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Tuesday, July 3, 2018

Article Defending Some of the Supreme Court's Controversial Arbitration Decisions

A Short Defense of Southland, Casarotto, and Other Long-Controversial Arbitration Decisions, was just published in the Loyola Consumer Law Review.

The abstract follows:

Scalding criticism of Supreme Court arbitration decisions appeared in the 1990’s and is now widespread. Over twenty years ago, the Supreme Court held that pre-dispute arbitration clauses in adhesion contracts are generally enforceable. Thoughtful scholars then feared threats to consumers' and employees' rights, and today similarly warn that the Court’s recent arbitration decisions “will provide companies with free rein to commit fraud, torts, discrimination, and other harmful acts without fear of being sued.” Professors are not the only sources of strong language opposing the Court’s arbitration decisions. Under the heading “Forced Arbitration Destroys Individual Rights,” a 2015 federal court decision declares: “Today, forced arbitration bestrides the legal landscape like a colossus, effectively stamping out the individual’s statutory rights wherever inconvenient to the businesses which impose them. What is striking is that, other than the majority of the Supreme Court, whose questionable jurisprudence erected this legal monolith, no one thinks they got it right.”

From this alleged consensus of “No one thinks they got it right,” this Article dissents in significant part. While I have long opposed Supreme Court decisions on arbitration law’s separability doctrine and judicial review of arbitration awards, and would reduce adhesive arbitration agreements’ impact on class actions, I continue to sympathize with some of the Court’s long-controversial arbitration decisions.

I choose the word “sympathize” because I believe much of the criticism of the Court’s arbitration decisions does not sufficiently weigh the difficult position the Court was in when deciding those cases. The FAA was enacted in the 1920’s before the landmark federalism case of Erie v. Tompkins, the New Deal’s expansion of the Commerce Clause and thus of federal power to preempt state law, the growth of federal employment and consumer law in the 1960’s and 1970’s, and the ensuing explosion of class actions. Each of these enormous changes to our nation’s legal landscape conflicted with the premises underlying the FAA. While Congress could have amended the FAA to accommodate and be more consistent with these enormous changes, it did not. So, reconciling an old statute with a half century of law in tension with that statute’s premises became the Court’s task.

The Courts’ critics generally argue that the drafters and adopters of the FAA did not intend for it to: (1) preempt state law or (2) cover consumer and employment arbitration agreements. This Article responds to those arguments.

Friday, June 22, 2018

Creator of Arbitral Class Waiver, Alan Kaplinksy, Profiled

Philadelphia lawyer Alan Kaplinsky profiled by Philadelphia Inquirer:

Kaplinsky takes credit for the Arbitration Waiver, an agreement that forces bank customers (and, more recently, corporate employees) to accept arbitration to settle disputes, instead of suing or joining well-financed class-action lawsuits. Kaplinsky had feared that the bureau under Cordray would effectively ban mandatory arbitration. The Trump administration has favored the practice, protecting Kaplinsky’s legacy.

“We made a lot of money defending those suits. So you could say this goes against our self-interest,” Kaplinsky told me. “But I felt class actions were being abused.

Friday, June 8, 2018

Will Securities Exchange Comm'n Permit Arbitration Clauses in Initial Public Offerings?

As Skadden explains, "Historically, the SEC has not permitted forced arbitration clauses in IPOs. The issue last arose in the context of an IPO of a U.S. company in 2012, when the Division of Corporation Finance took the position that it would not use its delegated authority to accelerate the effective date of the company’s registration statement because it was unable to conclude that such mandatory arbitration provisions were consistent with 'the public interest and protection of investors' as required by Securities Act Section 8(a)."

Various commentators weigh in:

IPO-Related Securities Litigation and the Idea of Shareholder Claim Mandatory Arbitration
By Kevin LaCroix

The Uncertain Role of IPOs in Future Securities Class Actions, by Jeff Lubitz, Institutional Shareholder Services,

SEC Weighs a Big Gift to Companies: Blocking Investor Lawsuits
By Benjamin Bain

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. 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

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.