U.S. Supreme Court to consider whether to review OTO, L.L.C. v. Kho

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Last year, we reported on the California Supreme Court decision in One Toyota of Oakland v. Kho, which struck a blow to employers seeking to enforce arbitration agreements. In March 2020, OTO, L.L.C. asked the United States Supreme Court (“SCOTUS”) to let it appeal the California Supreme Court’s decision, which is done by way of a Petition for a Writ of Certiorari (“Writ”). Though Mr. Kho waived his right to file a response to OTO’s Writ, SCOTUS requested that he filed one. On April 29, 2020, Mr. Kho file an Opposition to OTO’s Writ. The California Labor Commissioner also filed a brief in opposition.

SCOTUS will only grant a writ under certain circumstances, and it rarely does so. One consideration that SCOTUS takes into account when deciding whether to grant a writ is whether the highest state court decided an important federal question that either 1) conflicts with the decision of another state court of last resort or a U.S. court of appeals, or 2) should have, but has not been, decided by SCOTUS itself, or that in a way conflicts with relevant decisions of SCOTUS.

In its Writ, OTO alleged that the California Supreme Court’s decision regarding the unconscionability defense (in opposition to enforcing arbitration agreements) was preempted by the Federal Arbitration Act). Kho, in his response, raises various questions that he says the court should decide in determining whether it should hear the parties’ arguments. For instance, Kho asks SCOTUS to determine whether it has jurisdiction over this case if FAA is assumed to apply but there is no record establishing why it should apply, i.e., does the dispute arise from a transaction involving commerce. The Labor Commissioner’s opposition is more straightforward and addresses the question raised by OTO, which is whether the Court’s decision was consistent with the FAA.

If SCOTUS does decide to take up this case, there is a chance that it could overturn the employee-friendly decision of the California Supreme Court. In the meantime, employers should work with attorneys to ensure that their arbitration agreements do not run afoul of the Court’s findings in OTO v. Kho.