On Wednesday, for the fourth time in two weeks, the Supreme Court again explores the dispute-settling mechanism of arbitration. In any group of cases about that, it is likely that California will be involved in at least one of them. The state has a history of acting on its firm belief that, if there is a corporation on one side and an individual worker or consumer on the other, no arbitration will be fair. The Supreme Court does not share that view.
The “live” audio (no video) can be heard at Quick Links on the Supreme Court’s homepage – supremecourt.gov – and at c-span.org/supremecourt and C-Span Now App.
Wednesday’s case: Viking River Cruises v. Moriana. The hearing starts at 10 a.m., and is scheduled for one hour.
Background: It was 90 years ago this month that Justice Louis D. Brandeis, a celebrated author of Supreme Court opinions that ranged widely over social-science data to get to a legal result, wrote one of his most famous dissents. It was a call in the midst of the Great Depression for the Court to allow the government broad authority under the Constitution to regulate the economy. It is also remembered as a sturdy defense of innovation by state governments.
The March 1932 case was New State Ice Co. v. Liebmann. The majority, applying the Court’s then-dominant laissez-faire theory that people had a broad constitutional right to open and run a business without government regulation, struck down a 1925 Oklahoma state law. The law would have given a monopoly to any business already selling ice for refrigeration in that community. Supplying ice, the state believed, was a necessity, like selling electricity, and competition had to be curtailed.
Here is the most-often-quoted passage from Brandeis: “It is one of the happy incidents of the federal system that a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.”
Today, that seems to fit America’s most inventive state government, in California. All branches of its government almost predictably favor the smaller, weaker or more dependent people involved in legal controversy. That is part of what leads critics to refer to it as the “Left Coast.”
In no field of law has this tendency been followed more energetically than the law of arbitration, the less costly, mostly out-of-court, way to resolve an economic disagreement. For at least a decade, the Supreme Court and California have been engaged in a testy and continuing conflict over the proper way to carry out arbitration.
That has mainly been a disagreement about what is best for commercial peace, between private parties. California has not fared well at the Court with its well-established policy of protecting individual workers or consumers from being required, all alone, to go to arbitration against a corporation. The Court, by contrast, tends to regard with deep skepticism any attempt at group arbitration, among workers or consumers – that is, an individual seeking to draw others onto their side in arbitration.
California has lost when it attempted to forbid, inside its borders, any compelled waiver of a worker’s right to sue as part of a class action or as part of a group arbitration arrangement. The Court has found that tactic to conflict with the Federal Arbitration Act. (Under the Constitution’s Supremacy Clause in Article VI, federal laws prevail over conflicting state laws.)
The new case being heard Wednesday is a test of whether a state government can find a legal way to assure group action, especially in enforcing the rights of workers under state labor laws. Under a 2004 law, California deputizes workers who claim their rights were violated to act as private “attorneys general” to enforce its labor code.
Standing in for the state, an individual representing a group of workers who have a complaint about working conditions sues their employer. If the suit succeeds, the state gets 75 percent of any money awarded as a penalty, the workers get the remainder. The workers may not seek back pay or money damages. The individual who initially files the suit can include complaints of their own, but also those of other workers, even if not personally affected by those.
The state Supreme Court has ruled in the past that this enforcement method did not violate the federal arbitration law because it did not involve a dispute between workers and employers, but between the state government and employers. No employer in California, the state court said, can force a worker to give up participating in that system as a condition of their job. A federal appeals court based in California has backed up that interpretation.
The state government defends that system as an exercise of its sovereign power to structure state government as it prefers. The system is not hostile to the idea of arbitration, the state insists, but only adds enforcement resources for the state’s labor code.
It is that system that so far has evaded review by the Supreme Court, but is now being challenged directly in this case.
Angie Moriana was a sales agent in Los Angeles, booking cruises aboard one of the 70 vessels operated by Viking River Cruises, Inc. As a condition for getting hired, Viking requires employees to agree in advance to resolve all work-related disputes with the company through “bilateral arbitration” – that is, the employee is alone on one side, the company is on the other. That approach must be used in place of suing in court.
After Moriana left the job, she filed a lawsuit in state court as a private “attorney general,” for herself and other Viking employees, past and future. She made a long list of complaints of violations of state law, including failure to pay all wages due, failure to pay overtime at the proper rate, cutting short or not allowing meal breaks and paid rest periods, and failure to provide accurate wage statements.
Viking responded, relying on the arbitration promise, asking the court to block the lawsuit and to order Moriana to go through arbitration herself over her grievances. That move failed, with the court ruling that the private “attorney general” law barred Viking from compelling arbitration. A state appeals court agreed, declaring that Moriana could not be legally forced to surrender her right to sue on behalf of the state for the alleged workplace violations.
After the California Supreme Court refused to hear an appeal by Viking, the company appealed to the Supreme Court. It has gained a wide range of support from business and conservative advocacy groups. Moriana has broad support from the state government and from other employee and consumer advocacy organizations.
The question before the Court: Does the Federal Arbitration Act require state courts to enforce a worker’s agreement to arbitrate all workplace disputes, when the agreement bars the worker from suing in court as a representative of others?
Significance: Because this case arises in California, the sheer size of the labor market there – more than 10 percent of all workers in the nation – makes this dispute very significant. But beyond that, if California wins, the idea of inserting the state as the enforcer of workers’ right (through private workers acting as the state labor laws’ enforcers) almost certainly would tempt other worker-friendly states.
In its appeal to the Court, Viking argues that the idea is spreading across California, with “an onslaught” of claims under the 2004 law, threatening “millions of dollars” in penalties and raising the cost of doing business within the state.
The main thrust of Viking’s legal argument is that the Justices have already signaled, by prior rulings against California under the federal arbitration law, that this attempt at a legal workaround is already doomed. The Court, its appeal said, needs to reinforce its prior rulings against the state “to ensure that the federal policy favoring arbitration is not so easily undermined.”
In reply, lawyers for Moriana and for the advocacy groups supporting her are putting heavy stress on their contention that there really is no conflict between the state law at issue and the Federal Arbitration Act. Her brief, for example, argues that the Act only “promotes arbitration as an alternative forum, not a mechanism for forfeiture of rights.”
If the Supreme Court accepts Viking’s plea that this is just one more attempt by California to scuttle federal arbitration policy, the outcome may be foreordained.
However, there is one new factor in the Moriana case that might make a real difference. The current conservative majority on the Supreme Court is generally quite sympathetic to states’ rights claims under the Constitution, and is generous in allowing states latitude in how they choose to use their sovereignty. In significant recent decisions, for example, the Court has gone out of its way to assure that states can structure their own governments largely as they see fit.
The state of California, in its own brief supporting the system at issue and supporting Moriana, puts a heavy emphasis on the sovereignty argument. Viking’s broad approach to the meaning of the federal law, the state asserted, “substantially interferes with the state’s traditional authority to regulate the conduct of business entities and adopt effective enforcement strategies to protect the health and welfare of its workers,…ensuring the fair and legal treatment of some of the state’s most vulnerable workers.”
Acting “to protect the health and welfare” of a state’s people is the classic language used to defend states’ broad power, assured for them by the Constitution’s Tenth Amendment.
After Wednesday, the Court will next hold hearings beginning on April 18, the final scheduled round for the current term. After that sitting, the Court will be focusing on deciding all remaining cases, with the term likely to end in late June or early July.