APPENDIX
`
`
`
`
`
`TABLE OF APPENDICES
`
`
`Page
`
`Appendix A
`Opinion,
`United States Court of Appeals
`for the Ninth Circuit,
`Roberts, et al. v. AT&T Mobility, LLC,
`No. 16-16915 (Dec. 11, 2017) .................... App-1
`
`
`Appendix B
`Amended Order Granting
`Motion to Compel Arbitration,
`United States District Court for the
`Northern District of California,
`Roberts, et al. v. AT&T Mobility, LLC,
`No. 3:15-cv-03418-EMC
`(Apr. 24, 2016) ......................................... App-23
`
`
`Appendix C
`U.S. Const. amend. I ............................... App-52
`
`
`
`
`
`
`
`
`
`
`
`
`App-1
`
`
`
`
`
`
`Appendix A
`
`UNITED STATES COURT OF APPEALS
`FOR THE NINTH CIRCUIT
`_______________
`
`No. 16-16915
`D.C. No. 3:15-cv-03418-EMC
`_______________
`
`MARCUS A. ROBERTS; KENNETH A. CHEWEY; ASHLEY
`M. CHEWEY; JAMES KRENN, on behalf of themselves
`and all others similarly situated,
`
`Plaintiffs-Appellants,
`
`
`
`
`
`
`
`
`
`
`
`v.
`
`AT&T MOBILITY LLC,
`
`Defendant-Appellee.
`
`_______________
`
`Appeal from the United States District Court
`For the Northern District of California
`Edward M. Chen, District Judge, Presiding
`_______________
`
`Argued and Submitted October 17, 2017
`San Francisco, California
`Filed December 11, 2017
`_______________
`
`Before: Michael Daly Hawkins, William A. Fletcher,
`and Richard C. Tallman, Circuit Judges
`
`
`
`App-2
`
`Opinion by Judge Tallman
`_______________
`
`
`
`OPINION
`
`
`TALLMAN, Circuit Judge:
`
`
`Marcus Roberts, Ashley and Kenneth Chewey,
`and James Krenn (“Plaintiffs”) appeal an order
`compelling arbitration of their putative class action
`claims against AT&T Mobility LLC
`(“AT&T”).
`Plaintiffs allege that AT&T falsely advertised their
`mobile service plans as “unlimited” when in fact it
`intentionally slowed data at certain usage levels.
`AT&T moved to compel arbitration, and Plaintiffs
`opposed on First Amendment grounds. The district
`court compelled arbitration, holding as a threshold
`matter that there was no state action.
`
`On appeal, Plaintiffs raise two arguments.
`First, they claim there is state action whenever a
`party asserts a direct constitutional challenge to a
`permissive law under Denver Area Educational
`Telecommunications Consortium, Inc. v. FCC, 518
`U.S. 727 (1996). Second, Plaintiffs contend that the
`Federal Arbitration Act (“FAA”), 9 U.S.C. § 2, including
`judicial interpretations of the statute, “encourages”
`arbitration such that AT&T’s actions are attributable
`to the state. We find there is no state action under
`either theory and affirm.
`
`
`I
`
`
`Plaintiffs—AT&T customers and putative class
`representatives—contracted with AT&T for wireless
`
`
`
`App-3
`
`included
`contracts
`service plans. Their
`data
`arbitration agreements. Plaintiffs allege AT&T falsely
`advertised that its mobile service customers could use
`“unlimited
`data,” but
`actually
`“throttled”—
`intentionally slowed down— customers’ data speeds
`once reaching “secret data usage caps” between two
`and five gigabytes. Plaintiffs claim a phone’s key
`functions, such as streaming video or browsing
`webpages, are useless at “throttled” speeds.
`
`Plaintiffs filed a putative class action, alleging
`statutory and common law consumer protection and
`false advertising claims under California and
`Alabama law. AT&T moved to compel arbitration in
`light of the Supreme Court’s ruling in AT&T Mobility
`LLC v. Concepcion, 563 U.S. 333 (2011), “that the FAA
`preempts state law deeming AT&T’s arbitration
`provision to be unconscionable.” Plaintiffs opposed the
`motion on First Amendment grounds. They argued
`that an order forcing arbitration would violate the
`Petition Clause, as they “did not knowingly and
`voluntarily give up their right to have a court
`adjudicate their claims,” and could not “bring their
`claims in small claims court.”
