Are Adhesive Arbitration Agreements are "Corporate America's Oily Trick"?

Salon Magazine says yes.  I take a more positive view of them.  Salon says:

These hidden forced arbitration clauses lurk behind many of the most brutal injustices facing consumers and workers.  For example, a court in Texas recently held that a woman who washed dishes at a fast food restaurant could not sue in court for damages from personal injuries she sustained on the job.  The problem had nothing to do with her argument that she’d been treated unfairly; the problem was that her employee handbook had contained a forced arbitration agreement that dictated that her claims were to be decided by a private arbitrator.

This sort of thing makes me wonder: (1) Could she bring her claim in arbitration or does "could not sue in court" mean for some reason "could not bring her claim at all"? (2) If she could bring her claim in arbitration, did she, and to what result?

15 State Attorney Generals Criticize "Mandatory" Consumer Arbitration

“Mandatory pre-dispute arbitration is procedurally unfair to consumers, and jeopardizes one of the fundamental rights of Americans; the right to be heard and seek judicial redress for our claims,” the Attorneys General wrote to Consumer Financial Protection Bureau Director Richard Cordray, himself a former Ohio Attorney General. “These contractual requirements are neither voluntary nor readily understandable for most consumers.  Often consumers do not recognize the significance of these provisions, if they are aware of them at all. “

The following states’ AGs signed onto the letter: California, Connecticut, Delaware, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts New Mexico, New York, Oregon, Rhode Island, Vermont and Washington. 

Any Republicans among them?

 

Precedent and Lawmaking in International Arbitration

International Arbitrators as Lawmakers by Rahim Moloo and Brian King.

The abstract:

Arbitration scholars and practitioners have, for many years, spilled much ink debating the role of arbitrators as lawmakers. The debate has tended to center on two questions involving the role of precedent. First, should arbitrators treat prior arbitral decisions as a form of precedent, and, if so, to what degree should they rely on them? Second, to what extent should arbitrators view themselves as precedent-makers: Is their role limited to deciding strictly the dispute that is before them, or should they take into account the potential impact of their decision on future awards? Coloring the debate on both questions have been concerns about the implications of the answers for the legitimacy of the international arbitration "regime" as a whole.

The debate has assumed more urgency in certain fields of international arbitration, such as investment treaty arbitration, where the recent availability of an abundance of public awards has spurred much interest within the international legal community. As discussed in this article, this development is unsurprising given that the publicity of awards is, in itself, one of the critical prerequisites to the possibility of viewing arbitrators as lawmakers.

While this Article will touch upon some of the issues highlighted above, its focus is different. We begin from the standpoint that regardless of whether, normatively speaking, one believes that arbitrators should perform a lawmaking function, the fact is that they do. Arbitrators regularly cite to prior awards, appear to consider themselves cabined by them to some extent, and demonstrate concern about the impact that the awards they render may have on the development of the law. Parties, for their part, pepper their pleadings with references to past awards where they are available, seeking to convince the panel to follow or distinguish what tribunals have done before. Given the reality on the ground, it seems appropriate to shift the inquiry from the whether to the when and the what. What kind of law do arbitrators make, and when do they do so? Is the process of arbitral lawmaking legitimate, and are all awards created equal as far as precedential value is concerned? These are the questions that this Article seeks to address.

Oil & Gas Investment Arbitrations

The Environment, Energy and Natural Resources Center of the University of Houston Law Center invitation to a conference October 31, 2014:

The oil & gas industry is one of the key feeders of transnational disputes. As a sector, the oil & gas industry is responsible by far for the most significant element by volume and claim value in investment arbitrations. This traditional role of the oil & gas industry as the bellwether of international disputes will only continue to grow in light of growing resource needs. This potential is reflected in the significant increase in oil & gas investments over the last 10 years. This conference addresses the cutting edge issues faced by the industry in the current market and political conditions focusing on the next wave of significant disputes faced by the industry. Discussion of these developments will provide counsel with insight into the current positions of leading players in the field.

Inherent and Implied Powers of Arbitrators

Loyola Chicago Law Professor Margaret L. Moses writes in her abstract:     

The powers of arbitrators are generally based on the provisions of an arbitration clause agreed to by the parties to an arbitration, including any arbitral rules chosen to govern the arbitration. However, because these short clauses cannot set forth every kind of power that an arbitrator may need in the course of an arbitration, he may have to call on inherent or implied powers. This article sets forth a framework for understanding what is meant by inherent powers and implied powers of arbitrators. The distinction is important, but many commentators and courts use the terms interchangeably. Basically implied powers are those that can be implied or discerned from a textual provision, either in the clause adopted by the parties, or in the arbitral rules chosen by the parties, or in the applicable arbitration law. Inherent powers are those that an arbitrator may need to call on when novel situations occur for which there is no specific rule or authority. In all cases, but particularly with respect to inherent powers, an arbitrator must act with caution not to overstep proper authority and thereby endanger the enforcement of an arbitral award.

Correcting a Flaw in the Arbitration Fairness Act

Correcting a Flaw in the Arbitration Fairness Act by Loyola Law Professor Imre Szalai. in the Journal of Dispute Resolution:

The Introduction:

The proposed Arbitration Fairness Act of 2013 will ban courts from enforcing
arbitration agreements in the employment and consumer contexts. This law will
protect America's employees and consumers by keeping the courthouse door open
to critical civil rights, employment, and consumer protection litigation. However,
the proposed Arbitration Fairness Act suffers from a subtle flaw: it is uncertain
whether the law will apply to the states. This flaw, which arises from one of the
greatest constitutional errors the Supreme Court has ever made, must be corrected
in order to provide the broadest protection to millions of American employees and
consumers, and to prevent years of needless litigation and confusion.

