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JAMES C. STURDEVANT (SBN 94551)
JACK P. HUG (SBN 39168)
STEVEN S. KAUFHOLD (SBN 157195)
THE STURDEVANT LAW FIRM
475 Sansome Street, Suite 1750
San Francisco, California 94111
Telephone: (415) 477-2410

Attorneys for Amici Curiae

James C. Sturdevant, Co-Chair
Ian Herzog, Co-Chair
AMICUS CURIAE COMMITTEE
CONSUMER ATTORNEYS OF CALIFORNIA
Bruce A. Broillet
David S. Casey, Jr.
Deborah David
Douglas Devries
Laurence E. Drivon
Thor Emblem
Joseph F. Harbison III
Steven J. Kleifield
Moses Lebovits
Harvey R. Levine
Wayne McClean
David A. Rosen
Leonard Sacks
Rick Simons
Daniel Smith
Chris Spagnoli
Robert B. Steinberg
Thomas G. Stolpman Tony Tanke
Lea-Ann Tratten
William D. Turley
Roland Wrinkle

PAUL BLAND
VICTORIA NUGENT
SARAH POSNER
TRIAL LAWYERS FOR PUBLIC JUSTICE
1717 Massachusetts Avenue, NW, Suite 800
Washington, DC 20036-2001
Telephone: (202) 797-8600

PATRICIA STURDEVANT (CA SBN 54681)
NATIONAL ASSOCIATION OF CONSUMER ADVOCATES
3220 "N" Street, NW, Suite 343
Washington, DC 20007
Telephone: (202) 342-1975

INTRODUCTION

STATEMENT OF INTEREST

STATEMENT OF FACTS

ARGUMENT

I. THE HISTORY AND PLAIN LANGUAGE OF THE CLRA, INCLUDING THE EXPRESS ANTI-WAIVER CLAUSE, PRECLUDE ARBITRATION OF CLRA CLAIMS.

A. The CLRA Was Enacted To Address Corporate Wrong-Doing Directed At Consumers.

B. The Legislature Crafted A Detailed Statutory Scheme To Address The Deceptive Acts And Practices Enumerated In The CLRA.

II. COMPELLING ARBITRATION WOULD CONTRAVENE THE EXPRESS TERMS OF THE CLRA AND CIVIL CODE § 3513.

A. Both the CLRA Itself and Civil Code § 3513 Bar Waiver of the Protections and Provisions of the CLRA.

B. CLRA Claims May Not Be Compelled to Arbitration Since Arbitrators Cannot Provide, Monitor and Enforce Meaningful Injunctive Relief Sufficient to Protect the Public.

C. The Court of Appeal Correctly Held That Arbitration Clauses May Only Be Enforced Where the Arbitrator Has the Power and Ability to Provide the Same Remedies as Those That Are Available in Court.

D. Arbitration of the CLRA Claim Would Unlawfully Waive the Class Action Provisions of the CLRA.

III. ONLY THE LEGISLATURE MAY REWRITE THE EXPRESS LANGUAGE OF THE ANTI-WAIVER PROVISION.

IV. THIS COURT HAS NEVER ENFORCED PRIVATE AGREEMENTS THAT ARE CONTRARY TO PUBLIC POLICY.

V. THE APPELLATE COURT'S APPLICATION OF THE ANTI-WAIVER PROVISION IS CONSISTENT WITH FEDERAL LAW AND THE PRACTICE OF OTHER STATES.

A. The Federal Arbitration Act Does Not Apply.

B. Other States Preclude Waiver of Protective Provisions.

CONCLUSION

Amici Consumer Attorneys of California ("CAOC"), Trial Lawyers for Public Justice ("TLPJ"), and the National Association of Consumer Advocates ("NACA") file this Joint Amicus Brief to articulate and support the consistent application of the anti-waiver provision of the Consumer Legal Remedies Act ("CLRA"), California Civil Code § 1750, et seq. That anti-waiver provision, designed to ensure California consumers access to California courts, is directly attacked by the appellants in this case.⁽¹⁾

The California Legislature carefully crafted the CLRA to address a specific list of abuses perpetrated against California consumers. Unlike broader statutes such as the California Unfair Competition Law ("UCL"), California Business and Professions Code § 17200, et seq., the CLRA does not seek to deter and remedy all possible unlawful, fraudulent or unfair practices. The CLRA is limited to enumerated acts and practices.

In order to redress the specific practices, the CLRA includes provisions for:

() Issuance of injunctive relief. See Civil Code § 1780(a)(2);

() Relaxed standards for certification of class actions. See Civil Code § 1781; () Mandatory attorneys' fees awards to prevailing plaintiffs. See Civil Code § 1780(d).

In order to protect the public interest and ensure the protections codified in the CLRA, the Legislature enacted an express, specific, anti-waiver provision. Civil Code § 1751. That provision states: "Any waiver by a consumer of the provisions of this title is contrary to public policy and shall be unenforceable and void." The Legislature's inclusion of a specific anti-waiver provision is consistent with the long-standing law of California embodied in Civil Code § 3513 and confirmed recently by this Court in Bickel v. City of Piedmont (1997) 16 Cal.4th 1080. Section 3513, enacted in 1872, provides: "Anyone may waive the advantage of a law intended solely for his benefit. But a law established for a public reason cannot be contravened by a private agreement."

Consistent with the plain language of the CLRA, the long-standing policy of § 3513 and this Court's recent Bickel decision, the Court of Appeal determined that appellant's claim under the CLRA (as distinct from other claims made below) could not be compelled to arbitration where important, express provisions of the CLRA would be lost. As will be shown, the decision below is premised upon California law, which the parties specified would govern their agreement, as well as federal law and the law of California's sister states.