`
`The district court granted AT&T’s motion to
`compel arbitration. It held, as a threshold matter, that
`there was no state action and did not reach Plaintiffs’
`constitutional challenge. The court agreed
`to
`reconsider, but again held there was no state action.
`It rejected Plaintiffs’
`three main arguments,
`concluding that (1) judicial enforcement alone does not
`automatically establish state action; (2) Denver Area
`did not hold that state action categorically exists
`whenever there is a direct challenge to a permissive
`
`
`
`App-4
`
`insufficient
`there was
`(3)
`and
`statute;
`“encouragement” to attribute AT&T’s conduct to the
`government.
`
`The district court granted Plaintiffs’ motion to
`certify the order compelling arbitration for immediate
`interlocutory appeal. See 28 U.S.C. § 1292(b). The
`court found there was “substantial ground for
`difference of opinion on two issues” that raised “novel
`and difficult questions of first impression[:]” if state
`action exists under (1) Denver Area, or (2) the
`“encouragement” test. We granted permission to
`appeal.
`
`
`II
`
`
`We have jurisdiction under 28 U.S.C. § 1292(b)
`and Federal Rule of Appellate Procedure 5. We review
`orders compelling arbitration de novo. Duffield v.
`Robertson Stephens & Co., 144 F.3d 1182, 1186 (9th
`Cir. 1998) (reviewing order compelling arbitration
`certified under § 1292(b)), overruled on other grounds
`by EEOC v. Luce, Forward, Hamilton & Scripps, 345
`F.3d 742 (9th Cir. 2003). The district court’s state
`action determination is subject to de novo review.
`Merritt v. Mackey, 932 F.2d 1317, 1324 (9th Cir. 1991)
`(citation omitted).
`
`
`
`There is no state action here. First, AT&T’s
`conduct must be fairly attributable to the state, and
`Denver Area did not hold otherwise. Second, AT&T is
`not a state actor under the “encouragement” test. The
`FAA merely gives AT&T the private choice to
`
`III
`
`
`
`App-5
`
`arbitrate, and does not “encourage” arbitration such
`that AT&T’s conduct is attributable to the state.
`
`
`A
`
`1
`
`
`AT&T’s actions must be attributable to the
`government for state action to exist. Denver Area did
`not broadly rule that the government is the relevant
`state actor whenever there is a direct constitutional
`challenge to a “permissive” statute, and does not
`support finding state action here.
`
`
`
`“A threshold requirement of any constitutional
`claim is the presence of state action.” Duffield, 144
`F.3d at 1200. Because the First Amendment right to
`petition is “a guarantee only against abridgment by
`[the] government,” Hudgens v. NLRB, 424 U.S. 507,
`513 (1976) (citation omitted), “state action is a
`necessary threshold which [Plaintiffs] must cross
`before we can even consider whether [AT&T] infringed
`upon [Plaintiffs’] First Amendment rights,” George v.
`Pac.-CSC Work Furlough, 91 F.3d 1227, 1230 (9th Cir.
`1996).
`
`The state action requirement “preserves an
`area of individual freedom by limiting the reach of
`federal law and federal judicial power,” and “avoids
`imposing on the State, its agencies or officials,
`responsibility for conduct for which they cannot fairly
`be blamed.” Lugar v. Edmondson Oil Co., Inc., 457
`U.S. 922, 936 (1982). By requiring courts to “respect
`the limits of their own power as directed against . . .
`private interests,” id. at 936–37, the state action
`
`
`
`App-6
`
`doctrine “ensures that the prerogative of regulating
`private business remains with the States and the
`representative branches, not the courts,” Am. Mfrs.
`Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 52 (1999).
`“Whether this is good or bad policy, it is a fundamental
`fact of our political order.” Lugar, 457 U.S. at 937.
