Marcus & Millichap Real Estate Investment Services, Inc., et al. v. Rae Weiler
Arbitration JusticiabilityDoctri
Whether the Federal Arbitration Act preempts a state rule that denies enforcement of a cost-sharing provision in an arbitration agreement without a finding that the provision violates a general principle of state contract law
QUESTIONS PRESENTED This case involves the cost-sharing provision of an arbitration agreement. Executed as part of a contract to buy a restaurant, the agreement provides that the parties would divide arbitration costs equally. The investment turned sour within a few years, and one of the purchasers, Respondent Rae Weiler, sued petitioners for $2.8 million. After incurring only $15,725 in arbitration costs, Weiler asserted that she could not afford her share and demanded that petitioners pay all arbitration costs or lose their right to arbitrate. The California Court of Appeal granted Weiler’s demand. Without finding that the cost-sharing agreement violated any general contract-law doctrine, such as unconscionability, the court held that the state’s public policy favoring access to an affordable forum “far outweighs the interest, however strong, in respecting parties’ agreements to arbitrate.” App. 12a. The decision below, which rests on a state-law rule that applies only to arbitration agreements, will compel petitioners to pay all arbitration costs or lose their federal right to arbitrate. It also leaves courts free to usurp the arbitrator’s traditional role of allocating arbitration costs. The questions presented are: 1. Whether the Federal Arbitration Act preempts a state rule that denies enforcement of a cost-sharing provision in an arbitration agreement without a finding that the provision violates a general principle of state contract law. ii QUESTIONS PRESENTED—Continued 2. Whether this Court’s decision in Howsam v. Dean Witter Reynolds, Inc. requires an arbitrator to decide who pays arbitration costs, as the Fifth Circuit has held, or allows a court to decide, as the California Court of Appeal decided below.