Usually litigators and trial lawyers are the audience for a days’ cases, but three of today’s offerings involve good or questionable drafting and should be of interest to those creating arbitration clauses and settlement agreements.
A skinny arbitration clause and jury trial waiver
Legal writing instructors hammer into their charges that good writing is spare writing. Brody v. Culturesource, 2020 U.S. Dist. LEXIS 209067 (E.D. Mich.) (Nov. 9, 2020) shows that brevity can be overdone. The dispute begins as a straightforward click wrap case. The court, Steeh, J., easily disposes of the Plaintiff’s arguments that she never agreed to arbitrate. The court finds that clicking the “validate” button below the statement “I have read each section of the Agreement and I accept the terms and conditions described therein” constituted an acceptance of those terms, including the arbitration agreement. Judge Steeh also makes short work of Brody’s claim that a one-way agreement which excused Defendant from arbitration invalidated the arbitration clause for lack of consideration; under applicable Michigan law, he holds, mutuality is not required.
The case gets interesting, though, when the court discusses whether, even if a valid arbitration agreement existed, the plaintiff knowingly waived her Seventh Amendment right to a jury trial. The court holds that the language of the arbitration clause did not adequately advise Brody as to the consequences of her agreement. The arbitration provision is, indeed, short: “It is agreed that arbitration shall be the mechanism for bringing a legal claim against the Company and/or the Client for matters relating to employment discipline and/or termination.” Judge Steeh criticizes that clause for its failure to inform the employees of the rights which they are waiving or the process to which they are agreeing. Even recognizing that the Plaintiff, with bachelor’s and master’s degrees is well-educated, the court finds that she was unfamiliar with the arbitral process and “did not know that a person who agrees to arbitration gives up their right to a jury trial.” The opinion is best summed up by its closing paragraph.
“The arbitration clause in this case is unique in its failure to inform the employee about the process to which she is submitting. The court’s research has not revealed another case in which a similarly skeletal arbitration clause has been enforced to require arbitration of employment claims.”
So, note to drafters – be sure that your agreement has some level of detail as to the effect of arbitration. The best clauses contain an explicit statement that the signer will give up the right to a court or jury trial. While lay folks criticize lawyers for being verbose, there is – at least occasionally – a good reason for those extra words.
Mediators and advocates are familiar with the scene. It is late at night and folks are hungry. After a long day of negotiation, there is an agreement; it is time to memorialize it. Bleary-eyed, the mediator or a party pulls out a laptop and starts typing. Naylor v. Valicenti, 2020 U.S. Dist. LEXIS 208839 (W.D.N.Y.) (Nov. 9, 2020) demonstrates the problems that can arise.
After framing provisions purportedly settling a number of substantive issues, the mediator drafted a clause to deal with any misunderstandings as to the agreement’s effect.
“Any disagreement on the contents of any documents required under this agreement or any terms of the agreement shall be mediate[sic]/arbitrated by the mediator at the request of a party. . . .The basic terms of the Agreement, especially the economic terms in paragraphs 2, 3, and 4 are final and binding and is [sic] enforceable in any court having jurisdiction.”
There were post-settlement disputes which the mediator was unable to resolve. Naylor demanded arbitration under the quoted clause; Valicenti denied any obligation to arbitrate the disputes and refused to appear. The mediator, now sitting as an arbitrator, rendered an award. The court, Siragusa, J., here confirms that award, but only after holding an evidentiary hearing as to the meaning of the quoted clause. In determining that the arbitration – or is it mediation – clause in the settlement agreement was ambiguous and, therefore, that parole evidence was necessary, the court quotes Bryan Garner, the legal writing guru: “[The slash] is especially unfit for legal writing because it is inherently ambiguous: its function may be conjunction <secretary/treasurer> or disjunctive <a buy/sell decision>.” Having heard the mediator and the parties, the court describes the circumstances surrounding the drafting of the clause and finds that “the evidence has established the parties’ clear, explicit and unequivocal agreement to arbitrate.”
Moral – Spend the extra time to make sure that the settlement agreement is clear; everyone worked too hard to have a deal blow up over language. And stash the slash.
Quick hits –
Class action waiver
The holding in Woellecke v. Ford Motor Co., 2020 U.S. Dist. LEXIS 209066 (E.D. Mich.) (Nov. 9, 2020) is a run-of-the-mill finding that language providing that “the arbitrator shall have the exclusive authority to resolve any disputes about whether a claim is arbitrable” delegates arbitrability to the arbitrator. What makes the case interesting is something totally irrelevant to the holding – an unusual carve out in the competence-competence provision. The risk in delegating all issues regarding the scope of arbitration, including the enforceability of a class action waiver, to the panel is demonstrated in Oxford Health Plans, LLC v. Sutter, 569 U.S. 564 (2013); there is little relief if the arbitrator finds a way around such a provision. To avoid that risk, Ford removed all discretion regarding classing the dispute from the arbitrator and vested it in the judiciary: “The arbitrator will not have authority or jurisdiction to decide class certification or representative class issues.” This is an imaginative approach to a knotty problem, which places legal constraints on the finder of fact regarding a potentially crucial issue and leaves open a meaningful appeal from any undesired result. Drafters, take note.
Antonio Sisca was a seaman on the M/V Veendam, a cruise ship stuck at sea due to the COVID-19 pandemic. His employment contract expired on April 22, 2020. On April 23, the day after the contract’s expiration, while being transferred in a lifeboat from the Veendam to the Regal Princess for repatriation to Italy, Sisca fell, resulting in serious injuries and paraplegia. He brought a Jones Act claim against his employer, which, in turn, claimed arbitration by virtue of a provision in Sisca’s Seaman’s Employment Agreement. In Sisca v. Hal Maritime, Ltd., 2020 U.S. Dist. LEXIS 209722 (S.D. Fla.) (Nov. 10, 2020), the court rejects Plaintiff’s claim that the expiration of the SEA obviates arbitration. The court holds that Sisca can only recover Jones Act damages because of his service as a seaman, a status which arises solely from the employment agreement. Since the arbitration requirement is contained in that same contract, it is also triggered. Therefore, the court compels arbitration of the claims against Hal. It rejects arbitration of Sisca’s claims against Princess for mishandling his injuries while he was on board the Regal Princess, holding that Princess failed to prove that the law of the British Virgin Islands, the applicable substantive law, provides any basis for compelling arbitration through estoppel. Since Sisca and Princess had no written contract, his claims against it can proceed through litigation.
Enjoy the rest of your week. See you Friday.