision of the
CLRA, nor is he seeking to enforce an obligation imposed by the CLRA or any
other California statute. Instead, he has brought this action under the Delaware
Consumer Fraud Act and Delaware contract law, but seeks to enforce those
Delaware laws in a California court with a California unconscionability rule
against class action waivers that arguably is not found under Delaware law.
Whether he may do so remains to be determined on remand. Also to be addressed
is plaintiffs’ argument that class arbitration rules are procedural rules that
California courts are to apply even when the substantive law dictated by contract
is from another state (see Rest. 2d Conf. of Laws, supra, § 122), as well as any
other choice-of-law arguments appropriately raised.
34
III. DISPOSITION
The judgment of the Court of Appeal is reversed, and the cause is remanded
for proceedings consistent with this opinion.
MORENO, J.
WE CONCUR: GEORGE, C. J.
KENNARD,
J.
WERDEGAR,
J.
35
CONCURRING AND DISSENTING OPINION BY BAXTER, J.
I concur in part and dissent in part. I agree with the majority that federal
law does not compel enforcement of contractual class action waivers simply
because they are contained in arbitration agreements. But I lament the majority’s
determination to use this case as a vehicle to resolve the issue of California’s
policy on class action waivers. For two reasons, we need not, and should not,
confront that question here.
First, because the Court of Appeal upheld the instant waiver solely by
finding federal preemption of any California antiwaiver policy, that court did not
decide whether such a policy exists. Ordinarily, we do not address, on review,
issues that were not decided by the Court of Appeal.
Second, the majority’s questionable decision to deem the class action
waiver in this contract unconscionable by California standards—a determination
at odds with the vast weight of authority elsewhere (see discussion, post)—is
simply moot under the particular circumstances. The parties reasonably agreed
that Delaware law would govern all aspects of their contractual relationship, and
plaintiff has asserted only Delaware causes of action. Thus, regardless of
California’s position on class waivers, California has a manifest obligation to
evaluate the waiver under Delaware law alone. Because Delaware, like most other
1
jurisdictions, would uphold the waiver, California—the fortuitous venue for this
“nationwide” class action—must honor it.
If the majority insists on reaching beyond the issues addressed by the Court
of Appeal, it should at least identify and resolve the dispositive one. Instead, the
majority, so bold on the waiver issue, avoids deciding the choice-of-law issue.
Despite some mild cautionary admonitions, the majority leaves the Court of
Appeal free on remand to dishonor the class waiver under California law despite
the contrary Delaware rule.
In that event, the parties’ reasonable contractual expectations, as well as the
strong interest of Delaware itself in the application of its own law to this issue,
would be frustrated. Moreover, if California courts must, or may, dishonor class
action waivers that are perfectly valid under the governing law selected by the
parties themselves, California—which now takes a minority position on this
issue—might well become the magnet for countless nationwide consumer class
lawsuits that could not be maintained elsewhere. I cannot accept such a result.
I briefly review what I deem the pertinent aspects of this controversy. The
cardholder agreement at issue in this case, as modified by Discover Bank in 1999,
specifies that either party may choose arbitration, rather than litigation, of a
dispute under the contract, and that neither party may obtain class treatment. As
plaintiff concedes, the agreement provides that it will be governed, not by the law
of California, but by federal law and the law of Delaware.
The choice of Delaware law is hardly startling in view of Discover Bank’s
Delaware domicile. Indeed, Delaware requires that “[a] revolving credit plan
between a [Delaware-chartered] bank and an individual borrower shall be
governed by the laws of [Delaware].” (Del.Code Ann., tit. 5, § 956, italics added.)
2
For all but one purpose, plaintiff has embraced the choice of Delaware law.
He has expressly and intentionally asserted only Delaware causes of action. At
oral argument, his counsel explained that his complaint is so framed in deference
to the agreement’s choice of law, and also in hopes of certifying a nationwide
class subject to uniform legal principles.
But Delaware permits arbitration agreements that preclude class treatment,
even if such provisions are contained in standard-form consumer contracts. (E.g.,
Edelist v. MBNA America Bank (Del.Super.Ct. 2001) 790 A.2d 1249, 1261; see
also Lloyd v. MBNA America Bank, N.A. (D.Del. 2001) 2001 WL 194300; Pick v.
Discover Financial Services, Inc. (D.Del. 2001) 2001 WL 1180278, *4-*5.)1
1
Delaware’s position is in accord with the vast majority of decisions,
applying federal law or the law of other states, which hold that arbitration clauses
are not invalid either because they specifically exclude class treatment or because
they preclude such treatment by failing expressly to provide for it. (E.g.,
Livingston v. Associates Finance, Inc. (7th Cir. 2003) 339 F.3d 553, 559
(Livingston) [federal Truth-in-Lending Act (TILA)]; Snowden v. Checkpoint
Check Cashing (4th Cir. 2002) 290 F.3d 631, 638-639 (Snowden) [same];
Burden v. Check Into Cash Of Kentucky, LLC (6th Cir. 2001) 267 F.3d 483, 492
(Burden) [same]; Randolph v. Green Tree Financial Corp.-Alabama (11th Cir.
2001) 244 F.3d 814, 819 (Randolph) [same]; Johnson v. West Suburban Bank
(3d Cir. 2000) 225 F.3d 366, 370-378 (Johnson) [same]; Champ v. Siegel Trading
Co., Inc. (1995) 55 F.3d 269, 277; Shales v. Discover Card Services, Inc. (E.D.La.
2002) 2002 WL 2022596, *2; Lomax v. Woodmen of the World Life Ins. Society
(N.D.Ga. 2002) 228 F.Supp.2d 1360, 1365; Vigil v. Sears Nat. Bank (E.D.La.
2002) 205 F.Supp.2d 566, 572 [applying federal and Arizona law]; McIntyre v.
Household Bank (N.D.Ill. 2002) 216 F.Supp.2d 719, 724 [TILA]; Thompson v.
