Case 2:19-cv-02456-KJM-DB Document 40 Filed 01/24/20 Page 1 of 21
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`LITTLER MENDELSON, P.C.
`Bruce J. Sarchet (SBN 121042)
`Maurice Baskin (pro hac vice)
`500 Capitol Mall, Suite 2000
`Sacramento, CA 95814
`Telephone:
`(916) 830-7200
`Facsimile:
`(916) 561-0828
`Attorneys for Plaintiffs National Retail
`Federation, California Retailers Association
`National Association of Security Companies,
`Home Care Association of America, and
`California Association for Health Services
`at Home
`
`
`
`MAYER BROWN LLP
`
`
`Donald M. Falk (SBN 150256)
`
`Two Palo Alto Square
`
`
`3000 El Camino Real
`
`
`Palo Alto, CA 94306-2112
`
`
`Telephone:
`(650) 331-2000
`
`Facsimile:
`(650) 331-4000
`
`
`Andrew J. Pincus (pro hac vice)
`Archis A. Parasharami (SBN 321661)
`1999 K Street, N.W.
`
`
`
`Washington, D.C. 20006-1101
`
`Telephone:
`(202) 263-3000
`
`Facsimile:
`(202) 263-3300
`
`
`Attorneys for Plaintiffs Chamber of Commerce
`Of the United States of America and California
`Chamber of Commerce
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF CALIFORNIA
`
`
`
`Case No. 2:19-cv-02456-KJM-DB
`PLAINTIFFS’ SUPPLEMENTAL BRIEF
`IN SUPPORT OF MOTION FOR A
`PRELIMINARY INJUNCTION
`Date: January 10, 2020
`Time: 10:00 a.m.
`Courtroom: 3, 15th Floor
`
`Hon. Kimberly J. Mueller
`
`
`CHAMBER OF COMMERCE OF THE
`UNITED STATES OF AMERICA,
`CALIFORNIA CHAMBER OF COMMERCE,
`NATIONAL RETAIL FEDERATION,
`CALIFORNIA RETAILERS ASSOCIATION,
`NATIONAL ASSOCIATION OF SECURITY
`COMPANIES, HOME CARE ASSOCIATION
`OF AMERICA, and CALIFORNIA
`ASSOCIATION FOR HEALTH SERVICES
`AT HOME,
`
`
`
`
`
`Plaintiffs,
`
`v.
`
`XAVIER BECERRA, in his official capacity as
`the Attorney General of the State of California,
`LILIA GARCIA BROWER,
`in her official capacity as the Labor
`Commissioner of the State of California, JULIE
`A. SU, in her official capacity as the Secretary
`of the California Labor and Workforce
`Development Agency, and KEVIN KISH, in his
`official capacity as Director of the
`Department of Fair Employment and Housing of
`the State of California,
`
`
`
`Defendants.
`
`
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`PLAINTIFFS’ SUPPLEMENTAL BRIEF ISO MOTION FOR A PRELIMINARY INJUNCTION
`Case No. 2:19-cv-02456-KJM-DB
`
`
`
`
`
`
`

`

`
`Case 2:19-cv-02456-KJM-DB Document 40 Filed 01/24/20 Page 2 of 21
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`TABLE OF CONTENTS
`
`Page
`TABLE OF AUTHORITIES ......................................................................................................... ii
`INTRODUCTION ......................................................................................................................... 1
`ARGUMENT ................................................................................................................................. 3
`A.
`This Court Has Subject-Matter Jurisdiction Over Plaintiffs’ Claims. ................... 3
`
`1. Plaintiffs Assert A Cognizable Claim In Equity. .............................................. 3
`
`2. Plaintiffs Can Enforce The Federal Rights Conferred By The FAA
` Under Section 1983........................................................................................... 7
`Plaintiffs Have Established Standing. .................................................................... 9
`All Agree That The Injunction Should Be Limited To Application Of AB
`51 To Arbitration Agreements Governed By The FAA. ..................................... 13
`CONCLUSION ............................................................................................................................ 15
`
`B.
`C.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`i
`PLAINTIFFS’ SUPPLEMENTAL BRIEF ISO MOTION FOR A PRELIMINARY INJUNCTION
`Case No. 2:19-cv-02456-KJM-DB
`
`
`
`

