ORTEGA, J.

According to Blue Cross of California v. Superior Court (1998) 67 Cal.App.4th 42 ( Blue Cross), where an arbitration agreement governed by the Federal Arbitration Act ( 9 U.S.C. § 1 et seq.) (FAA) is silent with regard to classwide arbitration, section 4 of the FAA does not bar state courts from ordering classwide arbitration where permitted by California law. ( Blue Cross, supra, 67 Cal.App.4th at pp. 62-63.) Blue Cross also found that permitting the plaintiff to proceed with class certification efforts in such instances would not violate section 2 of the FAA: "In the absence of an express agreement not to proceed to arbitration on a classwide basis, ordering the parties to arbitrate class claims as authorized by state law does not conflict with their contractual arrangement." ( Id. at p. 64.)

The present case concerns a Discover Bank cardholder agreement that also contains an arbitration clause governed by the FAA. Unlike the arbitration agreement in Blue Cross, however, the agreement herein expressly prohibits arbitration on a classwide basis (the prohibition will sometimes be referred to herein as a "class action waiver"). Although section 2 of the FAA mandates the enforcement of arbitration agreements that fall within the scope of the act and preempts a state court's ability to invalidate on state substantive law grounds the express terms of a validly formed arbitration agreement, the lower court struck the class action waiver as substantively unconscionable and invalid under California law. (See Szetela v. Discover Bank (2002) 97 Cal.App.4th 1094 ( Szetela), in which the identical class action waiver in the same Discover Bank cardholder agreement was declared unconscionable and invalid under California law.) Having invalidated the class action waiver, the lower court granted Discover Bank's motion to compel arbitration, but permitted the plaintiff to attempt to certify a class for arbitration. (See Keating v. Superior Court (1982) 31 Cal.3d 584 ( Keating), disapproved on other grounds sub nom. Southland Corp. v. Keating (1984) 465 U.S. 1 ( Southland).)

In this proceeding, Discover Bank, seeking relief from the order striking the class action waiver, has petitioned for extraordinary writ relief on the ground that the FAA precludes states from forcing parties to arbitrate in a manner contrary to their agreement. ( 9 U.S.C. § 2.) Apart from the question of whether the FAA preempts a state court's ability to strike a class action waiver on substantive state law grounds, the validity of the arbitration agreement as a whole is not otherwise at issue in this proceeding. We hold that where a valid arbitration agreement governed by the FAA prohibits classwide arbitration, section 2 of the FAA preempts a state court from applying state substantive law to strike the class action waiver from the agreement. Accordingly, we disagree with the Szetela decision and grant Discover Bank's petition.

BACKGROUND

Plaintiff Christopher Boehr obtained a credit card from defendant Discover Bank in April 1986. The Discover Bank cardholder agreement ("agreement") governing plaintiff's credit card account contained a choice of law clause providing for the application of Delaware and federal law.

A. Addition of the Arbitration Clause to the Agreement

When plaintiff's credit card was issued, the agreement did not contain an arbitration clause. Discover Bank subsequently added the arbitration clause in July 1999, pursuant to a change of terms provision in the agreement. Relying on the change of terms provision, Discover Bank added the arbitration clause by sending to its existing cardmembers (including plaintiff) a notice that stated in relevant part: " NOTICE OF AMENDMENT. . . . WE ARE ADDING A NEW ARBITRATION SECTION WHICH PROVIDES THAT IN THE EVENT YOU OR WE ELECT TO RESOLVE ANY CLAIM OR DISPUTE BETWEEN US BY ARBITRATION, NEITHER YOU NOR WE SHALL HAVE THE RIGHT TO LITIGATE THAT CLAIM IN COURT OR TO HAVE A JURY TRIAL ON THAT CLAIM. THIS ARBITRATION SECTION WILL NOT APPLY TO LAWSUITS FILED BEFORE THE EFFECTIVE DATE."

In addition, the arbitration clause precluded both sides from participating in classwide arbitration, consolidating claims, or arbitrating claims as a representative or in a private attorney general capacity: ". . . NEITHER YOU NOR WE SHALL BE ENTITLED TO JOIN OR CONSOLIDATE CLAIMS IN ARBITRATION BY OR AGAINST OTHER CARDMEMBERS WITH RESPECT TO OTHER ACCOUNTS, OR ARBITRATE ANY CLAIM AS A REPRESENTATIVE OR MEMBER OF A CLASS OR IN A PRIVATE ATTORNEY GENERAL CAPACITY."

