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.

Supreme Court to Decide Class Arbitration Case

Lamps Plus Inc. v. Varela, from the Ninth Circuit, concerns "Whether the Federal Arbitration Act forecloses a state-law interpretation of an arbitration agreement that would authorize class arbitration based solely on general language commonly used in arbitration agreements."

The US Chamber of Commerce wants the Ninth Circuit reversed. As Supreme Court has decided many recent arbitration cases along predictable political lines, and there was a dissent to the Ninth Circuit opinion including the famously progressive (late) Judge Reinhardt, such a reversal would fit the usual pattern. Public Citizen predictably opposes the Chamber on this case.

As John Lewis of BakerHostletler writes, "the district court interpreted the arbitration agreement to authorize class arbitration. A divided 9th Circuit panel affirmed. Judges Reinhardt and Wardlaw first distinguished Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 55 U.S. 662, 684 (2010). In Stolt-Nielsen, “silence” was “more than the mere absence of language explicitly referring to class arbitration; instead, it meant absence of agreement.” So, merely because an agreement does not expressly refer to class arbitration is not determinative according to the judges. The majority then applied California contract principles to interpret the arbitration agreement. They found the agreement was ambiguous as to class arbitration and construed it against the drafter, Lamps Plus."

Ninth Circuit Refuses to Enforce Agreement Narrowing Grounds for Vacating Arbitration Award

"In the Hall Street decision in 2008, SCOTUS held that parties could not contractually enlarge Section 10 of the Federal Arbitration Act by agreeing that a court could vacate the arbitration award for reasons not found in that section.  This week, the Ninth Circuit held that parties also cannot contractually restrict Section 10 by providing for 'binding, non-appealable arbitration,'” explains Liz Kramer in one of her characteristically good analyses.  "This decision is important in that it protects consumers and other parties without negotiating power from arbitration agreements that write out even the minimal appeal bases in Section 10."

The Ninth Circuit opinion in In re Wal-Mart Wage and Hour Employment Practices Litig., __ F.3d __, 2013 WL 6605350 (9th Cir. Dec. 17, 2013) is here.  CPR's commentary by Bette Shifman is here.

I wonder if parties can get around this ruling to some extent (and in effect narrow some of the grounds for vacatur) by agreeing to arbitrate pursuant to the law of a state with arbitration law that has narrower grounds for vacatur than FAA section 10.  See the California supreme court's Cable Connections case and the Texas supreme court's Nafta Traders case.

Arbitration Clause in Lawyer's Contract with Client

A law firm's contract with its client said either side could opt for binding arbitration to settle a fee dispute or “any other dispute that arises out of or relates to this agreement or the services provided by the law firm.”  Despite this clause, the client sued the firm and three lawyers for malpractice. The First Circuit affirmed the district court in enforcing the arbitration clause and dismissing the case.

Read more in the National Law Journal about Bezio v. Draeger

An analysis by Jeff Mason contrasts this First Circuit Bezio case with a Ninth Circuit case, Smith v. JEM, 2013 WL 6570899 (9th Cir. Dec. 16, 2013), affirming a district court holding that the arbitration clause was unconscionable under Washington state law that makes arbitration clauses material provisions in attorney retainer agreements and, as such, enforceable only if “fully disclosed.”   Jeff Mason asks if The Easiest Arbitration Agreement to Avoid May Be the One Between Attorney and Client and "Are lawyers’ clients really such a special group of consumers that their arbitration clauses should be held to different standards?"  See also  Hodges v. Reasonover, 103 So. 3d 1069 (La. 2012) (placing special hurdles to enforcement of lawyer-client arbitration clauses).