`
`We apply a two-part state action test. Id. “First,
`the deprivation must be caused by the exercise of some
`right or privilege created by the State or by a rule of
`conduct imposed by the state[.]” Id. “Second, the party
`charged with the deprivation must be a person who
`may fairly be said to be a state actor.” Id. While the
`second Lugar prong “does not restrict the application
`of the Constitution solely to governmental entities,”
`Duffield, 144 F.3d at 1200, a private party’s actions
`must be “properly attributable to the State,” Flagg
`Bros., Inc. v. Brooks, 436 U.S. 149, 156
`(1978).
`Otherwise, “private parties could face constitutional
`litigation whenever they seek to rely on some [statute]
`governing their interactions with the community
`surrounding them.” Lugar, 457 U.S. at 937.
`
`
`
`Under Lugar, AT&T’s conduct must be
`attributable to the state. See id. Plaintiffs try to
`circumvent this requirement by bringing a “direct
`First Amendment challenge to the FAA and its
`Supreme Court[] interpretations[.]” They assert state
`action exists “because the government is the relevant
`state actor as to Plaintiffs’ direct challenge, not
`AT&T.”1
`
` 1
`Plaintiffs argued below that judicial enforcement of
`
`2
`
`
`
`App-7
`
`But the Supreme Court already rejected that
`argument in American Manufacturers. There, the
`plaintiffs sued private insurers for withholding
`disputed medical treatment payments, as permitted
`by a state workers’ compensation law. 526 U.S. at 43,
`48. The plaintiffs—“[p]erhaps hoping to avoid the
`traditional application of our state-action cases”—
`framed their challenge as “direct.” Id. at 50. They
`claimed “the ‘identity of the defendant’ or the ‘act or
`decision by a private actor or entity who is relying on
`the challenged law’” was irrelevant. Id.
`
`The Court was unpersuaded. The plaintiffs’
`approach “ignore[d] our repeated insistence that state
`action requires” satisfying the second Lugar prong—
`“that ‘the party charged with the deprivation must be
`a person who may fairly be said to be a state actor.’” Id.
`(citation omitted). The Court then “identif[ied] the
`specific conduct of which the plaintiff[s] complain[ed,]”
`and addressed the issue they sought to evade: “whether
`a private insurer’s decision to withhold payment for
`disputed medical treatment may be fairly attributable
`to the State so as to subject insurers to [constitutional]
`constraints[.]” Id. at 51 (quotation omitted) (holding
`that the private insurers were not state actors).
`
`Similarly, plaintiffs were required to show a
`private defendant was a “state actor” in Flagg Bros., a
`seminal case on which American Manufacturers
`relied. See id. at 50; Flagg Bros., 436 U.S. at 155–56.
`Flagg Bros. involved a due process challenge to a
`
`AT&T’s arbitration agreements constitutes state action, but
`abandoned that argument on appeal. It is well established that
`judicially enforcing arbitration agreements does not constitute
`state action. See, e.g., Duffield, 144 F.3d at 1202.
`
`
`
`App-8
`
`furniture as
`warehouseman’s proposed sale of
`permitted by the New York Uniform Commercial
`Code. 436 U.S. at 151–53. Because plaintiffs had
`named the warehouseman, Flagg Brothers, as a
`defendant, the Court asked “whether Flagg Brothers’
`action may be fairly attributed to the State of New
`York,” and “conclude[d] that it may not.” Id. at 157; see
`also Duffield, 144 F.3d at 1200 (noting that the
`Constitution would apply to “[p]rivate entities like the
`[New York Stock Exchange] and the [National
`Association of Securities Dealers]” only “if their
`actions are ‘fairly attributable’ to the state” (quoting
`Lugar, 457 U.S. at 936)).
`
`in American
`plaintiffs
`the
`as
`Just
`Manufacturers and Flagg Bros. had to show the
`private defendants were “state actors,” AT&T’s
`conduct must be fairly attributable to the state. See
`526 U.S. at 50–51; 436 U.S. at 157. Plaintiffs cannot
`convert AT&T into a state actor simply by framing
`their FAA challenge as “direct.” If every private right
`were transformed into a governmental action just by
`raising a direct constitutional challenge,
`“the
`distinction between private and governmental action
`would be obliterated.” See Ohno, 723 F.3d at 999
`(quotation omitted).
