PBS Video on Employment Arbitration

This PBS documentary provocatively entitled "How Forced Arbitration Tipped the Scales" traces employment arbitration controversies from Wall Street in the 1990's to the #MeToo era. Appearances by lawyers Cliff Palefsky and Alan Kaplinsky.

Harvard Law Seminar on "Forced Arbitration"

The instructor, Deepak Gupta, is a principal at Gupta Wessler PLLC, an appellate boutique in Washington, DC, and a former Senior Counsel at the Consumer Financial Protection Bureau. "He has represented consumers, workers, and small merchants in key cases on forced arbitration before the U.S. Supreme Court, including AT&T Mobility v. Concepcion and American Express v. Italian Colors" according to the Harvard course description.

For my arguments against the phrase "forced arbitration", see p.43 of The Centrist Case for Enforcing Adhesive Arbitration Agreements, 23 Harvard Negotiation Law Review 29 (2017)

House Passes Bill to Ban Consumer and Employment Pre-Dispute Arbitration Agreements

The U.S. House of Representatives approved the Forced Arbitration Injustice Repeal (FAIR) Act, 225-186, last Friday, September 20, 2019. The FAIR Act would amend the Federal Arbitration Act to state that “no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to an employment dispute, consumer dispute, or civil rights dispute.” In effect, this act bans adhesive arbitration agreements in many employment and consumer transactions.  The act would also invalidate similar current arbitration agreements for disputes that arise after the law goes into effect. 

The White House has issued a statement opposing the passage of the FAIR Act. Alan Kaplinsky writes "The Senate currently consists of 51 Republicans, 47 Democrats, and 2 independents who caucus with the Democrats.  Given that there are at least two Republican Senators who would likely support the FAIR Act (Senators Graham and Kennedy), there could be enough votes in the Senate to pass the FAIR Act.  For that reason,  it is comforting to know that President Trump would veto the FAIR Act.  Should he do so, it is very doubtful that there would be enough votes in the Senate to override the veto."

Opposition to the FAIR Act by Jennifer Braceras in The Hill. Support for it in HuffPo and Vox

Employee Remaining on the Job is Assent to Arbitration Agreement

The California Court of Appeals in Diaz v. Sohnen Enterprises, Inc. overturned a district court decision denying a motion to compel arbitration agreement.

Sohnen Enterprises held a meeting at which it informed employees that it was introducing a new arbitration agreement. Sohnen told employees that if they chose not to sign the new agreement but continued to work then that would mean they accepted the arbitration agreement. Erika Diaz refused to sign the arbitration agreement but continued to work for Sohnen from December 2 to 23. She then had her lawyer send her employer a letter saying that she planned to keep working but did not accept the arbitration agreement. After bringing a workplace discrimination case, Diaz challenged the employer’s motion to compel arguing that she never assented to the new agreement. The court of appeals, over a dissent, disagreed saying that her decision to continue work was an implied assent to the agreement. By the time her lawyer sent a letter Diaz was already bound.

National Law Review and Manatt discuss the case.

Delegation Clauses in Arbitration Agreements

The Missouri Supreme Court analyzed delegation clauses in  State ex rel. Newberry v. Jackson, 2019 WL 2181859 (May 21, 2019). Employees bringing a workplace discrimination claim challenged the delegation provision in an arbitration agreement contained in an employment contract. The employment contact at issue here incorporated the AAA rules, which delegate decisions about enforceability to the arbitrator. The US Supreme Court's decision in Rent-A-Center held that delegation clauses are severable from arbitration clauses much as Prima Paint long ago held that  an arbitration agreement is a separate component of a contract and, therefore, to avoid a motion to compel a party needs to challenge the arbitration agreement and not just contract as a whole. The Missouri Supreme Court says that a delegation clause in an arbitration agreement is similar and must be specifically challenged to avoid delegation to the arbitrator. The Court also found that no such specific challenge was made in this case. 

Arbitration Nation goes into more depth on the decision and the issue of separability/delegation as a whole.

Family Law Arbitration Around the World

It’s Arbitration, But Not As We Know It: Reflections on Family Law Dispute Resolution, by
Wendy Kennett, compares family law arbitration in many different countries.