The arbitration agreement also stated that the FAA would govern the agreement: "Your Account involves interstate commerce, and this provision shall be governed by the Federal Arbitration Act (FAA)." "The arbitrator shall follow applicable substantive law to the extent consistent with the FAA and applicable statutes of limitations and shall honor claims of privilege recognized at law."

Existing cardholders were notified that if they did not wish to accept the new arbitration clause, they must notify Discover Bank of their objection and cease using their account. Their continued use of the account would be deemed to constitute acceptance of the new terms. Plaintiff did not notify Discover Bank of his objection to the arbitration clause or cease using his account before the stated deadline.

B. Plaintiff's Putative Class Action Complaint

On August 15, 2001, plaintiff filed a putative class action complaint in superior court against Discover Bank alleging breach of contract and violation of the Delaware Consumer Fraud Act (6 Del. Code, § 2511 et seq.). The complaint alleged that both causes of action arose under Delaware law.

Allegedly, Discover Bank breached its cardholder agreement by imposing a late fee of approximately $29 on payments that were received on the payment due date, but after Discover Bank's undisclosed 1 p.m. "cut-off time." Discover Bank also allegedly imposed a periodic finance charge (thereby disallowing a grace period) on new purchases when payments were received on the payment due date, but after 1 p.m.

C. Discover Bank's Motion to Compel Arbitration

Discover Bank moved to compel arbitration of plaintiff's claim on an individual basis and to dismiss the class action pursuant to the arbitration agreement's class action waiver.

Plaintiff opposed the motion, contending the unilateral addition of the arbitration clause was unconscionable under California law ( Badie v. Bank of America (1998) 67 Cal.App.4th 779) ( Bank of America). In addition, plaintiff contended the class action waiver was unconscionable and unenforceable under California law. Discover Bank, on the other hand, argued that Delaware law permits the unilateral addition of arbitration clauses to cardholder agreements (5 Del. Code § 952), and the FAA requires the enforcement of the express provisions of an arbitration clause, including class action waivers. Discover Bank contended that under section 2 of the FAA, arbitration agreements should not be singled out for suspect status under state laws applicable only to arbitration provisions.

Plaintiff's counsel conceded below that if the trial court applied Delaware law to the agreement, the unilateral addition of the arbitration clause would be valid under Delaware law. (5 Del. Code § 952, subd. (a).) After the parties presented additional briefing on the applicability of Delaware law (particularly whether the Delaware statute allowing the unilateral addition of the arbitration clause was retroactively applicable to the agreement in this case), the trial court concluded that Delaware law governed the agreement.

The trial court initially granted Discover Bank's motion in its entirety under Delaware law. The trial court found no fundamental California public policy requiring it to reject the parties' selection of Delaware law, under which the unilateral addition of the arbitration clause was conceded to be valid. The trial court stated in part: "Moreover, I don't find in [ Bank of America] an articulation of a public policy against using a clause allowing a unilateral right to amend as a way of adding an arbitration clause. [¶] California law and Delaware law may differ in their analysis of contract formation principles regarding unilateral amendment of contracts, but that does not mean that Delaware's contract formation principles offend fundamental California policy."

The trial court also found no California public policy reason to invalidate the class action waiver, which was alleged to be a valid waiver under Delaware law. (See Johnson v. West Suburban Bank (3d Cir. 2000) 225 F.3d 366 ( Johnson), which Discover Bank cites in support of its position that Delaware law permits class action waivers.) The lower court noted the availability of small claims court actions to resolve disputes involving minor sums, and also the availability of the California Unfair Practice Act (Bus. Prof. Code, § 17200) for injunctive relief. The trial court found no fundamental policy in California to supplant federal and Delaware law permitting contractual waivers of class actions.

D. Plaintiff's Motion for Reconsideration

After Discover Bank's motion to compel arbitration was granted, the Fourth District Court of Appeal decided Szetela, supra, 97 Cal.App.4th 1094, on April 22, 2002. Plaintiff, citing Szetela, moved for reconsideration of that portion of the order enforcing the class action waiver. Plaintiff contended Szetela had articulated California public policy reasons to reject (purported) Delaware law permitting class action waivers.

The lower court found Szetela constituted new and controlling authority for the proposition that under California law, an arbitration class action waiver is unconscionable and, thus, unenforceable. The lower court stated in part, "We now know after Szetela, which is binding on this Court, that the result under California law is different from the result under Delaware law. That is, that California law finds unconscionable and unenforceable a contract provision by which a consumer waives the right to bring a class action."