Consumer Attorneys of California ("CAOC") is a voluntary membership organization of approximately 3,500 consumer attorneys practicing throughout California. The organization was founded in 1962 and its members predominantly represent individuals subjected in a variety of ways to consumer fraud practices. CAOC has taken a leading role in advancing and protecting the rights of injured individuals in both the courts and the Legislature.

Trial Lawyers for Public Justice ("TLPJ") is a national public interest law firm that specializes in precedent setting and socially significant civil litigation and is dedicated to pursuing justice for the victims of corporate and governmental abuses. Litigating throughout the federal and state courts, TLPJ prosecutes cases designed to advance consumers' and victims' rights, environmental protection and safety, civil rights and civil liberties, occupational health, and employees' rights, the preservation and improvement of the civil justice system and the protection of the poor and the powerless.

The National Association of Consumer Advocates ("NACA") is a non-profit corporation whose members are private and public sector attorneys, legal services attorneys, and law professors and students whose primary practice involves the protection and representation of consumers. Its mission is to promote justice for all consumers by maintaining a forum for information sharing among consumer advocates across the country and to serve as a voice for its members as well as consumers in the ongoing effort to curb unfair and abusive business practices. From its inception, NACA has focused primarily on issues which concern abusive and fraudulent business practices, and has been concerned about the imposition by businesses of mandatory arbitration clauses on their customers, because of the expense, limitation on discovery and remedies such as injunctive relief, and inability to reverse decisions which are incorrectly decided and result in injustice. Consistent with its goal of promoting justice for consumers, NACA has appeared as amicus curiae in a number of cases challenging arbitration clauses, including Badie v. Bank of America, Civ. No. A068753, before the California Court of Appeal.

As organizations representative of consumers throughout California and the entire United States, amici are vitally interested in the resolution of this issue and believe they can be of assistance in illuminating the legal and policy issues before the Court. Indeed, many members of amici represent private plaintiffs in litigation under the CLRA or under consumer statutes with similar anti-waiver provisions, and believe that authorities, arguments and policy considerations exist which have not yet been thoroughly addressed by the parties. Specifically, amici will address federal law and the laws of other states with respect to the waiver of consumer protection provisions. Also, amici will address the history and structure of the CLRA with an emphasis on the provisions regarding injunctive relief, class proceedings and mandatory attorneys' fees for prevailing plaintiffs.

Amici adopt the statement of facts contained in the published court of appeal decision. Amici wish to emphasize the following findings of the trial court. In particular, the court of appeal found that the parties had agreed to arbitration under provisions of the California Code of Civil Procedure and not under the provisions of the Federal Arbitration Act. Broughton v. Cigna, No. B093517, Slip Opinion ("Slip Op.") at 14. Additionally, the court found that some, but not all, of plaintiffs' claims were subject to arbitration. Id. at 2, 27. Thus, only the CLRA claim, based on the terms of the express anti-waiver provision was excluded from arbitration. The court found that a bifurcated proceeding, with most claims going to arbitration and the CLRA claim reserved for judicial proceedings, was precisely what the parties had agreed to. Id. at 2.

The California Legislature included an express statement of legislative intent in the text of the CLRA. "This title shall be liberally construed and applied to promote its underlying purposes, which are to protect consumers against unfair and deceptive business practices and to provide efficient and economical procedures to secure such protection." Civil Code § 1760. The CLRA was enacted in direct response to social and economic problems resulting from deceptive business practices. See Reed, Legislating For The Consumer: An Insider's Analysis Of The Consumers Legal Remedies Act, 2 Pacific L.J. 1, 5-7 (1971).

Unlike other statutes, such as the California Unfair Competition Law ("UCL"), the CLRA is limited to transactions involving a "consumer" -- defined by the CLRA as "an individual who seeks or acquires, by purchase or lease, any goods or services for personal, family, or household purposes." Civil Code § 1761.⁽²⁾ Just as the scope of transactions covered by the CLRA is limited to those involving "consumers," the CLRA proscribes 22 specific acts or practices. See Civil Code § 1770. As this Court recognized shortly after its enactment, the CLRA "is confined largely to deceptive representations." Vasquez v. Superior Court (1971) 4 Cal.3d 800, 818.

First, when a consumer suffers damage as a result of the use or employment of any of the methods, acts or practices declared unlawful by § 1770, the CLRA expressly provides for the issuance of "an order enjoining such methods, acts or practices." Civil Code § 1780(a)(2) .

Issuance of injunctive relief is particularly important since unlawful acts or practices utilized against one consumer will often result from a continuing course of conduct. The availability of injunctive relief permits courts to address and prohibit such unlawful conduct to protect all consumers subject to the same or similar practices and the public interest. Thus, the statutory authorization of injunctive relief is an express example of the "efficient and economical procedures to secure [protection from the unlawful actions enumerated in the CLRA]." Civil Code § 1760.

Second, in a further attempt to provide expressly "efficient and economical procedures" the CLRA authorizes certification of classes of consumers raising CLRA claims on a more permissive basis than that set forth for all other claims under Code of Civil Procedure § 382. See Civil Code § 1752. In Caro v. Procter & Gamble (1993) 18 Cal.App.4th 644, the court specifically differentiated between the standard for class certification of CLRA claims under § 1781 and the standard for certification of all other claims under Code of Civil Procedure § 382.

In evaluating the propriety of class certification of a CLRA claim, the court need not determine that certification is "a superior means of adjudicating" the dispute. Instead, upon a showing of four statutory factors, a court is required to permit the CLRA action to proceed as a class action ("The court shall permit the suit to be maintained on behalf of all members of the represented class if all of the following conditions are meet."). Civil Code § 1781. In Hogya v. Superior Court (1977) 75 Cal.App.3d 122, the court found that the plain language of § 1781 created a mandatory duty upon the trial court to certify a class when the four requirements were met. The import of section 1781, Hogya and Caro is plain; the Legislature specifically determined that it was vital to the fulfillment of the purpose of the CLRA that consumers have easier access to class proceedings.

