Sorry to have been radio silent over the last week (hopefully, you noticed). I took a great Introduction to International Arbitration course provided by the Chartered Institute of Arbitrators North American Branch last week; the Institute offers the course periodically and I strongly recommend it to anyone with even a passing interest in the subject. Earlier this week, I was tied up in an interesting arbitration, but, hopefully, “Highlights” is back on track.
Waiver of arbitration appeals
One of the purposes of arbitration is to resolve the parties’ matter more quickly than traditional litigation allows. A lengthy series of appeals confirming or vacating the award thwarts that goal. Beckley Oncology Associates, Inc. v. Abumasmah, 2021 U.S. App. LEXIS 10152 (4th Cir. April 8, 2021) points the way toward removing those delays. The Court of Appeals, Judge Diaz writing for himself and Gregory, C.J. and King, J., holds that an arbitration agreement may provide that the parties waive some judicial review. Since arbitration awards are not self-enforcing, the parties must be able seek District Court confirmation or vacatur to make the process effective. However, “a provision prohibiting appellate, but not district court, review is ‘a compromise whereby the litigants trade the risk of protracted appellate review for a one-shot opportunity before the district court.’ Such provisions are consistent with ‘the fundamental policy behind the FAA . . . to reduce litigation costs by providing a more efficient forum.’” (internal citations omitted). So, drafters, considering the advantages and disadvantages of waiving appellate review when you take up your next assignment.
Invocation of AAA rules as a delegation of gateway issues
Two cases, Passero v. Ford, 2021 U.S. Dist. LEXIS 67715 (S.D. Fla. April 7, 2021) and KPA Promotion & Awards, Inc. v. JPMorgan Chase & Co., 2021 U.S. Dist. LEXIS 68366 (S.D.N.Y. April 8, 2021) reiterate the now-familiar rubric that, when an arbitration clause invokes the American Arbitration Association’s Commercial Rules and their competence-competence provision, the parties have delegated many gateway issues to arbitral resolution, rather than reserving them for the court. This rule is so engrained that it normally would not justify comment here, except that SCOTUS has been asked to weigh in on the issue. Shivkov v. Artex Risk Solutions, Inc, Dkt. No.20-1313, is a pending petition for cert. raising the issue of whether specifying arbitration before the AAA, without specifically mentioning its rules, constitutes a clear mandate for the arbitrator to decide gateway questions. For a copy of the petition, go to the always helpful SCOTUS blog at Scotusblog.com.
Faith in arbitration
While the procedural facts are a little unusual, Casement v. Soliant Health, Inc., 2021 U.S. Dist. LEXIS 71420 (E.D. Cal. April 13, 2021) is a granting of the parties’ request to remand a matter to state court for approval of a settlement. However, in dictum, Judge Drozd reminds us of the importance of assuring that arbitrations are efficient. “The court takes this opportunity to express its concern with the way arbitration is sometimes used. . . While the general merits of arbitration agreements can be debated, in light of what transpired in this case, it is evident that arbitration multiplied the proceedings for no good reason and at the expense of both the parties’ and the court’s resources. At a minimum, this type of ‘conduct undermines the public’s confidence in getting a fair shake when arbitration is compelled.’” (citation omitted).
The Servotronics mess continues
The last issue of “ADR Highlights” discussed Servotronics, Inc. v. Rolls-Royce PLC, 2021 U.S. Dist. LEXIS 63988 (D. Minn. April 1, 2021), in which the court stayed consideration of a Section 1782 subpoena application pending the U.S. Supreme Court’s resolution of the Circuit split over whether that procedure applies to foreign private arbitrations, see Servotronics, Inc. v. Rolls-Royce PLC, Dkt. No. 20-794 (U.S. Sup. Ct). A second court has taken the same approach, In re: Servotronics, 2021 U.S. Dist. LEXIS 72128 (D.S.C. April 14, 2021) (Norton, J.) citing to the Minnesota decision. Since, as of the writing of those opinions, the arbitral tribunal is holding to a May 10 hearing date, it will be interesting to see whether the subpoena issue becomes moot and, if so, whether SCOTUS will hold that certiorari was improvidently granted (a/k/a a DIG). If so, the morass created by the split among the Circuits on this important issue will continue.
It seems that every week there is another case in which the court is faced with an “arbitration award” issued by a questionable “tribunal” without any true underlying agreement to arbitrate. John v. Central Loan Administration and Reporting (Cenlar), 2021 U.S. Dist. LEXIS 72411 (E.D.N.Y. April 13, 2021) gives the best description to date of the procedure under which these awards arise and “the indisputably meritless legal theory that an individual can fabricate an arbitration award and then enforce it in federal district court.” It is worth reading the opinion in case you or your client receives such an alleged “proof of claim.” Judge Kuntz also provides an extensive list of cases denying enforcement of “sham arbitration award[s].”