`

`
`Case 2:19-cv-02456-KJM-DB Document 40 Filed 01/24/20 Page 3 of 21
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`Cases
`
`TABLE OF AUTHORITIES
`
`Page(s)
`
`Am. Trucking Ass’ns, Inc. v. City of Los Angeles,
`559 F.3d 1046 (9th Cir. 2009) .............................................................................................2, 13
`
`Armstrong v. Exceptional Child Ctr., Inc.,
`575 U.S. 320 (2015) ......................................................................................................... passim
`
`AT&T Mobility LLC v. Concepcion,
`563 U.S. 333 (2011) ...............................................................................................................1, 7
`
`Blessing v. Firestone,
`520 U.S. 329 (1997) ...........................................................................................................7, 8, 9
`
`Cal. Trucking Ass’n v. Becerra,
`2020 WL 248993 (S.D. Cal. Jan. 16, 2020) .............................................................................11
`
`City of Los Angeles v. Lyons,
`461 U.S. 95 (1983) ...................................................................................................................13
`
`EEOC v. Waffle House, Inc.,
`534 U.S. 279 (2002) .................................................................................................................15
`
`Epic Sys. Corp. v. Lewis,
`138 S. Ct. 1612 (2018) .......................................................................................................6, 7, 8
`
`Fleck & Assocs., Inc. v. City of Phoenix,
`417 F.3d 1100 (9th Cir. 2006) ...................................................................................................9
`
`Friends of the Earth, Inc. v. Laidlaw Envt’l Servs.,
`528 U.S. 167 (2000) ...................................................................................................................9
`
`Friends of East Hampton Airport, Inc. v. Town of East Hampton,
`2015 WL 3936346 (E.D.N.Y. June 26, 2015) ...........................................................................6
`
`Gonzaga Univ. v. Doe,
`536 U.S. 273 (2002) ...................................................................................................................8
`
`Heller v. Rasier, LLC,
`No. 17-cv-8545 (C.D. Cal. Jan. 7, 2020) .................................................................................13
`
`Henry A. v. Willden,
`678 F.3d 991 (9th Cir. 2012) .....................................................................................................8
`
`Hunt v. Wash. Apple Advert. Comm’n,
`432 U.S. 333 (1977) ...................................................................................................................9
`
`
`
`
`
`
`
`
`
`ii
`PLAINTIFFS’ SUPPLEMENTAL BRIEF ISO MOTION FOR A PRELIMINARY INJUNCTION
`Case No. 2:19-cv-02456-KJM-DB
`
`
`
`