Third, in an effort to encourage consumers to bring CLRA claims for the benefit of the general public, the Legislature included a provision for a mandatory award of attorneys' fees for prevailing CLRA plaintiffs. Civil Code § 1780(d). That section provides "the court shall award court costs and attorney's fees to a prevailing plaintiff in litigation filed pursuant to this section." As an appellate court recently noted, § 1780(d) is mandatory and entitles a prevailing plaintiff to an award of costs and attorney's fees "as a matter of right." See Reveles v. Toyota By The Bay (1997) 57 Cal.App.4th 1139, 1154. The Legislature's precise determination that a mandatory award of attorney's fees was necessary to effectuate the provisions of the CLRA stands in sharp contrast with the general rule that an award of attorney's fees, even a case vindicating the public interest, is discretionary. See e.g. Code of Civil Procedure § 1021.5.

The anti-waiver provision of the CLRA is clear on its face. It states: "any waiver by a consumer of the provisions of this title is contrary to public policy and shall be unenforceable and void." Civil Code § 1751. The purpose of the anti-waiver provision is to safeguard from waiver the important consumer protections afforded by the CLRA. Also, the anti-waiver provision serves to maintain all provisions of the CLRA as a cohesive whole.

Even were § 1751 ambiguous and thus subject to interpretation by the Court, California law would dictate the application of the rule of construction contained in Civil Code § 3513. Section 3513 provides "anyone may waive the advantage of a law intended solely for his benefit. But a law established for a public reason cannot be contravened by a private agreement." In Bickel, this Court underscored the continuing vitality of § 3513 as well as the necessity of examining the purpose and language of any statutory right to be waived. Bickel, supra, 116 Cal.4th at 1051. To the extent that the anti-waiver provision was considered ambiguous, Code of Civil Procedure § 3513 and this Court's reasoning in Bickel would preclude any waiver of the provisions of the CLRA.

Here, arbitration would unlawfully contravene the CLRA provisions crafted to provide injunctive relief and relaxed class certification. Those provisions are addressed below in turn.

In its briefing, Cigna cites some authorities which address the issue of whether parties may specifically empower an arbitrator to issue injunctive relief as a remedy to resolve disputes. See Cigna Opening Brief at pp. 9-14.⁽³⁾ However, the issue in this case is not whether arbitrators can ever be specifically empowered to issue injunctions to resolve private commercial disputes pursuant to a specific provision in a negotiated agreement. Rather, the issue is whether a CLRA claim may be compelled to arbitration when arbitrators lack the authority, contractual or otherwise, to monitor and enforce injunctions for the protection of the public. The answer is no.

Arbitrators May Not Monitor and Enforce Injunctions and Thus Cannot Vindicate the Purposes of the CLRA.

Federal and state jurisdictions, including California, have reserved for the courts the duty of monitoring injunctions and enforcing injunctions since those duties by definition involve a continuing obligation. In Luster v. Collins (1993) 15 Cal.App.4th 1338, the Court of Appeal cogently explained why an arbitrator lacks the authority to enforce an injunction. The Luster court recognized that the Legislature addressed the complexities associated with enforcing judgments by enacting the enforcement of judgments law, Code of Civil Procedure § 680.010, in 1982. Luster at 1349. These provisions authorized courts to punish violations of a provision of a judgment as contempt. Code of Civil Procedure § 717.010. The Luster court concluded that in light of these provisions and the Legislature's efforts in enacting a comprehensive statute dealing with the various methods to enforce judgments the Legislature had no need to furnish an arbitrator additional authority for enforcement purposes post judgment. Such an action would not only conflict with judicial power but, absent carefully prescribed procedures, potentially interfere with the respective rights of the parties. Luster at 1349.

This is important because an arbitrator's award is not directly enforceable. Until it is confirmed or vacated by court proceedings the award has no more force or effect than a contract in writing between the parties to the arbitrator. Code of Civil Procedure § 1287.6; Jones v. Kvistad (1971) 19 Cal.App.3d 836, 840. Thus the ability of the court to fashion relief in accordance with the terms of the arbitration agreement is critical.

By contrast, historically arbitrators have been empowered, by contract and statute, to resolve factual issues and craft remedies in an expedited, efficient manner. Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 7. "The arbitrator's decision should be the end, not the beginning of the dispute." Id. at 10. Indeed, speed and reduced costs are frequently the twin promises of private contractual arbitration. See e.g Engalla v. Kaiser Permanente (1997) 15 Cal.4th 951, 978; Advanced Micro Devices, supra, 9 Cal.4th at 373.

A private arbitrator is not empowered to award injunctive relief. The injunctive remedy is fundamentally different from other forms of equitable relief in that permanent injunctions require a superior court's ongoing supervision and power to enforce. See Sontag Chain Stores Co. v. Superior Court (1941) 18 Cal.2d 94, 94-95. While this Court has recognized the need in negotiated commercial agreements to allow arbitrators to exercise certain equitable powers in fashioning a remedy between those parties, it has never addressed whether an arbitrator may issue an injunction. See Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362.⁽⁴⁾ The singular power of superior court judges to issue injunctions is underscored in cases brought under the CLRA which has a stated public purpose and specific provisions designed to protect the public from a litany of misrepresentations. The issuance and enforcement of such injunctions require the exercise of considerable discretion. Injunctions frequently require courts to retain jurisdiction for years to ensure that the purposes of the decree have been met. The very nature of that equitable remedy is inherently inconsistent with the goals and purposes of arbitral remedies.

Moreover, the California arbitration statutes themselves implicitly recognize that arbitrators lack the power to issue, supervise and enforce injunctions. For example, Code of Civil Procedure § 1281.8(b) requires a party who is subject to arbitration and seeking a temporary restraining order or a preliminary injunction to apply to the court, not the arbitrator.

