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Archive for the ‘Arbitration Agreements’ Category

Absent Class Members, Class Arbitration, Class Certification Awards, Consent, Coercion, and the Second Circuit

November 29th, 2019 Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Class Action Arbitration, Confirm Award | Exceeding Powers, Consent to Class Arbitration, Exceeding Powers, FAA Chapter 1, Federal Arbitration Act Section 10, Judicial Review of Arbitration Awards, United States Court of Appeals for the Second Circuit No Comments »
absent class members

While federal, and many state, courts have class-action procedural rules that permit them to bind absent class members to a judgment or settlement, arbitration is different because it is based on party consent, not coercion. While the critical, threshold issues presented in class arbitration is party consent to class arbitration, class certification disputes arising out of a class arbitration proceeding can be just as challenging, especially when they involve absent class members who have not opted in to the proposed or certified class (“absent class members” or “absent members”).

Suppose Employer A requires each of its employees to sign a form arbitration agreement that clearly and unmistakably authorizes the arbitrator to decide all disputes arising out of or relating to the employment relationship as well as arbitrability and procedural issues. More than 250 employees (including putative class representatives) assert that an arbitrator (the “Arbitrator”) should determine whether Employer A consented to class arbitration. Employer A submits that issue to the Arbitrator.

The Arbitrator hears and considers the evidence and arguments and makes a Clause Construction Award, which rules that Employer A and each of the employees consented to class arbitration by signing the employment agreement. Employer A challenges the award as exceeding the arbitrator’s powers under Section 10(a)(4) of the Federal Arbitration Act, but the challenge fails because an appellate court finds that the Arbitrator was at least arguably construing the employment agreement. .

After further proceedings the Arbitrator makes another award, this one certifying a class consisting of approximately 44,000 employees, which included not only the more than 250 persons who were either class representatives or opted in to the class, but also tens of thousands of persons who were absent class members in the sense that they had been notified of the class arbitration and proposed class but had not opted in to the class and had not otherwise appeared in the arbitration proceedings.  

Did the Arbitrator have the power to make that class certification award, which purports to bind each of the 44,000 class members, the vast majority of whom were never parties to the arbitration and had never submitted to the Arbitrator any of the issues that were decided by the Arbitrator’s Clause Construction and class certification awards?  

On November 18, 2019, the United States Court of Appeals for the Second Circuit said the answer to that question was “yes.”  But with all due respect to the Second Circuit, and understanding that reasonable minds can and do differ on this subject, we think the better answer would have been “no.”

This post briefly discusses the Second Circuit’s decision.

A subsequent post will explain why we believe the Second Circuit should have held that the arbitrator in that case did not have the authority to bind absent class members, who were not parties to the Clause Construction Award, did not opt into the class, did not otherwise agree to be bound by the Clause Construction Award or the class certification award, and did not otherwise submit to the Arbitrator the issues decided by the Clause Construction and class certification Awards.

 The result would be that the class arbitration could proceed, albeit with a far smaller, certified class (which might be expanded to accommodate any absent members who might be given an additional opportunity to opt-in). But that result, we think, is consistent with the consensual nature of arbitration— a dispute resolution method that is fundamentally different from its coercive counterpart, court litigation.   

Absent Class Members: Background and Procedural History of Jock v. Sterling Jewelers Inc.

The Second Circuit’s recent decision was the fourth appeal in the Jock v. Sterling Jewelers Inc. case, a long-running class arbitration dispute. The first of these appeals,  Jock v. Sterling Jewelers, Inc., 646 F.3d 113 (2d Cir. 2011) (“Jock I”), was decided in 2011—the most recent one, Jock v. Sterling Jewelers Inc., No. 18-153-cv, slip op. (2d Cir. November 18, 2019) (“Jock IV”), and the subject of this post, was decided November 18, 2019.