Illinois Title Loans, Inc. (N.D.Ill. 2000) 2000 WL 45493, *4 [same];
Zawikowski v. Beneficial National Bank (N.D.Ill. 1999) 1999 WL 35304, *2, &
fn. 2 [upholding clauses that compelled arbitration and precluded class litigation,
but declining to decide if class arbitration was proper]; Med Center Cars, Inc. v.
Smith (Ala. 1998) 727 So.2d 9, 20; Rains v. Foundation Health Systems
(Colo.Ct.App. 2001) 23 P.3d 1249, 1253-1254; Brown v. KFC National
Management Co. (Hawaii 1996) 921 P.2d 146, 166, fn. 23; Rosen v. SCIL, LLC
(footnote continued on next page)
3
Furthermore, under specific provisions of Delaware statutory law, Discover Bank
could insert such a provision in a preexisting contract, as the bank did here, by
issuing a unilateral notice, under which plaintiff’s inaction or continued use of his
credit card constituted acceptance. (Del. Code Ann., tit. 5, § 952.)
Thus, unwilling to take the bitter with the sweet, plaintiff would now rather
apply California law to a single issue governed by the contract. After agreeing to
one-on-one arbitration in a contract choosing Delaware law, he now seeks to
proceed as a nationwide class representative by persuading California courts,
through the application of California law, to dishonor his contractual waiver of
class treatment. As the majority itself cogently states the matter, he and his
counsel have selected a California forum so that, in an action representing
Discover Bank cardholders from all 50 states, he can “enforce . . . Delaware laws
. . . [but] with a California unconscionability rule against class arbitration
waivers.” (Maj. opn., ante, at p. 34.)
He should not be allowed to do so. The solution to this case lies in a
straightforward application of the choice-of-law test set forth in Nedlloyd Lines
B.V. v. Superior Court (1992) 3 Cal.4th 459 (Nedlloyd) and Washington Mutual
Bank v. Superior Court (2001) 24 Cal.4th 906 (Washington Mutual). Under that
test, California will apply the law of contractual choice if (1) the chosen state has a
(footnote continued from previous page)
(Ill.Ct.App. 2003) 799 N.E.2d 488, 494 [applying federal arbitration law];
Walther v. Sovereign Bank (Md. 2005) 872 A.2d 735, 749-751 [federal and
Maryland law]; Strand v. U.S. Bank Nat. Ass’n ND (N.D. 2005) 693 N.W.2d 918;
Gras v. Associates First Capital Corp. (N.J.Super.Ct. 2001) 786 A.2d 886, 889-
895; Ranieri v. Bell Atlantic Mobile (App.Div. 2003) 759 N.Y.S.2d 448, 449;
AutoNation USA Corp. v. Leroy (Tex. App. 2003) 105 S.W.3d 190, 199-200.)
4
substantial relationship to the parties or their transaction or (2) there is any other
reasonable basis for the parties’ choice of law, unless the chosen state’s law
offends a “fundamental” California policy. Even where there is a “fundamental”
conflict, the chosen state’s law will apply unless California has a materially
greater interest than the chosen state in resolving the particular issue. (Washington
Mutual, supra, at pp. 916-917; Nedlloyd, supra, at pp. 464-466.) By these
standards, plaintiff’s effort to apply California class waiver law, to the extent it
differs from Delaware’s, clearly fails.
The first two considerations favoring application of the chosen state’s law
are easily satisfied here. Delaware, where Discover Bank is domiciled, has a
substantial relationship to the parties and the transaction. Moreover, the choice of
Delaware’s law as uniformly applicable to Discover Bank’s nationwide credit card
business is entirely reasonable. The relationship to Delaware becomes even more
substantial, and the choice of its law even more reasonable, by virtue of
Delaware’s express statutory requirement that its law shall govern.
Furthermore, in the circumstances of this case, the contractual waiver is not
so contrary to “fundamental” California policy that California should invalidate it
despite contrary Delaware law. The majority suggests the waiver is
unconscionable. But unconscionability is simply a matter of contract law—it
constitutes a “ ‘generally applicable contract defense[]’ ” (Armendariz v.
Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114
(Armendariz), quoting Doctor’s Associates, Inc. v. Casarotto (1996) 517 U.S. 681,
687) based on a claim that a particular agreement, or a term thereof, is unfairly
oppressive to one party under the particular circumstances. (See Civ. Code,
§ 1670.5 [court may decline to enforce unconscionable contract, but only after
giving parties opportunity to explain context].) States may, of course, differ in
5
their conception of what constitutes an unconscionable contract term. Thus, what
is “unconscionable” in an agreement seems peculiarly an issue to be decided under
the law chosen by the parties in the agreement itself.
As noted, these parties chose Delaware law to govern and construe their
agreement. Even if California, applying its own contract law, might find certain
class waivers unconscionable, there is no “fundamental” reason to impose that
defense upon an agreement in which the parties, acting reasonably, chose the
contract law of a jurisdiction where such a defense would not apply.
The majority also notes that California affords certain substantive rights,
particularly those specified by statute, that are “unwaivable.” (See, e.g., Civ.
Code, §§ 1751, 1781 [unwaivable right to bring class action under Consumers
Legal Remedies Act]; see also Armendariz, supra, 24 Cal.4th 83, 100-101.) But
as the majority is forced to concede, that principle has no application here, where
plaintiff himself has carefully avoided invoking any such California statutory
right.
The majority suggests that class waivers in standard consumer contracts
may violate California’s arguably “fundamental” statutory policy against direct or
indirect “exculpatory” clauses. (See Civ. Code, § 1668.) In the majority’s view,
such waivers may have an exculpatory effect because, given the usually modest
amount of each cardholder’s personal claim against Discover Bank, litigation or
arbitration on an individual basis is impractical and uneconomic. The majority
posits that because cardholders and their attorneys have no incentive to pursue
such claims except by aggregating them with other similar complaints, Discover
Bank will escape liability or punishment for its improper practices.
