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ADR Highlights: April 29, 2021

Home NewsADR Highlights: April 29, 2021

ADR Highlights: April 29, 2021

News

With SCOTUS’s denial of a stay, the coverage of Servotronics may come to an end until next Term, when we get consideration on the merits. Meanwhile, today’s cases include the various flavors of waiver, a Circuit split on the continued vitality of the “manifest disregard” standard for vacatur, a lengthy opinion on rideshare drivers by a judge who may soon be elevated to the Court of Appeals, and some interesting appellate and trial strategy issues. 

Servotronics

On Tuesday, the U.S. Supreme Court denied the application to stay the discovery which the Fourth Circuit ordered in connection with the pending Rolls-Royce/Servotronics arbitration in London. We can all now start reading tea leaves as to the Court’s ultimate decision on the merits of whether 28 U.S.C § 1782(a) applies to private arbitrations.  As there is no opinion, just a three-line order, we are left to ask ourselves whether SCOTUS made its decision based on the absence of a likelihood of success on the merits or one of the other factors which a court weighs in considering a stay.  There is no recorded dissent; Justice Alito did not participate.  The arbitration is set to start in London on May 10, and the tribunal has already denied a request to postpone the matter pending SCOTUS’s decision.  ”Stay” tuned.

Waiver

Case law tells us there are two types of waiver.  Litigation conduct refers to waiver because of a delay in seeking arbitration in the pending case; contractual waiver involves the intentional relinquishment of a known right.  While the border of those two issues is not always clear, Judge Feinerman opines in Lukis v. Whitepages, Inc. 2021 U.S. Dist. LEXIS 78453 (N.D. Ill. April 23, 2021) on different procedures for resolving claims under those two doctrines. In doing so, he clarifies – or limits, depending on your viewpoint – the holdings in Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (1983) and Howsam v. Dean Witter Reynolds, Inc. 537 U.S. 79 (2002) as to the delegation of waiver issues to the arbitrator. Although recognizing that the Seventh Circuit has not ruled on the issue, the court holds that the presumption of the arbitrability of waiver questions expressed in Moses Cone applies only to “the contractual meaning of waiver, not to the litigation conduct meaning.”  To hold otherwise, he opines, would lead to what he calls the “absurd consequence” that, if a party on the second day of trial claimed that the dispute was arbitrable, the court would have to adjourn the proceeding to allow an arbitrator to decide if there had been a waiver of any such right.  Having retained jurisdiction to do so, he addresses the question of whether Whitepages waived the arbitration provision contained on its website. Based on defendant’s alleged failure to review its own records to determine whether Lukis had gone beyond its paywall, thus triggering the arbitration clause, the court holds that Whitepages waived any arbitration rights; he denies the motion to compel arbitration.

Applicability of the FAA to rideshare drivers

Osvatics v. Lyft, Inc., 2021 U.S. Dist. LEXIS 77559 (D.D.C. April 22, 2021) is another in the series of cases addressing whether rideshare drivers are part of a “class of workers engaged in foreign or interstate commerce” and, therefore, exempt from the FAA.  Following what she calls the majority rule, Judge Jackson holds that Osvatics and other Lyft drivers are not so exempt.  Numerous courts have considered the question and split over the question and the court cites opinions on both sides.  What makes Judge Brown’s opinion particularly interesting is her lengthy consideration of whether to take a nationwide view of the activities of Lyft drivers or to focus on drivers in the D.C. area who might more often drive outside the geographically constrained District to Maryland or to Reagan or Dulles airports in Virginia.[1]  She holds that a nationwide standard provides the proper test. First, the court opines, the language of the FAA places “other transportation workers” alongside seamen and railroad workers, none of whom are limited to a single state or geographic area.  Second, she holds, “in enacting the FAA, Congress sought to create a ‘national policy favoring arbitration[.]’” (Citation omitted; emphasis in the opinion). It would be contrary to that purpose, she opines, if Lyft drivers in different areas had varying arbitration rights merely because of geography. Ultimately, Judge Jackson holds that Lyft drivers, like taxicab drivers, are “in the general business of giving people rides, not the particular business of offering interstate transportation to passengers,” quoting Capriole v. Uber Technologies, Inc., 460 F. Supp. 3d 919 (N.D. Cal. 2020). She rejects the recent holdings in the Southern District of New York, which covers New York City, applying the FAA exemption to rideshare drivers, Islam v. Lyft, Inc., 2021 WL 841417 (S.D.N.Y. Mar. 9, 2021) and Haider v. Lyft, Inc., 2021 WL 1226442 (S.D.N.Y. Mar 31, 2021) “[D]rivers’ interstate rides, no matter how numerous, are mere ‘incident’ to their local transportation function.” (Both Islam and Haider are discussed in earlier “ADR Highlights”). Accordingly, the court compels arbitration on an individual basis of plaintiff’s claims that Lyft’s failure to provide paid sick leave violated D.C. law.

