Sorry about the radio silence. I had a long arbitration followed by vacation. But, the “saw is sharpened,” and Highlights is back online. While we were gone, SCOTUS had a field day, issuing four major opinions. Those have been well-covered by Scotusblog.com, George Friedman (Twitter @GFriedmanadr), and Alternatives to the High Cost of Litigation (blog.cpradr.org), among others, so let’s look at what has been happening elsewhere in the last couple of days.
Time limits on filing for arbitration
Lodi v. IBM, 2022 U.S Dist. LEXIS (S.D.N.Y July 11, 2022)(Koeltl, J.), is a reminder to always double-check the arbitration agreement for any time limits on commencing a proceeding. At the time that IBM terminated her employment, Plaintiff signed a severance agreement (the “Agreement”), which provided that, if she later sought any relief under the Age Discrimination in Employment Act (“ADEA”), she could only do so in an individual arbitration. The Agreement set a time limit on filing for arbitration. “[Any such demand must be filed before] the expiration of the statute of limitations (deadline for filing) that the law prescribes for the claim that you are making or, if the claim is one which must first be brought before a government agency, no later than the deadline for filing such a claim. If the demand for arbitration is not timely submitted, the claim shall be deemed waived.” (Emphasis added). IBM terminated Lodi on July 31, 2017, but she did not file a claim with the EEOC until October 11, 2018, fifteen months after her termination. The EEOC consolidated Lodi’s claim with those of 57 other employees who raised the same issue against IBM. On January 17, 2019, Plaintiff filed for arbitration.
The arbitrator dismissed the claim as time-barred, since it was not filed within the normal limit for asserting an ADEA claim before the EEOC – 300 days after the termination of the employment. In doing so, he or she interpreted the language of the Agreement to preclude Lodi’s claim that the deadline for the administrative filing was extended under the “piggybacking rule,” which allows an extension of the EEOC’s filing deadline where, as here, other claims were already pending. The subtleties of that rule are employment law issues beyond scope of Highlights, and anyone practicing employment law should read the opinion or its companion Chandler v. IBM, 2022 U.S. Dist. LEXIS 118883 (S.D.N.Y July 6, 2022), for more details. For our purposes, however, the case is a reminder that the applicable time limits for asserting a statutory claim in litigation may be shorter in arbitration. “Provisions in an arbitration agreement are enforceable ‘so long as the prospective litigant effectively may vindicate its statutory cause of action in the arbitral forum,’” quoting Chandler and American Express Co. v. Italian Colors Restaurant, 570 U.S. 228, 235 (2013).” Finding that the plaintiff had a “full and fair opportunity to file her Arbitration Demand within the applicable limitations period and simply failed to do so,” the court grants IBM’s motion to dismiss, effectively confirming the arbitration award.
John Van Buren, a mid-19th Century New York politician, recommended that people “vote early and vote often.” Lodi is a reminder that the same rule applies to arbitration. If there is any potential argument that a delay in filing a demand might result in the case being time-barred, file right away. Overturning an arbitrator’s decision dismissing the claim as untimely is an almost impossible feat.
Enforcement of Arbitration by a Non-Signatory
In Estrada v. Moore Law Group, APC, 2022 U.S. Dist. LEXIS 122332 (C.D. Cal. July 11, 2022)(Wright, J.), Plaintiff brought an action under the Fair Debt Collections Practices Act against the law firm which represented her creditor, Citibank, in an action for unpaid credit card charges. Defendant sought to compel arbitration under Estrada’s agreement with the credit card company, which required arbitration of “any claim, dispute or controversy between you and us arising out of or related to your account. . . .” Applying South Dakota law – the applicable law under the arbitration agreement – Judge Wright holds that a non-signatory may compel arbitration only if the claims asserted against it arise out of the agreement containing the arbitration clause or if the claims against the non-signatory assert “substantially interdependent and concerted misconduct” by the signatory and one or more signatories to the contract. The claims here, the court holds, meet neither of those tests. While the claims would not have arisen “but for” the existence of the credit relationship, they center around Moore’s alleged violation of certain statutory provisions. “Estrada does not rely on the [credit card] Agreement in making her claims and, therefore, her claims against TMLG [the law firm] do not ‘arise out of’ the Agreement. . . . Estrada does not even reference the Agreement in her allegations against TMLG.”
The opinion raises two issues of general interest. First, it is a reminder that state contract law, not federal law, determines whether a nonsignatory may compel arbitration. Second, since many jurisdictions apply the same test as South Dakota in resolving the right of a non-signatory to compel arbitration, it is a good resource for plaintiffs seeking to keep their dispute with a stranger to the arbitration agreement away from an arbitral tribunal.