New California Arbitration Statute on Consumer Arbitration Organizations

Robin E. Largent of the California Labor & Employment Law Blog writes:

in an effort to decrease the attractiveness of arbitration as a forum for dispute resolution, Governor Brown signed into law AB 802, which requires major arbitration providers such as JAMS and AAA to publish at least quarterly on their websites (beginning in January 2015) detailed information concerning arbitrations they have handled, including (1) the name of any non-consumer party involved in the arbitration (i.e. the name of the employer), (2) the nature of the dispute (e.g. employment), (3) where the non-consumer party is an employer, whether the employer was the initiating or responding party, (4) the annual wage (in a range) earned by the involved employee, (5) the amount of the claim, which party prevailed, and the amount of any award, including attorneys’ fees, (6) whether the employee was represented by an attorney and, if so, the name of the attorney and the law firm, (7) the name of the arbitrator and the amount of the arbitrator’s fees, and (8) the total number of times the employer previously has been a party in arbitration or mediation before the dispute resolution provider.  This new law has the obvious (and likely intended) effect of destroying the usual benefit of privacy that arbitration and mediation provide.

Former Labor Secretary Robert Reich Against Adhesive Arbitration

Former Labor Secretary Robert Reich is against arbitration clauses in adhesion contracts, which he calls "forced arbitration."  His video is sponsored by Alliance for Justice whose website provides no authority for its potentially-misleading assertions like "one study found that arbitrators rule for companies over consumers 94 percent of the time."

Precedent in Labor and Employment Arbitration

The Use and Abuse of Precedent in Labor and Employment Arbitration, 52 U. Louisville L. Rev. 431 (2014), by Michigan Law Professor Theodore J. St. Antoine.

The abstract:

Today I believe that the vast majority of arbitrators and advocates would agree that precedent has a salutary role to play in the arbitral process. The situation is different, of course, from the function of precedent or stare decisis (translated by a fabled country lawyer as “the mistake stands!”) in the judicial system. There, the hierarchy of courts calls for lower courts to treat as binding the decisions rendered by higher courts. And to maintain the benefits of uniformity, predictability, and stability in the legal system, even the superior courts are reluctant to overturn their own precedent except for some compelling reason.

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.

When Can Courts Substitute Arbitration Organizations?

This question is addressed in “Enforcement Upon theUnwitting: The Overreaching Ability of Courts to Appoint Substitute ArbitrationForums Under the FAA” by Zachary M. Rupiper.

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.

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.

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. 

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.

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.

 

Arbitration of Trust Disputes, Telephonic Hearing, and Whether Arbitrator Exceeded Powers

All this in an interesting recent 8th Circuit case, Brown v. Brown-Thill.

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.

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."

New Rules for Consumer Arbitration

The American Arbitration Association announces its new Consumer Arbitration Rules for cases filed on or after September 1, 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.

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."

Arbitration Award Based on Issue Preclusion (Collateral Estoppel) Enforced

A recent second circuit case confirmed an arbitrator's power to rule against a claim on the ground that of issue preclusion (collateral estoppel).  Specifically, the arbitrator found an Administrative Law Judge had already resolved the relevant issue against the claimant.  The case, American Postal Workers Union, AFL-CIO v. U.S. Postal Service, __F.3d__, 2014 WL 2535249 (2d Cir. June 6, 2014), is discussed here by Liz Kramer.

Settlement of Cases in Arbitration

Commercial Arbitration and Settlement: Empirical Insights into the Roles Arbitrators Play
by Thomas Stipanowich and Zachary P Ulrich, both of Pepperdine University School of Law

Abstract
A wide-ranging new Straus Institute for Dispute Resolution Survey of experienced arbitrators, conducted with the cooperation of the College of Commercial Arbitrators, reflects the growing professionalization of commercial arbitration, increasing competition for cases, and many other trends in arbitration practice. It also shows that a grower percentage of arbitrated cases are being settled prior to award or to the start of hearings, and offers a strong rationale for greater emphasis on the role of arbitrators in setting the stage for or facilitating settlement. Early settlement of a dispute can be a uniquely effective way of minimizing cost and cycle time in dispute resolution, but the role of has not been given significant attention. Survey data indicate that the incidence of settlement varies widely among arbitrators, and suggest that some experienced arbitrators do not perceive their arbitral role as extending to the promotion of settlement. On the other hand, many experienced arbitrators are conducting themselves as proactive managers of the case before them, and many perceive a connection between their activities and settlement. One of the most effective means by which arbitrators “set the stage” for settlement is by ruling on dispositive motions. Other arbitrators have taken more direct action in facilitating settlement, sometimes by serving as both a mediator and an arbitrator with respect to a dispute. This article considers the function of settlement in the quest for economy and efficiency in dispute resolution and various approaches aimed directly at promotion of settlement, such as stepped dispute resolution, creative variants, and “med-arb.” It examines ways in which techniques featured in recent initiatives promoting more cost-effective and expeditious arbitration may also lay the groundwork for settlement; in addition, it explores the more contentious proposals put forward by the CEDR Commission on Settlement in International Arbitration. The article summarizes new Survey results showing a recent increase in the incidence of pre-hearing and pre-award settlement in arbitration, as well as Survey responses reflecting experienced arbitrators’ differing perspectives toward their role respecting informal settlement. Among other things, it focuses on the activities some arbitrators regard as setting the stage for settlement, particularly their handling of dispositive motions in arbitration; it also briefly considers the more controversial approach involving a single individual serving the dual roles of mediator and arbitrator. It concludes with straightforward proposals to stimulate appropriate involvement by arbitrators as well as attorneys and other “stakeholders” in setting the stage for settlement.