Vacating an agreement for “manifest disregard” of the law

Two cases demonstrate the Circuits’ different approaches to “manifest disregard of the law” as a basis for setting aside an arbitrator’s award. In Zhang v. UnitedHealth Group, 2021 U.S. Dist. LEXIS 79433 (D. Minn. April 26, 2021), Judge Davis applies Eighth Circuit precedent to hold that “it is no longer a ground to vacate an arbitration award based on a manifest disregard of the law.”  On the other hand, the Second Circuit in Cesfin Ventures, LLC v. Al Ghaith Holding Co. PJSC, 2021 U.S. LEXIS App. 11871 (2nd Cir. April 22, 2021)(summary order by Chin and Park, Circuit Judges; Bolden, District Judge sitting by designation) reviews an arbitration panel decision under just that standard.  To vacate an award for manifest disregard, the Court holds, the party mounting the challenge must show “both that (1) the arbitrators knew of a governing legal principle yet refused to apply it or ignored it altogether, and (2) the law ignored by the arbitrators was well defined, explicit and clearly applicable to the case.” (citation omitted). The arbitrators need show merely a “barely colorable justification for the outcome reached” to have their award upheld. Finding that the ICC panel in the subject award addressed, but rejected, the applicability of certain UAE statutory law, the Court of Appeals affirms the District Court’s confirmation thereof.  Considering the Circuit split over the existence of manifest disregard vacatur and the different standards applied by even those courts recognizing the doctrine, it would be helpful for SCOTUS to address the question, particularly since its holding in Hall Street Associates, LLC. v. Mattel, Inc. 552 U.S. 576 (2008) underlies the dispute.

Creating appellate jurisdiction

Sperring v. LLR, Inc., 2021 U.S. App. LEXIS 12081 (9th Cir. April 23, 2021) reaffirms the doctrine that there is no end run around the FAA’s prohibition of appeals from orders compelling arbitration.  Here, after the District Court mandated arbitration, the plaintiff voluntarily dismissed the action with prejudice, thus purporting to create a final judgment from which she appealed. Reaffirming its holding in Langere v. Verizon Wireless Services, LLC, 983 F. 2d 1115 (9th Cir. 2020), the court, in a per curiam opinion by Judges Gould, Owens, and VanDyke, dismisses the matter for lack of subject matter jurisdiction. “The voluntary dismissal of claims following an order compelling arbitration does not create appellate jurisdiction,” quoting Langere, at 1124.

Proving the mailing of an arbitration provision

For litigators, Phillips v. Weatherford US, LP, 2021 U.S. Dist. LEXIS 79973 (W.D. Tex. April 27, 2021), Pitman, J., illustrates the type of proof which, in the context of a mass mailing of changes in arbitration procedures, may overcome the presumption of receipt. Phillips brought claims for age discrimination and retaliation based on the termination of his employment with Weatherford. Defendant sought to compel arbitration under a “Dispute Resolution Program” which it applied to all existing employees as a condition of continued employment.  It distributed the agreement to its work force through a mass mailing by a third-party vendor. Phillips claimed he never received the notice.  In support of its motion to dismiss or, alternatively, to stay and compel arbitration, Weatherford produced a declaration from its associate general counsel, both as to the process which the company utilized and to his own receipt of the notice by mail; a spreadsheet which it had provided to the vendor with the addresses for mailing, including that of Phillips; and a declaration from the bulk-mailer that it sent a mailing based on the address list provided in the spreadsheet and that the post office did not return any envelope addressed to Phillips.  Phillips countered with his own statement that he received no notice; a statement from another worker, Drew White, to the effect that he, too, never received notice; and a discrepancy between the 7,328 entries on the spreadsheet of addresses and the accompanying cover email from Weathersford to its vendor stating that there were 7,837 addresses included. While the court holds that a plaintiff’s mere denial that he or she got a mailing would be insufficient to create a triable issue as to the receipt of notice, it rules that “the discrepancy in how many addresses were sent to Ricoh [the bulk mailer], along with the declarations from Phillips and White, is sufficient for Phillips to allege that there was some irregularity in the mailing process and to raise a factual issue as to whether Phillips was provided notice of the DRP.”  The court holds that this factual issue requires an evidentiary hearing. Therefore, it denies the motion to dismiss, presumably without prejudice, as it schedules a hearing on the motion.

Ambiguous awards

While the ultimate holding of the case is limited to the award at issue, Syngenta Crop Protection, LLC v. Insurance Company of North America, Inc., 2021 U.S. Dist. LEXIS 78640 (S.D.N.Y. April 23, 2021)(Cote, J.) reminds us both that a court which compelled arbitration retains jurisdiction to determine any subsequent application related thereto and that “when asked to confirm an ambiguous award, the district court should instead remand to the arbitrations for clarification.” (citation omitted). Finding that the terms upon which Syngenta based its claim of ambiguity are not “susceptible to multiple meanings,” the court holds that the award is unambiguous and confirms it.

Hang in there.  The week is almost over.    

David A. Reif
Reif ADR
Dreif@reifadr.com
Reifadr.com

[1] Judge Brown has been nominated to the U.S. Court of Appeals for the District of Columbia.  The Senate Judiciary Committee held a hearing Wednesday on her nomination.

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About David Reif

After four decades of litigation and dispute resolution over the full range of disputes, Dave retired from active trial practice and is concentrating on the provision of arbitration and mediation services. He brings broad experience in resolving - as litigator, a mediator, and arbitrator - all types of disputes. Learn more about Dave!

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