`
`
`
`Plaintiffs argue Denver Area’s “implicit edict”
`changed this established state action framework and
`made “proving private arbitration clause drafters to be
`state actors unnecessary.” We disagree.
`
`
`
`3
`
`
`
`App-9
`
`a
`
`
`As an initial matter, Plaintiffs’ reading must be
`incorrect, as Denver Area did not overrule Flagg Bros.,
`decided eighteen years earlier; nor was Denver Area
`overruled by American Manufacturers, decided three
`years later.
`
`Plaintiffs unsuccessfully attempt to distinguish
`Flagg Bros. and American Manufacturers as section
`1983 lawsuits that “sought money damages from . . .
`private parties for harm caused by the alleged
`constitutional violations.” This distinction, drawn
`from a dissenting opinion,
`lacks binding
`legal
`authority. It is also barred by Duffield, where we asked
`if similarly postured private defendants were state
`actors. 144 F.3d at 1200. Still, the splintered
`decision—even considered in a vacuum—does not
`stand for the sweeping proposition Plaintiffs assert.
`
`
`b
`
`
`Denver Area addressed First Amendment
`challenges to three provisions of the Cable Television
`Consumer Protection and Competition Act of 1992,
`106 Stat. 1460, which empowered cable operators to
`restrict offensive, sex- related speech aired on cable
`television. 518 U.S. at 732. Two provisions permitted
`cable system operators to ban the broadcasting of
`programming—on leased access and public access
`channels—if the operator believed the programming
`contained “patently offensive” sex-related material.2
`
` 2
`A third provision required cable operators to segregate
`certain “patently offensive” programming from leased access
`channels to a single channel blocked except by subscriber
`
`
`
`App-10
`
`Id. Previously, federal law had barred cable operators
`from
`exercising
`any
`editorial
`control
`over
`programming on leased and public access channels. Id.
`at 734.
`
`All nine Justices addressed the merits of the
`First Amendment challenge,3 but only six explicitly
`addressed state action—four in a plurality opinion,
`and two in a separate opinion. Id. at 737 (plurality
`op.), 782 (Kennedy, J., concurring in part, concurring
`in the judgment in part, and dissenting in part).
`Justice Breyer’s plurality opinion, joined in relevant
`part by three Justices, explained:
`
`
`Although the court [of appeals] said that
`it found no “state action,” it could not
`have meant that phrase literally, for, of
`course,
`petitioners
`attack
`(as
`“abridg[ing] . . . speech”) a congressional
`statute—which, by definition, is an Act of
`“Congress.” More likely, the court viewed
`this statute’s “permissive” provisions as
`not themselves restricting speech, but,
`rather, as simply
`reaffirming
`the
`authority
`to
`pick
`and
`choose
`
`
`request. Denver Area, 518 U.S. at 733.
`
`A majority of the Court held that the provision permitting
` 3
`cable operators to restrict content on leased access channels was
`consistent with the First Amendment, but the provision
`permitting them to restrict content on public access channels was
`not. 518 U.S. at 768 (plurality op.) (describing the outcome of the
`case). The provision requiring cable operators to segregate
`certain
`content
`on
`leased
`channels was also held
`unconstitutional. Id.
`
`
`
`App-11
`
`programming that a private entity, say,
`a private broadcaster, would have had in
`the absence of intervention by any
`federal, or local, governmental entity.
`
`c
`
`
`Id. at 737 (alterations in original) (citation omitted).
`The plurality further reasoned “that the First
`Amendment, the terms of which apply to governmental
`action, ordinarily does not
`itself
`throw
`into
`constitutional doubt the decisions of private citizens to
`permit, or to restrict, speech—and this is so ordinarily
`even where those decisions take place within the
`framework of a
`regulatory
`regime such as
`broadcasting.” Id.
`
`
`
`We read Denver Area very narrowly. The case—
`its six opinions, with a majority opinion as to only one
`issue, plurality opinions as to others, and separate
`concurring and dissenting opinions—is “the epitome of
`a splintered opinion.” See Lair v. Bullock, 697 F.3d
`1200, 1205 (9th Cir. 2012) (referring to a case that
`generated six opinions). In the 21 years since it was
`published, the Supreme Court has never cited Denver
`Area in addressing state action.