The trial court conducted a choice of law analysis and concluded that enforcing the class action waiver under Delaware law would violate a fundamental public policy under California law as articulated in Szetela. Upon determining it would be proper to sever the class action waiver clause from the rest of the arbitration agreement, the trial court struck the class action waiver clause from the agreement, ordered plaintiff to arbitrate his claims individually, and left open the possibility that plaintiff may succeed in certifying an arbitration class under California law.

The written order granting plaintiff's motion for reconsideration states in part: "Upon reconsideration, this Court's March 7, 2002[,] order compelling plaintiff Christopher Boehr to arbitrate his claims is hereby vacated insofar as it precludes arbitration on behalf of a potential class. [¶] . . . Based on the law set forth in the Szetela case, and based on Civil Code section 1670.5(a), the portion of Discover's arbitration clause which purports to preclude classwide relief is hereby stricken as unconscionable and against public policy. [¶] . . . Notwithstanding the foregoing, this Court's March 7, 2002[,] order compelling plaintiff to arbitrate his claims is not vacated. Plaintiff's individual claims must be arbitrated and plaintiff may seek to certify an arbitration class."

E. This Writ Proceeding

After the lower court granted plaintiff's motion for reconsideration, Discover Bank filed the present writ petition. Discover Bank seeks reinstatement of the lower court's original order enforcing the arbitration clause in its entirety by compelling plaintiff to arbitrate on an individual basis and precluding him from participating in class litigation or class arbitration. We issued an order to show cause and set the matter for hearing.

DISCUSSION

A. The Federal Arbitration Act

The FAA "was enacted in 1925 (43 Stat. 883) and codified in 1947. (61 Stat. 669.) It provides in section 2 that a written arbitration provision in a contract 'evidencing a transaction involving commerce . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.' (9 U.S.C.A. § 2, italics added.) . . . [¶] The purpose of the act 'was to reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts.' [Citations.]" ( Blue Cross, supra, 67 Cal.App.4th at p. 48.)

"There is no federal policy favoring arbitration under a certain set of procedural rules; the federal policy is simply to ensure the enforceability, according to their terms, of private agreements to arbitrate." ( Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University (1989) 489 U.S. 468, 476 ( Volt).) The FAA's "primary purpose [is to] ensur[e] that private agreements to arbitrate are enforced according to their terms. Arbitration under the Act is a matter of consent, not coercion, and parties are generally free to structure their arbitration agreements as they see fit. Just as they may limit by contract the issues which they will arbitrate . . ., so too may they specify by contract the rules under which that arbitration will be conducted." ( Id. at p. 479.)

"[S]ection 2 of the act places arbitration agreements on an equal footing with contracts generally. [Citations.] In view of that purpose, the Supreme Court has held: 'Thus, generally applicable contract defenses, such as fraud, duress or unconscionability, may be applied to invalidate arbitration agreements without contravening § 2. [Citations.]' ( Doctor's Associates, Inc. v. Casarotto[(1996)] 517 U.S. [681,] 687.) However, a state law that invalidates the express terms of an arbitration agreement is preempted by the act." ( Blue Cross, supra, 67 Cal.App.4th at p. 51.)

B. A Valid Arbitration Agreement Was Formed

The cardholder agreement in effect when plaintiff opened his credit card account did not contain an arbitration clause. Discover Bank subsequently added the arbitration clause by unilateral amendment, as permitted by the agreement's change of terms clause and Delaware law. Under Delaware law, Discover Bank's unilateral addition of the arbitration clause resulted in the formation of a valid arbitration agreement: "Unless the agreement governing a revolving credit plan otherwise provides, a bank may at any time and from time to time amend such agreement in any respect, whether or not the amendment or the subject of the amendment was originally contemplated or addressed by the parties or is integral to the relationship between the parties. Without limiting the foregoing, such amendment may change terms by the addition of new terms or by the deletion or modification of existing terms, whether relating to . . . arbitration or other alternative dispute resolution mechanisms. . . ." (5 Del. Code § 952, subd. (a).)

In its motion to compel arbitration, Discover Bank urged the trial court to apply Delaware law, as designated in the agreement's choice of law clause, to uphold the formation of a valid arbitration agreement. Plaintiff, on the other hand, contended that upholding the formation of an arbitration agreement under Delaware law would conflict with California's fundamental public policy as expressed in Bank of America, supra, 67 Cal.App.4th 779.

