Again, the courts have been fairly quiet. However, there is good literature to highlight, a look at the potential future of compulsory arbitration of employment disputes, and a question related to ad hoc arbitrations.
Mandatory Arbitration of Sexual Assault and Harassment Claims
President Biden signed the “Arbitration of Disputes Involving Sexual Assault and Sexual Harassment Act,” which overrides mandatory arbitration of employees’ sexual assault or sexual harassment claims. The February 22, 2022, issue of “ADR Highlights” has some thoughts on the issue. You can find it in the “Blog” section of Reifadr.com.
In his remarks at the signing ceremony, the President stated that he will support legislation prohibiting both mandatory arbitration of other employment claims and the use of agreements making such proceedings confidential. The comments can be seen on YouTube Biden Signs Law Ending Forced Arbitration of Sexual Misconduct Cases | NBC News – YouTube
Rescinding of Arbitration Clauses
In a sidebar to this legislative issue, Airbnb has changed its policy to provide that sexual assault claims are no longer subject to mandatory arbitration. As an instance of its new approach, the company, in Esposito v. Airbnb Action, LLC., 2022 U.S. Dist. LEXIS 33724 (W.D. Ark. February 25, 2022)(Brooks, J.), agreed to the amendment of the complaint to include allegations of sexual assault and to the vacating of the court’s prior order compelling arbitration.
In AT&T Mobility, LLC v. Concepcion, 563 U.S. 333 (2011), the U.S. Supreme Court validated contract provisions prohibiting class arbitration. In response, the plaintiffs’ bar developed the practice of mass arbitration – the often-simultaneous filing of hundreds or thousands of individual arbitrations raising the same issue against the same respondent. Dave Rochelson has a great article in the Fall issue of the ABA’s Antitrust Section publication discussing the phenomenon, “Is This the End of Mandatory Arbitration?” 36 Antitrust ABA 63 (Fall, 2021). His heavily footnoted piece discusses the impact that filing fees have on such cases and the responding changes that arbitral institutions have made in their fee schedules. He also analyzes the “Shifting Cost-Benefit Calculus” for both plaintiffs and defendants. It is an interesting and informative read. I do not know whether the publication is available through the ABA website if you are not a member of the Antitrust Section, but you can find it on Lexis Advance if you subscribe to that research tool.
Compelling Arbitration outside the Federal District; Choice of Laws; Agreement to Arbitrate
Gold Lion Steel, LLC v. Global Merchant Cash, Inc., 2022 U.S. Dist. LEXIS 35076 (D.N.J. February 28, 2022), has a short holding surrounded by important dictum. The case centers on a claim that Global violated New Jersey usury laws in two “merchant cash advance” loans arising out of Gold Lion’s sale of receivables. The agreements contained an arbitration clause, and Global moved to compel arbitration. Section 4 of the FAA holds that, when a District Court compels arbitration, the arbitration “shall be within the district in which the petition for an order directing such arbitration is filed.” Since the arbitration clause requires that the proceeding take place in New York, the court holds that, even though the arbitration agreement is enforceable, it must deny the defendants’ motion – a result that the court characterizes as “somewhat paradoxical,” quoting Econo-Car International, Inc. v. Antilles Car Rentals, Inc., 499 F. 2d 1391 (3rd Cir. 1974)
This holding takes three paragraphs. In the balance of the decision, Judge Hayden discusses the enforceability of the arbitration provision, in what is clearly dictum designed to convey her views to whatever New York District Court may later consider the case. She first opines that a valid arbitration agreement need not specifically “describ[e] the arbitration process and how it differs from litigation.” Highlighting certain portions of the agreement, the court rules that contract language providing that disputes will be “exclusively and finally” settled by arbitration and that the parties are “waiving their right to a jury trial” is adequate to “demonstrate a clear and unequivocal agreement to arbitration at any party’s request. . . .” The court also conducts a choice-of-law analysis to determine whether to apply New York law, which the parties’ agreement designated, or the law of the forum state, New Jersey. Addressing Plaintiff’s claim that the application of New York law would violate New Jersey’s policy against usury, the court finds that both New York and New Jersey “have a strong public policy against usury.” Therefore, Judge Hayden opines that she would honor the parties’ agreement and apply New York law. The opinion provides a good collection of cases dealing with usury and conflicts of laws.
Application of an Institution’s Rules without the Institution’s Administration
In Beadcrete USA, Inc. v. Beadcrete Pty Ltd., 2022 U.S. Dist. LEXIS 34697 (D. Ariz. February 25, 2022), the court, Tuchi, J., addresses a number of familiar issues – litigation waiver, arbitration involving non-signatories, and attorneys’ fees. The more generally relevant holding relates to the parties’ designation of the AAA Commercial Rules as governing the proceeding, while not invoking AAA administration. The relevant agreement provided that “any dispute regarding this Agreement will be heard by experienced arbitrators in Phoenix, Arizona USA. Arbitration shall be conducted according to the rules of the American Arbitration Association by a panel of three arbitrators. . . .” PTY served a demand for arbitration and designation of arbitrator on BUSA, which, in response, commenced this action seeking a declaration that the demand was invalid, as it was not made through the AAA. Plaintiff cited AAA Rule 2, which provides that “when parties agree to arbitrate under these rules, or when they provide for arbitration by the AAA and arbitration is initiated under these rules, they thereby authorize the AAA to administer the arbitration. . . . Arbitrations under these rules shall only be administered by the AAA or by an individual or organization authorized by the AAA to do so.” Applying authority from outside the District and invoking AAA Rule 1, which provides that “[t]he parties, by written agreement, may vary the procedures set forth in these rules,” the court holds that invocation of the Commercial Rules only “authorize[s] AAA administration. . . But, while authorized, AAA administration is not required for an AAA-Rule-based arbitration.” (Emphasis in original). Therefore, parties may conduct an ad hoc proceeding and simply use an institution’s rules as the framework thereof. The wisdom of ad hoc arbitrations, regardless of the rules applied, is one which practitioners regularly debate. There are certainly savings in filing fees, which can be significant in a large case. However, the parties lose the administrative services of an institution, which include far easier docketing and scheduling and, increasingly, the electronic filing of exhibits for remote access during hearings and other proceedings. This latter facility, in and of itself, can save thousands of dollars in copying costs and reduce the confusion and inefficiency which invariably arise as parties and the panel juggle volumes of paper exhibits.
For about fifteen months, Highlights came out three times a week. With some additional projects and my “day job” as an active arbitrator and mediator, I have been writing less often recently. This more episodic routine will continue for a while. However, whenever anything important happens in the field, “ADR Highlights” will remain a source for the latest ADR news – and I hope that you will continue to stay tuned.
David A. Reif, FCIArb