Jock and her co-plaintiffs are retail sales employees of Sterling Jewelers, Inc. (“Sterling”). Back in 2008 they sought relief on behalf of a class under Title VII of the Civil Rights Act of 1964, and under the Equal Pay Act, alleging Sterling, based on their gender, paid them less than their similarly situated male co-workers. 

Sterling employees, including Jock and her co-plaintiffs were required to sign a “RESOLVE Program” agreement (the “Agreement”), which imposed mandatory arbitration. By executing the agreement employees expressly “waiv[ed] right[s] to obtain any legal or equitable relief . . . through any government agency or court, and . . . also waiv[ed] [their] right[s] to commence any court action.” The Agreement provided that they “may. . . seek and be awarded equal remedy through the RESOLVE Program.”

The Agreement provided that “[t]he Arbitrator shall have the power to award any types of legal or equitable relief that would be available in a court of competent jurisdiction[,]” and that any claim arising thereunder will be arbitrated “in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association.”

Class arbitration ensued, and the arbitrator construed the Agreement to permit class arbitration. The district court overturned the award on the ground that the class construction award exceeded under the arbitrator’s powers for the reasons stated in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010).

Jock I

But the Second Circuit in Jock I reversed the district court’s judgment. As the Court explained in Jock IV, the Jock I Court “reversed, holding that the District Court impermissibly substituted its own legal analysis for that of the arbitrator instead of focusing its inquiry on whether the arbitrator was permitted to reach the question of class arbitrability that had been submitted to her by the parties.” Jock IV, slip op. at 5-6. The Jock I Court also “explained. . . that the arbitrator had a colorable justification under the law to reach the decision she did.” Jock IV, slip op. at 6.

Jock I “distinguished Stolt-Nielsen on the ground that the parties in Stolt-Nielsen stipulated that their arbitration agreement contained ‘no agreement’ on the issue of class arbitration, whereas the plaintiffs in [Jock I] merely conceded that there was no explicit agreement to permit class arbitration, thus leaving open the possibility of an ‘implied agreement to permit arbitration.’”  Jock IV, slip op. at 6 (citation omitted). 

The Class Certification Award

After Jock I the arbitrator made a class certification award, certifying a class of “approximately 44,000 women, comprising the then-254 plaintiffs as well as other individuals who had neither submitted claims nor opted in to the arbitration proceeding (‘the absent class members’).” Jock IV, slip op. at 6 (parenthetical in original). The arbitrator’s class certification was limited to those with Title VII disparate impact claims seeking declaratory and injunctive relief.

The district court denied Sterling’s motion to vacate the certification award. As Jock IV explains, the district court reasoned “that Sterling’s argument that the arbitrator had exceeded her powers in ‘purporting to bind absent class members who did not express their consent to be bound’ was ‘foreclosed by’ this Court’s holding in Jock I that ‘there is no question that the issue of whether the agreement permitted class arbitration was squarely presented to the arbitrator.’” ”  Jock IV, slip op. at 7 (citation omitted).

Jock II

The district court’s decision refusing to vacate the class certification award resulted in the second appeal, Jock v. Sterling Jewelers Inc., 703 Fed. Appx. 15 (2d Cir. 2017) (summary order). (“Jock II”). In July 2017 we wrote a short post (here) about Jock II.

Jock II vacated and remanded the district court’s decision refusing to vacate the certification award because it purported to bind absent members, who (because of their absence) could not have “squarely presented” to the arbitrator the question whether the agreement authorized class procedures, let alone the issue of whether they should be deemed part of a class in a class arbitration to which they had not consented. See Jock II, 703 Fed. Appx. at 16, 17-18 (quotation and citation omitted).

In Jock II, the Second Circuit directed the district court to “consider[] on remand. . . ‘whether an arbitrator, who may decide. . . whether an arbitration agreement provides for class procedures because the parties “squarely presented” it for decision, may thereafter purport to bind non-parties to class procedures on this basis.’”) Jock IV, slip op. at 7-8 (citation omitted).  