H/t to Professor S.I. Strong

Statutes of Limitation (and Repose) May not Apply in Arbitration

"A statute of repose, as opposed to a statute of limitation, with a few exceptions, means that no matter when the claimed defect is 'discovered,' the claim is barred if not brought within a specific period of time after substantial completion", explain lawyers with Bradley Arant. In contrast, statutes of limitations generally don't start running until the plaintiff discovered, or should have discovered, the facts supporting the claim.

The lawyers say a recent arbitration panel ruled that Tennessee's four-year statute of repose did not apply in arbitration, and that other arbitrators and courts have ruled similarly about various states time bars.

Did Arbitration Save Uber $80 Million?

Did Uber's payout to its drivers fall by $80 million due to an enforceable arbitration clause? That's the impression given by Johana Bhuiyan in the LA Times:

"Uber agreed to pay $20 million to settle lawsuits challenging the classification of drivers as independent contractors, rather than employees owed the benefits of traditional employment.

The payout is a far cry from the $100 million Uber had agreed to pay to settle the suit in 2016, after a San Francisco judge granted 385,000 drivers in California and Massachusetts class-action status. Eventually, a judge determined $100 million was not sufficient given the original class size.

But an appeals court ruling found Uber’s mandatory arbitration agreements — which obligate workers to settle their claims with the company one-on-one — were largely valid and enforceable.

That ruling, and Uber’s decision in May to maintain its policy of upholding its arbitration clause in cases unrelated to sexual misconduct, ultimately reduced the class to about 13,600 drivers, who had either opted not to agree to mandatory arbitration or drove for Uber before the company implemented such a policy."

Shannon Liss-Riordan, the plaintiffs' lawyer representing drivers, is running for U.S. Senate in a primary challenge to Massachusetts Democrat Ed Markey.

Consumer Arbitration Radvocate and Data on AAA Consumer Arbitrations

Radvocate says it "is not a lawyer or a law firm. Radvocate is a service that automates companies' dispute resolution processes to help you bring consumer arbitrations." Alison Frankel at Reuters describes Radvocate as a "legal tech startup" while citing its analysis of American Arb. Ass'n (AAA) data on the number of consumer arbitrations.

Frankel writes that a "mere 895 consumer arbitrations were resolved by AAA in the first quarter of 2019" but "That’s the third-highest quarterly number since 2016." Frankel continues: "the company that resolved the most arbitration claims in the first quarter of 2019 was AT&T, which, together with its subsidiary DirecTV, completed 111 consumer arbitrations in the timeframe. Citibank resolved 44 cases; Credit One, 40; and Comcast, 36."

HT Tom Witherspoon

Partisan Divide in SCT Arbitration Cases

The partisan divide in Supreme Court arbitration cases continued this spring with Lamps Plus Inc. v. Varela, No. 17-988 (April 24), in which the 5 justices appointed by Republican presidents comprised the majority and the 4 justices appointed by Democratic presidents dissented. When the SCT agreed to take the case last year, I wrote "The US Chamber of Commerce wants the Ninth Circuit reversed...  Public Citizen predictably opposes the Chamber on this case."

The Ninth Circuit had affirmed interpreting the arbitration agreement to authorize class arbitration, by distinguishing Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 55 U.S. 662 (2010), which held that an agreement's silence on class arbitration was not enough to authorize it. In Lamps Plus, the Ninth Circuit found agreement to class arbitration in contract language stating that “arbitration shall be in lieu of any and all lawsuits or other civil legal proceedings” and a description of the substantive claims subject to arbitration.

But Chief Justice Roberts' majority opinion ruled this contract language merely ambiguous and thus  “cannot provide the necessary contractual basis for concluding that the parties agreed to submit to class arbitration.”

Justice Ginsburg's dissent said “mandatory individual arbitration continues to thwart ‘effective access to justice’ for those encountering diverse violations of their legal rights.”

Interestingly, Justice Thomas, who ordinarily opposes FAA preemption of state law, wrote a separate concurrence nevertheless joining his fellow conservatives in finding such preemption here.