I find this analysis unpersuasive for several reasons. At the outset, I cannot
accept the facile premise that lack of a class remedy is equivalent to exculpation of
6
an alleged wrongdoer. Class treatment, in whatever forum, is a relatively recent
invention, designed to encourage and facilitate the resolution of certain kinds of
disputes. It may provide valuable procedural leverage to one side. But as we
noted in Washington Mutual, supra, 24 Cal.4th 906, “ ‘[c]lass actions are provided
only as a means to enforce substantive law.’ ” (Id., at p. 918, quoting City of San
Jose v. Superior Court (1974) 12 Cal.3d 447, 462, fn. omitted, italics added.)
They must not be confused with the substantive law to be enforced. (Ibid.) Even
if the unavailability of class relief makes a plaintiff’s pursuit of a particular claim
“less convenient” (Moses H. Cone Hospital v. Mercury Constr. Corp. (1983)
460 U.S. 1, 19; see also Gilmer v. Interstate/Johnson Lane Corp. (1991) 500 U.S.
20, 32), such claims may nonetheless be pursued on an individual basis.
Moreover, the majority exaggerates the difficulty of pursuing modest
claims where class treatment is unavailable and overlooks the many other means
by which Discover Bank could be called to account for the mischarges plaintiff
alleges. For example:
(1) The cardholder may contact the bank and attempt to resolve the matter
informally. Discover Bank’s cardholder agreement specifically provides a 60-day
period in which to contact the company with billing questions and disputes.
Plaintiff’s complaint does not state that he pursued this avenue. (Indeed, though
the complaint asserts widespread improper billing practices by Discover Bank, it
does not allege that the bank has ever mischarged plaintiff himself. Plaintiff
admitted in his deposition that he does not know whether Discover Bank has ever
done so.)
(2) Pursuant to the agreement, the cardholder may pursue one-on-one
arbitration of Delaware state law claims, including those under the Delaware
Consumer Fraud Act (Del. Code Ann., tit. 6, § 2511 et seq.). The agreement
7
includes several provisions designed to make the individual arbitration process fair
and accessible. Under the agreement’s terms, Discover Bank will arbitrate in the
federal judicial district where the cardholder resides. Further, the cardholder may
obtain an advance of all forum costs and will never pay forum costs exceeding
those he or she would have had to pay in court litigation.
(3) For claims under $5,000, the cardholder may proceed in small claims
court. (See Code Civ. Proc., § 116.210 et seq,) In the cardholder agreement,
Discover Bank promises that it “will not invoke [its] right to arbitrate an
individual claim,” involving less than $5,000, which is pending only in a small
claims court.2 The only mandatory expense of a small claims action is a modest
filing fee plus the actual cost of any mail service by the court clerk. (Id.,
§§ 116.230, subds. (a), (c), 116.910.) The claim is pled by filling out a standard
form. (Id., §§ 116.310, subd. (a), 116.320.) No formal discovery is permitted (id.,
§ 116.310, subd. (b)), and neither party may be represented by a lawyer (id.,
§ 116.530, subd. (a)), though free advisory assistance is available to the claimant
(id., § 116.260).3
(4) The cardholder may arbitrate, pursuant to the terms of the cardholder
agreement, his rights under such federal statutes as TILA. (15 U.S.C. § 1601 et
2
The agreement does not eliminate the theoretical possibility that Discover
Bank might seek to remove a small claims action to another court, then elect to
arbitrate. However, a small claimant can suffer removal to another forum only if
the defendant files a counterclaim exceeding the $5,000 small claims jurisdictional
limit—an unlikely development in cases like plaintiff’s. (Code Civ. Proc.,
§ 116.390.)
3
Though the cardholder agreement contains no forum selection clause, and
thus does not bar suits in California courts, a question may arise whether, pursuant
to the choice-of-law provision, the small claims court would be obliged to apply
Delaware law to any dispute before it.
8
seq.).4 This statute imposes mandatory disclosure requirements for consumer
credit transactions, including those arising on credit card accounts. As to the
latter, the statute provides for detailed disclosure of the terms on which credit is
being extended, including annual percentage rates, methods of computing
outstanding balances, finance charges, grace periods, and late fees. (Id., § 1637.)
The cardholder, if he or she prevails, may recover actual damages, twice the
finance charge imposed in connection with each violative transaction, and attorney
fees and costs. (Id., § 1640(a)(1), (2)(A), (3).)
(5) If Discover Bank’s conduct violates California’s unfair competition
statutes (Bus. & Prof. Code, § 17200 et seq.), which broadly prohibit “any
unlawful, unfair or fraudulent business act or practice” (id., § 17200), the Attorney
General and designated local law enforcement officials (who are not bound by the
cardholder agreement) may sue on the People’s behalf for injunctive relief and for
mandatory civil penalties of up to $2,500 for each violation (id., §§ 17203, 17204,
17206). The amount of a civil penalty shall be calculated in accordance with “any
one or more of the relevant circumstances . . . including, but not limited to . . . the
nature and seriousness of the misconduct, the number of violations, the persistence
of the misconduct, the length of time over which the misconduct occurred, the
4
As indicated above (see fn. 1, ante), federal circuits addressing the issue
have uniformly held that claimants must arbitrate TILA claims pursuant to
agreement, that arbitration precludes class relief under TILA, that arbitration
agreements containing express waivers of class treatment, even for small
individual amounts in dispute, are not unconscionable with respect to TILA
claims, and that, although TILA contemplates class actions, it includes no
“unwaivable” right to class relief. (Livingston, supra, 339 F.3d 553, 559;
Snowden, supra, 290 F.3d 631, 638-639; Burden, supra, 267 F.3d 483, 492;
Randolph, supra, 244 F.3d 814, 819; Johnson, supra, 225 F.3d 366, 370-378.)
9
willfulness of the defendant’s misconduct, and the defendant’s assets, liabilities,
and net worth.” (Id., § 17206, subd. (b).)
(6) Finally, in the highly regulated banking and credit industry, other
means of sanctioning and remediating illegal conduct are available at the behest of
both federal and Delaware law. (See, e.g., 12 U.S.C. § 1818(b) [Federal Deposit
Insurance Corporation may issue cease-and-desist orders and order corrective
measures including restitution]; Del. Code Ann., tit. 5, § 121 et seq. [investigative
and enforcement powers of Delaware State Banking Commissioner]; Del. Code
Ann., tit. 29, § 2504 [investigative and enforcement powers of Delaware Attorney
General].)