`

`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`Case 2:19-cv-02456-KJM-DB Document 40 Filed 01/24/20 Page 4 of 21
`
`Kindred Nursing Ctrs. Ltd. P’ship v. Clark,
`137 S. Ct. 1421 (2017) ...................................................................................................1, 6, 7, 8
`
`KVUE, Inc. v. Moore,
`709 F.2d 922 (5th Cir. 1983), aff’d, 465 U.S. 1092 (1984) .....................................................12
`
`Lujan v. Defenders of Wildlife,
`504 U.S. 555 (1992) ...................................................................................................................9
`
`Mobil Oil Corp. v. Att’y Gen.,
`940 F.2d 73 (4th Cir. 1991) .....................................................................................................12
`
`Morales v. Trans World Airlines, Inc.,
`504 U.S. 374 (1992) ...............................................................................................................1, 4
`
`Nat’l Council of La Raza v. Cegavske,
`800 F.3d 1032 (9th Cir. 2015) .............................................................................................2, 11
`
`Nat’l Meat Ass’n v. Harris,
`565 U.S. 452 (2012) ...................................................................................................................7
`
`Price v. City of Stockton,
`390 F.3d 1105 (9th Cir. 2004) ...................................................................................................7
`
`Seminole Tribe of Florida,
`517 U.S. 44 (1996) .....................................................................................................................6
`
`Shaw v. Delta Air Lines, Inc.,
`463 U.S. 85 (1983) .............................................................................................................1, 3, 4
`
`Smith v. Hickenlooper,
`2016 WL 759163 (D. Colo. Feb. 26, 2016) ...............................................................................6
`
`Southland Corp. v. Keating,
`465 U.S. 1 (1984) .......................................................................................................................6
`
`Sprint Commc’ns, Inc. v. Jacobs,
`571 U.S. 69 (2013) .....................................................................................................................5
`
`Valley View Health Care, Inc. v. Chapman,
`992 F. Supp. 2d 1016 (E.D. Cal. 2014)............................................................................ passim
`
`Verizon Md., Inc. v. Pub. Serv. Comm’n of Md.,
`535 U.S. 635 (2002) ...............................................................................................................1, 4
`
`Ex parte Young,
`209 U.S. 123 (1908) ......................................................................................................... passim
`
`
`
`
`
`
`
`
`
`iii
`PLAINTIFFS’ SUPPLEMENTAL BRIEF ISO MOTION FOR A PRELIMINARY INJUNCTION
`Case No. 2:19-cv-02456-KJM-DB
`
`
`
`

`

`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`Case 2:19-cv-02456-KJM-DB Document 40 Filed 01/24/20 Page 5 of 21
`
`Statutes
`
`9 U.S.C. § 1 ....................................................................................................................................13
`
`28 U.S.C. § 1331 ..................................................................................................................1, 3, 4, 5
`
`42 U.S.C. § 1396a(a)(30)(A) ...........................................................................................................5
`
`42 U.S.C. § 1983 ..................................................................................................................1, 3, 7, 9
`
`Cal. Bus. & Prof. Code § 480 ........................................................................................................13
`
`Cal. Gov’t Code § 12953 ...............................................................................................................15
`
`Cal. Labor Code § 432.6(a)............................................................................................3, 13, 14, 15
`
`Cal. Labor Code § 432.6(b) ...........................................................................................3, 13, 14, 15
`
`Cal. Labor Code § 432.6(c)......................................................................................................14, 15
`
`Other Authorities
`
`California AB 51 (Employment Discrimination: enforcement), 2019-2020 Reg.
`Sess., Senate Rules Committee Analysis (as amended March 26, 2019) (Third
`Reading – Prepared on September 1, 2019) .........................................................................2, 10
`
`Mallory Moench, California has a new law against mandatory arbitration—but it
`doesn’t cover everyone, San Francisco Chronicle (Oct. 11, 2019) ..........................................10
`
`
`
`
`
`
`
`
`
`iv
`PLAINTIFFS’ SUPPLEMENTAL BRIEF ISO MOTION FOR A PRELIMINARY INJUNCTION
`Case No. 2:19-cv-02456-KJM-DB
`
`
`
`