Lots of good commentary on the case linked by Edith Roberts at SCOTUSblog

American Arbitration Association Contrasted with Trade Association Arbitration

Commercial arbitration's different types -- such as the contrast between the AAA and trade associations -- are discussed in my recent article: Stephen J. Ware, Private Ordering and Commercial Arbitration: Lasting Lessons from Mentschikoff, 2019 J. Disp. Resol. (2019).

It revisits the classic work of Soia Mentschikoff who detailed a
thoroughgoing form of private ordering in trade association arbitration that
privatizes all three of:

(1) lawmaking (through arbitrators applying industry trade rules rather than
governmental law, and through the precedential effect of arbitrators’ reasoned
awards);
(2) adjudication (through arbitration procedures quite different from courts’
rules of procedure and evidence); and
(3) enforcement of the adjudicator’s decision (through private sanctions
culminating in expulsion from the association).

By contrast, she shows that the general commercial arbitration typical of the
AAA often includes only the second of these three forms of privatization.

A summary from Beth Graham at DisputingBlog.

11th Circuit Denies Motion to Compel Arbitration of Telephone Consumer Protection Act Claim

In Gamble v. New England Auto Finance, Inc. the Eleventh Circuit Court of Appeals held that a loan agreement’s arbitration clause did not cover the plaintiff’s Telephone Consumer Protection Act (TCPA) claim. Plaintiff Gamble and New England Auto Finance, Inc. (“NEAF”) formed the auto loan agreement which requires arbitration of disputes that “arise[] from or relate[] to this Agreement or the Motor Vehicle securing this Agreement.” After the loan was paid off, NEAF began sending Gamble text messages and persisted even after Gamble requested NEAF stop, so Gamble brought a TCPA claim.

The Court refused to grant NEAF’s motion to compel arbitration because “Gamble’s TCPA claim ...arises not from the Loan Agreement or any breach of it, but from post-agreement conduct that allegedly violates a separate, distinct federal law.” The Eleventh Circuit pointed out that Gamble could bring a TCPA claim even if no agreement at all existed between Gamble and NEAF. Since Gamble paid off the loan and the texts did not arise from or relate to anything contained in the loan agreement the scope of the arbitration provision did not include Gamble’s claim.

Today's #Arbitration Hearing before the Senate Judiciary Committee

Video of the hearing with the following witnesses:

Mr. Kevin Ziober
Navy Reservist
Newport Beach , CA

Professor Myriam Gilles
Professor Of Law
Benjamin N. Cardozo School Of Law
Yeshiva University
New York, NY

Mr. Alan S. Kaplinsky
Partner
Ballard Spahr LLP
Philadelphia , PA

Mr. F. Paul Bland, Jr.
Executive Director
Public Justice
Washington , DC

Mr. Alan Carlson
Italian Colors Restaurant
Oakland , CA

Mr. Victor E. Schwartz
Co-Chair, Public Policy Practice Group
Shook, Hardy, & Bacon LLP
Washington , DC

Kentucky Revives Enforceability of Employment Arbitration

Kentucky's governor recently signed a bill enabling employers to require an employee or person seeking employment to execute an agreement for arbitration as a condition or precondition of employment. This legislation overrules the Kentucky Supreme Court decision in Northern Kentucky Area Development District v. Danielle Snyder which relied on a Kentucky statute forbidding any “employer [from requiring] as a condition or precondition of employment that any employee or person seeking employment waive, arbitrate, or otherwise diminish any existing or future claim, right, or benefit to which the employee or person seeking employment would otherwise be entitled.” KSA 336.700(2). The Kentucky Supreme Court ruled the Federal Arbitration Act (FAA) did not preempt the Kentucky statute because, instead of targeting arbitration specifically, the  KSA 336.700(2) “is a law that prohibits employers from firing or failing to hire on the condition that the employee or prospective employee waive all existing rights that employee would otherwise have against the employer.”

Missouri Supreme Court Enforces Arbitration Agreement in At-Will Employment

An at-will employee argued that his promise to arbitrate was not supported by consideration. Soars v. Easter Seals Midwest, 563 S.W.3d 111 (Mo. 2018). While both lower courts agreed with the employee and thus refused to compel arbitration, the Missouri Supreme Court reversed because the agreement “includes a delegation clause, identical to the one upheld in Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (2010), providing:

The Arbitrator, and not any federal, state, or local court or agency, shall have

exclusive authority to resolve any dispute relating to the interpretation,

applicability, enforceability or formation of this Agreement including, but

not limited to any claim that all or any part of this Agreement is void or

voidable.”

