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Tuesday, May 22, 2018

Employment Arbitration Agreements Widespread

Employment arbitration agreements are widespread. New York Times op-ed says:

"Sixty million employees in the United States — at places from Buffalo Wild Wings to Facebook to Goldman Sachs — are now bound by mandatory-arbitration agreements, and of those, 25 million are bound by class-action bans."


Monday, May 21, 2018

Supreme Court Enforces Employment Arbitration Agreement Waivers of Class Actions

The Court in EPIC SYSTEMS CORP. v. LEWIS predictably split 5-4 with conservative justices enforcing the class waivers and progressive justices dissenting. 

Russ Bleemer writes:

The long-running controversy involves arbitration provisions that kick in due to class waivers which prohibit employees from joining class processes—litigation or arbitration—in favor of mandatory, predispute, individualized arbitration to resolve disputes with their employers.

...

[Justice] Gorsuch’s [majority] opinion rejects a 2012 National Labor Relations Board administrative [decision] that held that FAA Sec. 2 removed mandatory individual arbitration from FAA application for employee agreements.  The Court’s opinion notes that the reasoning interfered with a fundamental attribute of arbitration.

After rejecting the Sec. 2 argument, Gorsuch dismantled the employees’ other arguments.  He develops the Supreme Court precedent concerning two clashing federal statutes, finding that the National Labor Relations Act, passed in 1935, didn’t override 1925’s FAA to require class or collective actions.




Saturday, May 19, 2018

Compelling Arbitration of Claims by Plaintiff Who Did Not Sign Arbitration Agreement

Coinbase, which pays cash for bitcoin, had an arbitration clause in its contract with its customer, Crypsty, which used Coinbase's services to steal from Crypsty's customers. One of those customers, Leidel was one of the individuals who filed a putative class action against Cryptsy. Leidel and  Cryptsy's receiver then sued Coinbase, alleging Coinbase aided Cryptsy’s breaches of fiduciary duty, theft, negligence, and unjust enrichment. Plaintiffs alleged Coinbase had these duties pursuant to various federal statutes and regulations.

Coinbase moved to compel arbitration, arguing the receiver was bound by the arbitration clause that Cryptsy formed, and that the doctrine of equitable estoppel bound  Leidel the arbitration clause because his claims relied on a duty owed by Coinbase to Cryptsy’s customers that arose—if at all—under the contract including the arbitration clause.

The Eleventh Circuit affirmed denial of the motion to compel arbitration because Leidel's claims allged breach of duties imposed by the Bank Secrecy Act rather than bearing a significant relationship to the arbitration agreements.

Commentary from Manatt Phelps & Phillips LLP which provides this copy of the Eleventh Circuit's opinion

Hat Tip to Tom Witherspoon

Tuesday, March 27, 2018

The Centrist Case for Enforcing Adhesive Arbitration Agreements

My latest article, The Centrist Case for Enforcing Adhesive Arbitration Agreements, was just published at 23 Harvard Negotiation Law Review 29 (2017)

The Abstract:

"The Politics of Arbitration Law and Centrist Proposals for Reform", 53 Harvard J. on Legislation 711 (2016), explained how issues surrounding consumer, and other adhesive,  arbitration agreements became divisive along predictable political lines (progressive vs. conservative) and proposed an intermediate (centrist) position to resolve those issues. However, "The Politics of Arbitration Law" did not argue the case for this centrist position. It left those arguments for two more articles: (1) "The Centrist Case against Current (Conservative) Arbitration Law", 68 Florida Law Review 1227 (2016), which argued against the overly-conservative parts of current arbitration law; and (2) this Article, which argues against progressive proposals to repeal, not only the overly-conservative parts of current arbitration law, but also the parts of current arbitration law that should be retained. While progressives would prohibit enforcement of individuals’ adhesive arbitration agreements, this Article argues that such agreements generally should be enforced.

Monday, March 26, 2018

Arbitration for Summer Associates at Law Firms?

The law firm of  Munger, Tolles & Olson required its summer associate employees to sign arbitration agreements -- until opposition mounted on social media, the American Bar Ass'n Journal reports.

Law.com also covered this story.

Thursday, March 15, 2018

Arbitration Agreements in Bankruptcy



I spoke on Arbitration Agreements in Bankruptcy at the Missouri Bar Association’s Annual Bankruptcy Institute in Springfield, MO, March 9, 2018,. The topic of arbitration agreements in bankruptcy is addressed in my co-authored 2017 book, Principles of Arbitration, and in a 2018 case by the United States Court of Appeals for the Second Circuit in New York City, Anderson v. Credit One Bank.

My presentation on arbitration agreements in bankruptcy is available on  Ware’s SlideShare.

Monday, February 26, 2018

Supreme Court to Decide Arbitration of Independent Contractor Disputes

The Supreme Court agreed to decide New Prime Inc. v. Oliveira.

Oliveira agreed to work for Prime under an Independent Contractor Operating Agreement stating that the relationship between the parties was that "of carrier and independent contractor and not an employer/employee relationship." This contract said the parties agreed to arbitrate "any disputes arising under, arising out of or relating to [the contract], . . . including the arbitrability of disputes between the parties."

Oliveira filed a class action alleging that Prime violated the Fair Labor Standards Act, as well as the Missouri minimum-wage statute, by failing to pay its truck drivers minimum wage. Prime moved to compel arbitration under the FAA. Section 1 of the FAA provides that the Act shall not apply "to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." The Supreme Court has interpreted this section to "exempt[] from the FAA . . . contracts of employment of transportation workers."

The First Circuit Court of Appeals denied Prime's motion to compel in stating “a transportation-worker agreement that establishes or purports to establish an independent-contractor relationship is a contract of employment under § 1,” and thus excluded from the FAA.