Under these circumstances, it cannot be said that, by upholding
cardholders’ contractual waiver of a class remedy under Delaware law, we would
effectively absolve Discover Bank of its objectionable conduct. Thus, there is no
basis to conclude that enforcement of the class waiver pursuant to the parties’
choice of Delaware law would contravene a fundamental California statutory
policy against exculpatory agreements.
Finally, even if the application of Delaware law permitting class waivers
would violate fundamental California public policy, I conclude that California has
no materially greater interest in applying its own policy to this controversy than
does Delaware. California is, to be sure, the home of this individual plaintiff, with
his modest personal monetary claim, and of some of the other similarly situated
Discover Bank cardholders, with similarly modest individual claims, he seeks to
represent. But to the extent plaintiff proposes to vindicate the rights of a
nationwide class under Delaware consumer protection laws, California has no
greater interest than any other jurisdiction, including Delaware, in protecting the
interests of its resident class members.
10
Indeed, California, its courts, and its judicial resources will be negatively
impacted if, by invoking its own liberal antiwaiver rule in derogation of contrary
law chosen by the parties, this state attracts nationwide consumer class litigation
of the sort plaintiff seeks to maintain. Such an adverse affect on California
detracts further from this state’s interest in applying its own law under such
circumstances.
Moreover, any factors in California’s favor are outweighed by Delaware’s
far greater concern with the primacy of its own law, both contractual and
regulatory, in relations between Discover Bank and its nationwide cardholders.
Delaware is Discover Bank’s domicile, as well as the source of the substantive law
plaintiff expressly seeks to apply. Robert A. Glen, the Delaware State Bank
Commissioner, explains in his amicus curiae brief that Delaware has a paramount
interest in the economic and business regulation of financial and banking
institutions domiciled in that state.
As Discover Bank’s domicile, Delaware has a specific regulatory interest in
applying its own laws and policies, uniformly and exclusively, to Discover Bank’s
operations. Delaware thereby seeks to minimize Discover Bank’s exposure to the
varying and possibly conflicting laws, regulations, and procedures of 49 sister
jurisdictions. In particular, Delaware has ample grounds for concern that the terms
of the standardized credit agreements entered by its locally chartered banks,
including those terms governing resolution of customer disputes, will have the
same meaning no matter where the banks’ customers reside.
As Commissioner Glen observes, Delaware also strives, for the benefit of
the banks’ customers, including their nationwide credit card customers, to promote
financial stability, safety, and soundness in such institutions. These interests are
substantially affected by the banks’ costs of consumer litigation, including their
11
exposure to consumer class actions. In Commissioner Glen’s words, “[a]rbitration
helps keep the costs of dispute resolution down because it is more efficient,
expeditious and economical than litigation. If a bank has to spend substantial
sums in connection with litigation and, in particular, class action litigation, that
threatens the bank’s safety and soundness and forces the bank to increase the costs
of operations, all of which redounds to the detriment of the bank and its customers,
including customers located in states outside of Delaware.”
Delaware has evidenced its concerns, as noted above, by specifically
providing that credit card agreements issued by Delaware-chartered banks must be
governed by Delaware law. (Del. Code Ann., tit. 5, § 956.) Commissioner Glen
explains that “[t]he purpose of this requirement is to ensure the safe and sound
operation of Delaware banks by effectuating the uniform construction of credit
card agreements issued by [such] banks in accordance with Delaware law, no
matter where disputes concerning those agreements might arise.”
Because Delaware has a substantial relationship to this controversy, the
parties’ choice of Delaware law was reasonable, and Delaware’s interest in
applying its own law—including its acceptance of class waivers—exceeds
California’s, California must uphold that choice of law. Under Delaware law, the
parties’ waiver of class treatment of disputes between them is valid, and California
courts must enforce it.
Plaintiff suggests that the choice-of-law principles set forth in Washington
Mutual, supra, 24 Cal.4th 906, and Nedlloyd, supra, 3 Cal.4th 459—as derived
from section 187 of the Restatement Second of Conflicts of Law (Restatement)—
apply to matters of “substantive” law but not of “procedure.” The forum state,
plaintiff asserts, always has a paramount interest in applying its own procedures.
12
Assuming without deciding that we confront an issue of “procedure,”
plaintiff’s argument nonetheless lacks merit. As primary support for his position,
plaintiff cites Restatement sections 122 and 125. The former section states that the
forum “usually applies its own” litigation rules even when the law of another
jurisdiction is applied for other purposes. The latter section declares that the
forum’s law determines “who may and who must be parties . . . unless the
substantial rights and duties of the parties would [thereby] be affected . . . .”5
But Restatement sections 122 and 125, like most of the Restatement, set
forth principles for determining which jurisdiction’s law to apply “[i]n the absence
of an effective choice of law by the parties.” (Rest., § 188(2).) Nothing in those
sections, or in the comments thereto, indicates a purpose to supersede Restatement
section 187 where the parties have contractually chosen the applicable law, or to
impose a forum rule for dispute resolution despite the express contrary provisions
of an agreement which specifies the law of a jurisdiction in which that choice is
valid.
Indeed, the comments to both these Restatement sections demonstrate their
inapplicability here. For example, the comments to section 122 point out that “in
matters of judicial administration, it would often be disruptive or difficult for the
forum to apply the local law rules of another state [without any repayment] by a
5
Section 122 provides: “A court usually applies its own local law rules
prescribing how litigation shall be conducted even when it applies the local law
rules of another state to resolve other issues in the case.” Section 125 provides:
“The local law of the forum determines who may and who must be parties to a
proceeding unless the substantial rights and duties of the parties would be affected
by the determination of this issue.”
13
furtherance of the values that the application of another state’s local law is
designed to promote.” (Rest., § 122, com. a, p. 350.)
Moreover, it is explained, “[p]arties do not usually give thought to matters
of judicial administration before they enter into legal transactions. They do not
usually place reliance on the applicability of the rules of a particular state to issues
that would arise only if litigation should become necessary. Accordingly, the
parties have no expectations as to such eventualities, and there is no danger of
unfairly disappointing their hopes by applying the forum’s rules in such matters.”