`

`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`Case 2:19-cv-02456-KJM-DB Document 40 Filed 01/24/20 Page 6 of 21
`INTRODUCTION
`Defendants raise two jurisdictional challenges, but neither holds water.
`First, Defendants argue that there is no federal subject matter jurisdiction. That is plainly
`wrong: The complaint expressly invokes the power of federal courts of equity to enjoin unlawful
`actions by state officials. Compl. ¶¶ 105-109. The Supreme Court has recognized this basis for
`federal subject-matter jurisdiction repeatedly, including where (as here) the state action is alleged
`to be preempted by federal law. See, e.g., Armstrong v. Exceptional Child Ctr., Inc., 575 U.S.
`320, 327 (2015); Verizon Md., Inc. v. Pub. Serv. Comm’n of Md., 535 U.S. 635, 645-46 (2002)
`(preemption); Morales v. Trans World Airlines, Inc., 504 U.S. 374, 381 (1992) (same); Shaw v.
`Delta Air Lines, Inc., 463 U.S. 85, 96 n.14 (1983) (same); Ex parte Young, 209 U.S. 123 (1908).
`And nothing in the Federal Arbitration Act, 9 U.S.C. §§ 1-16, limits the scope of this Court’s
`equitable powers. Indeed, another court in this District relied on this body of authority in
`enjoining a California law that restricted access to arbitration in the nursing home context on the
`ground that it interfered with “federal rights created under the FAA.” Valley View Health Care,
`Inc. v. Chapman, 992 F. Supp. 2d 1016, 1031 (E.D. Cal. 2014).
`This Court independently has jurisdiction under 28 U.S.C. § 1331 to entertain Plaintiffs’
`cause of action under Section 1983, because the FAA confers a federal right to enter into
`arbitration agreements on the same terms as other contracts, and AB 51 infringes on that right by
`imposing criminal and civil penalties on businesses that enter into workplace contracts that
`include arbitration as a condition of employment. The State argues that the FAA creates a
`federal right that applies only after an arbitration agreement is formed. That interpretation of the
`FAA is squarely foreclosed by Kindred Nursing Centers Limited Partnership v. Clark, 137 S. Ct.
`1421 (2017). It is “beyond dispute” that Section 2 of “the FAA was designed to promote
`arbitration,” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 345 (2011); that design would be
`meaningless if States could impose criminal and civil sanctions against the formation of
`arbitration agreements. Section 2 may not be interpreted so that it is “helpless to prevent even
`the most blatant discrimination against arbitration” of this kind. Kindred, 137 S. Ct. at 1429.
`Second, Defendants challenge Plaintiffs’ Article III standing by asserting that Plaintiffs
`
`
`1
`PLAINTIFFS’ SUPPLEMENTAL BRIEF ISO MOTION FOR A PRELIMINARY INJUNCTION
`Case No. 2:19-cv-02456-KJM-DB
`
`
`
`
`
`
`

`

`
`Case 2:19-cv-02456-KJM-DB Document 40 Filed 01/24/20 Page 7 of 21
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`have not come forward with sufficient evidence at this stage that any of their members enter into
`workplace contracts that include arbitration as a condition of employment. That challenge is
`impossible to square with the California Legislature’s own finding that “67.4% of all California
`employers mandate arbitration of employment disputes.” California AB 51 (Employment
`Discrimination: enforcement), 2019-2020 Reg. Sess., Senate Rules Committee Analysis 5 (as
`amended March 26, 2019) (Third Reading – Prepared on September 1, 2019), available at
`https://leginfo.legislature.ca.gov/faces/billAnalysisClient.xhtml?bill_id=201920200AB51.
`Furthermore, Ninth Circuit precedent establishes that, so long as “it is relatively clear”
`that “one or more members” of an association “have been or will be adversely affected by a
`defendant’s action,” there is “no purpose to be served by requiring an organization to identify by
`name the member or members injured.” Nat’l Council of La Raza v. Cegavske, 800 F.3d 1032,
`1041 (9th Cir. 2015). Under that standard, the Declaration of Brian Maas alone establishes
`standing. But Plaintiffs have submitted additional declarations that reinforce their standing. As
`those declarations make clear, Plaintiffs have members who include an agreement to arbitrate as
`one of the many conditions on the offer of employment—just like the amount of compensation,
`the duties of the working relationship, and the benefits provided to the worker. These members
`will not hire new workers (or will decline to retain existing workers presented with new
`agreements) who refuse to agree to arbitration, just as they will not hire or retain anyone who
`refuses to agree to the other conditions of the working relationship. The declarations further
`confirm that some members intend to continue entering into agreements with their workers that
`include arbitration as a condition or the working relationship (or on an opt-out basis, which AB
`51 treats as mandatory), based on the belief that AB 51 is preempted by federal law, while others
`have made or intend to make changes to their contracting processes in an effort to comply with
`AB 51, incurring administrative and other costs that they would not have otherwise incurred.
`Either way, the members would suffer irreparable harm if AB 51 is not enjoined. See Am.
`Trucking Ass’ns, Inc. v. City of Los Angeles, 559 F.3d 1046, 1058 (9th Cir. 2009).
`Third, on the question of severability, the parties agree that any injunction should
`preclude enforcement of AB 51 only in connection with arbitration agreements governed by the
`
`
`
`2
`PLAINTIFFS’ SUPPLEMENTAL BRIEF ISO MOTION FOR A PRELIMINARY INJUNCTION
`Case No. 2:19-cv-02456-KJM-DB
`
`
`
`
`
`
`