Arbitration v. Expert Decision; Magistrate Judge Authority
Agreements under which disputes might arise related to valuation or other accounting questions frequently provide that a CPA will issue a binding resolution on any such issue. Bus Air, LLC v. Woods, 2022 U.S. Dist. LEXIS 122382 (D. Del. July 11, 2022)(Andrews, J.), discusses the status of such an appointee.
The dispute arises out of Plaintiff’s purchase of Defendant’s bus-related air conditioning business. The agreement contained an Earn-out Payment of up to $2,000,000. Any disagreement as to that earn-out amount “shall be resolved by the Independent Accounting Firm [“IAF”].” The parties agreed that they “shall be bound” by the IAF’s determination of the disputed issue.
Bus Air filed this breach of contract action. After Defendants filed counterclaims, three of which related to the Earnout Amount, Bus Air moved to compel arbitration of those issues. The Court overrules objections to the decision of a Magistrate Judge denying the motion. Judge Andrews looks to the language of the contract and focuses on the absence any reference to arbitration. While the more common practice in drafting such a provision is to specifically label the accountant as an “expert not arbitrator,” the court holds that the rubric is not necessary. Here, the accountant’s role elsewhere in the Agreement is “cabined” to “particular factual disputes that are within the special expertise” thereof. The fact that these “Remaining Disputed Items are resolved by means of calculation suggests that the IAF’s role was specifically to resolve factual disputes regarding accounting practices and procedures, not legal disputes or non-accounting disputes.” Merely inserting language that the parties are “bound” by the decision “does not support a finding of a clear intent to arbitrate” all disagreements over the Earn-out. Therefore, the Magistrate correctly denied the Counterclaim-Defendant’s motion to compel arbitration before the IAF.
There is an interesting sidenote in the opinion as to the scope of a Magistrate Judge’s authority to issue a decision on motions to compel arbitration, as opposed to merely making a recommendation thereon to a District Judge. That question, in turn, hinges on whether such a decision is “determinative” of the case, since Magistrate Judges may issue decisions only on non-dispositive pretrial motions. If the Magistrate Judge issues a “decision,” instead of merely making a report and recommendation, the District Judge reviews the findings of fact under a “clearly erroneous” standard, rather than deciding the whole issue de novo. Based on Third Circuit authority, V.I. Water & Power Authority v. GE International, 561 F. App’x 131 (3rd Cir. 2014), the court holds that a motion to compel arbitration is not dispositive, and, therefore, the Magistrate Judge may enter a decision thereon. The status of a Magistrate Judge’s decision on a motion to compel is important to practitioners as it affects not just the scope of review, but the all-important timing of any challenge to such a ruling.
When Is an Arbitration Had?
Section 3 of the Federal Arbitration Act, 9 U.S.C § 3, provides that, if an action is stayed because of arbitration, the stay continues until “such arbitration has been had.” Friends for Health:Supporting the North Shore Health Center v. PayPal, Inc., 2022 U.S. Dist. LEXIS 123739 (N.D. Ill., July 13, 2022)(Pacold, J.), holds that the stay remains in place until the arbitration “is complete.” So, when is an arbitration “complete?” Although “no party addresses” the issue, the court, in a footnote, opines that “at least some courts have observed that the arbitration process does not conclude until the arbitration award is confirmed.” (citations omitted).
Discovery and Unconscionability
Stinger v. Fort Lincoln Cemetery, LLC, 2022 U.S. App. LEXIS 19106 (4th Cir. July 12, 2022)(per curiam by Judges Motz, King and Traxler), confirms the generally recognized proposition that limits on discovery do not invalidate arbitration as a means of resolving statutory claims. The arbitration clause between plaintiffs and their employer, the defendant, provided for arbitration under the JAMS rules, except that it specifically deleted Rule 21. That rule requires a party to produce its employees or those under its control at the merits hearing, without the need for a subpoena, and authorizes the arbitrator to issue subpoenas for the attendance of witnesses or production of documents at that hearing. The court rejects Plaintiff’s claim that the elimination of this discovery rule renders the arbitration requirement unconscionable. Since “limited discovery is a consequence of perhaps every agreement to arbitrate it cannot, standing alone, be a reason to invalidate an arbitration agreement.” (citation omitted). Rather, the plaintiffs must show that “the terms of the arbitration agreement would preclude them from effectively vindicating their statutory rights.” (Emphasis added). Since the plaintiff can obtain documents and evidence under the good faith exchange requirement and single deposition provisions of JAMS Rule 17, a route exists to get necessary information even without Rule 21; therefore, the agreement is not substantively unconscionable. Those interested in the requirements of a binding arbitration of statutory rights might read Stinger together with Lodi¸ discussed above.
It’s good to be back. Enjoy your weekend.
David A. Reif, FCIArb
 There is a thought-provoking footnote in which the court raises, but does not decide, the question of whether a post-award declaratory judgment must be treated as an application to vacate the award, with the time constraints attendant thereto.