Good morning.  Today’s lead case comes from the Ninth Circuit, as it adds to the jurisprudence on whether the availability of class arbitration is a gateway issue to be resolved by the court and, with an interesting twist, whether adoption of the AAA’s rules constitutes a delegation by the parties of that decision to the arbitrator. There are also District Court cases which are great summaries on “shrink-wrap” clauses and estoppel.

As a reminder, the term “Highlights” really summarizes my intent with this blog – to provide a quick read on some interesting cases within a couple days of their issuance, leaving others to provide in depth analysis.  I hope you will find this work useful both as a thought provoker on issues you may be considering and as a resource to punch into your arbitration notebook – well, really to drag and drop into a computer file.

 Class arbitration

In Shivkov v. Artex Risk Sols, Inc., 2020 U.S. App. LEXIS 28522 (9^th Cir.) (Sept. 9, 2020), Judge Milan Smith has written an opinion dealing in depth with some of the major issues facing the arbitration bar.  First, the Ninth Circuit specifically joins those holding that the question of whether an arbitration may proceed on a class basis is a gateway issue which, unless delegated by the parties to the arbitrator, is resolved by the court. Previously the Circuit had only addressed the issue in what Judge Smith characterizes as “an unpublished and nonprecedential memorandum disposition. See Eshagh v. Terminix Int’l Co., 588 F. App’x 703, 704 (9^th Cir. 2014).”  Here, the court specifically joins “seven of our sister circuit courts” and holds that “the availability of class arbitration is a gateway question for a court to presumptively decide.”  In light of the uniformity among Circuits, that ruling is no surprise.  Where the case is really interesting, though, is in its analysis of whether a reference in the dispute resolution section of the contract to arbitration before the AAA, whose rules delegate questions of arbitrability to the arbitrator, overcomes that presumption.  The dispute resolution provision in Shivkov was multiphased. The court summarized the process as follows: “The Clause provides first for mediation, second for arbitration by an arbitrator selected by the parties, and, only if the parties cannot agree on an arbitrator, arbitration before the AAA.”  Rather than “tak[ing] sides” on the circuit split about whether invocation of arbitration forum rules demonstrates an intent to delegate class resolution to the arbitrator, the court ruled that the process created in the agreement did not provide “clear and unmistakable evidence” of an intent by the parties to delegate the class issue to the arbitrator. First, the court held, arbitration before the AAA was only a “final option,” if all else failed.  Second, it parsed the clause’s language and focused on the fact that, while the clause provided for arbitration before the AAA, it did not specifically invoke the AAA’s rules. It distinguished Tenth Circuit precedent in which an arbitration clause specifically provided that the arbitration would be “administered by JAMS and conducted in accordance with its [Rules}.” (Emphasis added). Whether the court is parsing language too closely can be left to advocates, but the case is certainly a warning to drafters to be very, very careful.  Hopefully, at some point, SCOTUS will “Schein” its light on these issues and give us final guidance.

The case also addresses two other interesting issues.  The court deals, at length, with the presumption under Litton Financial Printing Division v. NLRB, 501 U.S. 190 (1991) that a dispute resolution provision survives termination of the contract, where the dispute has “its real source in the contract.” The court discusses at length authority from other circuits on the impact of a survival clause on post-termination arbitration obligations and holds that, in this case, there is such survival.  Second, the court deals with whether there is a fiduciary duty to point out and explain the existence of an arbitration clause in the context of certain service contracts; it rejects such a relationship.

This opinion is a detailed piece of scholarship which provides a gateway to a variety of caselaw throughout the circuits and nuanced analysis on the issues before it.  It is well worth your reading.

Shrink wrap arbitration clauses

In the last couple highlights, we have dealt with “browsewrap” and “clickwrap” arbitration clauses.  In Soo v. Lorex Corp., 2020 U.S. Dist. LEXIS 164664 (N.D. Cal.) (Sept. 9, 2020), the court addresses a “shrink wrap” clause, one which is included in an agreement within the box in which the product, in this case, a camera, is delivered. The court held that there was no agreement on Mr. Soo’s part, to arbitrate, despite the presence of an arbitration clause in the lengthy agreement within the camera packaging.  The crucial distinction between the facts here, the court held, and those cases which hold that retention and use of the product constitutes acceptance of the arbitration provision is that Mr. Soo was not told that he could return the product if he did not want to be bound by the agreement. The Court, thus, contrasts Brower v. Gateway 2000, 676 N.Y.S. 2d 569 (N.Y. App. Div. 1998), where the insert advised the buyer that he or she accepted the terms of the agreement, including the arbitration clause, if the product was not returned in thirty days.

Estoppel to compel arbitration based on participation in litigation

The issue presented in Purshe Kaplan Sterling Invs., Inc. v. Neff, 2020 U.S. Dist. LEXIS 164227 (E. D. Pa.) (Sept. 9, 2020) is not unique – did a party’s participation in litigation and delay in demanding arbitration estop it from compelling such a proceeding. Purshe sought a temporary injunction, in connection with a declaratory judgment action, enjoining Neff from proceeding with a FINRA arbitration. The court, holding that Neff had no likelihood of success, granted the requested TRO based upon Neff’s delay and her commencement of two separate cases against Purshe and others arising out of the same employment-related incident.  While the result is not unexpected, the case is worth reading because of its detailed analysis of the factors to be considered in such an alleged waiver case.

Writing opportunity

For those interested in scholarly writing, Negotiation and Conflict Management Research (affiliated with Creighton University) and Conflict Resolution Quarterly have put out calls for papers. NCMR is looking for works on Lessons from Practice: Extensions of Current Negotiation Theory and Research; CRQ on Shared Society; Theory and Practice.  Links to the call are available on Creighton-NCR’s webpage, adrhub.org. That page, by the way, is a terrific resource for happenings in the ADR Community.

Have a great weekend. For those of you who follow the NFL, I say, as a Pittsburgh native, “Go Stillers.” 

Dave Reif
Reif ADR
Dreif@reifadr.com
Reifadr.com