A primer on arbitration provisions; state arbitration laws; effective vindication
Every once in a while, a case comes along that captures several arbitration issues and efficiently describes their resolution – the kind of case that is worth reading and filing away as a reminder how to think through such questions. Butler v. ATS, Inc. 2021 U.S. Dist. LEXIS 70707 (D. Minn. April 13, 2021) is such a case. The case arises from a motion to compel arbitration of Fair Labor Standards Act, RICO and other statutory claims by an interstate truck driver. The parties agreed that the interstate transportation worker exemption made the Federal Arbitration Act inapplicable. Judge Schiltz, however, compels arbitration under the Minnesota arbitration statute, rejecting plaintiff’s claim that the FAA effectively prohibits arbitration of exempted claims under any law. He, then, turns to Butler’s claim, based on Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) and American Express Co. v. Italian Colors Restaurant, 570 U.S. 228 (2013), that the provision is unenforceable since it stands in the way of his “effective vindication” of his statutory rights. The court rejects plaintiff’s claims that difficulties in taking out of state discovery and the cost of arbitration are insurmountable impediments. In rejecting the discovery claims, the court opines “although discovery available to Butler in the arbitral forum ‘may not be as extensive as in federal court, by agreeing to arbitrate, a party “trades the procedures and opportunity for review of the courtroom for the simplicity, informality, and expedition of arbitration.”’” (citations omitted). Cost claims are set aside based both on proof issues and defendants’ interesting strategic agreement to pay “all fees, costs, and other expenses of arbitration.” Having found jurisdiction to consider arbitrability, the court then turns to an in-depth discussion of the arbitrability of claims of fraud in the inducement.
This sixty-four-page opinion is a must read. It is elegantly written; informative on a number of arbitration issues; and, on the merits, a detailed analysis of one state’s law regarding unconscionability. When you read it, do not ignore the thirty-eight footnotes – they are an opinion in and of themselves. (Regular readers of this blog will know that I have a footnote fetish).
On-line contract formation
Cases about clickwrap and browsewrap are now a regular part of arbitration decision making, as most consumer contracts seem to be consummated online. I only deal with them periodically to provide a reminder of basic principles. However, Britt v. ContextLogic, Inc., 2021 U.S. Dist. LEXIS 70414 (N.D. Cal. April 9, 2021) is worth reading both by those briefing whether the reference to contract terms and conditions is sufficiently conspicuous to demonstrate that the parties have formed a contract and by judges writing opinions on the issue. Judge Alsup takes full advantage of the graphic tools available in current writing programs (like Word), using screenshots to show the user interface in this case and various precedents. To a lesser extent, Judge Singhal does the same in Calderon v. Sixt Rent a Car, LLC, 2021 U.S. Dist. LEXIS 70589 (S.D. Fla. April 9, 2021). In both cases, the court compels arbitration.
Arbitration of statutory claims
Zoller v. GCA Advisors, Inc. 2021 U.S. App. LEXIS 10616 (9th Cir. April 14, 2021) addresses the arbitrability of claims under the Equal Pay Act, the Civil Rights Act, and various California statutes. The court, in an opinion by Judge Wallace, writing for himself and Judges Smith and Restani (sitting by designation), holds that the District Court erred in finding that plaintiff did not knowingly waive her right to pursue statutory protections in a court proceeding. The panel’s analysis begins with the Supreme Court’s holding in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), which provides that contracting parties may subject a statutory claim to arbitration “unless the party can prove a congressional intent to preclude a waiver of judicial remedies for the statutory rights at issue.” The court, then, walks through the Ninth Circuit’s holdings on the issue. The panel finds, based upon the arbitration agreement’s inclusion of “clear language encompassing employment disputes and evidence that Zoller knowingly waived her right to a judicial forum to resolve her statutory claims,” that the District Court erred in failing to compel arbitration and remands with “the direction that all claims be sent to arbitration and the case dismissed without prejudice.” Beyond the holding of the case, the opinion is worth reading for the court’s questioning of whether legislative history shows that Congress intended to bar arbitration of claims under the Civil Rights Act of 1991, although it leaves resolution of that question for another day.
Keplinger v. Securitas Security Services USA, Inc, 2021 U.S. Dist. LEXIS 70587 (W.D. Mo. April 12, 2021) also holds that statutory claims – in this case those arising under the Uniformed Services Employment and Reemployment Rights Act, 38 U.S.C. § 4301, et seq., – are subject to arbitration.
Enforcing an agreement reached in mediation
Mediations often wrap up late at night after a long day of negotiation and the parties do not think through or negotiate every nuance of their agreement. The Commonwealth School, Inc. v. Commonwealth Academy Holdings, LLC. 2021 U.S. App. LEXIS 10654 (1st Cir. April 14, 2021) addresses the question of when the parties have gone far enough to create an enforceable understanding. The case arose from a dispute regarding the similar names two schools. In August 2016, the parties “seemingly achieved a settlement through a court-attached mediation,” and, in October of that year, they acknowledged to the District Court that “they had agreed to the material terms of a settlement.” At that time, the District Court entered an stipulated order compelling the School to pay the Academy $25,000 and requiring the Defendant to change its name to “Springfield Commonwealth Academy.” In 2019, a dispute arose over the lettering on the Defendant’s basketball jerseys. The District Court dismissed the action, finding that the disagreement demonstrated that the parties had never reached a true settlement agreement. Since the underlying trade name dispute was based on the Lanham Act, the Court of Appeals, with Judge Selya writing for himself and Judges Kayatta and Barron, applies federal common law. Holding that the dispute over the detail of basketball jerseys “cannot be said to undermine the existence of the settlement agreement,” the court remands to the district court with instructions to enforce the settlement. “The failure to imagine every possible permutation related to performance does not necessarily negate the formation of a valid settlement agreement.” (Emphasis added). So, for those mediating, while working out as many details as possible is desirable, a broader brush may be all that is needed.
Enjoy your weekend.
David A. Reif