An analogy may be drawn to another equitable remedy, that of the appointment of a receiver. California law has reserved to the courts the duty of appointing and supervising receivers for the same reason as it reserves the power to monitor and superintend injunctions to the courts. "There is no power vested in the courts more jealously guarded or safeguarded than this very power to appoint a receiver to take, for the court, the possession and control of the property of others." Marsch v. Williams (1994) 23 Cal.App.4th 238, 248, quoting from Takeba v. Superior Court (1919) 43 Cal.App. 469, 475.

Because the importance of the trial court's role in supervising a receiver is significant, a receiver is an agent of the court, not of the parties and the receivership estate in the receiver's hands is under the control and continuous supervision of the court, the Marsch court held that an arbitration panel could not appoint a receiver in the absence of specific statutory authority. 23 Cal.App.4th at 245. See also Badglery v. Upp (1993) 20 Cal.App.4th 218, 221-22 (arbitration denied because provisional remedies of preliminary injunction and appointment of a receiver are "beyond the authority of an arbitrator to grant").

The continuing exercise of discretion over time is contrary to the expediency and finality that are the hallmarks of arbitration. As this Court has held, it is the general rule that parties to a private arbitration impliedly agree that the arbitrator's decision will be both binding and final. Moncharsh, supra, 3 Cal.4th at 10. An expectation that an arbitrator or a panel of arbitrators could exercise the continuing quasi-judicial supervision of the parties necessary to effect the proper monitoring of an injunction (or supervision of a receivership, another expansive equitable remedy) is contrary to the finality and efficiency of arbitration and to the policy of the law.

As the Court of Appeal correctly noted, a party may not be forced into arbitration where the arbitral forum cannot provide the same remedies available in a judicial forum. See Broughton, Slip Op. at 8 ("Cigna must establish that all the remedies available under the Act are available in an arbitration in order to demonstrate that it is merely an alternative neutral forum."). Cigna and its amici have assailed the Court of Appeal for enunciating this rule, but it is a core principle applicable to private contractual arbitration.

While the United States Supreme Court has articulated a policy favoring arbitration, the Court has explicitly conditioned this policy on the requirement that arbitration offers remedies that are equal to those available in court. In permitting arbitration of statutory claims under the Age Discrimination in Employment Act (ADEA), 29 U.S.C. § 621, et seq., the Court made this premise entirely clear: "[b]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum." Gilmer v. Interstate/Johnson Lane Corp. (1991) 500 U.S. 20, 26; see also Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth (1985) 473 U.S. 614, 628. Where, as here, this premise cannot be fulfilled, and arbitration necessarily involves the waiver of substantive statutory rights, arbitration cannot be compelled.

In 1998, the Court ruled unanimously that a general arbitration clause in a collective bargaining contract cannot be used to compel arbitration of a statutory claim arising under the Americans With Disabilities Act of 1990 ("ADA"), 42 U.S.C. § 12101f, et seq. Wright v. Universal Maritime Service Corp. (1998) ___ U.S. ___, 119 S.Ct. 391. The Court refused to infer from a general contractual provision that the parties intended to waive a statutorily protected right unless the undertaking is explicitly stated. It further held that the waiver must be clear and unmistakable. 119 S.Ct. at 396.

In Wright the Court emphasized that its holding in Gilmer, supra, should not be read expansively. The Court acknowledged the "tension" between separate lines of cases following Gilmer and Alexander v. Gardner-Denver Co, (1974) 415 U.S. 36. Alexander held that an employee does not forfeit his right to a judicial forum for claimed discriminatory discharge in violation of Title VII of the Civil Rights Act of 1974, 42 U.S.C. § 2000e, et seq., if he first pursues his grievance to final arbitration under a collective bargaining agreement, because a lawsuit under Title VII asserts "independent statutory remedies accorded by Congress." 415 U.S. at 49-50. Because the Court found no waiver of Wright's right to a judicial forum, it was not necessary to resolve the "tension" between the two lines of cases. Wright, supra, 119 S.Ct. at 395. However, the Court held that the right to a federal judicial forum is of sufficient importance to be protected against a "less-than-explicit" waiver. Id. at 396. Thus, a unanimous Supreme Court has explicitly held in both Alexander and Wright that waiver of a statutorily protected right must be clear and unmistakable.

Two circuits of the Federal Court of Appeals have recently refused to enforce arbitration agreements that limit the type of remedies available to claimants and subsequently would not have allowed a vindication of their statutory rights. The Eleventh Circuit refused to compel arbitration of an employment discrimination claim where the arbitration agreement limited remedies to damages for breach of contract and "insulate[d ] [the employer] from Title VII damages and equitable relief." Paladino v. Avnet Computer Tech., Inc. (11th Cir. 1998) 134 F.3d 1054, 1062 (Cox, J. concurring, for a majority of the court). The court reached this result holding that the arbitrability of claims under Title VII "rests on the assumption that the arbitration clause permits relief equivalent to court remedies." Id.

Similarly, the Ninth Circuit invalidated an arbitration agreement that required a claimant to forfeit rights and benefits guaranteed by statute - recovery of punitive damages and attorneys' fees and a one-year statute of limitations - in arbitrating a claim under the Petroleum Marketing Practices Act. Graham Oil v. ARCO Products Co. (9th Cir. 1994) 43 F.3d 1244, 1247, cert. denied, 516 U.S. 907 (1995). See also DeGaetano v. Smith Barney, Inc. (S.D.N.Y. 1997) 983 F. Supp. 459, 469 (voiding provision of an arbitration agreement that disallowed attorneys' fees to prevailing plaintiff in Title VII claim after concluding that "contractual clauses purporting to mandate arbitration of statutory claims...are enforceable only to the extent that the arbitration preserves the substantive protections and remedies afforded by the statute.").