Finding no California fundamental public policy to preclude the application of Delaware law, the trial court concluded a valid arbitration agreement had been formed. In the present proceeding, Discover Bank contends the issue of whether a valid arbitration agreement was formed is not before us. Discover Bank has petitioned for review of the order granting plaintiff's motion for reconsideration of the class action waiver issue. Whether a valid arbitration agreement had been formed was not at issue in plaintiff's motion for reconsideration. By limiting the motion for reconsideration to the class action waiver issue, Discover Bank contends plaintiff is precluded from "reviv[ing] the issue of whether the arbitration clause was validly added to the Cardmember Agreement."

In his opposition to the writ petition, plaintiff has denied that a valid arbitration agreement was formed, stating that he "admits that Discover purported to add an arbitration clause to the Cardmember Agreement, but denies that such amendment was valid and enforceable."

According to rule 28(e)(2) of the California Rules of Court, "[o]nly the issues set forth in the petition and answer or fairly included in them need be considered by the court." Given that plaintiff in his answer has denied that a valid arbitration agreement was formed, technically the issue is before us. In the discussion portion of plaintiff's brief, however, he failed to supply any arguments or authority to support his claim that no arbitration agreement was formed. Instead, plaintiff's brief focused exclusively on the question of whether the class action waiver was properly stricken from the agreement under California law. The two issues are not the same: whether a valid arbitration agreement was formed under Delaware law requires a choice of law analysis, whereas deciding whether the class action waiver was properly stricken from the agreement requires a federal preemption analysis.

"As stated in People v. Ham (1970) 7 Cal.App.3d 768, 783 . . .: 'Where a point is merely asserted by counsel without any argument of or authority for its proposition, it is deemed to be without foundation and requires no discussion.'" ( People v. Dougherty (1982) 138 Cal.App.3d 278, 282-283.) Given plaintiff's failure to provide argument or authority to support the position that no arbitration agreement was formed, we need not discuss the issue. We therefore assume that a valid arbitration agreement was formed.

C. Federal Preemption of California Law

Finding Szetela had articulated fundamental public policy reasons not to enforce the parties' choice of law clause, the trial court refused to enforce the class action waiver under Delaware law, finding Delaware law to be contrary to this state's fundamental policy of prohibiting class action waivers as expressed in Szetela. As we shall explain, however, where there is a valid arbitration agreement governed by the FAA, California's public policy regarding class action waivers has been preempted by section 2 of the FAA.

1. California Policy on Class Action Waivers

In America Online, Inc. v. Superior Court (2001) 90 Cal.App.4th 1 ( AOL), the plaintiff filed a putative consumer class action lawsuit under the California Consumer Legal Remedies Act (CLRA) (Civ. Code, § 1750 et seq.) against America Online, Inc. (AOL), in California. The CLRA specifically provides for the prosecution of class actions. (Civ. Code, §§ 1752, 1781, .) The CLRA also voids any purported waiver of rights under the CLRA as being contrary to California public policy. (Civ. Code, § 1751)

AOL moved to stay or dismiss the class action suit, seeking to enforce the forum selection and choice of law clauses in its agreements with the putative class members. The contracts provided for litigation in Virginia and for Virginia law to govern any dispute arising out of the contractual relationship.

Virginia, however, apparently does not allow consumer lawsuits to be brought as class actions. ( AOL, supra, 90 Cal.App.4th at p. 5.) The AOL court refused to enforce the Virginia forum selection and choice of law clauses, stating that to do so would violate California public policy by necessitating waivers of the CLRA's statutory remedies, right to bring a class action, and antiwaiver provision. ( Id. at p. 15.) The court also noted that "Virginia's law provides significantly less consumer protection to its citizens than California law provides for our own." ( Ibid.)

Regarding the absence of any provision in the Virginia Consumer Protection Act of 1977 (Va. Code Ann., § 59.1-196) for class action relief, the AOL court stated that California has an important interest in making class action relief available to consumers: "In contrast to Virginia consumer law's ostensible hostility to class actions, the right to seek class action relief in consumer cases has been extolled by California courts. . . . [¶] That this view has endured over the last 30 years is of little surprise given the importance class action consumer litigation has come to play in this state. In light of that history, we cannot accept AOL's assertion that the elimination of class actions for consumer remedies if the forum selection clause is enforced is a matter of insubstantial moment. The unavailability of class action relief in this context is sufficient in and by itself to preclude enforcement of the TOS [terms of service] forum selection clause." ( AOL, supra, 90 Cal.App.4th at pp. 17-18, fns. omitted.)

