What did Secretary of Commerce Herbert Hoover write in a 1925 Press Release and how should that affect the interpretation of the Federal Arbitration Act?

April 27th, 2011

In AT&T Mobility v. Concepion, we had a new jurisprudental joust between Justice Scalia and Justice Breyer about the use of legislative history. At issue was interpreting the Federal Arbitration Act of 1925, and whether it pre-empts a California state rule that  banning class action arbitration is unconscionable.

Justice Breyer, in his attempt to divine the purpose of the Congress of 1925, and ascertain whether it matches the purpose of the California rule, looks to a number of sources:

When Congress enacted the Act, arbitration procedureshad not yet been fully developed. Insofar as Congressconsidered detailed forms of arbitration at all, it may well have thought that arbitration would be used primarilywhere merchants sought to resolve disputes of fact, notlaw, under the customs of their industries, where the parties possessed roughly equivalent bargaining power.See Mitsubishi Motors, supra, at 646 (Stevens, J., dissenting); Joint Hearings on S. 1005 and H. R. 646 before theSubcommittees of the Committees on the Judiciary, 68thCong., 1st Sess., 15 (1924); Hearing on S. 4213 and S. 4214 before a Subcommittee of the Senate Committee on the Judiciary, 67th Cong., 4th Sess., 9–10 (1923); Dept. of Commerce, Secretary Hoover Favors Arbitration—Press Release (Dec. 28, 1925), Herbert Hoover Papers—Articles,Addresses, and Public Statements File—No. 536, p. 2(Herbert Hoover Presidential Library); Cohen & Dayton,The New Federal Arbitration Law, 12 Va. L. Rev. 265, 281 (1926); AAA, Year Book on Commercial Arbitration in theUnited States (1927). This last mentioned feature of the history—roughly equivalent bargaining power—suggests, if anything, that California’s statute is consistent with, and indeed may help to further, the objectives that Congress had in mind.

Justice Scalia is not persuaded by these citations: In a footnote Scalia calls out Breyer in dissent from relying on tenuous legislative history—“statements of witnesses in committee hearings and a press release of Secretary of Commerce Herbert Hoover.”

Relying upon nothing more indicative of congressional understanding than statements of witnesses in committee hearings and a press release of Secretary of Commerce Herbert Hoover, the dissent suggests that Congress “thought that arbitration would be used primarily where merchants sought to resolve disputes of fact . . . [and] possessed roughly equivalent bargaining power.” Post, at 6. Such a limitation appears nowhere in the text of the FAA and has been explicitly rejected by our cases. “Relationships between securities dealers and investors, for example, may involve unequal bargaining power, but we [have] nevertheless held . . . that agreements to arbitrate in that context are enforceable.” Gilmer v. Interstate/Johnson Lane Corp., 500 U. S. 20, 33 (1991); see also id., at 32–33 (allowing arbitration of claims arising under the Age Discrimination in Employment Act of 1967 despite allegations of unequal bargaining power between employers and employees). Of course the dissent’s disquisition on legislative history fails to note that it contains nothing—not even the testimony of a stray witness in committee hearings—that contemplates the existence of class arbitration.

Relying on press releases and statements of witnesses in committee hearings, not even members of Congress is quite tenuous.

Yesterday I commented on a Sotomay-Breyer concurring opinion, which focused on how the purposes of Congress today to understand an act passed in 1868. Today, Justice Breyer intimated the same notion:

Regardless, if neither the history nor present practice suggests that class arbitration is fundamentally incompatible with arbitration itself, then on what basis can themajority hold California’s law pre-empted?

This suggests that how Congress interprets the FAA today provides meaning of how the enacting Congress (in 1925) interpreted it.

Scalia directly responds to this part, and notes that class action arbitration did not exist in 1925. How could today’s intent possibly affect the old intent?

We find it unlikely that in passing the FAA Congressmeant to leave the disposition of these procedural requirements to an arbitrator. Indeed, class arbitration was not even envisioned by Congress when it passed the FAA in 1925; as the California Supreme Court admitted in Discover Bank, class arbitration is a “relatively recent development.” 36 Cal. 4th, at 163, 113 P. 3d, at 1110. And it is at the very least odd to think that an arbitratorwould be entrusted with ensuring that third parties’ dueprocess rights are satisfied.

Scalia focuses on the intent of the enacting Congress only:

We find it hard to believe that defendants would bet the company with no effective means of review, and even harder to believe that Congress would have intended to allow state courts to force such a decision

Breyer closes with a snipe at what he sees as pseudo-federalism in the pre-emption context.

action”). But federalism is as much a question of deeds as words. It often takes the form of a concrete decision by this Court that respects the legitimacy of a State’s action in an individual case. Here, recognition of that federalist ideal, embodied in specific language in this particular statute, should lead us to uphold California’s law, not to strike it down. We do not honor federalist principles in their breach.
With respect, I dissent.

Et tu Brutus? (Yes I know it is Brute, but Brutus was an anti-federalist, so it works here).