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Sunday, September 28, 2014

Arbitration Clauses in Military Servicemembers Credit Agreements

The New York Times reports:

The changes, which are being proposed by the Defense Department, would strengthen protections for military members by vastly expanding the kinds of credit covered by the law’s interest rate cap. The proposal also requires that creditors enhance their disclosures to military members, mandating that the lenders tell military members that they should first try to find alternatives to the costly forms of credit.
Creditors could also no longer require service members to agree to arbitration, a concession that would strip borrowers of their rights to fight in court.

Friday, September 26, 2014

When Can Courts Substitute Arbitration Organizations?

The Abstract:      

Section Five of the Federal Arbitration Act (“FAA”) allows courts to appoint a replacement arbitration forum when the designated arbitration forum is unavailable. However, it is unclear how far the power to replace extends, with the Seventh Circuit in 2013 deepening a current circuit split involving the Section Five replacement power. The Third, Fifth, and Eleventh Circuits recognize the integral part rule, which does not allow a court to appoint a replacement arbitration forum if the designation of the forum in the contract is considered integral. The Seventh Circuit is the lone circuit that has rejected the integral part rule in its entirety, and allows the appointment of a replacement arbitration forum no matter the contract. Furthermore, of the circuits that recognize the integral part rule, only the Fifth Circuit has applied the rule in a way that recognizes an arbitration forum designation as integral. This Note recommends that the Supreme Court adopt the integral part rule, and the application of the rule that finds arbitration forum designations integral to a contract. Such action by the Supreme Court would be justified by traditional contract principles and the congressional intent of the FAA.

"The hermetically-sealed vault of private arbitration"

Cardozo Law Professor Myriam E. Gilles writes:

Companies, anxious to avoid any and all exposure to class actions are highly motivated to insert confidential, one-on-one arbitration mandates into the standard-form agreements that, over these same thirty years, have come to govern their relationships with employees, consumers, direct purchasers, and all manner of counterparties. As a result, all disputes under these agreements – whether they would have otherwise been brought as class or individual claims – will now be shunted into the hermetically-sealed vault of private arbitration, where there is no public, transparent decision-making process, much less stare decisis or common law development.

Her paper is entitled "The End of Doctrine: Private Arbitration, Public Law and the Anti-Lawsuit Movement"

Arbitration Clauses and Other Online Contract Terms

Interesting and well written article, Notice, Assent, and Form in a 140 Character World, by Widener University Law Professor Juliet M. Moringiello

She writes

From the earliest days of internet contracting disputes, courts and scholars used the terms “clickwrap” and “browsewrap” to describe the different types of electronically presented terms, with clickwrap referring to terms to which party could accept only by clicking a web site button and browsewrap denoting terms for which no click was required and which often provided that a web site user accepted them merely by browsing the web site....
The recent opinion in Tompkins v. 23andMe, Inc., Case No. 5:13-CV-05682-LHK, N.D. Cal., June 25, 2014. illustrates both the doctrinal confusion that can result from adherence to a electronic contracting lexicon that is limited to the terms “clickwrap” and “browsewrap” and the tendency of courts to hold that so long as there is notice of the notice of contract terms, a contract will be formed when the web site user takes the requested acceptance action. The dispute involved a personal genetics company that provided individuals with a genome profile developed from a DNA sample. Numerous customers of 23andMe filed class action complaints against the company alleging various false advertising and consumer protection claims, and the company moved to compel arbitration, citing the plaintiffs’ agreement to arbitrate.

Tuesday, September 23, 2014

Preclusion in Arbitration as a Replacement for Class Actions

Arbitration agreements often require individual, rather than class, adjudication.  This can make it harder for plaintiffs' lawyers to bring small claims cost-effectively.  Ideas for plaintiffs' lawyers are well articulated by Cardozo Law Professors Myriam E. Gilles & Anthony J. Sebok in their paper
Crowd-Classing Individual Arbitrations in a Post-Class Action Era.  I must say some of these ideas occurred to me (when I was an expert witness in a case involving arbitration agreement's effect on small claims) and others, but I don't think anyone explains them as well or as thoroughly as Gilles & Sebok do. Really useful scholarship.

Their Abstract:

Class actions are in decline, while arbitration is ascendant. This raises the question: will plaintiffs’ lawyers skilled in bringing small-value, large-scale litigation – the typical consumer, employment, and antitrust claims that have made up the bulk of class action litigation over the past forty years – hit upon a viable business model which would allow them to arbitrate one-on-one claims efficiently and profitably. The obstacles are tremendous: without some means of recreating the economies of scale and reaping the fees provided by the aggregative device of Rule 23, no rational lawyer would expend the resources to develop and arbitrate individual, small-value claims against well-heeled defendants. But despite these complications, we think there are at least two possible models that might allow for informal aggregation of like claims in at least some subset of cases.

One hybrid model would seek a judicial liability judgment upon which serial, individual arbitrations could later rely. This judgment could take a number of different forms – whether a declaratory class action judgment or a decision rendered in a public enforcement action – so long as it has preclusive force that can be leveraged in subsequent arbitration hearings. A second, complementary model envisions “arbitration entrepreneurs” (either lawyers or non-lawyers) purchasing legally-identical, individual claims which our legal capitalists believe to have value in the arbitral forum. Upon procuring as many discrete claims as the market will bear, the arbitration entrepreneur would seek to resolve the hundreds or even thousands of claims she has amassed in a single arbitral session. With one arbitration entrepreneur as the lawful owner of a multitude of claims, this form of aggregation implicates neither the prohibition against class arbitration nor the contractual definition of “a claim” subject to arbitration.