“For [employee] to properly contest the validity of [this] delegation provision, he must have challenged the delegation provision specifically,” according to the Missouri Supreme Court. “The delegation provision is supported by adequate consideration because the provision, severed from the rest of the Agreement and considered by itself, is a bilateral contract supported by consideration.” So the court held that it was for the arbitrator to consider the employee’s other arguments.

In contrast, two dissenters “believe the arbitration agreement in this case is not enforceable because it lacked legal consideration due to Soars’ at-will employment status.”

Lisa Larkin of Baker Sterchi Cowden & Rice LLC covers the case with more details.

Baseball #Arbitration Helps Uphold AT&T/Time Warner Merger

“Baseball arbitration” is a common name for final-offer arbitration, in which the arbitrator’s choice of rulings is limited to choosing between two dollar amounts, one proposed by each disputing party. In Major League Baseball this procedure is used to resolve salary disputes. More on baseball arbitration can be found here.

The U.S. Court of Appeals for the D.C. Circuit recently mentioned baseball arbitration as it upheld a lower court ruling approving the merger of AT&T and Time Warner. While the U.S. Dept. of Justice sought to block the merger, CNN explains, irrevocable offers to engage in baseball arbitration were key to defusing this concern for the Court of Appeals.

TV Stars and Producers of "Bones" Get $178.7M Arbitration Award Against Fox

While arbitration, including arbitration awards, normally remain confidential, they become public when a disputing party asks a court to confirm or vacate the arbitration award. As today's NYTimes reports, the big arbitration award against Fox "spilled into public view on Wednesday after the plaintiffs in the case filed a petition to confirm the arbitration award in Los Angeles Superior Court.
The arbitrator, Peter D. Lichtman, said that Fox pocketed tens of millions of dollars that should have gone to the 'Bones' team. He ordered Fox to pay the plaintiffs $50 million in damages and an additional $128 million in punitive damages. Fox is contesting the $128 million ruling."

Worker's Claims Sent to Labor Arbitration if "Clear and Unmistakable" Collective Bargaining Agreement

This week the Second Circuit heard argument in Attending Homecare v. Abdullayeva, 2d Cir. App., 18-0651. The case turns on whether "clear and unmistakable" language in the collective bargaining agreement (CBA) requires employees to arbitrate their Fair Labor Standards Act (FLSA) claims.

While the district court said “The arbitration provision relied on is confusing. It does not clearly require Plaintiff to arbitrate her claims”, the Second Circuit might well find that the following CBA language clearly and unmistakably requires Plaintiff to arbitrate FLSA claims: “all claims brought by either the Union or Employees, asserting violations of or arising under the Fair Labor Standards Act ("FLSA'), New York Home Care Worker Wage Parity Law, or New York Labor Law (collectively, the "Covered Statutes"), in any manner, shall be subject exclusively, to the grievance and arbitration procedures described below.”

Bloomberg News story on this case includes analysis by me and Prof. Imre Szalai.

Ninth Circuit Vacates “Completely Irrational” Arbitration Award

While judicial enforcement of arbitrators’ decisions is an essential centerpiece of arbitration law and practice, the Ninth Circuit Court of Appeals recently vacated the district court opinion in Aspic Eng’g & Constr. Co. v. ECC Centcom Constructors, 2019 WL 333339 (9th Cir. Jan. 28, 2019), finding that the arbitrator issued a “completely irrational” award. The Ninth Circuit opinion is unusual in the extent to which it relies on labor arbitration precedents to vacate a non-labor arbitration award.

The underlying dispute in Aspic was between a subcontractor hired to construct facilities in Afghanistan and the general contractor. The sub alleged the GC owed the sub a significant amount and the arbitrator agreed despite the fact the sub failed to perform material provisions of the underlying contract. By ruling for the subcontractor despite these failings, the arbitrator exceeded his authority, according to the Ninth Circuit.