(Rest. § 122, com. a, p. 351.)
Here, the parties gave extensive and detailed contractual consideration to
the “issues that would arise . . . if litigation [became] necessary.” They
specifically agreed that disputes would be resolved, upon either party’s election,
by mandatory arbitration, and that class treatment of the dispute would not be
permitted. Further, they expressly provided that their agreement would be
governed by the law of Delaware—a jurisdiction which, for policy reasons of its
own, allows contractual provisions requiring nonclass arbitration and further
demands that credit card agreements issued by Delaware-chartered banks be
applied according to that state’s law. The reasonable expectations of both Discover
Bank and the State of Delaware would thus be “unfairly disappointed” if a
California rule banning class waivers were applied despite the parties’ agreement.
Moreover, by honoring the parties’ agreement in this respect, California
courts risk no disruption or confusion in matters of judicial administration. There
is no need to delve deeply into the procedural rules of another jurisdiction. All
that is required is to compel arbitration, and to deny class certification, as the
parties agreed.
14
Similarly, the comments to section 125, like the text of that section itself,
make clear that the forum’s rules on the identity of parties will not be applied
“when [such] application would substantially affect the rights and duties of the
parties.” (Rest. § 125, com. a, p. 356.) Here, Discover Bank’s rights would be
substantially affected were it forced into a class proceeding contrary to a specific
term of its contract with plaintiff.
Finally, as the majority must concede, neither Szetela v. Discover Bank
(2002) 97 Cal.App.4th 1094, nor America Online, Inc. v. Superior Court (2001)
90 Cal.App.4th 1 (AOL) undermines the dispositive effect in this case of Delaware
law. In Szetela, the Court of Appeal concluded that because choice-of-law issues
had not been briefed, they were waived. (Szetela, supra, at p. 1099, fn. 3.) AOL
involved a suit brought under a law of this state, the Consumers Legal Remedies
Act, which specifically grants the right to bring a class action and makes the rights
granted by the statute unwaivable by contract. (Civ. Code, §§ 1751, 1781,
subd. (a).) As noted above, plaintiff in this case bases his claims solely on
Delaware substantive law.
If, as the majority hints, California would refuse to enforce the parties’
agreement for individual arbitration as Delaware law demands, the legitimate
purpose of that agreement—uniform, inexpensive, efficient dispute resolution—
will be entirely frustrated. No matter how many other courts, state and federal,
would enforce the agreement according to its terms, if California declines to do so,
this state will simply become a forum of choice for putative nationwide class suits
like this one. It will only be necessary to find a single California cardholder to act
as a representative plaintiff, and to sue in a California court. I cannot join the
majority’s willingness to countenance such a result.
15
I would hold the parties to their agreement, expressly governed by
Delaware law, which calls for individual arbitration of disputes arising between
Discover Bank and its cardholders. Accordingly, I would affirm the judgment of
the Court of Appeal, which directed the issuance of a petition for mandate
requiring the trial court to (1) compel arbitration of plaintiff’s complaint and
(2) reinstate the waiver of class treatment.
BAXTER, J.
WE CONCUR:
CHIN, J.
BROWN, J.
16
See last page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion Discover Bank v. Superior Court
__________________________________________________________________________________
Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XXX 105 Cal.App4th 326
Rehearing Granted
__________________________________________________________________________________
Opinion No. S113725
Date Filed: June 27, 2005
__________________________________________________________________________________
Court: Superior
County: Los Angeles
Judge: Carolyn B. Kuhl
__________________________________________________________________________________
Attorneys for Appellant:
Kirkland & Ellis, Jeffrey S. Davidson, Rick Richmond, C. Robert Boldt, Amy M. Wilkins, Timothy B.
Jafek; Stroock & Stroock & Lavan and Julia B. Strickland for Petitioner.
Morrison & Foerster and Maren E. Nelson for California Bankers Association as Amicus Curiae on behalf
of Petitioner.
M. Jane Brady, Attorney General (Delaware); Severson & Werson and William L. Stern for Robert A.
Glen, Delaware State Bank Commissioner as Amicus Curiae on behalf of Petitioner.
Rintala, Smoot, Jaenicke & Rees, G. Howden Fraser; Wilmer, Cutler & Pickering and Christopher R.
Lipsett for American Bankers Association, American Financial Services Association and Consumer
Bankers Association as Amici Curiae on behalf of Petitioner.
Gibson, Dunn & Crutcher, Mark E. Weber, Gabriel J. Pasette; Stokes Lawrence, Kelly T. Noonan and
Bradford Axel for AT&T Wireless Services, Inc., as Amicus Curiae on behalf of Petitioner.
Littler Mendelson, Henry D. Lederman, Marissa M. Tirona and James Y. Wu for Ralphs Grocery Company
as Amicus Curiae on behalf of Petitioner.
__________________________________________________________________________________
Attorneys for Respondent:
No appearance for Respondent.
Page 2 – S113725 – counsel continued
Attorneys for Real Party in Interest:
Trial Lawyers for Public Justice, F. Paul Bland, Jr., Michael J. Quirk, Arthur H. Bryant, Leslie A. Bailey,
Kate Gordon; Strange & Carpenter, Brian R. Strange, Gretchen Carpenter; Law Offices of Barry Kramer
and Barry L. Kramer for Real Party in Interest.
Bramson, Plutzik, Mahler & Birkhaeuser and Robert M. Bramson for National Association of Consumer
Advocates as Amicus Curiae on behalf of Real Party in Interest.
Deborah M. Zuckerman, Michael R. Schuster; Kemnitzer, Anderson, Barron & Ogilvie and Mark F.
Anderson for AARP as Amicus Curiae on behalf of Real Party in Interest.
The Sturdevant Law Firm, James C. Sturdevant; Ian Herzog; Michael Adler; Sharon J. Arkin; Stuart B.