`

`
`Case 2:19-cv-02456-KJM-DB Document 40 Filed 01/24/20 Page 8 of 21
`
`FAA. The sole area of disagreement is whether the injunction should encompass Section
`432.6(b), which prohibits declining to hire applicants for work or terminating existing workers
`for refusing to agree to arbitration as a condition of employment. The answer is yes, both
`because Section 432.6(b) overlaps with Section 432.6(a) and because its restrictions on making
`arbitration a term of a continued employment relationship are preempted just as much as Section
`432.6(a)’s restrictions on making arbitration a term of a new employment relationship. Plaintiffs
`have submitted a proposed order that reflects the precise scope of the requested injunction.
`ARGUMENT
`
`A. This Court Has Subject-Matter Jurisdiction Over Plaintiffs’ Claims.
`This Court has subject-matter jurisdiction under 28 U.S.C. § 1331 over each of Plaintiffs’
`two causes of action. First, Plaintiffs rely on settled authority regarding the equitable powers of
`federal courts, which place it “beyond dispute that federal courts have jurisdiction over suits to
`enjoin state officials from interfering with federal rights.” Shaw, 463 U.S. at 96 n.14 (citing Ex
`parte Young, 209 U.S. at 160-62). Second, Plaintiffs and their members have an enforceable
`federal right under the FAA to form arbitration agreements in the same manner as they enter into
`other types of contracts, and Plaintiffs are entitled to enforce that right under 42 U.S.C. § 1983.
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`1. Plaintiffs Assert A Cognizable Claim In Equity.
`a.
`“The ability to sue to enjoin unconstitutional actions by state and federal officers
`is the creation of courts of equity, and reflects a long history of judicial review of illegal
`executive action, tracing back to England.” Armstrong, 575 U.S. at 327. The Supreme Court has
`“long recognized” that, “if an individual claims federal law immunizes him from state regulation,
`the court may issue an injunction upon finding the state regulatory actions preempted.” Id. at
`326 (citing Ex parte Young, 209 U.S. at 155-56). And it is equally clear that the Ex parte Young
`doctrine is itself a source of federal subject matter jurisdiction under 28 U.S.C. § 1331: “A
`plaintiff who seeks injunctive relief from state regulation, on the ground that such regulation is
`pre-empted by a federal statute which, by virtue of the Supremacy Clause of the Constitution,
`must prevail, thus presents a federal question which the federal courts have jurisdiction under 28
`U.S.C. § 1331 to resolve.” Shaw, 463 U.S. at 96 n.14.
`
`
`3
`PLAINTIFFS’ SUPPLEMENTAL BRIEF ISO MOTION FOR A PRELIMINARY INJUNCTION
`Case No. 2:19-cv-02456-KJM-DB
`
`
`
`
`
`
`

