Supreme Court Hearing Three Arbitration Cases in October

On October 3rd the Court heard oral arguments in New Prime, Inc. v. Oliveira, asking whether  FAA section 1, which excludes certain transportation “workers” from the FAA’s reach, applies to independent contractors, in addition to the employees, of a transportation company.  Ogletree Deakins writes: “Given the justices’ seeming alignment with Oliveira at the oral argument, it is anticipated that the Supreme Court will ultimately issue a decision allowing truck drivers and others independent contractors in the transportation industry to avoid arbitration.”

In late October the Court will hear Lamps Plus, Inc. v. Varela in which the Ninth Circuit held the agreement permitted class arbitration.

The Court will also hear Henry Schein v. Archer & White Sales, Inc. This contract provided for arbitration of all disputes, except claims for injunctive relief and involving intellectual property rights. Plaintiff sought injunctive relief and argued the case should be litigated, but defendants argued the arbitration agreement sends to the arbitrator any questions about the arbitrability of some or all of the case. The Fifth Circuit ruled that the court should decide arbitrability, and affirmed denial of the motion to compel arbitration.

The National Law Review provides a more detailed discussion of the issues.

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.”

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.

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

Congressional Hearing on Arbitration

Yesterday, the Senate Judiciary Committee held a hearing entitled "The Federal Arbitration Act and Access to Justice: Will Recent Supreme Court Decisions Undermine the Rights of Consumers, Workers, and Small Businesses?"   Video of the hearing is here.   Senator Al Franken begins the hearing with a strongly negative view toward arbitration clauses in consumer and employment contracts of adhesion.  While I disagree with much of it, he is a very intelligent person, which showed in his comedy career and shows in the senate.

The witnesses at this hearing include several very impressive and capable people:

Leslie Overton

Deputy Assistant Attorney General for Civil Enforcement, Antitrust Division
U.S. Department of Justice

Alan Carlson

Owner
Italian Colors Restaurant
Oakland, CA

Myriam Gilles

Professor of Law
Benjamin N. Cardozo School of Law

Vildan Teske

Partner
Crowder, Teske, Katz, & Micko, PLLP
Minneapolis, MN

Archis A. Parasharami

Partner & Co-Chair, Consumer Litigation & Class Actions practice
Mayer Brown LLP
Washington, DC

Peter Bowman Rutledge

Associate Dean for Faculty Development
Herman E. Talmadge Chair of Law
University of Georgia School of Law

UNLV Law Prof. Jean Sternlight's written testimony is here.

Parody of Arbitration Decision by Supreme Court Justice Scalia

Thanks to Professor Jean Sternlight for spreading the word about what she describes as a "brilliant but depressing parody Scalia decision finding that an employee is required to arbitrate all claims although the employer did not expressly impose arbitration on the employee."

The "opinion" says "We hold both that the failure to refer to arbitration in haec verba does not bar a finding of an agreement to arbitrate under the Federal Arbitration Act, and that arbitration is so much the preferred method of dispute resolution under the FAA that, for all contracts within its ambit, arbitration should be presumptively the sole method of resolving disputes that arise under that contract. Only when the parties have expressly and unmistakably negated arbitration, and insisted on judicial resolution, should a court refuse to order arbitration." 

Points for guessing which real opinions by J. Scalia this is parodying?

Arbitration Law's Separability Doctrine After Buckeye Check Cashing, Inc. v. Cardegna

Arbitration Law's Separability Doctrine After Buckeye Check Cashing, Inc. v. Cardegna

This article analyzes the Supreme Court cases of Buckeye Check Cashing, Inc. v. Cardegna, and Prima Paint Corp. v. Flood & Conklin Manufacturing Co.  It discuss the separability issues they leave unresolved. Finally, this Article critiques the separability doctrine and calls for its repeal by Congress.

Federal Arbitration Act Preemption

Ohio State law professor Sarah Rudolph Cole is an experienced, careful, and well-balanced scholar of arbitration law.  Her recent article discusses one of the most important topics in arbitration law, FAA preemption of state law.  She points out that the Supreme Court’s Stolt-Nielsen (2010) and Concepcion (2011) decisions permit preemption of state law in areas the FAA does not address.

Arbitration Clauses, Jury-Waiver Clauses and Other Contractual Waivers of Constitutional Rights

Consenting to a contract containing an arbitration clause or a jury-waiver clause alienates or waives the Seventh Amendment jury-trial right in federal court. The standards of consent in arbitration law, however, tend to be lower than the standards of consent in the federal caselaw governing jury-waiver clauses. The Federal Arbitration Act (FAA) requires courts to apply contract law's standards of consent to arbitration agreements, while certain commentators argue that courts are instead constitutionally required to apply the higher standards of consent (knowing consent) found in the caselaw governing jury-waiver clauses. This article responds to these commentators and argues that the FAA's contract-law standards of consent are constitutional.

Contractual Arbitration, Mandatory Arbitration and State Constitutional Jury-Trial Rights

Contractual Arbitration, Mandatory Arbitration and State Constitutional Jury-Trial Rights

This Article discusses the relationship between the Federal Arbitration Act and state constitutional jury-trial rights.

Privatizing Law Through Arbitration

Default Rules from Mandatory Rules: Privatizing Law Through Arbitration

This Article considers the extent to which the creation of law has been privatized through arbitration. It suggests that, under Supreme Court cases and other current legal doctrine, vast areas of law are privatizable and that this degree of privatization is possible only through arbitration. The implications of this point are separated along the familiar line between mandatory rules of law and default rules. The first implication is that arbitration jeopardizes mandatory rules of law. To preserve the mandatory effect of these rules, the Supreme Court must make a choice. The Court must either reverse its decisions that claims arising under otherwise mandatory rules are arbitrable, or require de novo judicial review of arbitrators' legal rulings on such claims. The second implication is that claims arising under default rules should be arbitrable and completely free from judicial review for errors of law. The arbitration of claims arising under default rules presents an opportunity to privatize the creation of vast areas of law. It is an opportunity to create private legal systems of unwritten norms, written rules, and the precedents of private courts.

Consumer Arbitration as Exceptional Consumer Law

Consumer Arbitration as Exceptional Consumer Law.  This article (part of a symposium on arbitration held by the McGeorge School of Law) defends the contractual approach to arbitration law.

Arbitration and Unconscionability

Wake Forest Law Review.

This article advocates the contractual approach over competing approaches to issues of unconscionability in arbitration.