Aspic correctly noted that, under the Federal Arbitration Act, it “may vacate an arbitration award where, among other reasons, ‘the arbitrators exceeded their powers.’” Aspic Eng’g & Constr. Co., 2019 WL 333339 at 8. The Ninth Circuit said that, “arbitrators ‘exceed their powers’ when the award is ‘completely irrational’ or exhibits a ‘manifest disregard of the law.’”

However, the Ninth Circuit cited labor arbitration cases for the proposition that an award is completely irrational when it “fails to draw its essence from the agreement.’” Ninth Circuit labor arbitration case law says a rational award must not “disregard contract provisions to achieve a desired result.” 2019 Wl 3333339 at 11. According the Ninth Circuit, a rational award would consider the terms of the contract as written. The arbitrator cannot “improperly stray[] from the plain text of the contract.”

The court also echoed a sentiment initially made by Liz Kramer of Stinson Leonard Street seven years ago: “we have become an arbitration nation.”

For more in depth coverage, see Liz Kramer’s Arbitration Nation blog here.

“Clickwrap” Arbitration Agreement in Email’s Hyperlink Unenforceable

In Starke v. SquareTrade, Inc., 2019 WL 149628 (2d Cir. Jan. 10, 2019), the 2nd Circuit affirmed a district court ruling that a “clickwrap” arbitration agreement in an email’s hyperlink was unenforceable because it did not give reasonable notice. While “shrinkwrap” was the name given to contracts on the box of tangible products, “clickwrap” is the name for agreements formed when a user clicks a link as opposed to opening some packaging. In Starke, following the consumer’s purchase of a service contract, the seller sent an email to the consumer with a hyperlink that was “inconspicuously placed” at the bottom, according to the court. The court provided guidance as to what can in future transactions be done to ensure the transaction process results in a binding agreement.

Check out Proskauer Rose’s article on Starke for a detailed discussion of the reasoning, images of the screens at issue and a list of the factors the court provided.

A couple weeks later in Sultan v. Coinbase, Inc.,  2019 WL 319391 (2d Cir. Jan 24, 2019), the 2nd Circuit case found enforceable an arbitration agreement that a user agreed to when signing up to use the digital currency exchange Coinbase. Proskauer Rose discusses Sultan and outlines how some of the same factors mentioned in Starke led to enforcement.

I posted on the issue of ‘clickwrap’ agreements previously when discussing what is required to manifest assent. I excerpted an article written by Widener University Law Professor Juliet M. Moringiello entitled “Notice, Assent, and Form in a 140 Character World.”

E-Signature Results in Enforceable Agreement to Arbitrate

The 3rd Circuit affirmed a district court ruling granting Kaplan University's motion to compel the student to arbitrate. The 3rd Circuit concluded that the e-signature was a valid method of assent and the student was bound regardless of whether or not she read the enrollment packet.

Buckley LLP discusses the case further.

SCT Holds Independent Contractors "Workers" Under Federal Arbitration Act

The Supreme Court unanimously today held that independent contractors are "workers" within the meaning of the Federal Arbitration Act and thus typically not covered by that Act when agreeing to arbitrate, but rather covered by state law.

Oliveira was a truck driver for Prime under a contract calling him an independent contractor and containing an arbitration clause. Oliveira filed a class action alleging underpayment of wages. Prime moved to compel arbitration under the FAA. But Oliveira persuaded the Supreme Court that as an independent contractor he was covered by the FAA Section 1 exclusion of "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce."

Employment arbitration expert Professor Rick Bales explains further.

New Justice Kavanaugh Gets to Write Unanimous Opinion Reaching Predictable Result

New Supreme Court Justice Brett Kavanaugh's opinion for a unanimous Court will interest arbitration nerds. It holds that if an arbitration agreement (or the rules it incorporates) sends to arbitrators (rather than judges) the issue of which disputes the parties agreed to arbitrate, then a court cannot refuse to enforce that agreement by finding "wholly groundless" the argument that the particular dispute is covered by the arbitration agreement.

The Court's opinion in Henry Schein, Inc. v. Archer & White Sales, Inc., is summarized by Law360, the National Law Review, and Squire Patton Boggs