Here, Cigna seeks to compel arbitration of the plaintiffs' CLRA claim. Under the CLRA, plaintiffs are statutorily entitled to the issuance of injunctive relief, which an arbitrator cannot award. Several other courts have joined the Court of Appeal in holding that where an arbitrator is not empowered to grant equitable relief that a plaintiff is entitled to receive, arbitration of a statutory claim cannot be compelled. Paladino, supra, 134 F.3d at 1062; LaChance v. Northeast Publishing, Inc. (D. Mass. 1997) 965 F. Supp. 177, 185 (allowing plaintiff to pursue a judicial claim under the Americans with Disability Act where arbitration agreement covering employment did not authorize arbitrator to provide remedy of "reasonable accommodation" which plaintiff was entitled to pursue under the Act).

In addition to the injunctive relief that is expressly authorized by the CLRA and which would be unlawfully waived by an agreement to arbitrate, the CLRA provides for relaxed standards for class certification which cannot be waived. As the court found in Hogya, § 1781 provides the exclusive criteria for class certifications brought pursuant to the CLRA. Hogya, supra, 75 Cal.App.3d at 140. The court found that failure to apply § 1781 as written would frustrate the purpose of the CLRA. Id.

Contextual examination of section 1781, subdivision (b), reveals that "shall" must be given such mandatory meaning to promote the act's purpose and effectiveness ... it is plain the construction offered by real parties in interest, which would permit trial courts to deny certification based on nonenumerated criteria, would counteract the legislation's underlying purposes because it would make it more difficult for consumers to secure the protection intended by the act.Id. at 135-136.

However, here, Cigna seeks to compel arbitration -- a result which would result in waiver of the mandatory class certification provisions of § 1781 which were designed to protect the public and facilitate the quick and efficient disposition of CLRA claims. Instead of mandatory certification, protected if necessary by the ability to seek and receive a writ to compel certification as in Hogya, arbitration would allow the arbitrator to permit or reject classwide treatment as he saw fit. The arbitrator would not be required to follow § 1781. Moncharsh, supra, 3 Cal.4th at 11 ("an arbitrator is not ordinarily constrained to decide according to the rule of law....") The arbitrator's denial of what would otherwise be mandatory certification would not even be subject to appellate review. Id. at 6. The result of allowing an individual to agree to arbitration of a CLRA claim is to sanction a rewriting of the otherwise mandatory, non-waivable language of § 1781. This result is contrary to public policy.⁽⁵⁾

In Kagan v. Gibraltar Sav. & Loan Ass'n (1984) 35 Cal.3d 582, this Court addressed the public policy underlying the CLRA generally, and the importance of following the express procedural provisions of the CLRA to ensure the public protection purpose of the CLRA. Specifically, this Court enforced § 1782(a)(c) which prevents a defendant from "picking off" prospective class representatives by offering them individual relief not made available to the entire class. Id. at 595-596. As this Court recognized, "[t]hose responsible for drafting the Act specifically sought to preclude such 'picking off' of prospective class plaintiffs." Id. at 593; see also Reed, supra, 2 Pacific L.J. at 19. The purpose of this provision was to allow class actions brought under the CLRA to continue on the merits and not be short-circuited by defendants' procedural machinations.

At bottom, what Cigna requests is that this Court rewrite and abrogate the express language of the anti-waiver provision, § 1751. Cigna seeks an interpretation of § 1751 that would gut the CLRA by permitting waiver of important public rights in order to compel arbitration. As set forth above, compelling arbitration here would contravene important CLRA provisions regarding injunctive relief, class actions and attorneys' fees.

However, § 1751 is clear -- these provisions may not be waived. To the extent that Cigna wants a special rule or exception that permits arbitration even when arbitration would result in the waiver of CLRA rights, that request must be made to the Legislature, not this Court. As this Court has recently emphasized, the task of a court in reviewing a statute is "to construe, not to amend, the statute ... We may not under the guise of construction, rewrite the law or give the words an effect different from the plain and direct import of the terms used." California Fed. Sav. & Loan v. Los Angeles (1995) 11 Cal.4th 342, 349. Moreover, while a court may question the wisdom of a statute, the judiciary is not empowered to sit as a superlegislature to weigh the wisdom of the legislation. Stop Youth Addiction, Inc. v. Lucky Stores (1998) 17 Cal.4th 553, 578; Cal Farm Ins. Co. v. Deukmejian (1989) 48 Cal.3d 805, 814; Amador Valley Joint Union High School District v. State Bd. of Equalization (1978) 22 Cal.3d 208, 219.

Even were the Court inclined to indulge Cigna's improper request, neither California law nor the Federal Arbitration Act would compel such a result. We discuss each in turn.

It is axiomatic that California courts will not enforce a private agreement that is against public policy derived from constitutional, legislative, or judicial sources. Accordingly, California's contract principles will not permit a party to enter into an agreement which would shield its wrongdoing part from important remedies provided by California law. In one of the leading cases nationwide on exculpatory clauses, this Court refused to enforce such a clause releasing all claims stemming from negligence -- in a contract between a charitable hospital and a health care consumer, holding that exculpatory clauses affecting the public interest cannot stand. Tunkl v. The Regents of the University of California (1963) 60 Cal.2d. 92. See also Henrioulle v. Martin Ventures, Inc. (1978) 20 Cal. 3d 512, 521 (relying upon "common law principles prevailing when the lease was executed" to invalidate an exculpatory clause in residential lease as against the public interest and allow negligence suit); Baker Pacific Corp. v. Suttles (1990) 220 Cal. App. 3d 1148, 1157 (voiding exculpatory clause in contract tendered to prospective employees as against public policy).