`
`Moreover, the plurality opinion on which
`Plaintiffs rely is not binding. See Thalheimer v. City
`of San Diego, 645 F.3d 1109, 1127 n.5 (9th Cir. 2011)
`(Supreme Court plurality opinions, while persuasive,
`are not binding precedent). Thus, if any controlling
`state action analysis emerged from Denver Area, it
`would be the “common denominator” of the four-
`Justice plurality opinion and Justice Kennedy’s
`
`
`
`App-12
`
`opinion, joined by Justice Ginsburg—the only opinions
`to explicitly address state action. See Marks v. United
`States, 430 U.S. 188, 193 (1977) (“When a fragmented
`Court decides a case and no single rationale
`explaining the result enjoys the assent of five Justices,
`the holding of the Court may be viewed as that position
`taken by those Members who concurred in the
`judgments on the narrowest grounds[.]” (quotation
`omitted)); United States v. Davis, 825 F.3d 1014, 1022
`(9th Cir. 2016) (applying the “common denominator”
`approach to the Marks rule, which requires that a
`narrower concurring opinion be a logical subset of the
`plurality opinion).
`
`Justice Kennedy, joined by Justice Ginsburg,
`wrote:
`
`
`In [two of the challenged provisions],
`Congress singles out one sort of speech
`for vulnerability to private censorship in
`a
`context
`where
`content-based
`discrimination
`is
`not
`otherwise
`permitted. The plurality at
`least
`recognizes this as state action, avoiding
`the mistake made by the Court of
`Appeals.
`
`
`Denver Area, 518 U.S. at 782 (Kennedy, J., concurring
`in part, concurring in the judgment in part, and
`dissenting
`in part)
`(emphasis added)
`(citation
`omitted).4
`
` 4
`Plaintiffs rely heavily on Justice Kennedy’s subsequent
`statement that “[s]tate action lies in the enactment of a statute
`altering legal relations between persons, including the selective
`withdrawal from one group of legal protections against private
`
`
`
`App-13
`
`To the extent the plurality and Justice
`Kennedy’s opinion overlap at all,5 it is seemingly
`where Justice Kennedy explicitly agrees with the
`plurality. That is, state action exists when “Congress
`singles out one sort of speech for vulnerability to
`private censorship in a context where content-based
`discrimination is not otherwise permitted.” See id.
`This narrow reading also accounts for Denver Area’s
`unique
`context, where
`cable operators were
`empowered by statute to censor speech on public
`television, and as a result were “unusually involved”
`with the government given their monopolistic-like
`power over cable systems. See id. at 739 (plurality op.),
`782 (Kennedy, J., concurring in part, concurring in the
`judgment in part, and dissenting in part). These
`unique characteristics of cable systems are not at issue
`here.
`
`
`Finally, our reluctance to expand the state
`action doctrine in other settings supports a confined
`reading of Denver Area. For example, we have refused
`to “alter our mode of analysis under the generally
`
`acts, regardless of whether the private acts are attributable to
`the State.” Denver Area, 518 U.S. at 782 (Kennedy, J., concurring
`in part, concurring in the judgment in part, and dissenting in
`part). But this reasoning is neither binding nor consistent with
`American Manufacturers, where there was no state action even
`though “[t]he State . . . ha[d] shifted [the statute] from favoring
`the employees to favoring the employer.” 526 U.S. at 54.
`
`The Supreme Court has found “it not useful to pursue the
` 5
`Marks inquiry to the utmost logical possibility when it has so
`obviously baffled and divided the lower courts that have
`considered it.” Nichols v. United States, 511 U.S. 738, 745–46
`(1994).
`
`
`
`
`App-14
`
`applicable Lugar framework,” despite Shelley v.
