Ninth Circuit: “We have become an arbitration nation.”

Earlier today, the Ninth Circuit issued its decision in Lambert v. Tesla, No. 18-15203, with a quote that “[w]e have become an arbitration nation.” (Click here for a copy of the decision.)  In Tesla, the Ninth Circuit addressed the arbitrability of Section 1981 civil rights claims, and not surprisingly, the Ninth Circuit held that such claims are arbitrable under the Supreme Court’s Gilmer test, examining the text, history, and purpose of the statute.  The Ninth Circuit also thought it was bound by its older decision in Luce Forward, where it had previously held that Title VII civil rights claims are arbitrable, especially in light of the 1991 amendments to federal civil rights legislation.

In today’s Tesla decision, Chief Judge Sidney Thomas issued a concurring opinion, agreeing with the result under governing law.  However, notably, he explained that the Ninth Circuit’s prior Luce Forward case was wrongly decided. I’m hoping his concurrence leads to an en banc review.  

I participated as an amicus at the district court level in this Tesla case, where I argued that out of all possible claims, Section 1981 claims are probably the ideal candidate for non-arbitrability under the Supreme Court’s Gilmer test.   There is absolutely no way that Congress, back in the late 1800s, intended a civil rights claim to be covered by a pre-dispute arbitration clause. When Congress passed this civil rights statute following the Civil War, Congress expressed special concern for the judicial enforcement of these rights.  Because of concerns regarding state courts in the former confederate states, Congress bestowed special federal question jurisdiction in connection with the enactment of this civil rights statute, one of the earliest uses of federal question jurisdiction.

Congress did amend federal civil rights laws in 1991 with language encouraging arbitration where it is “appropriate” and “to the extent authorized by law.”  The Ninth Circuit in Luce Forward and in today’s Tesla decision construes this 1991 language as not prohibiting arbitration for civil rights claims like Title VII or Section 1981 claims.  But I don’t believe this language gives a full green light for the arbitrability of such claims. Instead, the appropriate question should be whether Congress in 1991, with its amendments to the civil rights laws, intended to reverse the intent of Congress when it originally passed the Civil Rights Act of 1866 in the wake of the Civil War.  I don’t believe Congress intended to change the law with the 1991 amendment. In other words, the phrase from the 1991 amendment, “to the extent authorized by law,” did not change the existing law. The proper focus is still on what did Congress intend in the 1800s with the passage of the civil rights act following the Civil War, and Congress intended that particular statute to be enforced in the courts, particularly federal courts, and not through mandatory arbitration.  In 1991, if Congress had wanted to make all civil rights claims subject to arbitration, Congress would not have used the limiting language “to the extent authorized by law.”  

Chief Judge Thomas is correct in saying that the Ninth Circuit’s earlier decision in Luce Forward is wrongly decided.  I’m hoping that his concurring opinion leads to en banc review of this issue. Taking a cue from the Supreme Court’s recent decision in New Prime, policy preferences should not be used to override the clear text of a statute, and the FAA’s text is clear.  The FAA’s coverage is limited to written provisions in a contract “to settle by arbitration a controversy thereafter arising out of such contract.” 9 U.S.C. § 2. Statutory claims, civil rights claims, and tort claims do not necessarily arise out of a contract and should not be subject to arbitration pursuant to the FAA.  However, for decades, the Supreme Court and lower courts have ignored this textual limitation found in the FAA, and with a little smoke and mirrors, redirected our attention to whether the substantive merits law contains a prohibition on arbitration. Instead, the correct answer lies in the text, purpose, and history of the FAA, a statute originally intended to be of limited scope and coverage.