The hybrid model and the claims-buying model may work independently or synergistically, depending on the case, the form that the public declaration of liability takes, and the incentives of the lawyers and entrepreneurs involved. For example, in the appropriate case, claims-buying entrepreneurs may determine that a (b)(2) declaratory judgment class action creates more and better opportunities to bundle and capture claims than market forces alone. Similarly, lawyers who obtain a judgment under the hybrid approach may determine that the best way to monetize this victory is to buy up many claims for collective arbitration. Indeed, these models present a host of possibilities, and an equal number of potential challenges; this paper is but a first step in describing and analyzing the benefits and costs of these approaches.

Sunday, September 14, 2014

Objecting to Appointment of Arbitrators and Postponing Arbitral Hearings

California case summarized by California Arbitration and Mediation involving the arbitration organization, Alternative Resolution Centers (ARC), and mentioning another one: ADR, Services, Inc.,  California's options for arbitration extend beyond the American Arbitration Association and JAMS. 

Wednesday, September 10, 2014

Transparency in Arbitration

Indiana University Professor Lisa Blomgren Amsler (formerly Bingham) has written "Combating Structural Bias in Dispute System Designs That Use Arbitration: Transparency, the Universal Sanitizer."

The abstract:

Employers and businesses adopt adhesive arbitration clauses as a means to manage the risk of litigation and perceived “runaway” jury awards. Mandatory or adhesive arbitration describes the power of an economically stronger repeat player to impose an adhesive binding arbitration clause on the weaker, usually one-shot, player. In this brave new world, how can we combat structural bias built into dispute system designs (“DSDs”) that include mandatory or adhesive arbitration clauses? This essay will explore transparency and disclosure as means to that end. First, it will discuss institutional analysis and DSD to examine indicia of structural bias. Second, it will rely on other excellent scholarship to review the current state of the law and instead focus on the relative lack of remedies available to employees and consumers from the courts, Congress, or the executive branch. Third, it examines scholarly proposals to address the gap in remedies. Finally, it explores the various ways employees and consumers might engage in self-help to promote transparency as a means to accountability for biased arbitration systems.

Tuesday, August 19, 2014

Court Declines to Enforce Website's Arbitration Clause

The 9th Circuit yesterday declined to enforce an arbitration agreement contained in Barnes & Noble’s website’s Terms of Use.

The appellate court said “We agree with the district court that Barnes & Noble did not provide reasonable notice of its Terms of Use, and that Nguyen therefore did not unambiguously manifest assent to the arbitration provision contained therein.”

Good commentary by Technology & Marketing Law Blog.


Friday, August 15, 2014

Broadly Interpreting Arbitration Agreements, Effectively Vindicating Statutory Rights

The 10th Circuit broadly interpreted an arbitration clause in a non-compete agreement  to require arbitration of claims under the Fair Labor Standards Act because federal law requires all ambiguities about the scope of the agreement to be resolved in favor of arbitration.  Sanchez v. Nitro-Lift Technologies, LLC, __ F.3d__, 2014 WL 3882543 (10th Cir. Aug. 8, 2014).  The court remanded to the district court to determine whether the fees of arbitration precluded the plaintiffs from effectively vindicating their federal statutory rights.  Liz Kramer's summary.

Wednesday, August 13, 2014

A Solution to the Class Arbitration Problem?

by Emanwel J. Turnbull: "This Article proposes that parties and arbitral fora opt out of the American procedural morass (and the attendant long-running disputes about American class actions) by adopting an English procedural rule for aggregation."

Wednesday, August 6, 2014

Monday, August 4, 2014

Arbitration and Non-Signatories

California Arbitration and Mediation summarizes a recent case in which defendants who did not sign an arbitration agreement could nevertheless enforce that arbitration agreement to stay litigation and compel arbitration of the claims against them.  The California Court of Appeal: “agents of a signatory party, sued in that capacity by another party to an agreement, are entitled to the benefit of the agreement’s arbitration provisions.”

Arbitration and Unconscionability

Savannah Law Professor Susan Landrum has written Much Ado About Nothing?: What the Numbers Tell Us About How State Courts Apply the Unconscionability Doctrine to Arbitration Agreements  Marquette Law Review, Vol. 97, No. 3, 2014.

The abstract:

This Article evaluates how state courts have applied the unconscionability doctrine to contracts, including those involving arbitration agreements. Numerous scholars have been critical of state courts’ application of the unconscionability doctrine to arbitration agreements and have argued that, because state courts are often skeptical or even hostile to arbitration, at least some state courts have used the unconscionability doctrine more often to invalidate arbitration agreements than other types of contract provisions. These assumptions hold true for some individual states or limited time periods, but further research was necessary to determine if the assumptions are true more broadly. For purposes of this study, I analyzed the unconscionability case law, a total of 460 cases, from twenty states — Alaska, Arkansas, Colorado, Illinois, Maine, Maryland, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, and Vermont — during the time period from 1980 to 2012. The results of my research demonstrate that there is significant variation in how courts apply the unconscionability doctrine. Moreover, this Article shows that, for many of these states, the assumptions that scholars have had regarding state courts’ hostility to arbitration agreements, and those courts’ willingness to use the unconscionability doctrine as a means of invalidating arbitration provisions, are not always supported by the case law. Instead of applying generalized assumptions, it is necessary to delve deeper into the case law of each individual state to understand that state’s use of the unconscionability doctrine in the context of arbitration agreements.

Thursday, July 31, 2014

President Obama's Executive Order Against Employment Arbitration

President Obama today signed a new Fair Pay and Safe Workplaces Executive Order refusing to grant government contracts of over a million dollars to employers who contractually require their employees arbitrate certain disputes.  UNLV Law Professor Jean Sternlight's commentary says "This new order mirrors protections Congress already provided to employees of Defense Department contractors in 2011."