Esner; Brian S. Kabateck; David A. Rosen; Daniel U. Smith; Christine D. Spagnoli; Lea-Ann Tratten;
Steven B. Stevens and Scott H. Z. Sumner for Consumer Attorneys of California as Amicus Curiae on
behalf of Real Party in Interest.
Ghalchi & Associates, Kamran Ghalchi; Adhoot & Wolfson, Tina Wolfson and Robert Adhoot for Rebecca
Shakib and Karen Bernard as Amici Curiae on behalf of Real Party in Interest.
Counsel who argued in Supreme Court (not intended for publication with opinion):
Julia B. Strickland
Stroock & Stroock & Lavan
2029 Century Park East, Suite 1800
Los Angeles, CA 90067
(310) 556-5800
F. Paul Bland, Jr.
Trial Lawyers for Public Justice
1717 Massachusetts Avenue, NW, Suite 800
Washington, D.C. 20036
(202) 797-8600
Brian R. Strange
Strange & Carpenter
12100 Wilshire Boulevard, Suite 1900
Los Angeles, CA 90025
(310) 207-5055
Opinion Information
| Date: | Docket Number: |
| Mon, 06/27/2005 | S113725 |
Parties
| 1 | Boehr, Christopher (Real Party in Interest) Represented by Leslie A. Bailey Trial Lawyers for Public Justice, P.C. 555 Twelfth Street, Suite 1620 Oakland, CA |
| 2 | Boehr, Christopher (Real Party in Interest) Represented by Barry L. Kramer Law Offices of Barry Kramer 11111 Santa Monica Blvd. Suite 1860 Los Angeles, CA |
| 3 | Boehr, Christopher (Real Party in Interest) Represented by Paul Bland Trial Lawyers for Public Justice 1717 Massachusetts Avenue, N.W. Ste. 800 Washington, DC |
| 4 | Boehr, Christopher (Real Party in Interest) Represented by Arthur H Bryant Trial Lawyers for Public Justice 555 Twelfth Street, Suite 1620 Oakland, CA |
| 5 | Boehr, Christopher (Real Party in Interest) Represented by Katherine Helen Gordon Trial Lawyers for Public Justice 1 Kaiser Plaza, Suite 275 Oakland, CA |
| 6 | Boehr, Christopher (Real Party in Interest) Represented by Brian Strange Strange & Carpenter 12100 Wilshire Boulevard, Suite 1900 Los Angeles, CA |
| 7 | Superior Court Of Los Angeles County (Respondent) 600 South Commonwealth Avenue Los Angeles, CA 90005 |
| 8 | Discover Bank (Petitioner) Represented by Carl Robert Boldt Kirkland & Ellis 777 S Figueroa St #3700 Los Angeles, CA |
| 9 | Discover Bank (Petitioner) Represented by Jeffrey S. Davidson Kirkland & Ellis LLP 777 South Figueroa Street, Suite 3400 Los Angeles, CA |
| 10 | Discover Bank (Petitioner) Represented by Julia B. Strickland Stroock & Stroock & Lavan 2029 Century Pk East, #1800 Los Angeles, CA |
| 11 | American Express Travel Related Services Company, Inc. (Objector) Represented by Julia B. Strickland Stroock & Stroock & Lavan LLP 2029 Century Pk East, #1800 Los Angeles, CA |
| 12 | American Association Of Retired Persons (Amicus curiae) Represented by Mark F. Anderson Kemnitzer Anderson Barron & Ogilvie L.L.P 445 Bush Street, 6th Floor San Francisco, CA |
| 13 | National Association Of Consumer Advocates (Amicus curiae) Represented by Robert M. Bramson Bramson, Plutzik, Mahler & Birkhaeuser 2125 Oak Grove Road, Suite 120 Walnut Creek, CA |
| 14 | Chamber Of Commerce Of The United States (Amicus curiae) Represented by Donald M. Falk Mayer Brown Rowe & Maw 555 College Avenue Palo Alto, CA |
| 15 | Glen, Robert A. (Amicus curiae) Delaware Department of Justice 820 North French Street Wilmington, DE 19801 Represented by William L. Stern Severson & Werson 1 Embarcadero, 26th Floor San Francisco, CA |
| 16 | American Bankers Association (Amicus curiae) Represented by G. Howden Fraser Rintala Smoot, Jaenicke & Rees 10351 Santa Monica Boulevard, Suite 400 Los Angeles, CA |
| 17 | American Bankers Association (Amicus curiae) Represented by Christopher R. Lipsett Wilmer, Cutler & Pickering 520 Madison Avenue New York, NY |
| 18 | At&T Wireless Services, Inc. (Amicus curiae) Represented by Kelly T. Noonan Attorney at Law 800 Fifth Avenue, Suite 4000 Seattle, CA |
| 19 | At&T Wireless Services, Inc. (Amicus curiae) Represented by Mark E. Weber Gibson Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, CA |
| 20 | California Bankers Association (Amicus curiae) Represented by James R Mcguire Morrison & Foerster 425 Market St San Francisco, CA |
| 21 | Consumer Attorneys Of California (Amicus curiae) Represented by James C. Sturdevant The Sturdevant Law Firm 475 Sansome Street, Suite 1750 San Francisco, CA |
| 22 | Shakib, Rebecca (Amicus curiae) Represented by Kamran Ghalchi Ghalchi & Associates 10850 Wilshire Blvd., Ste 770 Los Angeles, CA |
| 23 | Bernard, Karen (Amicus curiae) Represented by Tina Wolfson Ahdoot & Wolfson LLP 10850 Wilshire Blvd, Ste 770 Los Angeles, CA |
| 24 | Ralphs Grocery Company (Amicus curiae) |
| Disposition | |
| Jun 27 2005 | Opinion: Reversed |
| Dockets | |
| Feb 21 2003 | Petition for review filed By counsel for Real Party in Interest {Christopher Boehr}. |
| Feb 21 2003 | Application to appear as counsel pro hac vice filed By Paul Bland. |
| Feb 21 2003 | Received: Notice of Association of Counsel. |
| Feb 21 2003 | Record requested |
| Feb 24 2003 | Request for depublication (petition for review pending) By the Law Firms of Johnson & Rishwain, Law Firm of Perona, Langer, Beck & Lallande, and the Law Offices of Shawn Khorrami. |
| Mar 6 2003 | Opposition filed to reqt to depublication>>petitioner Discover Bank |
| Mar 6 2003 | Opposition filed to reqt for depublication>>American Express Travel Related Services Company, Inc. [non-party] |
| Mar 17 2003 | Request for depublication filed (another request pending) Attorney General Lockyer |
| Mar 21 2003 | Opposition filed to depub reqt of Attorney General>>petitioner Discover Bank |