Although choice of law and forum selection clauses may be invalidated under California law as shown in AOL, there is no blanket prohibition against class action waiver clauses. In Washington Mutual Bank v. Superior Court (2001) 24 Cal.4th 906 ( Washington Mutual Bank), the California Supreme Court rejected the "suggestion that California businesses dealing with mass groups of consumers should not be permitted to rely on choice-of-law clauses as a means of avoiding involvement in a nationwide class action. The point is not well taken. 'Class actions are provided only as a means to enforce substantive law. Altering the substantive law to accommodate procedure would be to confuse the means with the ends — to sacrifice the goal for the going.' ( City of San Jose v. Superior Court 12 Cal.3d [447,] 462, fn. omitted. . . .) Consequently, an otherwise enforceable choice-of-law agreement may not be disregarded merely because it may hinder the prosecution of a multistate or nationwide class action or result in the exclusion of nonresident consumers from a California-based class action. [¶] Of course, choice-of-law agreements have no effect in a class action if the trial court determines that they are unenforceable or that class claims fall outside their scope. Nonetheless, if the class action opponent continues to invoke the application of foreign law to the claims of out-of-state class members, the trial court remains obligated to analyze the governmental interests of the various jurisdictions involved to determine whose law is more properly applied." ( Id. at pp. 918-919.)

2. Federal Preemption of State Policy

Neither AOL nor Washington Mutual Bank involved an arbitration agreement or the FAA. Where, as here, an arbitration agreement is governed by the FAA, we must engage in federal preemption analysis to determine whether state policy must bow to the federal act.

In Doctor's Associates, Inc. v. Casarotto (1996) 517 U.S. 681, a franchise holder (Casarotto) filed suit in Montana state court against the national franchisor of Subway sandwich shops. The franchise agreement contained an arbitration clause governed by the FAA, which the franchisor sought to enforce. The Montana Supreme Court held the arbitration clause was unenforceable, due to a violation of a Montana statute requiring that notice of arbitration clauses be typed in underlined capital letters on the first page of the contract. The United States Supreme Court reversed, holding that the Montana statute was preempted by section 2 of the FAA.

Casarotto discussed Volt, supra, 489 U.S. 468, which upheld an arbitration agreement governed by the FAA. The agreement in Volt incorporated a state procedural rule permitting the stay of arbitration pending the resolution of a related judicial proceeding. Volt held that enforcing the agreement's adoption of the state procedural rule would not conflict with the FAA, because the purpose of the FAA was to ensure that private arbitration agreements are enforced according to their terms. ( Id. at p. 688.)

Casarotto distinguished Volt and concluded that applying Montana's arbitration notice statute would conflict with the purpose of the FAA because the Montana statute would invalidate, rather than enforce, the parties' arbitration agreement. Under section 2 of the FAA, arbitration agreements may not be invalidated for reasons other than those applicable to all contracts: "The 'goals and policies' of the FAA, this Court's precedent indicates, are antithetical to threshold limitations placed specifically and solely on arbitration provisions. Section 2 'mandate[s] the enforcement of arbitration agreements,' Southland, 465 U.S., at 10, 'save upon such grounds as exist at law or in equity for the revocation of any contract,' 9 U.S.C. § 2. Section 27-5-114(4) of Montana's law places arbitration agreements in a class apart from 'any contract,' and singularly limits their validity. The State's prescription is thus inconsistent with, and is therefore preempted by, the federal law." ( Casarotto, supra, 516 U.S. at p. 688.)

In Southland, supra, 465 U.S. 1, the Supreme Court held that California's Franchise Investment Law (Corp. Code, § 31000 et seq.) (FIL), which provides for the judicial resolution of disputes, was not a defense to enforcement of an arbitration clause governed by the FAA. The FIL, like the CLRA, contains a nonwaiver provision that invalidates any contractual agreement to waive the statute's protections. Southland held that arbitration agreements may not be invalidated on the ground that state law provides for a nonwaivable judicial forum to resolve disputes: "We agree, of course, that a party may assert general contract defenses such as fraud to avoid enforcement of an arbitration agreement. We conclude, however, that the defense to arbitration found in the California Franchise Investment Law is not a ground that exists at law or in equity 'for the revocation of any contract' but merely a ground that exists for the revocation of arbitration provisions in contracts subject to the California Franchise Investment Law." ( Southland, supra, 465 U.S. at p. 16, fn. 11.)