More recently this Court refused to enforce a private contract in Wm. R. Clarke Corp. v. Safeco Ins. Co. (1997) 15 Cal.4th 882. There, a subcontractor sued to recover payment for work completed. The defendants claimed that under the "pay-if-paid" provision in the contract between the contractor and the subcontractor - conditioning payment of the subcontractor upon payment to the general contractor by the owner - no payment was due. This Court held that the provision was void, because it violated the public policy underlying the anti-waiver provisions of California's mechanics' lien laws. 15 Cal.4th at 890. In reaching that conclusion, this Court noted, "we find Safeco's 'freedom of contract' argument unpersuasive in this context....the Legislature has already determined that there are policy considerations here that override the value of freedom of contract. We merely recognize and enforce that legislative policy determination." Id. at 891-92.

In Westlye v. Look Sports, Inc.(1993) 17 Cal.App.4th 1715, 1746- 47, the court refused to enforce contract provisions disclaiming a ski equipment supplier's responsibility for future injuries and stating that consumers assumed the risk of any injury. Noting that California had a public policy to protect consumers from injuries caused by defective products, the Court of Appeal held that these provisions did not bar a plaintiff from proceeding with an action under a theory of strict liability.

California public policy has been applied in numerous contexts to void contracts contrary to public policy. The Court of Appeal's decision in the case below is entirely consistent with the law in that regard. Plaintiffs' alleged agreement to arbitrate claims against Cigna would operate as a waiver of rights and protections guaranteed by the CLRA. Such a waiver is prohibited by the CLRA and, like the mechanic's lien waiver in Wm. R. Clarke Corp., is void as against public policy.

California law on this point is entirely consistent with that of other states around the country. The following are but a few illustrations of the many cases in which courts have refused to enforce contracts that would insulate a wrongdoing party from important remedies, on the grounds that such provisions were against public policy. See e.g. Martin Marietta v. International Telecommunications Satellite Org. (4th Cir. 1992) 991 F.2d 94, 100 (applying Maryland law, the court concluded that contract provision waiving claims that might arise under contract, negligence and strict liability theories was against public policy and could not be enforced to block claim for gross negligence) (citing State Highway Admin. v. Greiner Eng'g Sciences (Md. Ct. Spec. App. 1990) 577 A.2d 363 and Boucher v. Riner (Md. Ct. Spec. App. 1986) 514 A.2d 485); Beacon Hill Civic Ass'n v. Ristorante Toscano (Mass. 1996) 662 N.E. 2d 1015, 1017 (holding that restaurant's promise to not seek a particular liquor license was unenforceable as contrary to the public policy of open public participation implicit in the state's statutory scheme for liquor licensing and stating "it is a principle universally accepted that the public interest in freedom of contract is sometimes outweighed by public policy, and in such cases the contract will not be enforced") (citations omitted).⁽⁶⁾

This Court has invited briefing on whether the construction of the CLRA adopted by the lower courts would violate the preemption provision of the Federal Arbitration Act, 9 U.S.C. § 1, et seq. Because the issue before this Court is whether there is a valid agreement to arbitrate respondents' statutory CLRA claims, the FAA does not apply to this dispute. The issue is not whether California state law policies that would preclude arbitration are in conflict with the FAA, but rather whether the parties can agree to arbitrate their dispute under the CLRA.

Unless and until there is determined to be in existence a valid agreement to arbitrate, the policy favoring arbitration is inapplicable. This point is made plain by the United States Supreme Court in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, supra, 473 U.S. 614. In that case the Court held that, "[t]he first task of a court asked to compel arbitration of a dispute is to determine whether the parties agreed to arbitrate that dispute." 473 U.S. at 626. The Court had previously held that:

the "liberal federal policy favoring arbitration agreements," Moses H. Cohn Memorial Hospital v. Mercury Construction Corp. (1983) 460 U.S. 1, 24, manifested by this provision and the [FAA] as a whole, is at bottom a policy guaranteeing the enforcement of private contractual arrangements: the [FAA] simply "creates a body of federal substantive law establishing or regulating the duty to honor an agreement to arbitrate." Id. at 25, n. 32.

Mitsubishi Motors Corp., supra, at 625-26 (footnote omitted); see also Graham v. Scissortail, Inc. (1981) 28 Cal.3d 807, 820.

In Dean Witter Reynolds, Inc. v. Byrd (1985) 470 U.S. 213, the Supreme Court made it clear that the purpose behind the FAA was to insure judicial enforcement of privately made agreements to arbitrate, not to mandate the arbitration of all claims.

Passage of the act was motivated, first and foremost, by a Congressional desire to enforce agreements into which parties had entered, and we must not overlook this principal objective when construing the statute[.]

470 U.S. at 219 (footnote omitted) (emphasis added).

The United States Supreme Court has repeatedly reaffirmed this principle. In AT&T Tech., Inc. v. Communications Workers (1986) 475 U.S. 643, the Court made clear that no public policy or presumption comes into play until a court concludes that a binding agreement to arbitrate exists. "'A party cannot be required to submit to arbitration any dispute which he has not agreed so to submit' . . . ." 475 U.S. at 648 (citation omitted). Three years later, the court repeated its admonition that "[a]rbitration under the [FAA] is a matter of consent, not coercion." Volt Info Sciences, Inc. v. Board of Trustees (1988) 489 U.S. 468, 478.

The FAA contains no express preemptive provision, nor does it reflect a Congressional intent to occupy the entire field of arbitration. Volt, supra, at 477. Rather, the Act requires courts to enforce privately negotiated agreements to arbitrate, like other contracts, in accordance with their terms. Id. at 478. See also First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 943; Allied-Bruce Terminix Cos. v. Dobson (1995) 513 U.S. 265, 271; Mastrobuono v. Shearson Lehman Hutton, Inc. (1995) 514 U.S. 52, 57 and n. 9.

The FAA's preemptive effect is a narrow one. The FAA will preempt only state laws which single out arbitration for special treatment. Doctor's Associates, Inc. v. Casarotto (1996) 517 U.S. 681, 116 S.Ct. 1652, 1656. However, the preemptive effect of the FAA is restricted to the question of the scope of arbitrability; the FAA does not otherwise preempt state law. Volt, supra, and Southland Corp., supra; Great Western Mortgage Corp. v. Peacock (3d Cir. 1997) 110 F.3d 222, 230.

