Perry v. Thomas
Annotate this Case
482 U.S. 483 (1987)
U.S. Supreme Court
Perry v. Thomas, 482 U.S. 483 (1987)
Perry v. Thomas
Argued April 28, 1987
Decided June 15, 1987
482 U.S. 483
Appellee brought suit in California Superior Court against his former employer and appellants, two of its employees, alleging breach of contract and related causes of action arising from a dispute over commissions on securities sales. After appellee refused to arbitrate, appellants filed a petition to compel arbitration under §§ 2 and 4 of the Federal Arbitration Act, which respectively provide that contractual arbitration provisions are valid and enforceable and mandate their judicial enforcement. The demand for arbitration was based on a provision in a form appellee executed in connection with his employment application, whereby he agreed to arbitrate any dispute with his employer. Appellee opposed arbitration on the ground that his suit was authorized by California Labor Code § 229, which provides that wage collection actions may be maintained without regard to the existence of any private agreement to arbitrate. The court refused to compel arbitration, characterizing as "controlling authority" Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Ware, 414 U. S. 117, which upheld § 229 in the face of a Supremacy Clause preemption challenge premised on an arbitration requirement in a New York Stock Exchange rule, which was promulgated pursuant to § 6 of the Securities Exchange Act of 1934 (1934 Act). The State Court of Appeals affirmed. Both lower courts refused to consider appellee's argument that appellants lacked "standing" to enforce the arbitration agreement, since they were not parties to it.
1. Under the Supremacy Clause, § 2 of the Federal Arbitration Act preempts § 229 of the California Labor Code. In enacting § 2, Congress declared a national policy favoring arbitration and withdrew the States' power to require a judicial forum for the resolution of claims that contracting parties agreed to resolve by arbitration. Ware is distinguishable on the ground that the language and policies of the 1934 Act and the regulations promulgated thereunder evidenced no clear federal intent to require arbitration. The oblique reference to the Federal Arbitration Act in footnote 15 of Ware cannot fairly be read as a definitive holding that that Act does not preempt § 229, since the footnote was concerned with federally created rights, and did not address the issue of federal preemption of state-created rights. Pp. 482 U. S. 489-491.
2. Appellee's contention that resolving in appellants' favor the question of their "standing" to enforce the agreement to arbitrate is a prerequisite under Article III of the Constitution to their maintenance of this appeal is rejected. Appellee's "standing" argument -- which this Court does not reach because the lower courts did not address it -- simply presents the straightforward contract interpretation issue whether the arbitration provision inures to appellants' benefit and may be construed to cover the present dispute. That issue may be resolved on remand, and its status as an alternative ground for denying arbitration does not prevent this Court from reviewing the lower courts' holdings on the preemption question. P. 482 U. S. 492.
Reversed and remanded.
MARSHALL, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and BRENNAN, WHITE, BLACKMUN, POWELL, and SCALIA, JJ., joined. STEVENS, J., post p. 482 U. S. 493, and O'CONNOR, J., post p. 482 U. S. 494, filed dissenting opinions.
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