3. Szetela Failed to Discuss Federal Preemption Szetela, as previously noted, involved the identical Discover Bank arbitration clause at issue in this case. In Szetela, the plaintiff cardholder filed a class action against Discover Bank for breach of contract, breach of the implied covenant of good faith and fair dealing, fraudulent or negligent misrepresentation, and deceptive business practices. The plaintiff in Szetela alleged Discover Bank had improperly charged cardholders fees for exceeding their credit limits (overlimit fees of $29) and other penalties. ( Szetela, supra, 97 Cal.App.4th at p. 1097.)

As in this case, Discover Bank moved to compel arbitration in Szetela and the plaintiff was ordered to arbitrate his claim on an individual basis. After Szetela prevailed at arbitration, recovering $29, Szetela appealed from the order compelling arbitration. Treating the appeal as a petition for writ of mandate, the appellate court reached the merits and vacated the order compelling arbitration. The appellate court struck the class action waiver from the arbitration clause, finding it to be unconscionable under California law. ( Szetela, supra, 97 Cal.App.4th at pp. 1099-1102.)

In striking the class action waiver, Szetela applied California law and rejected the contract's selection of Delaware and federal law without conducting any choice of law analysis, stating that Discover Bank had failed to brief the choice of law issue. ( Szetela, supra, 97 Cal.App.4th at p. 1099, fn. 3.) Szetela struck the class action waiver as unconscionable under California law (citing Civ. Code, § 1670.5, subd. (a)), which permits the revocation of a contract on the ground of unconscionability) and section 2 of the FAA (citing Casarotto, supra, 517 U.S. at pp. 686-687). ( Szetela, supra, 99 Cal.App.4th at p. 1099.)

Although Szetela cited the Casarotto decision , Szetela failed to discuss Casarotto in any detail. Szetela also failed to discuss the preemptive effect of the FAA. Instead, Szetela engaged in a public policy discussion similar to that found in cases such as AOL, supra, 90 Cal.App.4th 1, which do not involve arbitration agreements governed by the FAA.

In finding the class action waiver unconscionable, Szetela first discussed procedural unconscionability. In that context, Szetela found unconscionable the unilateral manner in which the arbitration clause was added to the agreement. Given that the validity of "the arbitration clause as a whole" was not at issue in Szetela (97 Cal.App.4th at p. 1099, fn. 2), however, Szetela erred in focusing on procedural unconscionability rather than on federal preemption.

Szetela found the Discover Bank class action waiver to be substantively unconscionable under California law, citing the California Unfair Practices Act (Bus. Prof. Code, § 17200 et seq.) as one basis for its finding. ( Szetela, supra, 97 Cal.App.4th at pp. 1101-1102.) As the Southland and Casarotto decisions have shown, however, the FAA has preempted a state's ability to refuse to enforce an arbitration agreement on the basis of state substantive law. If a state statute requiring a nonwaivable judicial forum for resolution of consumer disputes must give way to section 2 of the FAA, it necessarily must follow that a state judicial policy precluding classwide arbitration waivers must also give way to section 2 of the FAA. Accordingly, we believe Szetela was wrongly decided.

In its petition, Discover Bank states: "Permitting a state court to invalidate as 'unconscionable' discrete portions of an arbitration agreement that do not go to the issue of whether an arbitration agreement was formed is tantamount to a license to disregard the FAA altogether. Such a result is untenable given the United States Supreme Court's command that the FAA binds both state and federal courts." We agree with Discover Bank's position on this point. As explained in Southland, the FAA supersedes state law, and the FAA's substantive law is applicable in both state and federal court. ( Southland, supra, 465 U.S. at pp. 10-12.)

The California Supreme Court has recognized that California law, like the FAA, favors the enforcement of valid arbitration agreements: "California law, like federal law, favors enforcement of valid arbitration agreements. ( Broughton [ v. Cigna Healthplans (1999)] 21 Cal.4th [1066,] 1074.) As we have observed: 'Two years after the FAA was enacted, this state adopted its first modern arbitration statute (Stats. 1927, ch. 225), declaring arbitration agreements to be irrevocable and enforceable in terms identical to those used in section 2 of the federal act, and since that time California courts and its Legislature have "consistently reflected a friendly policy toward the arbitration process." [Citation.] That policy was expanded and clarified in the current arbitration statute which was adopted in 1961 (Stats. 1961, ch. 461, § 2 et seq.), and it continues to be the policy of this state.' ( Keating v. Superior Court (1982) 31 Cal.3d 584, 601-602, disapproved on other grounds sub nom. Southland Corp. v. Keating (1984) 465 U.S. 1.) Thus, under both federal and California law, arbitration agreements are valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. ( 9 U.S.C. § 2; see also, Code Civ. Proc., § 1281) In other words, under California law, as under federal law, an arbitration agreement may only be invalidated for the same reasons as other contracts." ( Armendariz, supra, 24 Cal.4th at pp. 97-98.)

