Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.

A controversial footnote, creating a possible "prospective waiver" doctrine that would allow a party to avoid arbitration under foreign law, has been much criticized by commentators and at the same time raised by many litigants.

[3] Seeing that other Japanese car makers were allowing their dealers in Puerto Rico to transship excess inventory to Latin America and the continental United States, Soler asked if it could do the same.

Soler countersued, alleging violations of the federal Automobile Dealers' Day in Court Act, which allowed civil suits by dealerships for damage due to bad faith on the part of the franchisor.

Mitsubishi responded with its practical objections to the transshipments, that the franchise had expired without being renewed and that the shipments were halted sometimes at Soler's request and sometimes for lack of an acceptable letter of credit.

The government's amicus brief had advised that German law similarly prohibited disputes under its corresponding statutes from being arbitrated, and the Treaty of Rome which established what was then known as the European Union had five articles devoted to forbidding or restricting anti-competitive practices.

"[W]hether or not other nations agree with United States law and attitudes relating to competition, it is extremely doubtful that they would describe them as 'parochial' in the sense of being petty provincialisms," he concluded.

In Byrd and other recent cases, the court had affirmed "a strong national policy favoring arbitration," as it had put it in Moses H. Cone Memorial Hospital v. Mercury Construction Corp.,[22] and he saw no reason to stop here.

However, when challenged on how the Court could reach his desired result without overruling American Safety and thus avoid the question of whether purely domestic antitrust claims were arbitrable, he pointed the justices to Scherk.

Rodriguez-Ramon cited the efficiency and expediency offered by arbitration as factors the Court had held in its favor, and contrasted that with his now-bankrupt client, who would have to take all his witnesses and evidence to Japan for a case to be heard in that country's language.

He raised the possibility that a manufacturer could, through agreements with all its distributors, create "a nice, tidy buffer from the American antitrust laws", since the indirect purchasers would likewise lack standing to sue under the Illinois Brick doctrine.

"We must weigh the concerns of American Safety against a strong belief in the efficacy of arbitral procedures for the resolution of international commercial disputes and an equal commitment to the enforcement of freely negotiated choice-of-forum clauses.

In fact, the Court itself had found when inquiring into the legislative history of the Sherman Act in Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc. that the treble damages were primarily intended to help individual litigants and not to serve a greater public policy.

[28][29] "To be sure," Blackmun qualified, the international arbitral tribunal owes no prior allegiance to the legal norms of particular states; hence, it has no direct obligation to vindicate their statutory dictates.

"[32] He reiterated past holdings in antitrust cases where the Court had indeed recognized the public-policy role of private actions, particularly by noting the uniqueness of the treble-damages provision when first passed.

This Court would be well advised to endorse the collective wisdom of the distinguished judges of the Courts of Appeals who have unanimously concluded that the statutory remedies fashioned by Congress for the enforcement of the antitrust laws render an agreement to arbitrate antitrust disputes unenforceable ... Despotic decisionmaking of this kind is fine for parties who are willing to agree in advance to settle for a best approximation of the correct result in order to resolve quickly and inexpensively any contractual dispute that may arise in an ongoing commercial relationship.

[35] "The Court's repeated incantation of the high ideals of 'international arbitration' creates the impression that this case involves the fate of an institution designed to implement a formula for world peace," Stevens concluded.

Like any other mechanism for resolving controversies, international arbitration will only succeed if it is realistically limited to tasks it is capable of performing well—the prompt and inexpensive resolution of essentially contractual disputes between commercial partners ...

A separate answer to Mitsubishi's motion was filed in October, in which Soler argued that its desperate financial straits prevented it from being "legally or equitably compelled" to return to Tokyo.

"[19] "Soler's only colorable argument for maintaining the stay was its inability to finance the Japanese arbitration, precisely the issue it was precluded from raising at such a late date," Coffin wrote.

[37] Sandra Day O'Connor wrote for the majority that Mitsubishi Motors and its predecessor cases had helped dispel former judicial mistrust of arbitration;[38] similarly, it dismissed public-policy arguments in support of the nonarbitrability of Racketeer Influenced and Corrupt Organizations Act (RICO) actions.

[39] Blackmun, dissenting this time, claimed that the majority was "in direct contradiction" of his opinion in Mitsubishi Motors, since it had rested on the lack of public policy intentions in the statute at issue rather than doubts about the suitability of the arbitral process.

Since, as the Mitsubishi majority had found, the alleged bad acts arose from the activities covered by the contract, all save the RICO and tortious interference claims were arbitrable.

[45] Four years later, after Rodriguez, William C. Conner, another judge from that district, held that along with the later cases, Mitsubishi should be read to make domestic antitrust claims arbitrable as well;[46] the Second Circuit affirmed without an opinion.

Blackmun allowed that this was a valid concern but countered that Mitsubishi had already stipulated at oral argument that American law would control the antitrust claims, mooting it in the instant case.

[51] Should that issue actually arise in a future case, Blackmun observed, the proper time to raise it was not prior to the arbitration but afterwards, when the court would be asked to enforce the award.

He added that "... in the event the choice-of-forum and choice-of-law clauses operated in tandem as a prospective waiver of a party's right to pursue statutory remedies for antitrust violations, we would have little hesitation in condemning the agreement as against public policy.

[53] The petitioner argued that the Japanese Hague Rules, which would govern the arbitration, allowed them to recover less than COGSA would since it released the shipper from liability for the action of hired stevedores.

Anthony Kennedy, writing for a 7–1 majority, extended it slightly by observing that it was not clear at that point whether TOMAC actually would apply the Hague Rules instead of COGSA, and if it did and Vimar was unsatisfied it could then seek a remedy from American courts during enforcement.

Clarence Thomas's majority opinion briefly noted in passing that under that dictum, "a substantive waiver of federally protected civil rights will not be upheld.

But in 1990 the Fourth Circuit struck that provision of Virginia's Motor Vehicle Dealer Licensing Act down as incompatible with the FAA under Southland Corp. v. Keating and the Supreme Court's other arbitration jurisprudence.

Three red diamonds arranged in a triangular pattern with the words "Mitsubishi Motors" in black beneath
Mitsubishi logo
An older man with glasses wearing black with a shelf full of brown, red and black books behind him
Justice Harry Blackmun, who wrote the majority opinion
An older man with white hair wearing a black robe and a bow tie
Justice John Paul Stevens (pictured in 2006)
A white ship several stories, seen from off the starboard side of the bow, with "Norwegian Dawn" painted on the side
The Norwegian Dawn , where Lindo worked. Many cases considering footnote 19 have been brought by cruise ship employees