This issue buries the lede a little, in that it relegates the Ninth Circuit’s decision invalidating the latest attempt by California to limit mandatory employment arbitration to a “Quick Hit.”  But, there has already been a lot written about Chamber of Commerce since it was decided last week, and there is a lot of other material of specialized and general interest this week.

Delivery/Sales Personnel and FAA Section 1

Some Court of Appeals opinions are written to advise the lower courts of a new or reaffirmed legal standard; some are written to disagree with other Circuits.  The opinions in last week’s Second Circuit consideration of the FAA “transportation worker” exception, Bissonnette v. Lepage Bakeries Park St., LLC, 2023 U.S. App. 3576 (2^nd Cir. February 15, 2023)(Bissonnette IV), were written for SCOTUS in connection with a probable application for certiorari.

The opinions issued last week arose, not from a decision on the merits, but from the Circuit’s denial of a motion for a rehearing en banc.  In May 2022, the Circuit held, by a 2-1 majority, that bakery drivers who delivered finished products to stores and stocked the shelves were not transportation workers whom the now familiar Section 1 excludes from coverage under the Federal Arbitration Act, Bissonnette v. Lepage Bakeries Park St., LLC,  33 F. 4^th 650 (9^th Cir. 2022).  That provision excludes “seamen, railroad employees, [and] any other class of workers engaged in foreign or interstate commerce,” 9 U.S.C § 1.  Thereafter, the U.S. Supreme Court held in Southwest Airlines Co. v. Saxon, 142 S. Ct. 1783 (2022), that a ramp supervisor who sometimes loaded baggage onto planes was a transportation worker engaged in interstate commerce.  Based on that decision, the Bissonnette panel issued a second opinion, with the same split, reaffirming its earlier holding, although with revisions to the opinions, Bissonnette v. LePage Bakeries Park St., LLC, 49 F. 4^th 655 (9^th Cir. 2022).  It, thereafter, issued another modified and substituted opinion in Bissonnette v. Lepage Bakeries Park St., LLC, 2022 U.S. App. LEXIS 27628 (2^nd Cir. May 5, 2022)[1], which, while I have not parsed line-by-line, seems only to have changed the mandate to reflect that the case “was argued on the district court’s record and the parties’ briefs.”[2]  In each of those decisions, Circuit Judge Jacobs wrote for himself and District Judge Gujarati and also concurred in a separate opinion dealing with the stay provisions of the FAA;  Circuit Judge Pooler wrote in dissent to all three holdings.

Thereafter, appellants moved for rehearing en banc. In Bissonnette IV, the court denies the motion, apparently by a vote of 10-3.  While most decisions on a rehearing merely reflect the denial or grant without elaboration as to who voted in favor or opposition and why, the three opinions here lay out the two sides of the Section 1 debate.  In “a statement of views,” Circuit Judge Jacobs reiterates the view expressed in his earlier opinions that the appropriate focus is on the nature of both the worker and the employer; he or she must be a “transportation worker” in a “transportation industry.”[3]

Circuit Judge Nathan, joined by Circuit Judges Robinson and Perez, issues a dissenting opinion and Circuit Judge Pooler joins them in a statement. Those opinions argue that the majority ignores Saxon by focusing on the industry in which the plaintiffs worked, i.e. baked goods, rather than their specific job, which involved a significant amount of truck driving to pick up product from the warehouse and deliver it to stores.

By bothering to write extensively on the court’s refusal to give the plaintiffs a rehearing, the dissenters are probably trying to highlight the case for the Justices – and their overworked clerks – when the petition for cert. comes up for a vote, thereby emphasizing the confusion that still exists after Saxon.  And, if I were a betting man, in the likely event that Bissonnette files an application for certiorari, I’d put money on SCOTUS’s taking up the challenge and hearing the case in the 2023-24 Term.