Accordingly, once an arbitration agreement is found to have been validly formed, California law, like federal law, favors its enforcement. In this case, as previously discussed, due to plaintiff's failure to present any argument or authority to support his assertion that the arbitration agreement was not validly formed, we need not discuss the contract formation issue and have assumed the existence of a valid arbitration agreement.

With that assumption in mind, we conclude section 2 of the FAA, which mandates enforcement of arbitration agreements, preempts any otherwise applicable California judicial law finding class action waivers to be substantively unconscionable and invalid. In reaching this conclusion, we look to Perry v. Thomas, supra, 482 U.S. 483 ( Perry), in which the issue was "whether § 2 of the [FAA], which mandates enforcement of arbitration agreements, pre-empts § 229 of the California Labor Code, which provides that actions for the collection of wages may be maintained 'without regard to the existence of any private agreement to arbitrate.' Cal. Lab. Code Ann. § 229 (West 1971)." ( Id. at p. 484.)

In upholding the arbitration agreement, Perry discussed the preemptive effect of the FAA as follows: "[T]he present appeal addresses the pre-emptive effect of the [FAA], a statute that embodies Congress' intent to provide for the enforcement of arbitration agreements within the full reach of the Commerce Clause. Its general applicability reflects that '[t]he preeminent concern of Congress in passing the Act was to enforce private agreements into which parties had entered. . . .' [ Dean Witter Reynolds Inc. v.] Byrd 470 U.S. [213,] 221. We have accordingly held that these agreements must be 'rigorously enforce[d].' Ibid.; see Shearson/American Express Inc. v. McMahon, 482 U.S. 220, 226 (1987); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625-626 (1985). This clear federal policy places § 2 of the Act in unmistakable conflict with California's § 229 requirement that litigants be provided a judicial forum for resolving wage disputes. Therefore, under the Supremacy Clause, the state statute must give way." ( Perry, supra, 482 U.S. at pp. 490-491.)

In Perry, the lower courts had not addressed the plaintiff's claim that the arbitration agreement was an unconscionable and unenforceable contract of adhesion. In noting that the issue may be considered on remand, the United States Supreme Court addressed the choice of law issues that arise when unconscionability defenses are asserted, stating: "We note, however, the choice-of-law issue that arises when defenses such as Thomas' so-called 'standing' and unconscionability arguments are asserted. In instances such as these, the text of § 2 provides the touchstone for choosing between state-law principles and the principles of federal common law envisioned by the passage of that statute: An agreement to arbitrate is valid, irrevocable, and enforceable, as a matter of federal law, see Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24 (1983), 'save upon such grounds as exist at law or in equity for the revocation of any contract.' 9 U.S.C. § 2 (emphasis added). Thus state law, whether of legislative or judicial origin, is applicable if that law arose to govern issues concerning the validity, revocability, and enforceability of contracts generally. A state-law principle that takes its meaning precisely from the fact that a contract to arbitrate is at issue does not comport with this requirement of § 2. See Prima Paint [ Corp. v. Flood Conklin Mfg. Co.] 388 U.S. [395,]404 [1967]; Southland Corp. v. Keating, 465 U.S., at 16-17, n. 11. A court may not, then, in assessing the rights of litigants to enforce an arbitration agreement, construe that agreement in a manner different from that in which it otherwise construes nonarbitration agreements under state law. Nor may a court rely on the uniqueness of an agreement to arbitrate as a basis for a state-law holding that enforcement would be unconscionable, for this would enable the court to effect what we hold today the state legislature cannot." ( Perry, supra, 482 U.S. at p. 492, fn. 9.)

While a state may prohibit the contractual waiver of statutory consumer remedies, including the right to seek relief in a class action, such protections fall by the wayside when the waiver is contained in a validly formed arbitration agreement governed by the FAA. The anti-waiver provisions in statutes such as section 229 of the California Labor Code and section 31512 of the California Corporations Code are preempted by section 2 of the FAA. ( Perry, supra, 482 U.S. at p. 492; Southland, supra, 465 U.S. at p. 16, fn. 11.) Similarly, we conclude the anti-waiver language found in judicial decisions such as AOL and Szetela also has been preempted by section 2 of the FAA.

