I normally only cover cases in the United States, both because the majority of readers practice here and because I do not want to get too far out over my skis.  However, I include a reference today to a case decided by the Supreme Court in the U.K. because of its relevance to arbitrators here. Otherwise, the cases today are probably of major interest to those drafting clauses as the courts bless certain language relating to delegation of decision making to the arbitrator and to waiver of the right to go to court.

Arbitrator disclosures

The first lesson in almost any arbitration class is the importance of disclosing potential conflicts. A case which the Supreme Court of the United Kingdom decided on Friday should remind arbitrators in the U.S. and elsewhere of that obligation. Halliburton Company v. Chubb Bermuda Insurance Ltd arises out of Halliburton’s challenge to an arbitration award related to the Deepwater Horizon drilling rig explosion.  During the pendency of that proceeding, the arbitrator was appointed to hear two other Deepwater references.  The issue before the Supreme Court was whether the arbitrator should have disclosed those appointments and, if so, whether there was any prejudice to Halliburton by his failure to do so.  Rather than wade into the interpretation of a British opinion, I refer you to what seems to be an even-handed article from the Institute of International Shipping and Trade Law at their blog, iistl.blog. The importance of the case to arbitrators outside the U.K. is its underlying lesson – “disclose, disclose, disclose and, if in doubt, disclose again.”

Arbitration of Title VII claims; waiver of trial

In Solomon v. CARite Corporate LLC, 2020 U.S. App. LEXIS 37224 (6^th Cir.) (Nov. 23, 2020), the court is asked to harmonize potentially conflicting contractual provisions relating to dispute resolution.  Plaintiff brought an action under Title VII.  Her employment agreement contained an arbitration provision which covered “all claims arising in the course of an employee’s employment at CARite not specifically excluded. . . includ[ing] all alleged violations of any state of [sic] federal law. . . [which] may include . . . any and all unlawful employment discrimination and/or harassment claims” (Emphasis added). However, the same agreement provided that “claims made with any government agency such as the Equal Employment Opportunity Commission” are “not covered by the [a]greement” (Emphasis added). Plaintiff claimed that, since the EEOC has exclusive jurisdiction over Title VII claims for 180 days, her claims fell among those “specifically excluded” and the arbitration provisions did not apply.  The District Court agreed and did not compel arbitration.   Circuit Judge Bush, writing for himself and Judges Gilman and Readler, reverses and enters a mandate compelling arbitration. Applying the rubric that “we must read these sections harmoniously if it is possible to do so,” the court holds that the reference to claims made with the EEOC applies only to the actual agency proceedings themselves, not to federal litigation after the EEOC process terminates.

The court also discusses the related issue of whether Ms. Solomon knowingly and voluntarily waived her right to a trial of her Title VII claims.  The court applies a five-part test based on ordinary principles of contract law.  First, it holds that Plaintiff, by virtue of her education and business experience, could understand the effect of her execution of the arbitration provision. Second, although expressing concern about the speed with which she was required to sign the agreement and the potentially intimidating presence of her supervisor, it discounts these factors, particularly in light of her failure to ask for more time to review the contract or consult with an attorney. Third, it finds that agreement was “sufficiently clear.”  Fourth, Solomon’s continued employment provided consideration for the agreement. Fifth, the “totality of the circumstances” does not demonstrate financial hardship or intimidation.

When are arbitration agreements incorporated a contract?

Two cases provide guidance on the timing and method of presenting an arbitration agreement to a counterparty or employee.

In Kelly v. Aliera Companies, Inc., 2020 U.S. Dist. LEXIS 219472 (W.D. Mo.) (Nov. 23, 2020), the dispute resolution clause, including an arbitration requirement, was contained in a “Member Guide” which was not presented until ten to fourteen days after members of the health cost sharing plan, such as plaintiff, signed their agreement to enroll.  Thus, the court holds the “dispute resolution ‘agreement’ lacks offer, acceptance, and bargained for consideration” and declines to compel arbitration. The issue which the court does not decide – and which would have been more interesting – is whether Defendants’ program constitutes a Health Sharing Ministry or, rather, is a health insurance policy.  The issue was significant here because the State of Missouri deems arbitration provisions in insurance plans to unenforceable.  Since state regulation of arbitration in health insurance contracts is fairly common and membership in Health Sharing Ministries is growing, the unresolved issue in Kelly will take on broader importance and we can expect to see the question fleshed out in the future.