`Kraemer, 334 U.S. 1 (1948), which established that
`judicially enforcing a legal right or obligation can
`constitute state action. Ohno, 723 F.3d at 998. We
`explained that Shelley “has generally been confined to
`the context of discrimination claims under the Equal
`Protection Clause” and does not apply “[i]n the context
`of First Amendment challenges to [judicially enforced]
`speech- restrictive provisions in private agreements or
`contracts[.]” Id.; see also Davis v. Prudential Secs.,
`Inc., 59 F.3d 1186, 1191 (11th Cir. 1995) (rejecting the
`defendants “Shelley v. Kraemer theory that a court’s
`enforcement of a private contract constitutes state
`action,” as “Shelley . . . has not been extended beyond
`the context of race discrimination”). Plaintiffs here
`cannot invoke Denver Area to evade Lugar. They must
`show AT&T is a state actor.
`
`
`
`Plaintiffs spend much of their briefing arguing
`“that requiring private actors to be state actors as a
`prerequisite to challenging permissive statutes would
`immunize many such statutes from constitutional
`scrutiny,
`including
`the FAA.” Given
`this
`“immunization-from-judicial-scrutiny problem,” they
`assert that “normative justice demands” a relaxed
`state action doctrine, under which “the government is
`the relevant state actor for direct challenges of
`permissive statutes and that the private infringer’s
`status is irrelevant.” This policy argument does not
`and cannot alter the existing state action doctrine
`under which the private party’s status is relevant and
`serves to preserve “the essential dichotomy between
`public and private acts that our cases have
`
`4
`
`
`
`App-15
`
`consistently recognized.” Am. Mfrs., 526 U.S. at 53
`(quotation omitted).
`
`Plaintiffs’ argument also assumes the FAA
`violates citizens’ constitutional rights. For example,
`Plaintiffs allege that “AT&T resorts to the tired fiction
`that its adhesive arbitration clause is an ‘agreement,’
`as if consumers had a choice.” But the FAA declares
`that arbitration agreements are “valid, irrevocable,
`and enforceable, save upon such grounds as exist at
`law or in equity for the revocation of any contract.”
`Concepcion, 563 U.S. at 336 (quoting 9 U.S.C. § 2).
`And “the FAA does not require parties to arbitrate
`when they have not agreed to do so[.]” Volt Info. Scis.,
`Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489
`U.S. 468, 478 (1989).
`
`Plaintiffs disagree with this case law, but we
`are bound by it. See, e.g., DIRECTV, Inc. v. Imburgia,
`136 S. Ct. 463, 468 (2015) (“No one denies that lower
`courts must follow [the Supreme Court’s] holding in
`Concepcion.”); United States v. Dare, 425 F.3d 634, 641
`(9th Cir. 2005) (“[I]t certainly is not our role as an
`intermediate appellate court to overrule a decision of
`the Supreme Court or even to anticipate such an
`overruling by the Court.” (quotation omitted)).
`
`
`
`Plaintiffs argue that, even if their Denver Area
`argument fails, they can still show state action under
`because
`the
`government
`sufficiently
`Lugar
`“encourages” AT&T to arbitrate. They reason “the
`FAA’s mandate
`and
`the Supreme Court’s
`corresponding enforcement of consumer adhesion
`
`B
`
`
`
`App-16
`
`1
`
`sufficiently
`contracts have
`forced arbitration
`encouraged the drafting of such contracts, particularly
`in the mobile phone industry, so as to hold the State
`fairly responsible for their burgeoning use.” This
`stretches the encouragement test too far.
`
`
`
`For a private party to be a state actor, there
`must be “a sufficiently close nexus between the State
`and the challenged action of the [private] entity.”
`Duffield, 144 F.3d at 1200 (quoting Blum v. Yaretsky,
`457 U.S. 991, 1004–05 (1982)). Courts first identify
`“the specific conduct of which the plaintiff complains,”
`paying “careful attention to the gravamen of the
`plaintiff’s complaint.” Am. Mfrs., 526 U.S. at 51
`(quotation omitted). “Whether such a ‘close nexus’
`exists . . . depends on whether the State ‘has exercised
`coercive power or has provided such significant
`encouragement, either overt or covert, that the choice
`must in law be deemed that of the State.’”6 Id. at 52
`(citation omitted); see also Duffield, 144 F.3d at 1202
`(“The touchstone of state action in the context of
`governmental oversight is whether the government
`has moved beyond mere approval of private action into
`the realm of
`‘encouragement, endorsement, and
`participation’ of that action.” (citation omitted)).
