After two Terms in which arbitration was a focus, SCOTUS issued its first arbitration opinion late last month, and, looking at the current cert. grants, this may be the only one.  While the case largely reads as a civil procedure issue, the implications for the case after remand will be important to arbitration litigators.  We also have some Quick Hits on a variety of subjects.

Reopening a Dismissal; Whence Badgerow?

On March 3^rd, in his terrific Substack Post, One First – a must read for anyone interested in the Supreme Court – Professor Steven Vladeck refers to Waetzig v. Halliburton Energy Services, Inc., 2025 U.S. Lexis 868 (February 26, 2025), as a case that “only a Civil Procedure scholar could love.”  Well, Professor, fans of arbitration law are even geekier. For us, this case is really about the issue that the Supreme Court did not decide.

In a unanimous opinion, written by Justice Alito, the Court held that a voluntary dismissal under Fed R. Civ. P. 41(a) was a “final judgment” for purposes of reopening the case under Rule 60(b).  The latter rule allows the court to “relieve a party. . . from a final judgment, order or proceeding. . . .” Among the grounds for such relief are “mistake, inadvertence, surprise, or excusable neglect.”

Waetzig, a former employee, sued Halliburton, claiming that his termination violated the federal Age Discrimination Employment Act.  In response to Halliburton’s motion to compel arbitration, Waetzig agreed to arbitrate.  However, rather than moving to stay the case under Section 3 of the Federal Arbitration Act, he dismissed the action.  Since Halliburton had not yet filed a motion for summary judgment or an answer, the dismissal did not require any court action.  Also, since it was the first time that Plaintiff had dismissed his claims, the dismissal was without prejudice.

Waetzig lost the arbitration.  At that point, rather than filing a petition to vacate the award, he moved to reopen the initial action in order to challenge the arbitrator’s decision for an alleged failure to follow procedural mandates of the arbitration agreement.  Defendant argued that Rule 60(b) did not apply to voluntary dismissals. The District Court granted Rule 60(b) relief and vacated the arbitration award. The Tenth Circuit reversed, accepting Halliburton’s position on the scope of the rule.  This appeal ensued.

Justice Alito’s opinion is both a historical and, as expected in his rulings, a textual analysis of the relevant rules.  Professor Vladeck is right about that part of the opinion – only a Civil Procedure savant wants to wade through it.

For those in the arbitration world, though, the issue the court does not decide is going to be important to follow on remand.  Halliburton argued that, even if Rule 60(b) allowed a reopening, the District Court lacked subject matter jurisdiction to vacate the award.  The Supreme Court did not consider that issue, limiting its holding to the certified question of the applicability of Rule 60(b). “We leave it to the lower courts to address any subsequent jurisdictional questions on remand.”

The implications of that lower court decision will flesh out SCOTUS’s decision in Badgerow v. Walters, 596 U.S. 1 (2022).  In that case, the Supreme Court held that, while a District Court can look to the elements of the parties’ underlying dispute to determine whether it has jurisdiction to compel arbitration, it cannot do so in a dispute over whether to confirm or vacate an award.  In other words, if non-diverse parties dispute the plaintiff’s rights under a federal statute, such as a civil rights act, the Defendant may bring an action to compel arbitration, but neither party may bring an action to confirm or vacate an award in the court’s mandated arbitration resolving the same claims.

Now, throw SCOTUS’s holding last Term in Smith v. Spizzirri, 601 U.S. 472 (2024), into the mix.  The Supreme Court there held that a District Court that compels arbitration may only stay, not dismiss, the case, if either party asks for such a stay.  So, what happens in a case in which the District Court’s jurisdiction over the initial dispute arises, not from diversity, but from the existence of a federal question?  While it is clear that a party could not bring a new petition outside the existing case to confirm or vacate the arbitral award, may the District Court do so in the stayed case in which it ordered those parties to arbitrate?  The question has created a Circuit split.  Compare White v. Titlemax of Virginia, Inc., 2024 U.S. App. LEXIS 10593 (4^th Cir. May 1, 2024), and SmartSky Networks, Inc. v. DAR Wireless, LTD, 93 F. 4^th 175 (4^th Cir. 2024), with Kinsella v. Banker Hughes Oilfield Operations, LLC, 66 F. 4^th 1099 (7^th Cir. 2023).  With the stay mandate laid out Smith, this will become a recurring issue.  Hopefully, it ultimately works its way up the chain to SCOTUS

Watch this space.

Quick Hits

Arbitral Confidentiality Provisions and Substantive Unconscionability

In Stubbins v. Spring Valley Hospital Medical Center, 2025 U.S. Dist. LEXIS 39327 (D. Nev. March 4, 2025)(Youchah, M.J.), the Court addresses whether a provision in a form arbitration agreement which prohibits the parties from disclosing “the existence, content . . . [and] results of any arbitration” renders the case substantively unconscionable. (Brackets and ellipsis in the opinion).  The Magistrate Judge ultimately opines that the question is “too close to call,” but holds that the arbitration clause is not procedurally unconscionable and, therefore, enforceable under Nevada law.  The case is worth reading by drafters who are trying to keep a proceeding totally sub rosa.

Litigation Waiver

Two recent cases reached opposite results as to whether limited discovery constitutes a waiver of any right to arbitrate, Compare Parker v. Kearney School District, 2025 U.S. App. LEXIS 5322 (8^th Cir. March 7, 2025)(Shepherd, Arnold, and Erickson, C.J.s) with In re: Amitiza Antitrust Litigation, 2025 U.S. Dist. LEXIS 39957 (D. Mass. January 27, 2025)(Joun, J.).  The lesson remains the same – assert your client’s right to arbitrate at every conference, in every filing, and with every communication to opposing counsel.

Arbitration Clause Governs the Arbitration

Garland Symphony Orchestra Association, Inc. v. Dallas-Forth Worth Professional Musicians Association, 2025 U.S. Dist. LEXIS 41372 (N.D. Tex. March 7, 2025)(O’Connor, J.)(vacating award as to issues not submitted in arbitration agreement), and Center for Excellence in Higher Education, Inc. v. Accreditation Alliance of Career Schools and Colleges, 2025 U.S. Dist. LEXIS 40996 (E.D. Va. March 6, 2025)(Alston, J.)(confirming award where arbitrator refused to accept evidence outside items allowed under arbitration provision), are reminders that arbitration is a matter of contract.  Therefore, the arbitrator’s considerations are limited by the parties’ agreement.

Delegation; Incorporation of AAA Rules

In the third appeal from the District Court’s repeated denial of a motion to compel arbitration in Berkeley County School District v. Hub International Limited, the Fourth Circuit, again, reverses and remands, holding that an agreement which delegates to the tribunal questions of arbitrability refers the question of which of two different arbitration provisions applies, Berkeley, 2025 U.S. App. LEXIS 5367 (4^th Cir. March 7, 2025)(King, Gregory, Rushing, C.Js.).  The case also is a further indication that, while it has never held directly that the incorporation of the AAA’s Rules delegates arbitrability, the Circuit leans that way, see p. *3, fn. 2.

Enjoy the rest of your week and try to get outside.  Spring is coming to the Northeast U.S.

David A. Reif
Reif ADR
Dreif@reifadr.com
Reifadr.com