Accordingly, we find the lower court erred in granting the motion for reconsideration and striking the class action waiver from the arbitration agreement.

4. The Issues Are Substantive, Not Procedural

Plaintiff contends preemption is not an issue in this case because in state court, the FAA does not preempt matters of procedure, such as class action procedural rules, which are to be governed by state law. In support of this position, plaintiff cites Blue Cross, supra, 67 Cal.App.4th 42, which held that because section 4 of the FAA does not apply in state court (section 4 requires federal district courts to apply Federal Rules of Civil Procedure in determining motions to compel arbitration), in the absence of an express agreement to the contrary, state courts may order classwide arbitration where permitted by California law. ( Id. at pp. 62-63.) The critical distinction between this case and Blue Cross, however, is that here, the agreement contains a class action waiver clause.

Even if we were to view the issues before us as procedural, that would not justify applying state law to this proceeding. Federal rules of procedure are not binding on state courts except where the applicable state rules would defeat the purpose of the FAA. (See Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 409.) In this case, it would defeat the purpose of the FAA, which was enacted primarily to ensure that arbitration agreements are enforced according to their terms ( Volt, supra, 489 U.S. at p. 479), to strike the class action waiver from the agreement. The FAA's "primary purpose [is to] ensur[e] that private agreements to arbitrate are enforced according to their terms. Arbitration under the Act is a matter of consent, not coercion, and parties are generally free to structure their arbitration agreements as they see fit. Just as they may limit by contract the issues which they will arbitrate . . ., so too may they specify by contract the rules under which that arbitration will be conducted." ( Ibid.)

In any event, the issues before us are substantive, not procedural. Blue Cross dealt primarily with preemption issues under section 4 of the FAA, and left it to the trial court to determine, in the first instance, whether to impose classwide arbitration in the absence of any contractual provision on the subject. Blue Cross mentioned, but did not decide, the defendant's contention that because the agreement had adopted the rules of the American Arbitration Association (AAA), which do not provide for classwide arbitration, it would interfere with the parties' intention to impose classwide arbitration under California's "'hybrid'" system requiring judicial intervention. ( Blue Cross, supra, 67 Cal.App.4th at p. 64.) Blue Cross did not decide this issue, finding it to be premature given the absence of a trial court decision on the certification issue. ( Ibid.)

Although Blue Cross did not decide the issue, the issue demonstrates that arguments of unconscionability and unfairness run in both directions where classwide arbitration is concerned. While California courts have, for policy reasons, declared class action waivers to be unconscionable from the consumer's point of view, a competing policy exists to enforce valid arbitration agreements. ( 9 U.S.C. § 2.) Although California courts have recognized the consumer protection value of classwide arbitration, that is not the sole consideration. Courts should also consider the "California rule which prevents reweighing the merits of an arbitrator's decision." ( Siegel v. Prudential Ins. Co. (1998) 67 Cal.App.4th 1270, 1290; Code Civ. Proc., § 1286.2) The FAA does not preempt this rule. ( Ibid.) As judicial review of the merits of an arbitrator's decision may not be had under California law, a multi-million dollar class arbitration award entered on nothing more than mere whim cannot be corrected under California law. Just as consumers may be harmed by the enforcement of an unconscionable class action waiver, defendant companies may be able to prove they will be prejudiced if classwide arbitration is imposed where, even though the arbitration agreement is silent on the subject, the agreement has adopted arbitration rules, such as those of the AAA, that do not provide for classwide arbitration.

In this case, the prejudice to Discover Bank that would be caused by altering the parties' agreement is clear. As classwide arbitration in California vastly increases the scope of potential liability and damages that a defendant will face without the ability to seek judicial review of the merits of the arbitrator's decision, we conclude the decision to strike a classwide arbitration ban from a valid agreement alters substantive, and not just procedural, rights of both parties.

DISPOSITION

The petition for writ of mandate is granted. We direct the lower court to vacate its July 11, 2002, order granting plaintiff's motion for reconsideration and to issue a new and different order denying same. The lower court's original order granting the motion to compel arbitration shall be reinstated in full, requiring plaintiff to arbitrate on an individual basis and submit to the class action waiver. Discover Bank is entitled to its costs on this writ proceeding.

We concur:

SPENCER, P.J.

VOGEL (Miriam A.), J.