`Conduct “by private entities with the mere approval or
`acquiescence of the State is not state action.” Am.
`Mfrs., 526 U.S. at 52.
`
`
` 6
`The Supreme Court has articulated three other tests for
`determining whether a private party’s conduct amounts to state
`action, none of which Plaintiffs have invoked. See Ohno, 723 F.3d
`at 995.
`
`
`
`App-17
`
`2
`
`
`For example, Duffield held that the New York
`Stock Exchange and National Association of
`Securities Dealers were not state actors under the
`“encouragement”
`test—even
`though
`the SEC
`approved and influenced their rules, including a
`mandatory arbitration requirement. 144 F.3d at
`1201–02. There was not “a sufficiently close nexus
`between the State and the challenged action” because
`“the ‘challenged action’ is the requirement that [the
`plaintiff] actually arbitrate her lawsuit, [and] that
`requirement is found in her private contract, not in
`federal law.” Id. at 1201. “No federal law required [the
`plaintiff] to waive her right to litigate[,] . . . and no
`state action is present in simply enforcing that
`agreement.” Id.; see also Fed. Deposit Ins. Corp. v. Air
`Fla. Sys., Inc., 822 F.2d 833, 842 n.9 (9th Cir. 1987)
`(“The arbitration involved here was private, not state,
`action; it was conducted pursuant to contract by a
`private arbitrator.”). The SEC had not crossed the line
`of
`“mere approval
`.
`.
`.
`into
`the realm of
`‘encouragement’” because no SEC “rule or regulation .
`. . specifie[d] arbitration as the favored means of
`resolving employer-employee disputes.” Duffield, 144
`F.3d at 1202 (citations omitted); accord Desiderio v.
`Nat’l Ass’n of Secs. Dealers, Inc., 191 F.3d 198, 207 (2d
`Cir. 1999); Koveleskie v. SBC Capital Mkts., Inc., 167
`F.3d 361, 368 (7th Cir. 1999).
`
`Even assuming Duffield “left open whether
`state action would exist [under the circumstances
`here],” as Plaintiffs claim, American Manufacturers
`eliminated any lingering doubt. There, the choice by
`private insurers to withhold payments for disputed
`
`
`
`App-18
`
`medical treatments was not state action under the
`encouragement test. Am. Mfrs., 526 U.S. at 51. The
`state authorized—but did not require—insurers to
`withhold payment; “[t]he decision . . . [was] made by
`concededly private parties,” and depended on
`“judgments made by private parties’ without
`‘standards . . . established by the State.” Id. at 52
`(quotation omitted).
`
`the State had
`The plaintiffs argued
`“encouraged”
`insurers to withhold payment by
`amending the relevant statute to allow the practice
`when it had previously been prohibited. Id. at 53.
`Recognizing this could “in some sense be seen as
`encouraging [insurers,]” or “favoring the employer,”
`the Court nevertheless rejected the argument:
`
`
`[T]his kind of subtle encouragement is no
`more significant than that which inheres
`in the State’s creation or modification of
`any legal remedy. We have never held
`that the mere availability of a remedy for
`wrongful conduct, even when the private
`use of that remedy serves important
`public
`interests,
`so
`significantly
`encourages the private activity as to
`make the State responsible for it. It bears
`repeating that a finding of state action on
`this basis would be contrary to the
`“essential dichotomy” between public
`and private acts that our cases have
`consistently recognized.
`
`
`Id. at 53–54 (citations omitted).
`
`
`
`
`App-19
`
`In fact, allowing insurers to withhold payments
`could be
`interpreted as
`“state
`inaction”—the
`legislature’s choice not to interfere in private disputes
`between insurers and employees. Id. at 53 (emphasis
`added). “The most that can be said of the statutory
`scheme . . . is that whereas it previously prohibited
`insurers from withholding payment for disputed
`medical services, it no longer does. Such permission of
`private choice cannot support a finding of state action.”
`Id. at 54 (citation omitted).