Courts, including this Court, have carefully distinguished between the substantive provisions of the FAA, 9 U.S.C. §§ 1, 2, and the procedural provisions of the FAA. Rosenthal v. Great Western Financial Sec. (1996) 14 Cal.4th 394. The substantive provisions of the FAA concerning arbitrability of disputes are binding on state courts, as well as federal courts; the procedural provisions are not. Id. at 405-410; Blue Cross of California v. Superior Court (1998) 67 Cal.App.4th 42, 60-63.

In Doctor's Associates, Inc. v. Casarotto, supra, the Supreme Court was particularly careful to distinguish between state laws applicable only to arbitration provisions and issues concerning the validity, revocability and enforceability of contracts generally. Holding that the goals and policies of the FAA are antithetical to threshold limitations placed solely on arbitration provisions, the Court reversed a Montana Supreme Court holding that an arbitration clause was unenforceable for failure to comply with Montana law concerning notice. The Court reiterated its holding in Volt, supra, that the state rule upheld there did not affect the enforceability of the arbitration agreement itself. Because Montana's law placed arbitration agreements in a class apart from "any contract" and singularly limited their validity, the state's law was preempted by the FAA. 116 S.Ct. at 1657.

California courts have followed the same path as the federal courts in resolving the issue of whether an agreement to arbitrate exists. Under California law, arbitration is solely a matter of contract between the parties. Badie v. Bank of America (1998) 67 Cal.App.4th 779, 787; Chang- Canindin v. Renaissance Hotel Assoc. (1996) 50 Cal.App.4th 676, 683. This Court has stated that "the policy favoring arbitration cannot displace the necessity for a voluntary agreement to arbitrate." Victoria v. Superior Court (1985) 40 Cal.3d 734, 739. The threshold issue is to determine under general contract principles whether a written agreement to arbitrate exists. Lawrence v. Walzer & Gabrielson (1989) 207 Cal.App.3d 1501, 1505.

"By its terms, the FAA does not apply until the arbitration clause in question is determined to be part of the contract. The FAA dictates the effect of a contractually agreed upon arbitration provision, but it does not displace state law on the general principles governing formation of the contract itself." Chan v. Drexel Burnham Lambert, Inc. (1986) 178 Cal.App.3d 632, 640 (emphasis added). "'Arbitration is recognized as a matter of contract, and a party cannot be forced to arbitrate something in the absence of an agreement to do so.' [citation]" Arista Films, Inc. v. Gilford Securities, Inc. (1996) 43 Cal.App.4th 495, 501.

Whether an arbitration agreement applies to a controversy is a question of law to which the appellate court applies its independent judgment where there is no conflicting extrinsic evidence in aid of interpretation introduced in the trial court. Brookwood v. Bank of America (1996) 45 Cal.App.4th 1667, 1670. This Court has explicitly endorsed the principle that the issue of whether the parties' agreement to arbitrate triggers the policy favoring arbitration.

Because the decision to arbitrate grievances evinces the parties' intent to bypass the judicial system . . . arbitral finality is the core component of the parties' agreement to submit to arbitration. Thus, an arbitration decision is final and conclusive because the parties have agreed that it be so. By insuring that an arbitrator's decision is final and finding, courts simply assure that the parties receive the benefit of their bargain.

Moncharsh v. Heily & Blase, supra, 3 Cal.4th at 10.

Thus, both federal and state courts emphasize that while it is the policy of the law to uphold arbitration agreements, and while the FAA preempts any state provisions to the contrary, the FAA applies only if an agreement containing an arbitration clause exists under state law contract principles. 9 U.S.C. § 2 (providing that an arbitration agreement shall be valid, irrevocable and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract).

Application of state contract law principles to this agreement demonstrates that there was no valid agreement to arbitrate under the CLRA. It is respondent's contention that because the CLRA contains an anti-waiver provision, no valid agreement to arbitrate respondent's CLRA claims ever came into being. The CLRA explicitly states that waiver of its provisions is contrary to public policy. Civil Code § 1751. Thus, compelling arbitration of a claim authorizing injunctive relief, which arbitrators may not award, is incompatible with the protection of a statutory right. See Moncharsh, supra, at 33. The FAA can only apply if there is a valid agreement to arbitrate. The anti-waiver provision did not single out arbitration for special treatment, but instead provided that consumers may not waive any of the rights or remedies provided by the CLRA.

The issue before this Court is whether the arbitration agreement in this case is valid. Since the FAA cannot be used to uphold an otherwise invalid agreement, it cannot be held to pre-empt any state law provisions unless and until a determination is made that the arbitration agreement is valid. Otherwise, appellants would bootstrap the pro-arbitration provisions of the FAA into a finding that CLRA claims must be arbitrated in the face of public policy considerations mandating non-waiver of CLRA claims. Thus, the FAA is inapplicable to the issue before the Court.

Other states have agreed that substantive statutory non-waiver provisions prevail over the general provisions of arbitration acts. For example, in Lambdin v. District Court (Colo. 1995) 903 P.2d 1126, 1129, the Colorado Supreme Court held that a specific non-waiver provision of Colorado's Wage Claim Act prevails over the general provisions of Colorado's Uniform Arbitration Act. In that case, the issue presented was whether sections of the Colorado Wage Claim Act prohibit employers from requiring employees to submit disputes over compensation to arbitration. Colorado's UAA, in language similar to both the California provisions and the FAA, states:

A written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable, and irrevocable, save upon such grounds as exist at law or in equity for revocation of any contract.