Thursday, February 15, 2018

Adhesive Arbitration Agreement with Consumer Already Litigating?

The U.S. Court of Appeals for the 11th Circuit refused to enforce an adhesive arbitration agreement between a bank and a consumer customer already suing that bank.

The Dasher v. RBC Bank (11th Cir. Feb. 13, 2018) plaintiffs alleged the bank had processed debit card transactions in such a way that it would increase overdraft charges. When the suit was brought, the bank had no arbitration agreement with plaintiffs, but during the case the bank sent customers an amended customer agreement that included an arbitration provision. By continuing to use their bank accounts, the customers arguably assented to the amended customer agreement. But the 11th Circuit said that was overridden by the fact that, as Liz Kramer puts it, "Through counsel, the named plaintiff [customer] was fighting the motion to arbitrate in the courts."

Kramer's Arbitration Nation blog goes on to say: "This is an important decision for many reasons.  First, it offers future courts an alternative argument to  “waiver” in situations like this one.... Second, it offers an important reminder to defendants that courts do not take kindly to repeated motions to compel arbitration based on evolving arbitration agreements." 

Saturday, December 23, 2017

Arbitrators' Subpoena Powers

The Ninth Circuit recently discussed arbitrators' subpoena powers and discovery in the case of CVS Health Corporation v. Vividus, LLC, No. 16-16187 (9th Cir. Dec. 21, 2017).

The court held that while Federal Arbitration Act Section 7 gives arbitrators the authority to subpoena witnesses for a hearing, including bringing documents to the hearing, it does not give arbitrators power to subpoena documents prior to a hearing. 

Loyola New Orleans Law Professor Imre Szalai writes:
"The Ninth Circuit noted that its decision conflicted with the Eighth Circuit, which has held that section 7’s broad subpoena power for a hearing encompasses the lesser subpoena power regarding pre-hearing discovery...In my view, the Ninth Circuit is interpreting the FAA correctly, as originally intended.  (Remember, back in the 1920s, broad pre-hearing discovery as we know it today under the Federal Rules of Civil Procedure did not exist.)"

 Video of oral argument  https://www.youtube.com/watch?v=C0FgDZ7csT4

Tuesday, December 19, 2017

Reinsurance Arbitration

Reinsurance arbitration is the focus of a recent article by Jeff Stempel, a professor at the University of Nevada's Boyd School of Law.

The article, in Penn State University's Arbitration Law Review is Notes from a Quiet Corner: User Concerns About Reinsurance Arbitration – And Attendant Lessons for Selection of Dispute Resolution Forums and Methods.

The abstract:

Arbitration between insurers and reinsurers – those who insure insurance companies – should logically run as smoothly as any arbitration process. Like the traditional commercial arbitration that drove enactment of the Federal Arbitration Act, reinsurance arbitration involves experienced actors in a confined industry in which the parties should be constructively aware of the rules, norms, customs and practices of the industry. But in spite of this, reinsurance arbitration experiences consistent problems of which the participants complain. This article reviews the complaints and exams possible solutions – including the possibility of arbitrating less and litigating more. Although these possible solutions would seem to have enough merit for at least some experimentation, reinsurers and insurers are unlikely to stray far from the existing arbitration system in spite of its shortcomings.

Sunday, November 26, 2017

Arbitration of Sex Discrimination Cases

"Comparing the Effects of Judges' Gender and Arbitrators' Gender in Sex Discrimination Cases and Why It Matters" is the title of an article by Professor Pat K. Chew, of the University of Pittsburgh School of Law

Prof. Chew's abstract:

Empirical research substantiates that the judges’ gender makes a difference in sex discrimination and sexual harassment court cases. The author’s study of arbitration of sex discrimination cases administered by the American Arbitration Association between 2010 and 2014, however, finds that this judges’ “gender effect” does not occur. Namely, there is no significant difference in the decision-making patterns of female and male arbitrators as indicated by case outcomes.

The author proposes that characteristics of arbitrators, the arbitration process, and arbitration cases all combine to help explain the gender effect differences. Further, she suggests that this analysis reveals concerns about the arbitration process more broadly: do the employers’ advantages as a repeat player, the arbitrators’ competitive pressures, and the arbitrators’ unmonitored discretion in decision-making all combine to explain both the gender effect differences and problematic biases in the arbitration process? 

Saturday, October 28, 2017

V.P. Pence Casts Deciding Senate Vote to Overrule CFPB Rule Against Arbitral Class Waivers

The Vice President cast the 51st Senate vote Tuesday to repeal the Consumer Financial Protection Bureau’s rule banning class-waivers in consumer financial services contracts' arbitration clauses.
The senate thus joined the house in using the Congressional Review Act which allows Congress to overturn an agency's recently finalized rule by a majority vote.

American Banker writes "Financial companies and the powerful U.S. Chamber of Commerce both opposed the rule, joining Republicans who claimed that the new regulation would expose financial companies to costly class-action lawsuits that rarely deliver significant compensation for plaintiffs. They pointed to a CFPB study that found that consumers who went through a closed-door arbitration process received more than $5,000 on average opposed to $32 in class-action lawsuits."

Slate quotes the NY Times as saying "The [CFPB] found that once blocked from suing, few people went to arbitration at all. And the results for those who did were dismal. During the two-year period studied, only 78 arbitration claims resulted in judgments in favor of consumers, who got $400,000 in total relief.”

NBC News points out "Two Republicans sided with Democrats to keep the rule — Lindsey Graham of South Carolina and John Kennedy of Louisiana." That these GOP defections were not the usual defectors--like McCain, Murkowski, Collins, Snowe, or Paul--but southern conservatives, perhaps indicates the pressure to defect came primarily from trial lawyers--often a particularly strong factor in  otherwise-conservative southern states.