As I wrote on Friday, I was going to use today’s “Highlights” to discuss Judge Ketanji Brown Jackson’s arbitration jurisprudence. However, CPR has already done a great job, so I will simply refer you to their piece Nominee Ketanji Brown Jackson’s ADR Work | CPR Speaks (cpradr.org) and spend today on recent developments.
Truthfulness and candor
Usually Highlights describes new literature at the end of the blog, but there is a current piece that deserves to be right up front. Neil Posner has written an important article in the ABA TIPS Section’s legal journal entitled “Candor, Truthfulness and Conflicts of Interest: Ethics in Negotiations,” 57 Tort & Insurance L.J. 121 (Winter, 2022). Among other issues, Attorney Posner analyzes the difference between Model Rule 3.3, candor toward a tribunal, and Rule 4.1, the requirement of truthfulness, in the context of arbitration and mediation. He directly faces the controversy raised by ABA Formal Ethics Opinion 06-439 (2006), which opines that Rule 3.3 has only a limited application to mediation. The article is well researched and adds valuable insight to this on-going ethical conversation. Regardless of ethical debates, though, as a practicing neutral I can tell you that a lack of candor when the mediator is meeting with the parties individually makes his or her job very difficult. If the mediator does not know where you want to end up, how can he or she help you get there?
Timing of Arbitration and Conditional Certification, Unconscionability, Enforcement by a Non-signatory
In Bell v. Arise Virtual Solutions, Inc., 2022 U.S. Dist. LEXIS 32711 (W.D. Mo. February 24, 2022), Judge Ketchmark addresses virtually every issue involved in enforcement of an arbitration clause by a non-signatory and in questions of substantive unconscionability. As a fan of writings at the bottom of the page, I particularly savored the decision, as the court’s footnotes are almost a second opinion and may outrun the rest of the text in length.
The case arises out of a conditional class action alleging that defendant misclassified “Customer Support Professionals,” who work remotely and provide telephone customer support, as independent contractors. Arise argued that the members of the class were bound by arbitration agreements and sought to postpone conditional certification of the class until after the resolution of its motion to compel arbitration. Recognizing that the Eighth Circuit, in which the District Court sits, had not resolved the timing issue, the court looks elsewhere for guidance, adopts the Fifth Circuit’s reasoning in Reyna v. International Bank of Commerce, 839 F. 3d 373 (5th Cir. 2016), and resolves the arbitration issue first. In the course of her reasoning, Judge Ketchmark cites to the case law which falls on the other side of her conclusion. She also distinguishes several decisions as addressing a different question – should notice of conditional certification be given to employees who have signed arbitration agreements and, therefore, might not be included in the litigating class.
Having decided to resolve arbitrability, the remainder of the opinion follows well-worn tracks. It looks to applicable state law to determine when a non-signatory may enforce an arbitration agreement. It holds that the agreement is neither procedurally nor substantively unconscionable. The interesting portion of this latter analysis is the court’s consideration of whether “cost-splitting” under the AAA rules renders the arbitration agreement unconscionable by making the process prohibitively expensive, citing to Green Tree Financial Corp-Alabama v. Randolph, 531 U.S. 79 (2000). The plaintiff, by presenting affidavits from counsel as to the cost of other arbitrations, focused “less on evidence of her individual financial ability to costs related to arbitration and more on specific evidence as to arbitrators’ fees and costs that she is likely to incur.” Adopting the same vantage point, the court discusses whether the AAA’s Commercial Rules or Employment Rules, which have substantially different fee structures, would apply to the matter. Judge Ketchmark concludes that the evidence before her does not demonstrate an undue cost burden.
In the course of the opinion, the court also discusses, generally in dictum, the delegation of threshold questions, choice of laws, and the unconscionability of lengthy agreements.
Judge Ketchmark’s work reads like a law review article. She assembles authorities from around the country that support her conclusion, but also includes numerous instances of “but see” directing the reader to contrary jurisprudence. In the process she cites approximately eighty-five decisions. Forget Lexis or Westlaw; this case is the place to start research on these issues.