903 P.2d at 1129. However, the court concluded that because the Colorado legislature has developed a comprehensive statutory scheme through which employees may obtain wages that are owed and because that scheme protects employees against contractual waiver or modification of their substantive and procedural rights, an arbitration provision that waives an employee's rights under the Wage Claim Act is void.⁽⁷⁾

Speaking in general terms, the Court of Appeals of New York has stated that where judicial, as opposed to arbitral, enforcement of particular rights and prohibitions is mandated by public policy, an agreement to arbitrate will not be given effect by the courts. Where no such conflict with law or pubic policy exists, the courts will enforce the parties' contractual decision to submit their disputes to arbitration. Marcross Construction, Inc. v. Central New York Regional Transportation Authority (N.Y. 1985) 488 N.E.2d 67.

Other states have enacted and enforced non-waiver provisions. For example, Texas has declared that any waiver of the Texas Deceptive Trade Practices-Consumer Protection Act is against public policy, unenforceable and void unless certain conditions are met. Tex. Bus. & Com. Code Ann. § 17.42 (Vernon 1987). Similarly, Pennsylvania has provided in its Consumer Contract Act that a consumer cannot waive his rights under that act. 73 Pa. Stat. Ann. §§ 2201-2212 (1993).

The overwhelming weight of authority, both federal and state, supports the proposition that neither the Federal Arbitration Act nor its state counterparts, mandate enforcement of all arbitration agreements, whatever their content. Where, as in this case, a clearly defined public policy precluding waiver of specific rights would prevent enforcement of an otherwise valid arbitration agreement, judicial remedies for the statutory rights of the consumer must be required.

The inability of arbitrators to issue, monitor and enforce injunctions precludes the finality and efficiency that characterizes the arbitration process. The CLRA expressly precludes waiver of any of its provisions, including the right to injunctive relief. Neither the Federal Arbitration Act nor any other applicable legislation overrides or preempts the non-waivable statutory provisions of the CLRA that ensure judicial protection of the rights of all affected consumers through injunctive decrees.

Amici curiae respectfully submit that the order of the Superior Court denying arbitration of plaintiffs' CLRA claims should be affirmed.

DATED: May 3, 1999

Respectfully submitted,

THE STURDEVANT LAW FIRM

A Professional Corporation

By: __________________________

JAMES C. STURDEVANT

Attorneys for Amicus Curiae

ENDNOTES

1. Amici file this Joint Brief in support of plaintiffs and respondents.

2. ' "" See California Grocers Ass'n, Inc. v. Bank of America NT&SA (1994) 22 Cal.App.4th 205, 217 (finding that a trade group of grocers was not a "consumer" within the meaning of the CLRA and that on that basis the CLRA could not be invoked in a dispute between the trade group and a national bank).

3. Citing Advanced Micro Devices v. Intel. Corp. (1998) 9 Cal.4th 362; Morris v. Zuckerman (1968) 69 Cal.2d 686, Ericksen, Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak Street (1983) 35 Cal.3d 312 and Pacific Inv. Co. v. Townsend (1976) 58 Cal.App.3d 1.

4. § The opinion in Wolitarsky v. Blue Cross of California (1997) 53 Cal.App.4th 338 does not discuss and, in fact, makes no mention of any request for injunctive relief sought by the plaintiffs under the Unruh Civil Rights Act, Civil Code § 51, et seq. Indeed, the opinion states only that the plaintiffs sought a declaration under that Act. 53 Cal.App.4th at 343.

5. § A business such as Cigna would include an arbitration clause and/or a clause that disallowed classwide treatment of claims and frustrate any application of § 1781.

6. ' ' " " ' ' See also New Light Co. v. Wells Fargo Alarm Services ) (Neb. 1994) 525 N.W. 2d 25, 30 (refusing to enforce exculpatory clause barring actions for negligent acts or omissions as against public policy where defendant was grossly negligent in design, installation and maintenance of alarm system); Sommer v. Federal Signal Corp. (N.Y. 1992) 593 N.E. 2d 1365, 1370 (refusing to enforce contract provision waiving liability as against public policy where defendant was grossly negligent); Bowman v. Parma Board of Education (Ohio App. 1988) 542 N.E. 2d 663, 666-67 (finding unenforceable contract provision that barred school board members from disclosing the reason for teacher's forced resignation to prospective employers, holding that the non-disclosure clause void and unenforceable as a matter of public policy, in part because the agreement's impact on third parties (schoolchildren) would "expose our most vulnerable citizens to a completely unacceptable risk of physical, mental and emotional harm."); Crawford v. Buckner (Tenn. 1992) 839 S.W. 2d 754, 758-59 (declaring exculpatory clause releasing negligence claims for future damages in residential lease void as against public policy, despite inapplicability of state housing law); Hiett v. Lake Barcroft Community Assoc., Inc. (Va. 1992) 418 S.E. 2d 894, 897 (holding that pre-injury release provision contained in triathalon entry form was prohibited by public policy and therefore void and could not be invoked to dismiss a suit brought by injured participant); Liberty Furniture v. Sonitrol of Spokane (Wash. App. 1989) 770 P. 2d 1086, 1087 (finding that security company's gross negligence was sufficient to invalidate exculpatory clause limiting damages caused by defendant's negligence), rev. denied, 777 P.2d 1050 (Wash. 1989); Tony Spychalla Farms, Inc. v. Hopkins Agricultural Chemical Co. (Wis. App. 1989) 444 N.W. 2d 743, 748 (finding limit on liability in agricultural chemical warranty could not be enforced to prevent customer from suing to recover for damage caused by a defective product that was unreasonably dangerous under theory of strict liability).

7. ' The Colorado Court declined to consider an argument from defendant that the FAA applied because defendant had not raised that issue in the courts below. Id. at 1132. In Grohn v. Sisters of Charity Health Services Colorado (Colo. App. 1998) 960 P.2d 722, the Colorado Court of Appeals distinguished Lambdin and held that the FAA pre-empts Colorado's Wage Claim Act. The Colorado Supreme Court has not addressed the issue.