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584 F. 3d 849, reversed and remanded.

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Thomas, J., concurring



on writ of certiorari to the united states court of appeals for the ninth circuit

[April 27, 2011]

     Justice Thomas , concurring.

     Section 2 of the Federal Arbitration Act (FAA) provides that an arbitration provision “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U. S. C. §2. The question here is whether California’s Discover Bank rule, see Discover Bank v. Superior Ct. , 36 Cal. 4th 148, 113 P. 3d 1100 (2005), is a “groun[d] … for the revocation of any contract.”

     It would be absurd to suggest that §2 requires only that a defense apply to “any contract.” If §2 means anything, it is that courts cannot refuse to enforce arbitration agreements because of a state public policy against arbitration, even if the policy nominally applies to “any contract.” There must be some additional limit on the contract defenses permitted by §2. Cf. ante , at 17 (opinion of the Court) (state law may not require procedures that are “not arbitration as envisioned by the FAA” and “lac[k] its benefits”); post , at 5 ( Breyer , J., dissenting) (state law may require only procedures that are “consistent with the use of arbitration”).

     I write separately to explain how I would find that limit in the FAA’s text. As I would read it, the FAA requires that an agreement to arbitrate be enforced unless a party successfully challenges the formation of the arbitration agreement, such as by proving fraud or duress. 9 U. S. C. §§2. Under this reading, I would reverse the Court of Appeals because a district court cannot follow both the FAA and the Discover Bank rule, which does not relate to defects in the making of an agreement.

     This reading of the text, however, has not been fully developed by any party, cf. Brief for Petitioner 41, n. 12, and could benefit from briefing and argument in an appropriate case. Moreover, I think that the Court’s test will often lead to the same outcome as my textual interpretation and that, when possible, it is important in interpreting statutes to give lower courts guidance from a majority of the Court. See US Airways, Inc. v. Barnett , 535 U. S. 391, 411 (2002) (O’Connor, J., concurring). Therefore, although I adhere to my views on purposes-and-objectives pre-emption, see Wyeth v. Levine , 555 U. S. 555 , ___ (2009) (opinion concurring in judgment), I reluctantly join the Court’s opinion.


     The FAA generally requires courts to enforce arbitration agreements as written. Section 2 provides that “[a] written provision in … a contract … to settle by arbitration a controversy thereafter arising out of such contract … shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” Significantly, the statute does not parallel the words “valid, irrevocable, and enforceable” by referencing the grounds as exist for the “invalidation, revocation, or nonenforcement” of any contract. Nor does the statute use a different word or phrase entirely that might arguably encompass validity, revocability, and enforce-ability. The use of only “revocation” and the conspicuous omission of “invalidation” and “nonenforcement” suggest that the exception does not include all defenses applicable to any contract but rather some subset of those defenses. See Duncan v. Walker , 533 U. S. 167, 174 (2001) (“It is our duty to give effect, if possible, to every clause and word of a statute” (internal quotation marks omitted)).

     Concededly, the difference between revocability, on the one hand, and validity and enforceability, on the other, is not obvious. The statute does not define the terms, and their ordinary meanings arguably overlap. Indeed, this Court and others have referred to the concepts of revocability, validity, and enforceability interchangeably. But this ambiguity alone cannot justify ignoring Congress’ clear decision in §2 to repeat only one of the three concepts.

     To clarify the meaning of §2, it would be natural to look to other portions of the FAA. Statutory interpretation focuses on “the language itself, the specific context in which that language is used, and the broader context of the statute as a whole.” Robinson v. Shell Oil Co. , 519 U. S. 337, 341 (1997) . “A provision that may seem ambiguous in isolation is often clarified by the remainder of the statutory scheme … because only one of the permissible meanings produces a substantive effect that is compatible with the rest of the law.” United Sav. Assn. of Tex. v. Timbers of Inwood Forest Associates, Ltd. , 484 U. S. 365, 371 (1988) .

     Examining the broader statutory scheme, §4 can be read to clarify the scope of §2’s exception to the enforcement of arbitration agreements. When a party seeks to enforce an arbitration agreement in federal court, §4 requires that “upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue,” the court must order arbitration “in accordance with the terms of the agreement.”

