With Friday’s “Highlights” focusing on just the Seventh Circuit’s decision in Wallrich v. Samsung, there is some catching up to do on other interesting cases and literature.  So, today’s issue is what Jim Cramer on CNBC calls “the lightning round.”  If something interests you or is relevant to an issue on your desk (or mind), you can go to the original for more detail.

Delegation through the AAA Rules and “Unsophisticated” Parties

The American Arbitration Association’s rules and those of other tribunals provide that the arbitrator decides his or her own jurisdiction.  It is now black letter law that, at least in the context of commercial parties, invoking those rules is sufficient to demonstrate that the parties intended to delegate to the arbitrator threshold questions, such as arbitrability, that would normally be resolved by the court.  However, some District Courts have held that the rule does not apply to unsophisticated parties, see e.g. Eiess v. USAA Federal Savings Bank, 404 F. Supp. 3d 1240 (N.D. Cal. 2019).  In Acosta v. Brave Quest Corp., 2024 U.S. Dist. LEXIS 115398 (C.D. Cal. May 10, 2024), Judge Blumenfeld, after a lengthy analysis of authorities on both sides of the question, relies upon the language of the arbitration clause and holds that the sophistication of the parties is irrelevant. “The judicial task instead is a familiar one – to determine the mutually expressed intent of the parties as reflected in their agreement.  And that task is not well served by drawing a general line between the “sophisticated” and the “unsophisticated.” (Internal citation omitted).  In addition to providing authority for those seeking to compel arbitration in a typical consumer case, Eiess is a good source for competing precedents.

Applicability of EFAA to Retaliatory Discharge Cases; Scope of the EFAA

In Lee v. Taskus, 2024 U.S. Dist. LEXIS 116623 (W.D. Tex. July 2, 2024), Plaintiff alleged that she was discharged, in violation of Title VII, as retaliation for her complaints about a male colleague’s masturbation in a location adjacent to her.  Defendant moved to compel arbitration under Lee’s terms of employment.  Magistrate Judge Chestney holds that the agreement is unenforceable under the provisions of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (“EFAA”).  The court opines that the language of the EFAA is “broad. . . .  The EFAA will apply as long as the case ‘relates’ to a ‘sexual harassment dispute.’” (Internal citation omitted).  Since the co-worker’s conduct “could be considered sexual harassment” and the “retaliation claim is based on an assertion that [plaintiff] was terminated for complaining” about that conduct, the court holds that her retaliation claim relates to that harassment.  Therefore, the arbitration clause is invalidated under the EFAA.

The court goes on to hold that all of the plaintiff’s claims, including those of racial and gender discrimination, are barred by the EFAA.  The Court declines to opine that a court may never compel arbitration of those counts of a complaint which do not specifically relate to sexual harassment, citing Mere v. SA Hospital Group, LLC, 675 F. Supp. 3d 442 (S.D.N.Y. 2023)(compelling arbitration of wage and hour claims, but not hostile work environment claims).  However, here, Magistrate Judge Chestney finds that “the factual bases for [Plaintiff’s] race and sex discrimination claims are the same facts and incidents that gave rise to her retaliation claim. . . . “ Therefore, the Court denies the motion to compel as to all claims.

Vacatur for the Arbitrator’s Exceeding His or Her Powers

While the opinion is short and does not break any new ground, Global Industrial Investment, Ltd. v. 1955 Capital Fund I GP, LLC, 2024 U.S. App. LEXIS 15977 (9^th Cir. July 1, 2024)(Mem.)(Judges Nguyen, R. Nelson, and Bress), is worth keeping in easy reach. The Ninth Circuit affirms the District Court’s refusal to vacate an award under Section 10(a)(4) of the FAA, which provides for the setting aside of an award where “the arbitrators exceeded their powers.”  The court opines that such a vacatur is limited to circumstances where “the arbitrator’s exercise of authority is ‘completely irrational’ in that it ‘fails to draw its essence from the agreement.’” (Internal citations omitted).  To be enforceable in the face of a Section 10(a)(4) challenge, the court holds, the arbitrator’s conclusion need only be “plausible.”

Discovery While a Motion to Compel Arbitration Is Pending

In light of SCOTUS’s decisions related to stays after a court compels arbitration, see Smith v. Spizzirri, 144 S. Ct. 680 (2024)(upon granting motion to compel, District Court must stay, not dismiss, case); Coinbase, Inc. v. Bielski, 599 U.S. 736 (2023)(District Court must stay case during the pendency of appeal from denial of motion to compel), it is likely that more counsel will seek discovery before the court decides a pending motion to compel arbitration.  Ramirez v. Equifax Information Systems, LLC, 2024 U.S. Dist. LEXIS 115471 (E.D. Tex. July 1, 2024)(Johnson, M.J.), in denying such a motion, considers the competing considerations.