The Jock II Remand

The district court vacated the class determination award on remand for two reasons. First, the district court said that it had ruled in 2010 that the Agreement did not authorize class procedures and that, accordingly, the absent class members had not consented to class arbitration.

Second, the submission by the plaintiffs and defendants (not the absent members) to the arbitrator of the question whether the Agreement authorized class arbitration did not confer on the arbitrator the authority to make a ruling binding on the absent members (who did not submit the issue to the Arbitrator). “The District Court[,]” said the Second Circuit, “reasoned that, even if the arbitrator’s ‘erroneous interpretation’ of the [Agreement] could bind the 254 plaintiffs who had ‘authorized the arbitrator to make that determination by submitting the question to her or opting into the proceeding, that erroneous interpretation could not bind absent class members.” Jock IV, slip op. at 8.

The Jock IV Appeal

The district court ruling on the Jock II remand resulted in the Jock IV appeal. (The Jock III decision was the dismissal of an appeal of a district court ruling that it lacked subject matter jurisdiction to vacate an interim decision rendered by the arbitrator. Jock v. Sterling Jewelers Inc., 691 F. App’x 665 (2d Cir. 2017) (summary order).) 

Since the issue before the district court on the Jock II remand  was whether the arbitrator’s class certification decision should be vacated under Section 10(a)(4) of the Federal Arbitration Act, the applicable standard of review was the manifest disregard of the agreement standard set forth in Stolt-Nielsen and Oxford Health Plans LLC v. Sutter, 569 U.S. 564, 568-69 (2013). See Jock IV, slip op. at 9-11. (For discussion of that deferential standard, see here, here, here, and here)  

Sterling (the “Award Challenger”) argued, consistent with the district court’s decision,  that the deferential standard should not apply to the question whether the absent members had consented to class arbitration, because they were not parties to the class construction award that was the subject of Jock I, did not submit the issue of class consent to the arbitrator, or otherwise agree to be bound by a determination of consent to class arbitration to which they were not parties.

But the Second Circuit did not agree with the district court or the Award Challenger. It agreed with the plaintiff-appellants (the “Award Defending Parties”), who “argue[d] that the absent class members have, in fact, authorized the arbitrator to determine whether the [Agreement] permits class arbitration procedures.” Jock IV, slip op. at 11.  They urged “that because all Sterling employees signed the RESOLVE Agreement, all Sterling employees “agreed that, if any of them initiated a putative class proceeding, the arbitrator in that proceeding would be empowered to decide class-arbitrability—and, if he or she found it appropriate, to certify a class encompassing other employees’ claims.” Jock IV, slip op. at 11-12.

The Award Defending Parties asserted that “the District Court erred by ‘never ask[ing] what authority absent class members conferred on [the arbitrator] by joining the RESOLVE Program [i.e., signing the Agreement],’ a question that is a matter of contract interpretation.” Jock IV, slip op. at 12.

The Second Circuit determined that, by signing the Agreement, the employer and the absent class members agreed that: (a) any other employee who signed the Agreement was authorized to arbitrate on behalf of any absent member of a yet-to-be certified class the issue of consent to class arbitration, irrespective of whether the absent class member was a party to the arbitration, and irrespective of whether the absent member had notice of, and consented to, the arbitration; (b) any absent class member would be bound by the outcome of such a class-arbitration-consent arbitration proceeding, even though the absent class member did not participate in the arbitration, did not consent to the arbitration (apart from signing the Agreement), and did not play any role in the selection of the arbitrator who presided over the arbitration; and (c) the decision on class arbitration reached by the arbitrator in his or her absence would be subject to review under the exceedingly deferential Oxford/Stolt-Nielsen standard only, and the absent members would be bound by the result of that judicial review even though they were not parties to the Clause Construction Award or to the judicial proceeding in which the Clause Construction Award was reviewed.  