`
`sufficient
`was
`there
`contrast,
`By
`encouragement to establish state action in Skinner v.
`Railway Labor Executives’ Ass’n, 489 U.S. 602 (1989).
`Skinner considered Federal Railroad Administration
`regulations that “removed all legal barriers” to drug
`testing by preempting any collective bargaining
`agreement that did not provide for the testing,
`prohibited railroad companies from negotiating away
`their right to conduct tests in the future, punished
`employees who refused to submit to testing, and
`authorized the government to obtain testing results.
`Id. at 615. These coercive provisions evinced the
`government’s “strong preference for [drug] testing.”
`Id.
`
`
`
`3
`
`
`Here, AT&T’s conduct is not attributable to the
`state, and thus the second Lugar prong is not met.7 As
`
` 7
`AT&T’s argument that Plaintiffs cannot meet the first
`Lugar prong fails. The alleged constitutional deprivation arose
`because AT&T exercised its federally created right to compel
`arbitration under the FAA, and “[u]ndoubtedly the State was
`responsible for the statute.” Lugar, 457 U.S. at 938.
`
`
`
`App-20
`
`an initial matter, there is not a “sufficiently close
`nexus between the State and the challenged action of
`[AT&T.]” See Duffield, 144 F.3d at 1200 (emphasis
`added). Here, as in Duffield, “the ‘challenged action’ is
`the requirement that [Plaintiffs] actually arbitrate
`[their] lawsuit.” See id. at 1201. Plaintiffs concede, as
`they must, that “the FAA regulates private conduct,”
`and
`“private parties draft adhesive consumer
`arbitration clauses, not governments[.]” Because “[n]o
`federal law required [Plaintiffs] to waive [their] right
`to litigate,” there is no state action simply because the
`state enforces that private agreement. See id. at 1201–
`02 (“[N]either private arbitration nor the judicial act
`of enforcing it under the FAA constitutes state
`action.”); see also Federal Deposit, 822 F.2d at 842 n.9
`(“[W]e do not find in private arbitration proceedings
`the state action requisite for a constitutional due
`process claim.”); Tulsa Prof’l Collection Servs., Inc. v.
`Pope, 485 U.S. 478, 485 (1988) (“Private use of state-
`sanctioned private remedies or procedures does not
`rise to the level of state action.” (citation omitted)).
`
`Plaintiffs contend this case law does not apply
`because “the Supreme Court (and Congress via the
`FAA, as so interpreted)” has “exercised its power in a
`manner so heavily favoring arbitration . . . to fairly
`attribute AT&T’s use of such contracts to the State[.]”
`That argument is a nonstarter. If amending a statute
`to afford private insurers a previously unavailable
`right—thereby “shift[ing the remedial system] from
`favoring the employees to favoring the employer”—
`does not provide sufficient “encouragement,” Am.
`Mfrs., 526 U.S. at 54, then neither does the FAA,
`which simply ensured courts would “place arbitration
`agreements on an equal footing with other contracts
`
`
`
`App-21
`
`terms,”
`their
`to
`them according
`and enforce
`Concepcion, 563 U.S. at 339 (emphasis added)
`(citations omitted).
`
`There is insufficient “encouragement” even
`assuming “Concepcion [and its progeny] crystalized
`the directive . . . that the FAA’s purpose is to give
`preference (instead of mere equality) to arbitration
`provisions.” See Mortensen v. Bresnan Commc’ns,
`LLC, 722 F.3d 1151, 1160 (9th Cir. 2013). Neither has
`“the government . . . moved beyond mere approval of
`private action,” Duffield, 144 F.3d at 1202, simply
`because the Supreme Court has said the FAA
`“reflect[s] . . . ‘a liberal federal policy favoring
`arbitration,’” Concepcion, 563 U.S. at 339 (quoting
`Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp.,
`460 U.S. 1, 24 (1983)). While the post-Concepcion
`increase in arbitration could “in some sense be seen as
`encouraging [AT&T to arbitrate,] . . . this kind of subtle
`encouragement is no more significant than that which
`inheres in the State’s creation or modification of any
`legal remedy.” See Am. Mfrs., 526 U.S. at 53; see
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