Waiver of Immunity
Leonard A. Sacks & Associates, P.C. v. International Monetary Fund, 2022 U.S. App. LEXIS 5082 (D.C. Cir. February 25, 2022)(Judge Pillard for herself and Judges Henderson and Silberman), addresses the interface between immunity from suit and arbitration. Plaintiff sought to vacate or modify an arbitration award arising out of a fee dispute. The IMF asserted that its litigation immunity under the Breton Woods Agreement extended to actions to confirm or vacate an award. While recognizing that post-award vacatur and confirmation are inherent parts of the arbitration process, citing to C & L Enterprises, Inc. v. Citizen Band Potawatomi Indian Tribue of Oklahoma, 532 U.S. 411 (2001), the court holds that the IMF specifically reserved its immunity in the parties’ arbitration clause. Accordingly, Sacks had reason to believe the normal safeguards ordinarily associated with binding arbitration had been contracted away.” The Court affirms the District Court’s dismissal of the action
Confirmation of a Stipulated FLSA arbitration
As a general principle, a court must pass upon the fairness of settlements of class actions alleging violations of the Fair Labor Standards Act. Moore v. Universal Protection Service, LP., 2022 U.S. Dist. LEXIS 32530 (C.D. Cal. January 21, 2022)(Bernal, J.) applies that standard to a stipulated arbitration award. Pursuant to the parties’ agreement, the arbitrator entered an award in favor of the plaintiffs in the amount of $4.35 million. However, the court denied Plaintiffs’ motion to confirm since they had not submitted “the settlement agreement or any evidence that would allow the Court to review the arbitration award.” Judge Bernal holds that the arbitrator’s finding that the agreement was fair and reasonable “is insufficient.” “This Court may not ‘rubber stamp’ the Arbitration Order.” The Court orders the plaintiffs to file “the final arbitration award and any other documents that would allow the Court to review the settlement agreement under the FLSA.” Such a filing presumably makes the terms of the settlement public; thus, this case plays into the on-going discussion in the arbitration world as to the degree to which there really is confidentiality or privacy built into the process.
Limits on Broad Arbitration Clause
Between 2010 and 2011, Kamisha Stanton signed three Customer Agreements with Cash Advance, each of which included an arbitration agreement providing that “if you have any dispute with us or if we have any dispute with you then both you and we must seek resolution of the dispute in either small claims court or in arbitration.” (Emphasis added). In Stanton v. Cash Advance Centers, Inc., 2022 U.S. Dist. LEXIS 32812 (W.D. Mo. February 23, 2022), she alleges that Defendant began calling her in December 2020, looking for “Sergio Rodriguez,” whom she claims she did not know. Despite her requests that Defendant stop the calls, they continued. She brought an action for damages under the Telephone and Consumer Protection Act (“TCPA”). The court, Bough, J., denies Defendant’s motion to compel arbitration, reasoning that “while broad arbitration provisions are construed liberally, the dispute must still ‘touch matters covered by the arbitration provision.’” Here, the relevant customer agreements only established short-term loan agreements, and Ms. Stanton had satisfied those loans or Defendant sold them; the phone calls had nothing to do with those transactions. Therefore, the court holds, “the Arbitration Provisions are not susceptible to an interpretation that covers this lawsuit.” While the court does not cite to contrary authority, there are cases which would read “any dispute” more broadly than does Judge Bough. So, before relying on this case, counsel should research the law in the federal district in which they are litigating.
The Supreme Court this morning granted the Solicitor General’s motion for permission to argue in ZF Automotive and AlixPartners, the cases regarding discovery under Section 1782 for use in foreign, private arbitrations. In its amicus brief, the Government has taken the position that the term “foreign tribunal” should not include such proceedings.
In light of the tragedies in Ukraine, arbitration law seems less important than it did only recently. However, “Highlights” will be back later this week. Seek peace.
David A. Reif, FCIArb
 If the director John Waters was right that “without obsession, life is nothing,” counting citations must be the ultimate in a “life well-lived.”