Smeck v. Comcast Cable Communications Management, LLC. 2020 U.S. Dist. LEXIS 221526 (E.D. Pa.) (Nov. 25, 2020), contrary to Kelly, enforces an arbitration provision contained in a document separate from the parties’ contact. Comcast created a “Comcast Solutions” dispute resolution program, which included arbitration.  Although Smeck was not given a full copy of the full “Program” when he accepted employment and signed an Offer Letter, he received a Comcast Solutions Brochure along with the letter.  The brochure provided that “you and the company waive the right to a civil action or a jury trial for any covered claims and . . .  you and the company will be bound by the final decision of the arbitrator.”  The brochure also provided a contact for further information on the details of the underlying dispute resolutions program.

Two lessons come out of these cases.  First, if you want to want to mandate arbitration, convey that information to your counterparty before or contemporaneously with execution of the underlying contract.  Second, be sure to give enough information about the arbitration program to assure that all parties are adequately informed as to its requirements.

Arbitration claim by a non-signatory

Abdurahman v. Prospect CCMC, LLC, 2020 U.S. Dist. LEXIS 219732 (E.D. Pa. Nov. 24, 2020) is one more case in which a party seeks to enforce the arbitration clause of a contract to which it is not a signatory.  CCMC hired plaintiff as a graduate trainee for a medical residency in emergency medicine pursuant to a “Graduate Medical Education Appointment” (“Residency Agreement”).  In addition to her contract with CCMC, Plaintiff signed an employment contract (“Employment Agreement”) with Prospect Health Access Network, Inc., CCMC’s sister entity, which contained an arbitration provision; CCMC did not sign that agreement and was not a party thereto.  In this action, Abdurahman alleged sexual harassment, libel, and retaliatory discharge against CCMC and an individual physician. Defendants argued that they could compel arbitration by reason of her Employment Agreement.  The court, Kenney, J., denies that motion. Applying Pennsylvania law, he rejects claims that Prospect Health Access was acting as an agent for CCMC, noting that the Residency Agreement did not refer to CCMC or otherwise cross-reference provisions of the two contracts. He also rejects equitable estoppel as a driver of arbitration, holding that plaintiff’s claim against CCMC was not “intimately founded in” or “intertwined” with her Employment Agreement with Prospect Health Access.

Quick Hits

New York Convention and Jones Act

Rodrigo Pagaduan was injured while working as a seaman on a Carnival Cruise vessel.  The District Court and the Court of Appeals had previously ordered him to arbitrate his claim in the Philippines; the arbitration resulted in an award of $5,100 “sickness allowance.”  He challenged the award as inadequate; the District Court confirmed the arbitrator’s decision.  In this appeal, Pagaduan v. Carnival Corp., 2020 U.S. App. LEXIS 37350 (2^nd Cir.) (Nov. 25, 2020), the Court of Appeals, in a summary order by a panel consisting of Circuit Judges Jacobs, Pooler, and Lohier, rejects Plaintiff’s claim that the award should have been vacated under Article V(2)(b) of the New York Convention, which allows nonenforcement where the “recognition of the award would be contrary to the policy” of the country in which enforcement is sought. The court holds that, even if the recovery were lower under Philippine law than it would have been under the Jones Act, the award does not “violate our most basic notions of morality and justice.”

A failed on-line mediation

I suppose it was inevitable.  Romero v. Diaz-Fox, 2020 U.S. Dist. LEXIS 222075 (S.D. Fla.) (Oct. 12, 2020) arises from a failed virtual mediation.  Because of “technical problems,” the plaintiff was able to connect by telephone, but could not appear visually.  The mediation was adjourned for four business days, at which point it went forward.  Even though the mediator did not charge for the aborted proceeding, Defendant sought to recover both attorneys’ fees incurred in preparing for and attending the shortened mediation and additional fees for filing her sanctions motion. After reviewing Fed. R. Civ. P 16(f) and 37(b)(2)(A), the court declines to enter sanctions, finding no noncompliance amid justified technical difficulties.

 I hope your week is kicking off well.  See you Wednesday.   

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