The Arbitration Clause as Super Contract

by Drexel Law's Richard Frankel.  The abstract says in part:

judicial reliance on the federal policy favoring arbitration unfairly deprives litigants of access to the courts by pushing cases into arbitration that do not belong there. By creating special rules that favor arbitration and that deviate from state contract law, courts are enforcing arbitration agreements in situations where they would not enforce other agreements. This article questions the basis for the federal policy favoring arbitration and identifies several areas in which courts are relying on it to over-enforce arbitration clauses. Because the original purpose of the Federal Arbitration Act was to make arbitration clauses just like other contracts, this article proposes that courts should not rely on a poorly-conceived federal policy favoring arbitration, but instead should apply general contract principles to arbitration clauses. Doing so best ensures that litigants are not unfairly forced into arbitration in situations where they never agreed to it.

Separately, Frankel testified before the Consumer Financial Protection Bureau:

“A lot of corporate wrongdoing involves cheating consumers out of small amounts of money, but doing that across thousands or millions of people, so that the company makes huge amounts of money,” Frankel said. “What it does is ensure that instead of arbitration being an alternate form of dispute resolution, it guarantees that consumers have no forum at all.”

International Investment Arbitration

Challenging arbitrators under ICSID and UNCITRAL rules.  Challenges of International Investment Arbitrators: How Does It Work and Does It Work? by Chiara Giorgetti of the Richmond University School of Law. The Abstract:      

In this article, I examine and assess how challenges are decided in international investment arbitration, and suggest ways to improve challenge proceedings. The analysis focuses only on the rules of the Convention on the Settlement of Investment Disputes between States and Nationals of other States (ICSID Rules) and the 1976 and 2010 UNCITRAL Arbitration Rules ("UNCITRAL . Rules (1976)" and "UNCITRAL Rules (2010)") because the great majority of international investment proceedings occur under either of those rules. In the first part, I describe the qualities required for an arbitrator's appointment under ICSID and UNCITRAL Rules. I then assess.and compare the standards for challenges under those rules, first procedurally, and then substantially. In the conclusion, I suggest that the ICSID challenges procedures should be amended to be more in line with the UNCITRAL Rules. Specifically, I argue that a neutral and independent body should decide arbitrator challenges in ICSID proceedings. I also argue that the standard applied in challenges to arbitrators in ICSID proceedings is too onerous, and should be interpreted taking into consideration the International Bar Association Guidelines for Conflict of Interest in International Arbitration (IBA Guidelines).

Nursing Home Arbitration Enforced

The South Carolina Supreme Court recently enforced a nursing home's arbitration agreement, in
Dean v. Heritage Healthcare of Ridgeway, LLC, __S.E.2d__, 2014 WL 2771300 (S.C. June 18, 2014).

As Liz Kramer explains:

the agreement said that “any arbitration proceeding that takes place under this [] Agreement shall follow the rules of the [AAA]“.  However, the AAA stopped accepting personal injury disputes based on pre-injury arbitration agreements in 2003.  The nursing home moved to compel arbitration and the trial court denied the motion.  It found that the language about the AAA rules meant that the dispute should be heard by the AAA and since the AAA was not available, the arbitration agreement was invalid.  The Supreme Court of South Carolina reversed.  But before the supremes could get to the merits, they had to overrule their own 1993 decision, which held that nursing home contracts did not involve interstate commerce.  After reviewing the intervening cases from SCOTUS, the court found the nursing home agreement does involve interstate commerce and is governed by the FAA.  On the merits, the court found that the availability of the AAA to administer the arbitration was not a material term and instead the parties’ agreement simply calls for the arbitration to be governed by the AAA rules, regardless of what entity administers the proceeding.

The Nation Magazine Criticizes SCOTUS Arbitration Decisions

The title of the article is How Consumers Are Getting Screwed by Court-Enforced Arbitration

Criticism of SCOTUS Arbitration Cases: Concepcion and Amex

U.S. Supreme Court rulings AT&T Mobility v. Concepcion and American Express v. Italian Colors criticized by Lina Khan who writes that these "decisions culminate a thirty-year trend during which the judiciary, including initially some prominent liberal jurists, has moved to eliminate courts as a means for ordinary Americans to uphold their rights against companies. The result is a world where corporations can evade accountability and effectively skirt swaths of law, pushing their growing power over their consumers and employees past a tipping point."

VACATING LEGALLY-ERRONEOUS ARBITRATION AWARDS

My latest article, which is being published at 6 Yearbook on Arbitration and Mediation 56 (2014).

Abstract: In the United States, arbitrators’ decisions are legally binding. Courts generally confirm and enforce, rather than vacate, arbitration awards. Suppose, however, that the arbitration award is very different from the judgment a court would have rendered had the dispute been litigated, rather than arbitrated. And suppose this is because the arbitrator did not correctly apply the law. If the party that lost in arbitration (the party that would have done better with a correct application of law) asks a court to vacate the award because it is legally erroneous, will the court vacate or confirm the award? And does the answer depend on:

• Whether the parties formed their agreement to arbitrate before or after the dispute arose?
• Whether the agreement’s terms ask courts to vacate or confirm legally-erroneous arbitration awards?
• Whether the arbitrator did not try to apply the law or tried to apply it but did so incorrectly?
• Whether the law the arbitrator did not correctly apply is well-established or in doubt? Simple or complex?
• Whether the law the arbitrator did not correctly apply is mandatory law (binding on the parties despite a contract term to the contrary) or default law the parties may contract around?

