Comcast Petitions the Supreme Court over Arbitration

Comcast petitioned the Supreme Court in response to the McGill rule, which states that “provisions in predispute arbitration agreements waiving the parties’ right to seek ‘public injunctive relief’ in any forum are contrary to California public policy and unenforceable.” Comcast presented the following questions to the Supreme Court: “Whether the McGill rule falls outside the [Federal Arbitration Act’s] saving clause because it is not a ground that ‘exist[s] at law or in equity’ for the ‘revocation’ of any contract?”; and “Whether, even if the McGill rule falls within the FAA’s saving clause, it is otherwise preempted by the FAA because it interferes with fundamental attributes of arbitration by negating the parties’ agreement to resolve their dispute bilaterally?”

The Federal Arbitration Act (FAA) reads that written arbitration agreements are “valid, irrevocable, and enforceable,” except “upon such grounds as exist at law or in equity for the revocation of any contract.” The FAA is designed to “ensure judicial enforcement of privately made agreements to arbitrate.” At issue in the case is what qualifies as “ground for revocation.” The Ninth Circuit “sustained a judge-made rule rendering unenforceable arbitration provisions that preclude requests for public injunctive relief.” Further, the Ninth Circuit declared that the “‘McGill rule’ falls within the FAA’s savings clause, and that it does not interfere with the fundamental attribute of arbitral bilateralism.”

Comcast argued that the Supreme Court should grant the petition because it proposes two important questions: if state anti-arbitration rules fall within the FAA savings clause, and if said state rules are preempted outside of a class or group action. These are issues that the Court has not directly answered. Comcast stated that the Supreme Court needs to rule on the first question to resolve conflicts in law between McGill and the FAA in lower courts. Comcast argued that the McGill rule is not a defense for revocation of a contract as prescribed in the FAA and it “undermines the FAA’s protection of bilateral arbitration.” According to Comcast, the Court needs to look at the matter to “protect consumer arbitration in California” and “correct the McGill rule’s intrusion on bilateralism.”

In July 2019, the Ninth Circuit agreed to lift motions that compel arbitration, therefore allowing plaintiffs in class action cases to avoid arbitration. The decision was particular to California but could have implications across the country. Comcast had appealed the California Supreme Court ruling to the Ninth Circuit. The California Supreme Court held that companies cannot compel arbitration and force consumers to forfeit their ability to seek a public injunction. The court also claimed that the state’s policy was not preempted by the Federal Arbitration Act. Under the ruling, corporations are not allowed to require consumers or employees to waive injunctions. However, companies can set injunctive arbitration terms and limit how claims are presented.

Comcast is represented by Gibson, Dunn & Crutcher before the Supreme Court of the United States.