| Mar 25 2003 | 2nd record request |
| Mar 25 2003 | Received Court of Appeal record 2 doghouses [being sent o/n] |
| Apr 9 2003 | Petition for Review Granted (civil case) Votes: George, CJ., Kennard, Baxter, Werdegar, Chin, Brown and Moreno, JJ. |
| Apr 9 2003 | Application to appear as counsel pro hac vice granted The application of Paul Bland of the State of Maryland for admission pro hac vice to appear on behalf of real party in interest Christopher Boehr is hereby granted. |
| Apr 9 2003 | Letter sent to: Counsel in re Certification of Interested Entities or Persons. |
| Apr 23 2003 | Certification of interested entities or persons filed petitioner Discover Bank |
| Apr 24 2003 | Certification of interested entities or persons filed RPI {Christopher Boehr}. |
| May 9 2003 | Opening brief on the merits filed By Real Party in Interest {Christopher Boehr}. |
| Jun 9 2003 | Answer brief on the merits filed petitioner Discover Bank |
| Jun 16 2003 | Request for extension of time filed Real Party in Interest asking until July 14, 2003 to file RPI's Reply Brief on the Merits. |
| Jun 20 2003 | Extension of time granted To July 14, 2003 to file Real Party in Interest's reply brief on the merits. |
| Jul 10 2003 | Received document entitled: supplemental brief on new authority petitioner Discover Bank |
| Jul 10 2003 | Notice of substitution of counsel received Letter from Kirkland & Ellis LLP: Amy Wilkins substituted by attorney C. Robert Boldt. |
| Jul 14 2003 | Reply brief filed (case fully briefed) by counsel for RPI Christopher Boehr |
| Aug 13 2003 | Received application to file Amicus Curiae Brief Robert A. Glen, Delaware State Bank Commissioner in support of petitioner. |
| Aug 13 2003 | Received application to file Amicus Curiae Brief Of The Chamber of Commerce of the United States in support of petitioner. |
| Aug 13 2003 | Request for extension of time filed Of Consumer Attorneys of California asking until August 28, 2003 to file AC Brief in support of Real Party in Interest. |
| Aug 13 2003 | Received application to file amicus curiae brief; with brief California Bankers Association [in support of real party] |
| Aug 13 2003 | Received application to file amicus curiae brief; with brief American Bankers Assn, American Financial Services Assn and Consumer Bankers Assn [in support of petitioner] |
| Aug 13 2003 | Received application to file amicus curiae brief; with brief AT&T Wireless Services, Inc. [in support of petitioner] |
| Aug 14 2003 | Received application to file Amicus Curiae Brief of The National Association of Consumer Advocates in support of Real Party in Interest. / 40(K). |
| Aug 14 2003 | Received application to file Amicus Curiae Brief of AARP in support of RPI. / 40(K). |
| Aug 15 2003 | Received letter from: proposed AC California Bankers Association |
| Aug 18 2003 | Extension of time granted To August 28, 2003 to file Application and AC Brief of Consumer Attorneys of California. |
| Aug 18 2003 | Permission to file amicus curiae brief granted AARP in support of RPI {Christophr Boehr}. |
| Aug 18 2003 | Amicus Curiae Brief filed by: AARP in support of RPI {Christopher Boehr}. Answer is due within twenty days. |
| Aug 18 2003 | Permission to file amicus curiae brief granted The National Association of Consumer Advocates in support of RPI {Christopher Boehr}. |
| Aug 18 2003 | Amicus Curiae Brief filed by: The National Association of Consumer Advocates in support of RPI {Christopher Boehr}. Answer is due within twenty days. |
| Aug 18 2003 | Permission to file amicus curiae brief granted The chamber of commerce of the United States in support of petitioner. |
| Aug 18 2003 | Amicus Curiae Brief filed by: The Chamber of Commerce of the United States in support of petitioner. Answer is due within twenty days. |
| Aug 18 2003 | Permission to file amicus curiae brief granted Robert A. Glen, Delaware State Bank Commissioner in support of Petitioner. |
| Aug 18 2003 | Amicus Curiae Brief filed by: Robert A. Glen, Delaware State Bank Commissioner in support of Petitioner. Answer is due within twenty days. |
| Aug 20 2003 | Permission to file amicus curiae brief granted American Bankers Association, American Financial Services Association and Consumer Bankers Association in support of petitioner {Discover Bank}. |
| Aug 20 2003 | Amicus curiae brief filed American Bankers Association, American Financial Services Association and Consumer Bankers Association in support of petitioner {Dicover Bank}. Answer is due within twenty days. |
| Aug 20 2003 | Permission to file amicus curiae brief granted AT&T Wireless Services Inc., in support of petitioner {Discover Bank}. |
| Aug 20 2003 | Amicus curiae brief filed AT&T Wireless Services Inc in support of petitioner {Discover Bank}. Answer is due within twenty days. |
| Aug 20 2003 | Permission to file amicus curiae brief granted California Bankers Association in support of petitioner {Discover Bank}. |
| Aug 20 2003 | Amicus curiae brief filed California Bankers Association in support of petitioner {Discover Bank}. Answer is due within twenty days. |
| Aug 29 2003 | Received application to file Amicus Curiae Brief Consumer Attorneys of California in support of RPI. / 40(K)> |
| Sep 5 2003 | Permission to file amicus curiae brief granted Consumer Attorneys of California in support of Real Party in Interest {Christopher Boehr}. |