These questions are the subject of this article. I suggest that arbitration law in the United States has answered these questions differently over time and that these changes in legal doctrine roughly divide into four eras. Unfortunately, recent Supreme Court cases have left much uncertainty on the fundamental question whether arbitration awards must apply the law correctly to avoid vacatur.

American Arbitration Association Consumer Arbitration

More good work by my University of Kansas School of Law faculty colleague, Christopher R. Drahozal.  Professor Drahozal is serving as a Special Advisor to the Consumer Financial Protection Bureau on its study of arbitration clauses in consumer financial services contracts.

His abstract:

This chapter has provided an overview of consumer arbitrations administered by the American Arbitration Association, the largest administrator of consumer arbitrations. It does not, of course, purport to resolve the ongoing debate over arbitration and access to justice. A consumer’s incentive to bring a claim (and an attorneys’ incentive to take a case) depend on the costs of the process and the expected outcome in the forum. With the recent amendments to its consumer arbitration rules, the AAA reduced the cost to consumers of bringing claims in arbitration, both by lowering the upfront fees and by largely precluding reallocation of fees to consumers in the award. The expected outcome in arbitration (in particular, relative to the expected outcome in court) presents a much more difficult question because limits to available data preclude comparison of similarly-situated complainants. More research remains to be done.

Part of what I like about this chapter’s review of empirical studies is that it points out when selection effects make it hard to draw conclusions from the data.

Arbitration of Stockholder Disputes

Claudia H Allen, of Katten Muchin Rosenman LLP, has written Bylaws Mandating Arbitration of StockholderDisputes? forthcoming in the Delaware Journal of Corporate Law.

The abstract reads as follows:

Would a board-adopted bylaw mandating arbitration of stockholder disputes and eliminating the right to pursue such claims on a class action basis be enforceable? That question came to the fore as a result of late June 2013 decisions from the United States Supreme Court and the Delaware Court of Chancery, which, when read together, suggest that the answer to this question is yes. In American Express Co. v. Italian Colors Restaurant, the United States Supreme Court, interpreting the Federal Arbitration Act, upheld a mandatory arbitration provision, including a class action waiver, in a commercial contract. The decision focused upon the arbitration provision as a contract subject to the FAA. Next, the Delaware Court of Chancery rendered its opinion in Boilermakers Local 154 Retirement Fund v. Chevron Corp. The decision, which emphasized that bylaws are contracts between a corporation and its stockholders, upheld the validity of bylaws adopted by the boards of Chevron Corporation and FedEx Corporation requiring that intra-corporate disputes be litigated exclusively in Delaware courts. Subsequent United States Supreme Court and Delaware Supreme Court decisions addressing forum selection and the board’s power to adopt bylaws have only strengthened the argument.

In addition to complementing each other, both American Express and Boilermakers address a similar issue, namely, the explosion in class action and derivative litigation that settles primarily for attorneys’ fees, most commonly in the context of mergers and acquisitions. Stockholders ultimately bear the costs of such litigation. Class actions and derivative lawsuits are forms of representative litigation, in which named plaintiffs seek to act on behalf of a class of stockholders or the corporation itself. The plaintiffs are customarily represented by attorneys on a contingent fee basis, making the lawyer the “real party in interest in these cases.” If mandatory arbitration bylaws barring class actions were enforceable, the logical outcome would be a marked decline in class actions, since the alleged existence of a class is a principal driver of attorneys’ fees.

This Article examines the legal and policy issues raised by arbitration bylaws, whether adopting such bylaws would be attractive to public companies, likely reaction from stockholders and opportunities for private ordering. Since arbitration is a creature of contract, this article argues that there are opportunities for corporations to craft bylaws that take into account company-specific issues, while responding to many likely criticisms. However, the inherent bias of some stockholders and corporations against arbitration is likely to make experimentation in this area slow and difficult.

California Appeals Court Holds Arbitration Clause Unconscionable

 Sabia v. Orange County Metro Realty, Inc., No. B243141 (2nd Dist. Div. 8 June 18, 2014) summarized by California Mediation and Arbitraiion.

Vacating Arbitration Awards

Liz Kramer reports an Alabama Supreme Court justice's statement: “further reflection has caused me to question whether arbitrators who willfully ignore applicable state law are not, in fact, ‘exceeding their power’ or acting ‘beyond their authority’ within the contemplation of” Federal Arbitration Act Section 10(a)(4).

Venue of Actions To Enjoin Arbitration

A Compelling Case for Streamlining Venue of Actions To Enjoin Arbitration, by Jason W. Burge & Lara K. Richards, in the Tulane Law Review.

"A circuit split has developed regarding whether federal courts have the power to compel arbitrations in districts outside their own, stemming from § 4 of the Federal Arbitration Act’s conflicting permissive versus mandatory venue provisions. There are likewise conflicting opinions regarding whether a federal court can enjoin an arbitration pending in another district. This Article explores the disparate decisions on these issues, arguing that venue for an action to enjoin arbitration should be limited to the district where arbitration is pending in order to promote judicial efficiency, to prevent forum shopping, to avoid inconsistent rulings, and to funnel parties quickly to arbitration."

