Sorry to have been away for a while.  With the world reopening and the courts backlogged, the world of arbitration and mediation is heating up. 

Procedure for seeking arbitration in a pending case

Two decisions by Courts of Appeals came down on July 1 which address the procedure for determining whether to grant a motion to compel and the weight of evidence needed to create a triable question of fact on contract formation.

Boykin v. Family Dollar Stores of Michigan, LLC., 2021 U.S. App. 19658 (6^th Cir., July 1, 2021) opens, “It has been almost a century since Congress enacted the Federal Arbitration Act.  Yet this case suggests that the existing caselaw still leaves unclear how a defendant should go about raising an arbitration defense in a pending suit.”  Circuit Judge Murphy, joined by Circuit Judges Rogers and Nalbandian, goes a long way toward bringing clarity.  Applying the standard under Fed. R. Civ. P 12(b)(6), the District Court dismissed the action on defendant’s motion, finding that the affidavit filed by Boykin denying that he ever signed an arbitration agreement was “self-serving.”

In a far-ranging opinion, the Court addresses essentially all the procedural issues which might be raised by a motion to compel arbitration – dismissal v. stay, the difference between Rule 26(b)(6) and summary judgment standards, and when the evidence presented in opposition to contract formation is sufficiently weighty to require that the court hold an evidentiary hearing.  Ultimately, the panel determines that, despite Family Dollar’s evidence that both its employment on-boarding processes and specific computer records demonstrated that Boykin had executed an on-line agreement to arbitrate, plaintiff’s affidavit and the apparent absence of a copy of the agreement in defendant’s files mandated an evidentiary hearing.  The court reverses and remands for an evidentiary hearing.

Gallagher v. Vokey, 2021 U.S. App. LEXIS 19696 (5^th Cir. July 1, 2021) (per curiam) also reverses the District Court, but does so to compel arbitration. The case arises from allegedly unpaid legal bills in the high-profile criminal case against Navy SEAL Edward Gallagher.  After Gallagher terminated the Plaintiff’s representation of him, a dispute arose over the payment of Vokey’s bills.  Plaintiff brought an action to compel arbitration under the terms of the parties’ alleged engagement letter; Gallagher brought a separate action for a declaratory judgment that the arbitration agreement was unenforceable and that he owed no fees. According to the opinion by a panel of Circuit Judges Clement, Hayes, and Wilson, Vokey produced an affidavit stating that there was an agreement to arbitrate, while Gallagher produced no evidence in opposition.  Rather, defendant merely stated that he did not recall signing an agreement and characterized Plaintiff’s affidavit as “self-serving.” (There is that term, again).  The court opines that “this Circuit has not articulated precisely what quantum of evidence is necessary to prove or disprove the existence of an agreement to arbitrate, but we have explained that ‘[t]he party resisting arbitration bears “the burden of showing that he is entitled to a jury trial under § 4 of the Arbitration Act.”’” (internal citations omitted).  The court raises, but does not resolve, the issue of whether the § 4 standard is “congruent” with that for summary judgment under Fed. R. Civ. P 56.  Rather, since it holds that, because Vokey presented the engagement letter containing the arbitration clause and statements by Vokey and his associate that they saw Gallagher sign the letter, the burden shifted to Gallagher to present some evidence in opposition; he could not simply rely upon a statement that he did not remember signing the agreement.  As the court says, “there is an important conceptual difference between ‘I don’t remember’ and ‘I didn’t sign it,’ and the latter – backed by evidence – is what is required to overcome Vokey’s proffer of a signed contract.”  The panel reverses and remands, holding that “the District Court erred in denying Vokey’s motion to compel arbitration. . . .”

While the cases technically set the standard for considering the adequacy of evidence in support and opposition to a motion to compel within only two Circuits, they are required reading for anyone dealing with a motion to compel arbitration.  Boykin is particularly instructive, as Judge Murphy assembles nationwide authorities and walks through the multiple procedural decisions which a moving party must consider.

