Today’s offerings include a significant case for international arbitration lawyers seeking discovery under Section 1782 and for U.S. litigators opposing such subpoenas. In addition, there are a number of quick hits on recurring issues.
Section 1782 update; Discovery in ICSID Arbitrations
Last Term, SCOTUS held that private, international arbitrations were not “proceeding[s] in a foreign or international tribunal” for purposes of discovery under 28 U.S.C. § 1782, see ZF Auto, US, Inc. v. Luxshare, Ltd, 142 S. Ct. 2078 (2022)(“ZF Auto”). In re: Alpene, Ltd., 2022 U.S. Dist. LEXIS 196061 (E.D.N.Y October 27, 2022)(Levy, M.J), refines the analysis of what constitutes such a “tribunal.”
Alpene arises from a request to subpoena a New York resident for evidence to be used in connection with an ICSID arbitration between Alpene, which is a Hong Kong corporation, and the Republic of Malta. ICSID, the International Centre for the Settlement of Investment Disputes, is established by the World Bank, and the proceeding is governed by a Bilateral Investment Treaty between Malta and China. While SCOTUS in ZF Auto was also faced with an action under a bilateral investment treaty – in that case between Lithuania and the Russian Federation – the arbitration was before an ad hoc panel presiding under the Arbitration Rules of the United Nations Commission on International Trade Law (“UNCITRAL”). Opining that “[Section 1782] reaches only governmental or intergovernmental adjudicative bodies,” the Supreme Court held that the statute did not authorize the issuance of a third-party subpoena on behalf of the applicant in that action. Merely because “nations agree in a treaty to submit to arbitration” before the tribunal or one of the parties is a sovereign tribunal the forum does not become a “foreign or international tribunal” for Section 1782 purposes.
Magistrate Judge Levy starts from the proposition that “[t]he relevant question is whether the nations intended that the [arbitral] panel exercise governmental authority,” quoting ZF Auto at p. 2091 (brackets in opinion; emphasis added). In a detailed opinion, the court explores the similarities and differences between the ad hoc procedure in ZF Auto and the more permanent structure of the ICSID. However, Magistrate Judge Levy does not directly discuss such international intent. Rather, he relies upon the fact that the ICSID did not exist when Section 1782 was amended to include the term “foreign or international tribunals”; the “mismatch” that would exist between discovery in an ISCID arbitration and that which is available in cases subject to the Federal Arbitration Act; and the court’s determination that “while the Supreme Court did not address investor-state arbitrations specifically, by reaching out to decide this issue absent a circuit split, it did signal a desire to limit the availability of discovery in U.S. courts for international commercial arbitrations.” Based on that analysis, the court vacates an earlier order and quashes the subpoena.
As Section 1782 jurisprudence interpreting the bounds of ZF Auto develops, this opinion is worth saving, as the question of whether that case applies to ICSID arbitrations is certain to reoccur. In particular, does it matter to a ZF Auto analysis whether the arbitration is pending before an ad hoc panel or one that is formally organized and managed by sovereign nations?
Sanctions for Attorney Conduct during an Arbitration
In Curbelo v. Southwest Florida Enterprises, Inc., 2022 U.S. Dist. LEXIS 195979 (S.D. Fla. October 27, 2022), Judge Scola holds that a court does not have authority to sanction an attorney for his or her conduct during an arbitration. Such a proceeding is not “an annex to litigation, but an alternative method for dispute resolution.” (Citation omitted, quotation in cited case).
Standard of Review for ERISA Arbitrations
GCIU-Employer Retirement Fund v. MNG Enterprises, Inc., 2022 U.S. App. LEXIS 30044 (9th Cir. October 28, 2022)(Nelson, C.J., writing for himself; Smith, C.J.; and Drain, D.J., sitting by designation), reviews an arbitration award related to an employer’s obligations upon withdrawal from a multiemployer pension plan. While the case will primarily interest ERISA and employment lawyers, it is a reminder to dispute resolution nerds that the standard of review in statutorily mandated arbitrations may not be the same as in contract-based proceedings. The court recognizes that “the standard of review for MPPAA [Multiemployer Pension Plan Amendments Act] arbitrations is notably less deferential than under the Federal Arbitration Act.” Applying 29 U.S.C. § 1401(b)(2), the court “presume[s] that ‘findings of fact made by the arbitrator were correct,’ unless rebutted ‘by a clear preponderance of the evidence.’. . . We review conclusions of law de novo . . . and applications for equitable relief for abuse of discretion.” (Citations omitted).
