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.”