FSIA and the New York Convention

In a pair of virtually identical decisions, 9Ren Holdings S.A.R.L. v. Kingdom of Spain, 2023 U.S. Dist. LEXIS 25860 (D.D.C. Feb. 15, 2023), and Nextera Energy Global Holdings, B.V. v. Kingdom of Spain, 2023 U.S. Dist. LEXIS 25862 (D.D.C. February 15, 2023), Judge Chutkan addresses an esoteric issue that is important only to international arbitration litigators. Because of that narrow scope, I’ll largely refer those interested in the issue to the opinions themselves.  In broad brush, however, they deal with the scope of the arbitration exception to the Foreign Sovereign Immunities Act.  Both cases arise out of ICSID arbitrations.  In one, 9 Ren obtained an award against Spain in the amount of 42 million Euros; in the other, the panel awarded Nextera 390.6 million Euros, also against Spain.  Spain alleges that, based upon authority from the Court of Justice of the European Community (CJEU), Slovak Republic v. Achmea B.V., Case No. C-284/16 (March 6, 2018), ECF No. 62-47, Spain had no right to enter into the treaty upon which the arbitrations were based because the treaty assigns questions of EU law to non-EU tribunals. Therefore, Spain argues, FSIA’s exception allowing resolution of applications to confirm arbitration awards “governed by a treaty . . . in force . . . “ is not applicable.  The court holds that there is no question as to the existence  of the treaty.  Whether it is enforceable is “a backdoor challenge to FSIA jurisdiction.”

A second issue is really one for advanced civil procedure class, rather than an arbitration blog.  Nextera and 9Ren sought injunctions to prohibit Spain from seeking relief in courts of the Netherlands and Luxembourg which would “interfere with” the plaintiffs’ confirmation applications in U.S. District Court.  The opinion revolves around the standards for anti-suit litigation and preliminary injunctions.

Bottom line – absent an appeal of the denial of preliminary relief, the plaintiffs can now move forward with their motions to confirm the award. The proceedings in Europe, however, will remain a brooding omnipresence, since those cases are already pending.  What happens if the foreign courts say that they really don’t care what the U.S. says?

Sealing of awards

One of the tensions in post-award litigation is the balance between the parties’ desire for confidentiality and the public’s right to know the basis upon which a court confirms or vacates an award.  Twitch Interactive, Inc. v. FishwoodCo GMBH, 2023 U.S. Dist. LEXIS 26116 (N.D. Cal. February 15, 2023)(DeMarchi, M.J.), is a good starting point for considering those issues. Twitch filed this action to confirm an arbitration award against FishwoodCo. The parties’ arbitration agreement and the JAMS rules under which the arbitration was conducted required the filing of any materials under seal.  Twitch unsuccessfully sought defendant’s permission to file unsealed versions with the court in connection with its petition to confirm, and, before this decision, the court provisionally granted that request “although it was not persuaded that all the information in question met the ‘compelling reasons’ standard for sealing.”  In this opinion, the court grants Twitch’s motion to unseal as to the specific items set forth in the request.

As a threshold matter, Magistrate Judge DeMarchi recognizes that “the fact that the parties agreed to the confidentiality of the underlying arbitration proceedings does not, standing alone, provide a compelling reason to keep them under seal.”  Having reviewed the documents, the court finds that there is “no compelling reason” to maintain the sealing.  She opines that the content thereof simply describes “the nature of Twitch’s allegations and claims,” the procedural history of the arbitration, legal arguments, and “high-level summaries of the relief awarded in the arbitration.”  To the extent that it describes defendant’s business operations, the information “appears to rely on public sources for this information,” and none of it is less than five years old.  Significantly, however, the court does not give carte blanche to the public filing of other portions of the arbitral proceedings. It recognizes that, as of the time of the decision, Twitch did not seek to unseal “trade secrets or other business information that might harm [defendant’s] business interests.”  Therefore, the court limits its holding to the items set forth in an attached table and warns that the unsealing “does not necessarily extend to documents referenced” therein.

