I hope those of you here in the U.S. had a good Fourth of July weekend. As one would expect, opinions are a little thin today; I anticipate a tsunami later this week, as judges and law clerks catch up. In the meantime, since space allows, this edition has links to a couple of good pieces of literature.
The reason for a “reasoned” award
One of the procedural decisions in any arbitration is the form of the award. Should it be a “standard” award, which merely identifies the prevailing party; sets forth the damages, if any, which the arbitrator awards; and describes any payment terms? Or should it be a “reasoned” award, which like a court’s opinion, describes the arbitrator’s reasoning process? Because of the amount of work involved, the arbitrator’s fee for a reasoned award will exceed, often by a significant amount, that which one or more of the parties incurs if only a standard award is required. In light of the deference which the courts give the arbitrator’s conclusions, it is a legitimate topic of discussion in many cases as to whether that extra cost is justified. In re: Ngo, 2021 Bankr. LEXIS 1773 (E.D. Va. July 2, 2021), demonstrates the advantages of a reasoned award.
After CACI terminated Ms. Ngo’s employment, it sued her for allegedly violating the company’s interest in trade secrets. Upon Ms. Ngo’s motion, the case went to arbitration. In a ninety-six-page award, the arbitrator found for CACI and awarded it attorneys’ fees of approximately $685,000, along with an injunction prohibiting Ms. Ngo from disclosing, using, or destroying CACI’s trade secrets and requiring that she return the same. The District Court confirmed the award in June 2020. About six months later, Ms. Ngo filed for bankruptcy. This decision addresses an adversary proceeding to determine whether the debt to CACI is dischargeable.
Section 523(a)(6) of the Bankruptcy Code excepts from discharge debts that arise from “willful and malicious injury. . . to another entity or to the property of another entity.” The issue which Bankruptcy Judge Kenney addresses is whether the arbitral award has preclusive effect on the questions of willfulness and maliciousness. The Court reviews the award in depth, but, in summary, notes that the arbitrator stated, “I find that [Ms. Ngo’s conduct] demonstrates ‘willfulness’. . . ,” “strongly bespeaks an intention to cause injury or harm to CACI,” and “shows an intent to cause injury and harm.” The arbitrator, with a degree of care that is a good lesson to the rest of us, even defined the terms “willfully” and “maliciously” as he or she used them in the award. Based on the arbitrator’s detailed findings, the Court finds that the award is preclusive as to the elements of Section 523(a)(6) and holds that the debt is not dischargeable.
Two lessons from the opinion. First, since a party never knows the use to which it may want to apply the award down-the-road, except in the most rudimentary cases they should think long and hard before foregoing a reasoned award. Second, arbitrators need to treat a reasoned award seriously, walking the parties slowly through every step of the deliberative process; remember, the award is generally the only way that a court knows what happened in the proceeding and what the arbitrator was thinking.
Mediation privilege and discovery
Those who appear in court sometimes end up in the caption. The Trial Lawyers College v. Gerry Spence’s Trial Lawyers College at Thunderhead Ranch, 2021 U.S. Dist. LEXIS 124124 (D. Wy. June 30, 2021), resolves a discovery dispute related to the production of certain documents in this Lanham Act litigation. The court holds that the individual defendants waived any attorney-client privilege attached to the subject documents by disclosing them to a third-party. However, Magistrate Judge Carman also finds that the materials may be protected under a “mediation waiver.” The Court opines that “it is imperative that any communications or documents directly concerning the mediation is [sic] not disclosed to the Plaintiff” because “[t]he Court, and the parties themselves, have spent many hours in an effort to mediate this matter.” Accordingly, he orders the defendants to provide to the court for in-camera review any documents or communication they “believe to be related to the mediation in this matter.” It is unclear from the opinion what standard Magistrate Judge Carman will apply in determining whether a document is discoverable.