Reading §§2 and 4 harmoniously, the “grounds … for the revocation” preserved in §2 would mean grounds related to the making of the agreement. This would require enforcement of an agreement to arbitrate unless a party successfully asserts a defense concerning the formation of the agreement to arbitrate, such as fraud, duress, or mutual mistake. See Prima Paint Corp. v. Flood & Conklin Mfg. Co. , 388 U. S. 395, 403–404 (1967) (interpreting §4 to permit federal courts to adjudicate claims of “fraud in the inducement of the arbitration clause itself” because such claims “g[o] to the ‘making’ of the agreement to arbitrate”). Contract defenses unrelated to the making of the agreement—such as public policy—could not be the basis for declining to enforce an arbitration clause. *


     Under this reading, the question here would be whether California’s Discover Bank rule relates to the making of an agreement. I think it does not.

     In Discover Bank , 36 Cal. 4th 148, 113 P. 3d 1100, the California Supreme Court held that “class action waivers are, under certain circumstances, unconscionable as unlaw-fully exculpatory.” Id. , at 65, 113 P. 3d, at 1112; see also id. , at 161, 113 P. 3d, at 1108 (“[C]lass action waivers [may be] substantively unconscionable inasmuch as they may operate effectively as exculpatory contract clauses that are contrary to public policy”). The court concluded that where a class-action waiver is found in an arbitration agreement in certain consumer contracts of adhesion, such waivers “should not be enforced.” Id., at 163, 113 P. 3d, at 1110. In practice, the court explained, such agreements “operate to insulate a party from liability that otherwise would be imposed under California law.” Id., at 161, 113 P. 3d, at 1108, 1109. The court did not conclude that a customer would sign such an agreement only if under the influence of fraud, duress, or delusion.

     The court’s analysis and conclusion that the arbitration agreement was exculpatory reveals that the Discover Bank rule does not concern the making of the arbitration agreement. Exculpatory contracts are a paradigmatic ex-ample of contracts that will not be enforced because of public policy. 15 G. Giesel, Corbin on Contracts §§85.1, 85.17, 85.18 (rev. ed. 2003). Indeed, the court explained that it would not enforce the agreements because they are “ ‘against the policy of the law.’ ” 36 Cal. 4th, at 161, 113 P. 3d, at 1108 (quoting Cal. Civ. Code Ann. §1668); see also 36 Cal. 4th, at 166, 113 P. 3d, at 1112 (“Agreements to arbitrate may not be used to harbor terms, conditions and practices that undermine public policy” (internal quotation marks omitted)). Refusal to enforce a contract for public-policy reasons does not concern whether the contract was properly made.

     Accordingly, the Discover Bank rule is not a “groun[d] … for the revocation of any contract” as I would read §2 of the FAA in light of §4. Under this reading, the FAA dictates that the arbitration agreement here be enforced and the Discover Bank rule is pre-empted.


*  The interpretation I suggest would be consistent with our precedent. Contract formation is based on the consent of the parties, and we have emphasized that “[a]rbitration under the Act is a matter of consent.” Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U. S. 468, 479 (1989) . The statement in Perry v. Thomas, 482 U. S. 483 (1987) , suggesting that §2 preserves all state-law defenses that “arose to govern issues concerning the validity, revocability, and enforceability of contracts generally,” id., at 493, n. 9, is dicta. This statement is found in a footnote concerning a claim that the Court “decline[d] to address.” Id., at 392, n. 9. Similarly, to the extent that statements in Rent-A-Center, West, Inc. v. Jackson, 561 U. S. ___, ___ n. 1 (2010) (slip op. at ___, n. 1), can be read to suggest anything about the scope of state-law defenses under §2, those statements are dicta, as well. This Court has never addressed the question whether the state-law “grounds” referred to in §2 are narrower than those applicable to any contract. Moreover, every specific contract defense that the Court has acknowledged is applicable under §2 relates to contract formation. In Doctor’s Associates, Inc. v. Casarotto, 517 U. S. 681, 687 (1996) , this Court said that fraud, duress, and unconscionability “may be applied to invalidate arbitration agreements without contravening §2.” All three defenses historically concern the making of an agreement. See Morgan Stanley Capital Group Inc. v. Public Util. Dist. No. 1 of Snohomish Cty., 554 U. S. 527, 547 (2008) (describing fraud and duress as “traditional grounds for the abrogation of [a] contract” that speak to “unfair dealing at the contract formation stage”); Hume v. United States, 132 U. S. 406, 411, 414 (1889) (describing an unconscionable contract as one “such as no man in his senses and not under delusion would make” and suggesting that there may be “contracts so extortionate and unconscionable on their face as to raise the presumption of fraud in their inception” (internal quotation marks omitted)).