Quick Hits

Deference to FINRA in Interpreting Its Rules

Velocity Capital Group, LLC v. BA Securities, LLC, 2023 U.S. Dist. LEXIS 25419 (E.D. Pa. February 15, 2023)(Bartle, J.), relates to a FINRA arbitration.  At issue was whether Velocity breached an agreement to utilize BA exclusively in obtaining a $50,000,000 line of credit in return for a 5% transaction fee. .  The parties’ agreement provided for arbitration “to be conducted by [FINRA] . . . in accordance with [its] rules,” and BA filed a demand for arbitration with that tribunal.  The FINRA administrator held that, under FINRA Rule 12200, the matter should proceed as to BA Securities and Agra Capital, since one of those respondents, BA Securities is a member of the FINRA, even though Agra is not, and both signed the arbitration agreement.  BA Securities and Agra Capital here seek an injunction to bar the arbitration.  Accepting the FINRA decision, the court denies the injunction. “FINRA Rule 12200 applies to a dispute between a customer and a member. There is a dispute between Velocity, a customer, and BA Securities, a member. . . . FINRA has necessarily interpreted Rule 12200 to encompass the claim involving Agra Capital, a non-member. . .  FINRA has latitude to construe its own rules when as here the interpretation is reasonable.”

California Private Attorney General (“PAGA”) claims

The status of arbitrations of “PAGA claims arising out of events involving other employees” has been a recurring issue in California since the Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana, 142 S. Ct. 1906 (2022).  While primarily a California question, the issue has some relevance outside the Golden State, since other jurisdictions which want to limit arbitration of employee claims will be watching the result.  The matter is currently pending before the California Court of Appeals, see Adolph v. Uber Technologies, Inc., Dkt. No. G059860.  According to United States v. University of Southern California, 2023 U.S. Dist. LEXIS 26053 (C.D. Cal. February 14, 2023)(Sykes, J.), argument will be scheduled soon.

California Statute Criminalizing Mandatory Employment Clause Preempted by FAA

There has been a lot written already about last week’s decision in Chamber of Commerce v. Bonta, 2023 U.S. App. LEXIS 3586 (9^th Cir. February 15, 2023), so, in the interest of space, I’ll send you to those sources for more detail. You can find a variety of discussions on Google, LinkedIn, and Twitter.  However, in brief, in an opinion by Circuit Judge Ikuta, writing for herself and Circuit Judge Fletcher, with a dissent by Circuit Judge Lucero, the Court held that the FAA preempts California Assembly Bill 51, which made it unlawful for an employer to impose mandatory arbitration of certain employment disputes, but did not invalidate such agreements.  The majority looks to the practical effect of such legislation on employer behavior, finding that, as a practical matter, the risk of sanctions would make them reluctant to include such provisions. The dissent would have upheld the statute on the basis that it merely reflects the consensual nature of arbitration.

Litigation Waiver

Two cases dealt with claims that a party’s delay in seeking arbitration resulted in the waiver of any such right.  In Stickles v. Atria Senior Living Inc., 2023 U.S. Dist. LEXIS 26659 (N.D. Cal. February 16, 2023)(Alsup, J.), the court finds that there was a waiver when a party waited until after the decision on an outcome-determinative motion for summary judgment prior to making its motion.  In Boustead Securities, LLC v. Leaping Group Co., Ltd., 2023 U.S. Dist. LEXIS 25208 (S.D.N.Y. February 14, 2023)(Caproni, J.), the court holds that a two-year delay in asserting the right to arbitrate was not a per se bar to arbitration.  Nor were three motions to dismiss preclusive. “Courts have long concluded that such pre-answer motion practice does not constitute the sort of significant litigation that weights in favor of a finding that there has been a waiver of an arbitration agreement.”  Besides being a case that should be in the notebook of every litigator who believes he or she may want to make a very late application to compel arbitration, the case is interesting because of its consideration, albeit relegated to a footnote, of the appropriate test for determining waiver after Morgan v. Sundance, Inc. 142 S. Ct. 1708 (2022).  After recognizing that the Second Circuit has not yet decided the issue, Judge Caproni holds that prior Circuit authority still governs waiver arguments, except that she strips the prejudice requirement therefrom.

To those of you in the U.S. Midwest and New England, be careful over the next few days and Winter’s (hopefully last) blast moves through.

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

[1] The Court did not change the date on either of the later opinions,  at least as reported on LEXIS.

[2] The court may be signaling that at least some of the Circuit Judges view the decision as very fact driven.  For anyone trying to distinguish Bissonnette, this footnote may be your key.  Get deep into the case’s appendix in the appeal and see how it may differ from the case you have at hand.

[3] As Senior Circuit Judges, Circuit Judges Jacobs and Pooler did not vote on the rehearing, but, as members of the panel that decided the case, they are authorized to file statements related to opinions challenging the earlier holding.