Interstate Commerce Worker Exception to the FAA

SCOTUS, during the its last term, defined the scope of the “residual exception” to the Federal Arbitration Act which excepts “transportation workers” from the Act’s coverage, Bissonnette v. LePage Bakeries Park Street, LLC, 601 U.S. 246 (2024).  Estanislao Enterprises, Inc., v. FedEx Ground Corp., 2024 U.S. Dist. LEXIS 118358 (W.D. Pa. July 5, 2024)(Fischer, J.), holds that the exception applies only to individuals and “does not extend to business entities.” (Internal citations omitted).

Discovery for Use in a Foreign Tribunal, 28 U.S.C. § 1782

In ZF Automotive US, Inc. v. Luxshare, Ltd., 596 U.S. 519 (2022), SCOTUS held that Section 1782, which allows U.S. based discovery for use in a “foreign tribunal” does not extend to parties in a foreign, private arbitration.  In In re: Matter of the Exparte Application of B&C KB Holding GMBH for an Order to Take Discovery Pursuant to 28 U.S.C. § 1782 from Goldberg Lindsay & Co., 2024 U.S. App. LEXIS 15498 (2^nd Cir. June 26, 2024), the Court considers whether a request for discovery allegedly in connection with a Austrian criminal investigation is merely a pretext for gaining information to be used in a related German arbitration. The Court of Appeals affirms the District Court’s granting of the application. The mere fact that there is a “close match between the discovery that B&C requests and the claims B&C seeks to prove in arbitration” is insufficient to demonstrate pretext.  Rather, “to satisfy Section 1782’s ‘for use’ requirement, an applicant need only show that ‘the evidence is minimally relevant to the foreign proceeding,’” citing In re: BonSens.org., 95 F. 4^th 75 (2^nd Cir. 2024)(Emphasis added in opinion).  Nor is the failure of the Austrian prosecutor to support the application relevant.  The focus is not on the prosecution’s need for the information, but rather “the ‘for use’ condition is about an applicant’s ‘practical ability to inject the requested information in a foreign proceeding.’” (Emphasis added; internal citation omitted).

Literature

The June issue of the Michigan Bar Journal focused on ADR.  Three articles are particularly worth reading.

Witness Statements in Arbitration

Two active arbitrators discuss the use of witness statements in lieu of live testimony in arbitration, Rock and Harris, Article: Witness Statements in Arbitration, 103 MI Bar Jnl. 24 (June 2024), available on-line at ARTICLE: WITNESS STATEMENTS IN ARBITRATION, 103 MI Bar Jnl. 24 (lexis.com).  The authors consider how such statements may be used, the circumstances for which they are best suited, and timing of the exchange thereof.

Pre-mediation Sessions

A group of eleven commercial mediators undertook a project to determine how mediators might be more effective in resolving cases.  They “gravitated to a conclusion that commercial litigation mediations benefit from mediators engaging more directly with client decision makers. . . . “  The results of that work is laid out in an excellent article, McNeill, Article: Proposed Advancements in Mediation Practices: Placing Clients at the Center of Mediation, 103 MI Bar. Jnl. 16 (June 2024), available on-line at ARTICLE: PROPOSED ADVANCEMENTS IN MEDIATION PRACTICES: PLACING CLIENTS AT THE CENTER OF MEDIATION, 103 MI Bar Jnl. 16 (lexis.com).  One of the most interesting suggestions is that the mediator hold a separate  meeting, preferably in-person, with each party and their counsel several days before the mediation.  McNeill also includes a useful “mediation day checklist.”  It’s a practical article for both counsel and mediators.

Early Dispute Resolution (“EDR”)

Mediations often occur shortly before trial, after the parties have expended significant sums in discovery and motion practice.  Early dispute resolution aims to move the mediation process to a point sooner in the life of dispute, thus allowing the parties to save the costs incurred during the ramp up to trial. Lisa Timmons, the chair-elect of the Michigan Bar’s Alternative Dispute Resolution Section, discusses various approaches to EDR in Timmons, Article: Early Dispute Resolution: Practices and Principles for Early Settlement, 103 MI Bar Jnl. 20 (June 2024), available on-line at ARTICLE: EARLY DISPUTE RESOLUTION: PRACTICES AND PRINCIPLES FOR EARLY SETTLEMENT, 103 MI Bar Jnl. 20 (lexis.com).  The EDR Institute has developed a specific protocol for use in EDR and offers training in its use.  As someone who has taken the training, I can vouch for its effectiveness.  For more information on the Institute, see its website, EDRinstitute.org – EDRinstitute.org

Have a good week.  For those of you in the path of Hurricane Beryl, please be safe.

David Reif, FCIArb
Reif ADR
Dreif@reifadr.com
Reifadr.com