The case is cite-worthy in that the Magistrate Judge reminds us that, under Fed. R. Evidence 501, issues of privilege in a federal question case are determined as a matter of federal common law. Therefore, he opines that the Wyoming statute concerning mediation privilege is irrelevant. Also, the case raises an interesting, nuanced question. Is there really a “mediation privilege” or is the issue of whether a document used in mediation should be produced simply one of the scope of discovery under Fed. R. Civ. P. 26(b)(1)? The answer may be relevant where one party claims that the mediation “privilege” has been waived or where the party objecting to production has no standing to assert a “privilege,” perhaps because he or she was not a party to the mediation. Ah, it can be fun to count the dancing angels on that pinhead.
Arbitration of Title VII case
In an unsurprising result under Ninth Circuit law, Judge Lanza holds that Title VII claims must be arbitrated under an agreement which covers “any disputes relating to my employment, and any termination of my employment. . . .” where “Dispute” specifically included “allegations of discrimination based on race. . .national origin. . . or other legally protected characteristic; . . .legally prohibited retaliation. . . [and]infliction of emotional distress.” (ellipses and brackets in opinion), Graham v. United Services Automobile Association, 2021 U.S. Dist. LEXIS 124668 (D. Ariz. July 2, 2021). The value of the opinion comes not from its result, but rather from its reminder that Zoller v. GCA Advisors, LLC, 993 F. 3d 1198 (9th Cir. 2021) and EEOC v. Luce, Forward, Hamilton & Scripps, 345 F. 3d 742 (9th Cir. 2003)(en banc) overrule the Circuit’s previous decision in Duffield v. Robertson Stephens & Co., 144 F. 3d 1182 (9th Cir. 1998), which held Title VII cases non-arbitrable.
In Caremark LLC v. Chickasaw Nation, 2021 U.S. Dist. LEXIS 124664 (D. Ariz. July 2, 2021), Plaintiff, a pharmacy benefit manager, sought to compel arbitration of its dispute with the Nation regarding the Chickasaws’ claim that Caremark failed to pay claims for prescription drugs. The Nation had previously sued Caremark in Oklahoma on those same claims; they moved here to dismiss the Arizona case, in favor of the Oklahoma matter, under the first-to-file doctrine. The court, Logan, J., first rejects the argument that resolution of this procedural issue should be left to the arbitrator. “The first-to-file rule, although technically procedural in nature, is not a condition precedent to arbitration, such as time limits, notice, laches and estopped. Accordingly, this Court does not find that the arbitrator must decide the first-to-file issue.” He cites to District Court cases in California, Mississippi, and Oregon for support. The court, then, declines to defer to the Oklahoma court, since to do so would not move the case forward. The parties’ agreement venued the arbitration in Scottsdale, Arizona. Since, under Section 4 of the FAA, a federal court may only compel arbitration within its District, the Oklahoma court would be powerless to enforce the agreement. Turning to the merits, the court finds that the parties delegated questions of arbitrability to the arbitral tribunal and grants the application to compel.
Since the case law pickings are scarce today, let me refer you to a couple of good pieces of literature.
Alfred Fileu, a New York neutral, prepares a monthly arbitration case law compendium, in which he groups matters by topic. I found it referenced in a posting by Jeff Zaino, of the AAA, on LinkedIn. The best source I can find for reaching this useful listing is through the newsletter of the Dispute Resolution Section of the New York State Bar, Resolution Roundtable (nysbar.com).
Ksenia Matthews, a third-year law student at Fordham University School of Law and an Article and Notes editor of the Fordham Law Review, has written a citation-rich (141 footnotes) article for the Securities Arbitration Alert entitled “Distinguishing Discovery Procedures in Commercial Arbitration: A Comparative Analysis of AAA and FINRA Rules.” It is available at the Alert’s website, Distinguishing Discovery Procedures in Commercial Arbitration: A Comparative Analysis of AAA and FINRA Rules – SAA Blog (secarbalert.com). The Alert itself is always useful.
I hope the desk and the email inbox were not too laden on your return – and that you may even have gotten a chance to take more than just one day off. See you later in the week.
David A. Reif