10th Circuit Holds Unsigned Arbitration Agreement Unenforceable

Bellman v. i3Carbon, LLC, 2014 WL 2210739 (10th Cir. May 29, 2014), discussed by Liz Kramer

The court writes "Defendants argue that Plaintiffs manifested their acceptance of the
Operating Agreement, and specifically the arbitration provision, when they
invested in i3Carbon following receipt of the approximately 200-page
Investment Binder. However, the Operating Agreement included in the
Investment Binder did not have Plaintiffs’ names on it and did not indicate that
Plaintiffs were expected to sign it. Moreover, Plaintiffs have submitted
uncontroverted evidence that (1) i3Carbon never requested that they sign the
Operating Agreement or agree to its provisions, and (2) Plaintiffs, in fact, did
not sign the Operating Agreement."

California Arbitrator Disclosure

California Mediation and Arbitration summarizes recent case applying California statute on arbitrator disclosure:

"Though Code of Civ. Proc., section 1281.9 requires disclosure of “any professional or significant personal relationship” [between arbitrator and party or lawyer], evolving case law doesn’t require disclosure of any professional relationship.  Pointing to rules that are concerned about only two years of relationships (Ethics Stds., std. 7(d)(8)(A), Code of Civ. Proc., section 170.1(a)(2)), the Court concluded a five year old relationship did not need to be disclosed."

Securities Arbitration

Cincinnati Law Professor Barbara Black continues to do good writing on securities arbitration.  Her latest:
The Past, Present and Future of Securities Arbitration between Customers and Brokerage Firms.

Religious Arbitration

Pepperdine Law Professor Michael Helfand continues to write thoughtfully and interestingly about religious arbitration.  By doing so, he fills a gap in arbitration scholarship.  His current article Between Law and Religion: Procedural Challenges to Religious Arbitration Awards

Amex v. Italian Colors and the "Effectively Vindicate" Doctrine

Good article by St. Mary's Law Professor Ramona Lampley  who writes that the Amex case calls into question the very existence of the “effective vindication doctrine.” She argues that to effectuate both the FAA and other statutes courts should compare the costs of arbitration to the costs of proceeding in litigation.

California Employment Arbitration Unconscionability Cases

Summarized by Joel Grossman.  Example: Calif. Court of Appeals holds unconscionable an agreement unless employer provided it in Spanish.

Arbitration Clauses Do Not Cover Every Possible Dispute

Liz Kramer discusses two recent appellate cases in which the disputes were outside the scope of the arbitration clauses.  Both cases relate to health insurance and medical matters.

Consumer Arbitration Debate, CFPB

Participants in this debate include the Consumer Bankers Association's Steve Zeisel, California Arbitration and Mediation's Marc Alexander and Law Professor Imre Szalai.

Was the Federal Arbitration Act Less About Enforcing Agreements and More About Procedural Reform?

Loyola Law Professor Hiro Aragaki is one of the most prolific arbitration scholars of the last few years.  His latest effort, "The Federal Arbitration Act as Procedural Reform," is characteristically thorough and ambitious.  It makes some good points but I won't quote them here because his draft asks that it not be quoted without permission.

Class Waiver Voided in Securities Arbitration

Since the Supreme Court's Concepcion and Italian Colors cases, courts have generally enforced arbitration agreement provisions requiring individual, rather than classwide, adjudication.  In contrast, the Financial Industry Regulatory Authority (FINRA) ruled otherwise for securities arbitration.

Good lawyering by Pace Law Professor Jill Gross and Cincinnati Law Professor Barbara Black, who argued for this result in their article,  Investor Protection Meets the Federal Arbitration Act, 1 Stan. J. Complex Litig. 1 ­­(2012).

As Professor Gross explains at ADR Prof Blog, FINRA held that the Securities Exchange Act constituted a sufficient Congressional command to overcome the FAA’s mandate to courts to enforce arbitration agreements as written.  Since the Exchange Act delegated to the SEC, which in turn delegated to FINRA, the authority to regulate broker-dealers’ arbitration agreements for the protection of investors, FINRA’s rules barring class action waivers and mandating that investors be able to bring class claims in court were enforceable [notwithstanding the FAA].

Arbitration Video by Loyola New Orleans Law Professor Imre Szalai

Professor Szalai's book Outsourcing Justice is here

His strongly-worded video is at this YouTube link

General Mills Abandons its Controversial Arbitration Clause

General Mills' April 19 announcement:

We rarely have disputes with consumers – and arbitration would have simply streamlined how complaints are handled. Many companies do the same, and we felt it would be helpful.

But consumers didn’t like it.

So we’ve reverted back to our prior terms.

New York Times article
Commentary by Bob Sullivan, Consumer Advocate

NY Times Criticizes Class Waivers in Arbitration Agreements

Class Actions v. Payday Lenders Use of Arbitration

Emily Bazelon in the New York Times writes "Getting rid of predatory lenders was a victory for the citizens of North Carolina but the larger question of the right of companies to limit customers’ ability to sue for bad practices has not been rectified" due to the Supreme Court's AT&T v. Concepcion decision.

As Bazelon explains, "Only the Supreme Court can reverse one of its rulings, but Concepcion is based on a statute, which Congress can change. Senator Al Franken, of Minnesota, introduced a bill to bar mandatory arbitration, and even if Congress stalemates, the C.F.P.B. has the power to issue its own regulations on some arbitration claims." 