`

`
`Case 2:19-cv-02456-KJM-DB Document 40 Filed 01/24/20 Page 9 of 21
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`Shaw is directly on point. The Supreme Court held that the federal courts had jurisdiction
`to hear a claim that New York state statutes were preempted by the federal Employee Retirement
`Income Security Act of 1974—and affirmed in part an injunction against enforcing the state
`laws. Id. at 92-93 & n.9. Similarly, in Morales, the Court held that Ex parte “Young establishes
`that injunctive relief was available” to prevent state attorneys general from enforcing state
`deceptive practices laws against advertising protected by the federal Airline Deregulation Act.
`504 U.S. at 381. And in Verizon Maryland, when a local exchange carrier sought injunctive
`relief against a State public utilities commission for issuing an order that was allegedly
`preempted by the federal Telecommunications Act of 1996, the Court expressed “no doubt that
`federal courts have jurisdiction under § 1331 to entertain such a suit.” 535 U.S. at 642.
`Tellingly, the State’s brief does not mention Shaw, Morales, or Verizon Maryland—or even Ex
`parte Young.
`Consistent with this uniform Supreme Court authority, one court in this District has held
`that it had jurisdiction to hear a claim seeking to enjoin California officials from enforcing a state
`law that the FAA allegedly preempted. Valley View, 992 F. Supp. 2d at 1032. In Valley View, a
`trade association and several skilled nursing facilities sued to enjoin the director of the California
`Department of Public Health from enforcing provisions that would have voided agreements
`waiving the right to sue under the California Patient’s Bill of Rights and required arbitration
`clauses both to be “in a form separate from the rest of the admission contract” and to “clearly
`indicate that agreement to arbitration is not a precondition for medical treatment or for
`admission.” Id. at 1027. Citing Shaw and Ex parte Young, the court held that it had jurisdiction
`to hear the plaintiffs’ “challenge [to] the Department’s interference of federal rights created
`under the FAA.” Id. at 1031. The same is true here.
`b.
`Defendants recognize this Court’s equitable powers, but argue that this is not “‘a
`proper case’ for the Court to exercise its equitable discretion.” Supp. Br. 4-5 (quoting
`Armstrong, 575 U.S. at 327). They are wrong.
`To begin with, Defendants’ observation that neither the FAA nor the Supremacy Clause
`confers subject matter jurisdiction (Supp. Br. 2, 4) is a red herring, because those are not the
`
`
`
`4
`PLAINTIFFS’ SUPPLEMENTAL BRIEF ISO MOTION FOR A PRELIMINARY INJUNCTION
`Case No. 2:19-cv-02456-KJM-DB
`
`
`
`
`
`
`

`

`
`Case 2:19-cv-02456-KJM-DB Document 40 Filed 01/24/20 Page 10 of 21
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`asserted bases for jurisdiction here. Instead, Plaintiffs rely on this Court’s equitable power under
`Armstrong and Ex parte Young and 28 U.S.C. § 1331. As Judge O’Neill put it in rejecting the
`virtually identical argument advanced in Valley View, “[t]his Court does not view plaintiffs to
`use the FAA or Supremacy Clause as the toe hold for subject matter jurisdiction. * * *
`[P]laintiffs challenge the Department’s interference of federal rights created under the FAA and
`which conflict with state law. Such an attempt to enforce federal rights opens this Court’s doors
`to plaintiffs.” 992 F. Supp. 2d at 1031 (emphasis added). Indeed, with rare exceptions not
`relevant here, federal courts have an “unflagging” obligation to exercise the jurisdiction
`Congress granted them. Sprint Commc’ns, Inc. v. Jacobs, 571 U.S. 69, 77 (2013).
`The question under Armstrong is not whether the federal law at issue provides a private
`cause of action or confers subject matter jurisdiction on its own, but rather whether Congress has
`constrained “[t]he power of federal courts of equity to enjoin unlawful executive action” through
`“express and implied statutory limitations.” 575 U.S. at 327. Defendants’ failure to
`acknowledge the relevant standard speaks volumes, because nothing in the FAA imposes
`“limitations” on federal courts’ equitable powers to enjoin unlawful executive action.
`The Court in Armstrong held that the provision of the Medicaid Act at issue demonstrated
`an intent to preclude traditional equitable relief from courts for two reasons, neither of which are
`present here. First, the provision was “judicially unadministrable” because it required State
`Medicaid plans to set reimbursement rates at levels that both “‘may be necessary to safeguard
`against unnecessary utilization of such care’” and “‘are sufficient to enlist enough providers so
`that care and services are available under the plan at least to the extent that such care and
`services are available to the general population in the geographic area.’” 575 U.S. at 323, 328
`(quoting 42 U.S.C. § 1396a(a)(30)(A)). As the Court elaborated, “[i]t is difficult to imagine a
`requirement broader and less specific” than the mandate to “provide for payments that are
`‘consistent with efficiency, economy, and quality of care,’ all the while ‘safeguard[ing] against
`unnecessary utilization of * * * care and services.’” Id. at 328 (alterations in original). The
`Court concluded that “[t]he sheer complexity associated with enforcing § 30(A), coupled with
`the express provision of an administrative remedy, * * * shows that the Medicaid Act precludes
`
`
`
`5
`PLAINTIFFS’ SUPPLEMENTAL BRIEF ISO MOTION FOR A PRELIMINARY INJUNCTION
`Case No. 2:19-cv-02456-KJM-DB
`
`
`
`
`
`
`

