Last Monday, January 14th, the United States Supreme Court heard oral argument in the Preston v. Ferrer case. This case raises the question whether the Federal Arbitration Act preempts the California Talent Agencies Act. Preston involves a dispute between a purported talent agent and his client, Alex Ferrer, over fees. “Judge Alex”, as he is known from his television show (see www.youtube.com/watch?v=fvQ8ZrwjVDk), wanted to avoid the arbitration agreement contained in his contract with Preston and take his case to the California Labor Commissioner (who oversees talent agent/client disputes). The California statute which authorizes parties to take their disputes to the Commissioner also permits de novo review of the Commissioner’s decision in California Superior Court.
The Court appeared to favor Preston’s position. Some of the justices suggested that Ferrer’s efforts to avoid arbitration by filing with Commissioner amounted to an end run around arbitration and would render arbitration agreements meaningless. The Court also reacted skeptically to Ferrer’s suggestion that he would not avail himself of the appeal right to the California Superior Court. Justice Scalia wondered why he should be permitted to avoid arbitration at all.
Several of the justices also distinguished the Volt case. Volt permitted parties to stay arbitration pending the outcome of litigation between one of the parties to arbitration and a non-party. The Justices (as well as Preston’s attorney) distinguished Volt on the ground that Preston involves only arbitration parties (not any non-parties) and is, therefore, different. Scalia observed that Volt would have come out the other way (i.e. the FAA would preempt the California law) if all of the disputants had been parties to the arbitration agreement.
In my opinion, the Court will find in favor of Preston and rule that the FAA preempts the California Talent Agencies Act. The Court did not appear interested in overruling Southland v. Keating (the case that extended the FAA’s preemption ability to state courts).