Arbitration under state law where the FAA may not apply

Siperavage v. Uber Technologies, Inc., 2021 U.S. Dist. LEXIS 122002 (D.N.J. June 30, 2021) is another ride-share case, which might have hinged on the question of whether such drivers are “interstate transportation workers” and, thus, are not covered by the Federal Arbitration Act.  However, Judge Hillman short-circuits the issue.   Citing both District and Circuit Court authority, the court holds that it need not determine the applicability of the FAA before considering whether state law mandates arbitration.  He, then, holds that the New Jersey act requires enforcement of the arbitration clause.  Opining that the parties delegated gateway issues to the arbitrator, the court declines to consider Plaintiff’s unconscionability argument.  In addition, he finds that New Jersey law, at least in this non-consumer context, does not invalidate the agreement’s ban on class actions. Accordingly, the court compels arbitration and stays the action.

Arbitration Award as res judicata

Pham v. JP Morgan Securities, LLC, 2021 U.S. Dist. LEXIS 123022 (S.D. Ohio July 1, 2021) addresses the prerequisites to making an arbitration award preclusive of a subsequent civil action. Pham was employed by J.P. Morgan; he was terminated for allegedly falsifying a timecard and failing to secure confidential client information.  He arbitrated the claim before FINRA, and the panel issued an award rejecting his claims in their entirety. This pro se action followed.  Applying W.J. O’Neil Co. v. Shepley, Bulfinch, Richardson & Abbott, Inc., 765 F. 3d 625 (6^th Cir. 2014), the Court, Marbley, J., holds that an arbitration may provide the basis for a finding of res judicata.  He, then, addresses the four-part test for applying the doctrine.  First, since there was no petition to vacate the award, he finds that the arbitration decision is a final decision. Second, he finds it involved the same parties are those engaged in this litigation. Third, since Pham demonstrated no difference in the facts involved in the arbitration and in this action, the court holds that the issues raised here were litigated in the arbitration. Finally, Judge Marbley finds that the two matters involve common facts, allegations, and transactions.  Accordingly, the court holds that, under the doctrine of res judicata,  the action is barred by the result in the arbitration and grants summary judgment for defendant.

SCOTUS

There were two significant arbitration matters this week in the U.S. Supreme Court.

Servotronics

On Monday, the U.S. filed an amicus brief in Servotronics v. Rolls-Royce, PLC, Dkt. No. 20-794, arguing that 28 U.S.C. § 1782 should not be interpreted to allow U.S.-based “discovery” in private, foreign commercial arbitrations.  The Solicitor General raises concerns that such an interpretation would create greater discovery rights under the statute for international proceedings than are available under the FAA in domestic cases. Also, she fears the effect of such a ruling on investor-state arbitrations.  The “Tenth Justice” has requested permission to present oral argument. To see the amicus brief (along with the six others that have been filed to date), go to the Scotusblog, Scotusblog.com.  I have tried, without success, to find the status of the underlying arbitration.  The matter was scheduled to begin on May 10 and the panel turned down a motion to continue it pending the decision by SCOTUS next Term.  Perhaps this case may become moot if an arbitration award is entered and we will be back to a basic Circuit split.  That would be regrettable.

Shivkov v. Artex Risk Solutions

In its Monday orders, SCOTUS denied certiorari in Shivkov v. Artex Risk Solutions, Dkt. 20-1313.  The case raised the issue of whether an arbitration agreement’s referral of a matter to the AAA for resolution was enough to delegate gateway issues to the arbitrator where the agreement did not specifically invoke the AAA rules.

Back up and running

The AAA-ICDR announced that all of its hearing rooms are now up and running.  It is good to be home.

Have a good Fourth of July.  Remember that, as much as we may disagree, often bitterly, over policy and politics, it is essential that certain principles – equality, access to justice, and the  Four Freedoms – unite us. They are crucial to the “Great Experiment” that is American democracy.

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