| Sep 5 2003 | Amicus curiae brief filed By Consumer Attorneys of California in support of Real Party in Interest {Christopher Boehr}. Answer is due within twenty days. |
| Sep 8 2003 | Response to amicus curiae brief filed by Real Party (Christopher Boehr) to Amici Briefs in support of petitioner (Discover Bank) |
| Sep 25 2003 | Response to amicus curiae brief filed Discover Bank's answer to A/C Brief of Consurmer Attorneys of CA. |
| Dec 26 2003 | Change of Address filed for: Barry L. Kramer counsel for RPI {Christopher Boehr}. Change effective January 1, 2004. |
| Feb 11 2004 | Supplemental brief filed By counsel for RPI {Christopher Boehr} re New Authority. |
| Feb 24 2004 | Received application to file Amicus Curiae Brief of Rebecca Shakib and Karen Bernard in support of RPI. |
| Feb 27 2004 | Permission to file amicus curiae brief granted Rebecca Shakib and Karen Bernard in support of RPI. |
| Feb 27 2004 | Amicus curiae brief filed By Rebecca Shakib and Karen Bernard in support of RPI. Answer is due within twenty days. |
| Mar 11 2004 | Supplemental brief filed petitioner Discover Bank |
| Mar 18 2004 | Received application to file Amicus Curiae Brief Ralphs Grocery Company in support of petitioner. |
| Mar 18 2004 | Response to amicus curiae brief filed petitioner Discover Bank, to amicus brief of Rebecca Shakib and Karen Bernard. |
| Mar 23 2004 | Permission to file amicus curiae brief granted Ralphs Grocery Company in support of petitioner. |
| Mar 23 2004 | Amicus curiae brief filed Ralphs Grocery Company in support of petitioner. Answer is due within twenty days. |
| Jul 14 2004 | Received: supplemental brief on new authority petitioner, Discover Bank. |
| Jul 21 2004 | Received: RPI's Notice of Appearance of Additional Counsel for RPI. |
| Sep 17 2004 | Change of contact information filed for: Arthur H. Bryant, counsel for RPI {Christopher Boehr}. |
| Nov 29 2004 | Received: application of AC The Chamber of Commerce of the United States for permission to file supplemental. |
| Nov 30 2004 | Change of contact information filed for: counsel for amicus curiae California Bankers Association adivising court that Maren Nelson, formerly of Morrison & Foerster LLP should no longer be listed as counsel of record. New counsel of record is James R. McGuire of Morrison & Foerster. |
| Dec 6 2004 | Supplemental brief filed By AC The Chamber of Commerce of the United States in support of petitioner. Filed with permission from the court. |
| Dec 13 2004 | Association of attorneys filed for: Leslie A. Bailey, as co-counsel for RPI {Christopher Boehr}. |
| Dec 17 2004 | Supplemental brief filed By counsel for RPI {Christopher Boehr} re New Authority. |
| Mar 8 2005 | Case ordered on calendar Thurs. 4/7/05 @1:30pm - Los Angeles |
| Mar 11 2005 | Received: from petitioner Discover Bank request to conitnue oral argument date. |
| Mar 14 2005 | Letter sent to: Letter to counsel re request to continue oral argument date. The Court has decided to retain case on the oral argument calendar for April 7, 2005 at the originally scheduled time. |
| Mar 18 2005 | Association of attorneys filed for: Petitioner DISCOVER BANK The Firm of Stroock & Strooch & Lavan LLP Attorney Julia B. Strickland |
| Mar 18 2005 | Filed: Request of RPI {Christopher Boehr} to divide oral argument time. |
| Mar 28 2005 | Supplemental brief filed Petitioner ( Discover Bank). |
| Mar 28 2005 | Order filed The request of real party in interest to allow two counsel to argue on behalf of real party in interest at oral argument is hereby granted. |
| Mar 28 2005 | Order filed The request of real party in interest to allocate Brian R. Strange 10 minutes and F. Paul Bland Jr. 20 minutes of real party in interest's 30 minute allotted time for oral argument is granted. |
| Apr 4 2005 | Received: from petitioner Discover Bank, supplemental authority. |
| Apr 7 2005 | Cause argued and submitted |
| Apr 27 2005 | Received: Petitioner's Supplemental Brief New Authority |
| May 10 2005 | Received: RPI's Supplemental Brief New Authority. |
| May 13 2005 | Received: letter dated 5/12/05 from Robert Bramson on Behalf of AC the National Association of Consumer Advocates re: New Authority |
| May 20 2005 | Received: letter dated 5/20/05 from petnr Discover Bank re new authorities |
| Jun 27 2005 | Opinion filed: Judgment reversed and remanded for proceedings consistent with this opinion. Opinion by Moreno, J. ---joined by George, C.J., Kennard and Werdegar, JJ. Concurring and Dissenting Opinion by Baxter, J. ---joined by Chin and Brown, JJ. |
| Aug 1 2005 | Remittitur issued (civil case) |
| Aug 3 2005 | Note: per request of T. Wright, #1 doghouse sent to LA Supreme Court Office |
| Aug 16 2005 | Received: Receipt for Remittitur from CA 2/1. |
| Briefs | |
| May 9 2003 | Opening brief on the merits filed |
| Jun 9 2003 | Answer brief on the merits filed |
| Jul 14 2003 | Reply brief filed (case fully briefed) |
| Aug 18 2003 | Amicus Curiae Brief filed by: |
| Aug 18 2003 | Amicus Curiae Brief filed by: |
| Aug 18 2003 | Amicus Curiae Brief filed by: |
| Aug 18 2003 | Amicus Curiae Brief filed by: |
| Aug 20 2003 | Amicus curiae brief filed |
| Aug 20 2003 | Amicus curiae brief filed |
| Aug 20 2003 | Amicus curiae brief filed |
| Sep 5 2003 | Amicus curiae brief filed |
| Sep 8 2003 | Response to amicus curiae brief filed |
| Sep 25 2003 | Response to amicus curiae brief filed |
| Feb 27 2004 | Amicus curiae brief filed |
| Mar 18 2004 | Response to amicus curiae brief filed |
| Mar 23 2004 | Amicus curiae brief filed |