The phrase "mandatory arbitration" is worth attention.  As University of Kansas Law Professor Chris Drahozal writes:

A frequent criticism of arbitration in consumer contracts is that it is “mandatory.” The criticism is rhetorically powerful because viewing arbitration as “mandatory” is contrary to the whole idea of arbitration: that it is the product of an agreement between the parties. But as Richard Speidel explained, this label is “misleading because it connotes arbitration that is compelled by law regardless of consent.” Arbitration is mandatory when required by law, such as mandatory arbitration of public-employee grievances. No law requires that parties to consumer contracts arbitrate disputes.

Agreeing to Arbitrate When you Download a Coupon

General Mills pushes arbitration in striking ways

Today's New York Times says “the maker of cereals like Cheerios and Chex … has quietly added language to its website to alert consumers that they give up their right to sue the company if they download coupons, ‘join’ it in online communities like Facebook, enter a company-sponsored sweepstakes or contest or interact with it in a variety of other ways.”  A fascinating case about assent to contract terms will arise when someone challenges a this website language: “Please note we also have new Legal Terms which require all disputes related to the purchase or use of any General Mills product or service to be resolved through binding arbitration.”

Ethics in Arbitration

University of Nebraska Law Professor Kristen Blankley has written three thoughtful articles on arbitration ethics.  Here is her latest, which argues  that arbitrators must take a more active role as an “ethics enforcer” given the limited judicial review and questionable applicability of perjury and similar criminal laws to the arbitral forum.

First Circuit Interprets Arbitration Clause Broadly

As Jeremy Telman reports at Contracts Prof Blog, the First Circuit recently interpreted a Verizon arbitration clause broadly to encompass claims that the district court thought could be litigated.  In Grand Wireless, Inc. v. Verizon Wireless, Inc. the First Circuit also held that Verizon's employee could compel arbitration of claims against her: " "Verizon and Grand certainly wished to have their disputes settled by arbitration. Since Verizon could operate only through the actions of its employees, it would have made little sense to have agreed to arbitrate if the employees could be sued separately without regard to the arbitration clause."  

AT&T v. Concepcion: The Problem of a False Majority

Article by John Marshall Law Professor Lisa Tripp and Evan Hanson concludes "Concepcion should viewed as having created no rule of law outside its specific facts and should, ... be treated as not having a majority opinion for precedential purposes."

"waiting for Congress to address the quagmire of mandatory consumer arbitration"

"waiting for Congress to address the quagmire of mandatory consumer arbitration"

a phrase from Michelle L. Caton, Form over fairness: how the Supreme Court's misreading of the Federal Arbitration Act has left consumers in a lurch, 21 Geo. Mason L. Rev. 497-529 (2014), which notes "Of the 139 bills introduced into Congress between 1995 and 2010 that sought to restrict or eliminate various uses of mandatory arbitration, only five were eventually passed into law."



 

California Court Strikes Down Class Waiver Arbitration Clause

California Court of Appeal finds a way around Concepcion and declines to enforce class waiver clause in   Imburgia v. DIRECTV, Inc., B239361 (2nd Dist. Div. 1 April 7, 2014).  As the valuable blog, California Mediation and Arbitration summarizes, "Concepcion does not necessarily invalidate all class action waivers.  The objective of the FAA is to carry out the intent of the parties, and contract interpretation may lead to the conclusion that the parties intended to proceed under state law rules that allow for the invalidation of class action waivers."

Collective Actions and Joinder of Parties in Arbitration

"Collective Actions and Joinder of Parties in Arbitration: Implications of DR Horton and Concepcion"

by UC Irvine Law Professor Catherine Fisk

Berkeley Journal of Employment and Labor Law, Vol. 35, No. 1, 2014, Forthcoming

Professor Fisk argues that employment agreements "to arbitrate individually are unenforceable under the National Labor Relations Act and the Norris LaGuardia Act."  She argues that such agreements are not covered by the Supreme Court’s reasoning in Concepcion and Italian Colors to the extent they prohibit joinder of fewer parties than would be required to bring a large class action and, therefore, remain protected by labor law.

Professor Fisk's article criticizes the Fifth Circuit’s Horton case and questions the practical wisdom of agreements requiring employees to pursue claims only as individuals. "State and federal courts universally allow liberal joinder of plaintiffs and defendants because it is more efficient and avoids some truly thorny issues about the preclusive effect of judgments."

Do Arbitration Organizations Comply with California Disclosure Laws?

Carolyn Said writes in the San Francisco Chronicle that while "a decade-old California law already requires arbitration companies to post data on their cases online. The problem is that many don't do it. A UC Hastings study found that only half post any data, and it's short of what's required."


"The vast majority of California consumer arbitrations, about 95 percent, are done by JAMS (formerly Judicial Arbitration and Mediation Services), the American Arbitration Association or Kaiser's independent administrator, and all of these organizations comply with the disclosure law," said Donne Brownsey, a lobbyist for the California arbitration industry.
"JAMS is compliant with California's consumer arbitration disclosure requirements," the organization's general counsel, John Walsh, said in a statement.

Eleventh Circuit Enforces Class Waiver Clauses in Employment Arbitration Agreements

NLRB v. Courts

Class Action Waivers

While the NLRB says such clauses are unenforceable, courts disagree--including the now the Eleventh Circuit in Walthour v. Chipio Windshield Repair, LLC, 2014 WL 1099286 (11th Cir., March 21, 2014),

Contract Terminated; Arbitration Clause Survives

So says Liz Kramer and the Sixth Circuit in Huffman v. The Hilltop Cos., LLC, __ F.3d __, 2014 WL 1243795 (6th Cir. March 27, 2014), .

The NLRB v. The Courts: Class Actions v. Arbitration

The NLRB holds for class actions

The National Labor Relations Board holds that individual employment agreements may not prevent employees from engaging in protected concerted activity in both union and nonunion environments.