`

`
`Case 2:19-cv-02456-KJM-DB Document 40 Filed 01/24/20 Page 11 of 21
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`private enforcement of § 30(A) in the courts.” Id. at 329.
`In contrast, courts routinely can and do enforce the provisions of the FAA, including
`Section 2. The Supreme Court has never suggested that courts are unable to administer the
`standards under the FAA. To the contrary, the Court has repeatedly interpreted and applied the
`FAA. See, e.g., Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1621-23 (2018); Southland Corp. v.
`Keating, 465 U.S. 1, 11-16 (1984).
`Second, Congress conferred exclusive enforcement of the “judgment-laden standard” at
`issue in Armstrong on the Secretary of Health and Human Services by expressly providing for an
`administrative rather than judicial remedy. Id. at 328.1 Yet no federal agency is tasked with
`administering the FAA.
`Defendants invoke Sections 3 and 4 of the FAA, which establish procedures for parties to
`an arbitration agreement to seek enforcement of that agreement in court, but those provisions
`support, rather than refute, the availability of equitable judicial relief to enforce plaintiffs’ federal
`rights under the FAA. Defendants suggest (Supp. Br. 4) that Sections 3 and 4 implicitly cabin
`this Court’s authority to enforce the substantive rights created by Section 2 of the FAA. But
`Section 2 and its equal-footing principle apply not only to the enforcement of arbitration
`agreements once formed, but also to laws involving the formation of arbitration agreements.
`Kindred, 137 S. Ct. at 1427-28. Consistent with that distinction, and anticipating Kindred, Judge
`O’Neill rejected California’s contention that “FAA rights ‘are conferred and limited to only
`contracting parties who have an existing dispute involving an arbitration contract governed by
`the FAA.’” Valley View, 992 F. Supp. 2d at 1031.
`Finally, Defendants rehash their false dichotomy between regulating “employer
`
`The other cases Defendants cite (at Supp. Br. 4) share similar distinctions. In Seminole
`1
`Tribe of Florida, 517 U.S. 44 (1996), Congress enacted an “intricate scheme” for enforcing the
`Indian Gaming Regulatory Act against States that would impose liability “that is significantly
`more limited than would be the liability imposed upon the state officer under Ex parte Young,”
`demonstrating that Congress “had no wish to create the latter.” Id. at 75-76. And in both Smith
`v. Hickenlooper, 2016 WL 759163, at *1 (D. Colo. Feb. 26, 2016) and Friends of East Hampton
`Airport, Inc. v. Town of East Hampton, 2015 WL 3936346, at *9 (E.D.N.Y. June 26, 2015), aff’d
`in part and vacated in part on other grounds, 841 F.3d 133 (2d Cir. 2016), Congress delegated
`enforcement of the laws at issue exclusively to federal officers—the Attorney General and the
`Secretary of Transportation, respectively.
`
`
`
`6
`PLAINTIFFS’ SUPPLEMENTAL BRIEF ISO MOTION FOR A PRELIMINARY INJUNCTION
`Case No. 2:19-cv-02456-KJM-DB
`
`
`
`
`
`
`