There is nothing new in Penhall v. Young Living Essential Oils, LC, 2022 U.S. Dist. LEXIS 196790 (D. Utah October 27, 2022)(Barlow, J.), but its extensive footnotes are a good lesson in evaluating assent under a clickwrap arbitration clause. While the cited cases arise under Utah law due to choice of law principles, the legal reasoning is applicable everywhere.
On-boarding Employment Agreements
Williford v. Covenant Care Vegas, Inc., 2022 U.S. Dist. LEXIS 196483 (D. Nev. October 28, 2022)(Navarro, J.), addresses substantive and procedural unconscionability in the on-boarding process. Ms. Williford claimed that she was terminated because she became pregnant and that her termination for cause was pretextual. Covenant sought to compel arbitration pursuant to an agreement which was part of the documentation that plaintiff signed at the time of her hiring. The court grants the motion to compel, holding that the arbitration agreement is not procedurally unconscionable merely because it was “one of many pages of documents.” “Rather than using fine print or hiding provisions within a lengthy document, the terms of the [Arbitration] Agreement that Plaintiff signed are contained within a single-page document, titled in bolded, underlined letters. . . .” Additionally, the court opines, the document “features” a bolded acknowledge directly above Plaintiff’s signature, setting forth that she was “expressing waiving any and all rights to a trial before a judge and/or a jury. . . .”
Post-termination Arbitration Obligations
Samons v. 84 Lumber Company, 2022 U.S. Dist. LEXIS 196518 (E.D. Ky. October 28, 2022)(Reeves, J.), addresses the survival of an arbitration clause after the termination of employment. Samons was hired in May 2014, at which time he signed an arbitration agreement. He resigned in August 2014, but was rehired in May 2015. When he returned, he was neither asked to sign a new arbitration agreement nor reminded of the previous agreement. In 2021, the defendant instituted a mandatory vaccination policy. Samons sought a religious exemption, which the company rejected; he was subsequently terminated under the vaccination policy. He brought this action alleging religious discrimination. 84 Lumber sought to compel arbitration under a provision to which Samson agreed when he was initially hired. That provision specifically applied to “any subsequent employment of Associate by Company, should Associate’s current employment with the Company be terminated for any reason.” The court grants the motion, holding that the provision does not constitute an unenforceable “perpetual contract” under Kentucky law. Rather than leaving the contract’s duration unstated, the agreement’s “express language demonstrates the parties’ intent for the agreement to survive termination of Samons’ employment and subsequent reemployment.” The contractual provisions are quoted at length in the opinion and provide a template for drafters who wish to have an expansive employment arbitration policy.
In its orders on Monday, SCOTUS denied cert. in Caputo v. Wells Fargo Advisors, Inc., Dkt. No. 22-265, which sought to address the continued viability of “public policy” as a basis for vacating an award under the FAA.
Andrew Nissensohn, a third-year student at Washington & Lee School of Law, has published a comprehensive note on the history of multi-party arbitration and the resulting development of mass arbitrations, Note: Mass Arbitration 2.0, 79 Washington and Lee L. Rev. 1225 (Summer 2022). Whether or not one agrees with Mr. Nissensohn’s strongly expressed view of the motives and effect of corporate advocacy related to arbitration, the article is an excellent summary of post-Stolt-Nielsen jurisprudence on class arbitration. It is particularly useful for anyone just beginning to delve into the subject. The article is available on Lexis Advance. NOTE: Mass Arbitration 2.0, 79 Wash & Lee L. Rev. 1225 (lexis.com)
Game Three tonight. Go Phillies.
David A. Reif
 The court’s reference to the absence of a Circuit split apparently applies specifically the subset of investor-state arbitrations. There clearly was a Circuit split on the applicability of Section 1782 to private arbitrations, which was the thrust of the Supreme Court’s opinion.