The Board ruled in D.R. Horton that individual, as opposed to collectively bargained, arbitration agreements that are a condition of employment, may not bar collective action through both arbitral and judicial forums.

In contrast, most courts enforce arbitration agreements that foreclose class actions.

See for example, the Fifth Circuit.

This article "The NLRB v. The Courts: Showdown Over the Right to Collective Action in Workplace Disputes" by Boston College Professors Stephanie M. Greene & Christine Neylon O'Brien sides with the NLRB’s interpretation.   American Business Law Journal, Vol. 51, No. 4, 2014

Mass Arbitration and Democratic Legitimacy

Mass Arbitration and Democratic Legitimacy 

This very well written article by UC Davis Law Professor David Horton reviews Margaret Jane Radin’s "dazzling new book, Boilerplate."

Horton's Essay argues that Radin’s democratic degradation thesis is particularly compelling in the context of consumer and employment arbitration.

Allegation that Companies Breach Promises to Pay Consumers' Arbitration Fees

Arbitration Fees: Do Companies Breach Duty to Pay Them?

Via Art Hinshaw at ADR Prof, and Jean Sternlight of UNLV writes that Public Justice's Paul Bland (here) argues that although many companies promise to pay arbitration fees incurred by their customers and employees, "quite a few fail to pay those fees on the rare occasion when someone actually brings a claim against them in arbitration.  The post further discusses how the AAA has begun to send letters to such companies demanding that they stop using the AAA name in company documents. Bland identifies car dealers as a common culprit,"

California's Ethics Standards for Neutral Arbitrators in Contractual Arbitration

California's Ethics Standards for Neutral Arbitrators in Contractual Arbitration

California's Ethics Standards for Neutral Arbitrators in Contractual Arbitration are important because our largest state is a leader in arbitration and these are both rules of ethics and rules of law.  They are made rules of law by California Code of Civil Procedure section 1281.85.

California's Ethics Standards for Neutral Arbitrators in Contractual Arbitration have recently been amended.

Consumer Arbitration by Bruce Wardhaugh

Thoughtful new article, Unveiling Fairness for the Consumer: The Law, Economics and Justice of Expanded Arbitration, by Dr. Bruce Wardhaugh of Queen's University, Belfast.  I appreciate the extent to which he addresses my own articles, particularly Paying the Price of Process: Judicial Regulation of Consumer Arbitration Agreements. 

Bruce Wardhaugh writes "some argue that pre-dispute agreements in consumer (and employment) matters are consumer welfare enhancing: they decrease the costs of doing business, which is then passed on to the consumer. This Article examines these latter claims from both an economic and normative perspective. The economic analysis of these arguments shows that their assumptions do not hold. Rather than being productive of consumer surplus, the use of arbitration is likely to have the opposite effect. The industries from which the recent Supreme Court cases originated not only do not exhibit the industrial structure assumed by the proponents of expanded arbitration, but are also industries which exhibit features that facilitate consumer welfare reducing collusion."

 

The Problem with Class Arbitration

"The Problem with Class Arbitration" is an article by Neil Troum, an adjunct professor at Temple University's Beasley School of Law.  He makes what seems to me a powerful point:

"The current state of the law is: where the parties have consented to class arbitration, an arbitrator can enter a class award that a court will confirm and that will have the same res judicata effect as a class action judgment in court. There is a problem with this. The problem is not the incompatibility of the class action's traits with those of the arbitral realm, however--which is how a majority of the Supreme Court currently sees things. It is instead that an arbitrator possesses what power he has only with the consent of the parties whose claim he will resolve. As a result, a class arbitration judgment should not be deemed to have preclusive effect on absent (i.e., nonconsenting) class members, like a class judgment issued from a court. This is not the law, however."

Supreme Court Decides Investment Arbitration Case

Today, the Supreme Court decided BG v. Argentina, in which an arbitration panel awarded BG $185 million in damages.

The basic issue is who—court or arbitrator—bears primary responsibility for interpreting and applying an investment treaty provision providing for arbitration 18 months after litigation in Argentina’s courts.

The Supreme Court today holds that investment treaties should in some respects be treated like ordinary contracts.  "A treaty is a contract between nations, and its interpretation normally is a matter of determining the parties’ intent. Where, as here, a federal court is asked to interpret that intent pursuant to a motion to vacate or confirm an award made under the Federal Arbitration Act, it should normally apply the presumptions supplied by American law."

The relevant presumptions are those the Supreme Court articulated, primarily in its Howsam decision:

In an ordinary contract, the parties determine whether a particular matter is primarily for arbitrators or for courts to decide.  If the contract is silent on the matter of who is to decide a "threshold" question about arbitration, courts determine the parties’ intent using presumptions. That is, courts presume that the parties intended courts to decide disputes about "arbitrability," e.g., Howsam v. Dean Witter Reynolds, Inc., 537 U. S. 79, 84, and arbitrators to decide disputes about the meaning and application of procedural preconditions for the use of arbitration, see id., at 86, including, e.g., claims of "waiver, delay, or a like defense to arbitrability,"  and the satisfaction of, e.g., " ‘time limits, notice, laches, [or] estoppel,’ " Howsam, 537 U. S., at 85. The [treaty] provision at issue is of the procedural variety.