`

`
`Case 2:19-cv-02456-KJM-DB Document 40 Filed 01/24/20 Page 12 of 21
`
`behavior” and the formation of arbitration agreements. Supp. Br. 4-5. Plaintiffs have refuted
`this point, explaining that interpreting the FAA to permit a State to impose criminal sanctions on
`the making of an arbitration agreement would “make it trivially easy for States to undermine the
`Act—indeed, to wholly defeat it.” Kindred, 137 S. Ct. at 1428; see Mot. 12; Reply 5-6.
`Plaintiffs further explained that the Supreme Court has rejected California’s similar
`attempts at too-clever-by-half line-drawing outside of the arbitration context. Reply 6
`(discussing Nat’l Meat Ass’n v. Harris, 565 U.S. 452 (2012)). And Defendants are not helped by
`the fact that AB 51 forges a “new path,” Supp. Br. 5 (citing Tr. 36:7-8), by criminalizing the act
`of entering into an arbitration agreement rather than refusing to enforce such an agreement once
`formed. That “new path” shows only that States have never before been so brazen as to attempt
`to circumvent FAA preemption by imposing criminal and civil sanctions for entering (or trying
`to enter) into arbitration agreements in the first place. As the Supreme Court has warned, just as
`“antagonism toward arbitration before the Arbitration Act’s enactment ‘manifested itself in a
`great variety of devices and formulas declaring arbitration against public policy,’” courts “must
`be alert to new devices and formulas that would achieve much the same result today.” Epic, 138
`S. Ct. at 1623 (quoting Concepcion, 563 U.S. at 342). AB 51 is just such a device.
`
`2. Plaintiffs Can Enforce The Federal Rights Conferred By The FAA Under
`Section 1983.
`In the alternative, Plaintiffs may enforce their and their members’ rights under Section
`1983. “Section 1983 imposes liability on anyone, who under color of state law, deprives a
`person ‘of any rights, privileges, or immunities secured by the Constitution and laws.’” Blessing
`v. Firestone, 520 U.S. 329, 340 (1997). The Supreme Court has recognized that Section 1983
`“safeguards certain rights conferred by federal statutes,” id., and has “set forth a three-factor test
`to guide this inquiry: (1) whether Congress intended the provision in question to benefit the
`plaintiff; (2) whether the plaintiff has demonstrated that the asserted right ‘is not so vague and
`amorphous that its enforcement would strain judicial competence’; and (3) whether the provision
`giving rise to the right is ‘couched in mandatory, rather than precatory, terms.’” Price v. City of
`Stockton, 390 F.3d 1105, 1109 (9th Cir. 2004) (quoting Blessing, 520 U.S. at 340-41). Section 2
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`
`
`
`
`
`
`7
`PLAINTIFFS’ SUPPLEMENTAL BRIEF ISO MOTION FOR A PRELIMINARY INJUNCTION
`Case No. 2:19-cv-02456-KJM-DB
`
`
`
`

`

`
`Case 2:19-cv-02456-KJM-DB Document 40 Filed 01/24/20 Page 13 of 21
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`of the FAA satisfies all three factors.
`First, the “text and structure of the statute” demonstrate the requisite “focus on individual
`entitlement to benefits rather than the aggregate or systemwide policies and practices of a
`regulated entity.” Price, 390 F.3d at 1109-10 (citing Gonzaga Univ. v. Doe, 536 U.S. 273, 285
`(2002)) (quotation marks omitted). Section 2 of the FAA pro