Arthur Andersen LLP v. Carlisle - Oral Argument - March 03, 2009

Arthur Andersen LLP v. Carlisle

Media for Arthur Andersen LLP v. Carlisle

Audio Transcription for Opinion Announcement - May 04, 2009 in Arthur Andersen LLP v. Carlisle

Audio Transcription for Oral Argument - March 03, 2009 in Arthur Andersen LLP v. Carlisle

John G. Roberts, Jr.:

We'll hear argument next in Case 08-146, Arthur Andersen v. Carlisle.

Mr. Baker.

M. Miller Baker:

Mr. Chief Justice, and may it please the Court: The principal question before the Court today is whether nonparties to an arbitration agreement that are otherwise entitled to enforce that agreement under State law are foreclosed as a matter of law from seeking relief under section 3 of the Federal Arbitration Act.

Respondents' argument that section 3 forecloses such relief to nonparties is contrary to both the text of section 3 and the structure of the FAA.

Nothing in the text of section 3 forecloses nonparty enforcement rights, and under the structure of the Act section 3 is a procedural device to enforce, rather than a substantive limitation upon, State-law arbitration rights made applicable by section 2.

I'll begin with the text of section 3.

Under section 3, a stay is mandatory if the issue in suit is, quote,

"referable to arbitration under such an agreement. "

We contend that there are three elements to determine whether or not an issue is referable to arbitration under the agreement.

First, the applicant must be able to enforce the agreement.

Second, the plaintiff must be bound by the agreement.

And, third, the claim must fall within the scope of the agreement.

Nothing in section 3 limits who can enforce the agreement.

To answer that question we have to turn to section 2.

Ruth Bader Ginsburg:

Before you leave the text, it says as you --

"referable to arbitration under an agreement. "

but then it says

"shall on application of one of the parties. "

How do we know whether that is parties to the litigation or parties to the arbitration agreement?

M. Miller Baker:

Your Honor, it's -- it's clear from the -- from the context it's referring to parties to the action.

Likewise, in section 4 there's a reference to parties, and it's parties to the controversy.

So section 3 refers to parties to the action in which the section 3 stay is sought.

Section 4, likewise, the companion enforcement provision, refers to parties to the controversy.

John G. Roberts, Jr.:

And what -- what is the "controversy"?

Is it the controversy asserted to be subject to arbitration or something else?

M. Miller Baker:

Well, 4, Your Honor, as opposed to section 3.

But the controversy in this case is a tort claim against various defendants.

And that -- the Petitioners in this case assert that they are entitled to enforce the arbitration clause, and under that clause this controversy is supposed to be arbitrated.

Now, section 2 is the primary substantive provision of the Act.

Section 2 establishes that questions concerning the enforceability of an arbitration agreement, including who may enforce that agreement, are decided by State law.