Yale Law Prof. Opposed to Supreme Court's Arbitration Decisions

Yale Law Professor Judith Resnik in the New York Times objects to "the growing privatization of judging and the closing of access to courts."  She says "The Supreme Court has accelerated this trend through its expansive interpretation of the Federal Arbitration Act."  She asserts "the court stretched that law to apply to consumers and employees."  In contrast, I defend the Court's arbitration decisions on that question here where I wrote in fn.76: 

It is true, as Jean Sternlight argues, that when the FAA was enacted “the economy looked substantially different than it looks today. There were very few transactions between large merchants and individual consumers that would have involved interstate commerce and thus fallen under the jurisdiction of the FAA.”  The great number of transactions now held to involve interstate commerce reflects not only an increase in long-distance consumer transactions, but also the Supreme Court's expansion of the Commerce Clause to cover transactions previously considered beyond the reach of federal legislation. See Henry C. Strickland, The Federal Arbitration Act's Interstate Commerce Requirement: What's Left for State Arbitration Law?, 21 Hofstra L. Rev. 385, 459 (1992) (“Consumer disputes (and other disputes that are the subject of special consideration in state arbitration statutes) were unlikely to find their way to federal court in 1926, because they seldom involved citizens of more than one state[,] and they usually did not meet the requisite amount in controversy. Indeed, Congress may have considered such disputes beyond its commerce power in 1925.”). If applying the FAA to consumer contracts is inconsistent with the intent of the Congress that enacted it, that inconsistency is more properly blamed on the Court's interpretation of the Commerce Clause than on the Court's interpretation of the FAA.

Yale Prof. Resnik also complains that "purchasers of cellphones and prospective employees are frequently required to sign 'contracts' replacing court access with [arbitration] procedures companies choose. These are take-it-or-leave-it deals. If you want a cellphone or a job, you have to agree to private dispute resolution." Maybe if you want that cellphone or that job then arbitration is part of the take-it-or-leave-it offer to the consumer or employee, however, some cellphones (prepaid) and many employers do not include arbitration clauses in their contracts.  Arbitration is one of many factors a consumer or employee may consider in choosing which contracts to form.  I'm generally happy to see arbitration clauses in contracts.  For some reasons see here

Dropbox Adds Arbitration Clause

California Mediation and Arbitration reports the clause has what are now pretty typical provisions for consumer agreements:

Arbitration will be administered by the AAA under the Commercial Arbitration Rules and the Supplementary Procedures for Consumer Related Disputes. 

Arbitration will be held in the US in the county where you live or work, San Francisco (where Dropbox is headquartered) or any other location the parties agree to.

Dropbox will pay arbitration fees for claims less than $75,000.  If you receive a more favorable award than what Dropbox offers to pay, you get a bonus of $1,000, in addition to the award.  Dropbox won’t seek fees and costs in arbitration – unless the arbitrator determines your claim is frivolous.

Exceptions to the arbitration requirement include small claims, or injunctive relief for certain claims.

There is a class action waiver:  “You may only resolve disputes with us on an individual basis, and may not bring a claim as a plaintiff or a class member in a class, consolidated, or representative action.”

Pace University Law Professor Jill Gross writes at the consistently-strong ADR Prof Blog "I wonder whether Dropbox adopted the few consumer-friendly features of the clause simply to please its users, to forestall any finding of unconscionability based on the class action waiver, or to try to retain users who might object."

Arbitration as an Article of Constitutional Faith

Michigan State Law Professor Jim Chen's book review of Georgia Law Professor Peter(Bo) Rutledge’s book, Arbitration and the Constitution (Cambridge, 2012).



Abstract:      

Scarcely any legal question arises in the United States that is not resolved, sooner or later, through arbitration. If Alexis de Tocqueville could survey contemporary American legal culture, he would rub his eyes with amazement at the privatization of adjudication across a wide swath of issues previously committed to judicial resolution. From trade disputes posing serious questions of economic diplomacy to consumer contracts adhering to cell phones and credit cards, mandatory arbitration has displaced conventional adjudication. In the country that de Tocqueville characterized as driven by its dedication to constitutional lawmaking through litigation, arbitration has become a dominant form of dispute resolution with little if any direct doctrinal influence by federal constitutional law. This is the overriding theme of Peter B. Rutledge’s book, Arbitration and the Constitution (Cambridge, 2012).

Arbitration Articles in DePaul Symposium Issue

11 DEPAUL BUSINESS & COMMERCIAL LAW JOURNAL, NO. 4, SUMMER, 2013.

Symposium. Commercial Arbitration: Advancing and Refining the ADR Process. 11 DePaul Bus. & Com. L.J. 441-543 (2013). [H][L][LA][W]

Sklar, Stanley. Arbitration advocacy: its role in business and legal education, and new options for dispute resolution. 11 DePaul Bus. & Com. L.J. 441-453 (2013). [H][L][LA][W]

Lurie, Paul M. Guided choice arbitration. 11 DePaul Bus. & Com. L.J. 455-469 (2013). [H][L][LA][W]

Martin, Christopher. Costs of arbitration and the options for controlling those costs. 11 DePaul Bus. & Com. L.J. 471-481 (2013). [H][L][LA][W]

Varallo, Gregory and John Mark Zeberkiewicz. Delaware private arbitration: an explanation of Delaware's Chancery arbitration program and its benefits. 11 DePaul Bus. & Com. L.J. 483-517 (2013). [H][L][LA][W]

Delaware Private Arbitration: Its Practicality, Constitutionality, and Potential Influence on Other States. John Mark Zeberkiewicz, moderator; Christopher Martin, Hon. Clifford Meacham, Gregory Varallo, panelists. 11 DePaul Bus. & Com. L.J. 519-543 (2013). [H][L][LA][W]