Absent Class Members: What to Make of Jock IV?

We’ll discuss that in an upcoming post….

Delegation Agreements, Separability, Schein II, and the October 2019 Edition of CPR Alternatives

November 12th, 2019 Appellate Practice, Arbitrability, Arbitrability | Clear and Unmistakable Rule, Arbitration Agreements, Arbitration Practice and Procedure, Arbitration Provider Rules, Clear and Unmistakable Rule, Contract Interpretation, Delegation Agreements, FAA Chapter 1, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 2, Federal Arbitration Act Section 3, Federal Arbitration Act Section 4, Practice and Procedure, Separability, Severability, United States Court of Appeals for the Fifth Circuit, United States Supreme Court No Comments »
Delegation Provision

There have been a number of important cases decided in 2019 concerning the application and effect of “delegation provisions”—clear and unmistakable agreements to arbitrate arbitrability issues. Delegation provisions, which we’ll refer to as “delegation agreements,” are not a recent phenomenon, and are quite common, especially in administered arbitration, where consent to applicable arbitration rules typically includes clear and unmistakable consent to arbitrate arbitrability. But there’s been a good deal of judicial controversy this year over whether delegation agreements should, in certain circumstances, be given the full force and effect that they deserve.  

We think that delegation provisions should ordinarily be enforced as written and according to their terms. When Courts interpret and apply delegation agreements, they should, consistent with Rent-a-Center West, Inc. v. Jackson, 561 U.S. 63 (2010), consider those agreements to be separate and independent from the arbitration agreements in which they are contained.

Much of the controversy has centered on whether terms of the arbitration agreement should define or circumscribe the scope of the delegation agreement and even effectively negate it. Consequently, certain courts have conflated the question of who gets to decide whether an issue is arbitrable with the separate question of what the outcome of the arbitrability dispute should be, irrespective of who decides it. 

The SCOTUS Schein Decision and The Fifth Circuit’s Schein II Decision on Remand

The first significant delegation-agreement development this year came on

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Second Circuit Says Collective Bargaining Agreement’s Arbitration Clause was Mandatory and did not Deprive Union Employee of Due Process

July 17th, 2019 Arbitrability, Arbitration Agreements, Arbitrator Selection and Qualification Provisions, Labor Arbitration, Motion to Compel Arbitration, United States Court of Appeals for the Second Circuit, United States District Court for the Eastern District of New York Comments Off on Second Circuit Says Collective Bargaining Agreement’s Arbitration Clause was Mandatory and did not Deprive Union Employee of Due Process

collective bargaining

Back in 2009 the Author wrote an article on the United States Supreme Court’s decision in 14 Penn Plaza LLC v. Pyett, 556 U.S. 247 (2009), which held “that a collective-bargaining agreement that clearly and unmistakably requires union members to arbitrate ADEA claims is enforceable as a matter of federal law.” 559 U.S. at 274. (See Loree Reins. & Arb. L. Forum Post here.)

On July 2, 2019, the U.S. Court of Appeals for the Second Circuit reversed a district court decision that erroneously applied the Pyett clear and unmistakable standard to the question whether an arbitration clause in a collective bargaining agreement (the “CBA”) was mandatory or permissive. Finding that the CBA imposed mandatory arbitration, the Second Circuit ruled that the clear and unmistakable standard applied only to the question whether the Employee’s statutory claims were within the scope of the CBA’s arbitration agreement (the “Arbitration Agreement”), and not to the mandatory versus permissive question. Abdullayeva v. Attending Homecare Servs. LLC, ___ F.3d ____, No. 18-0651, slip op. at *8-10 (2d Cir. July 2, 2019).

Applying ordinary contract principles to the question whether the Arbitration Agreement was mandatory or permissive, the Court held that it was mandatory. Slip op. at *10-13. Applying Pyett‘s clear and unmistakable standard to the scope question, it held that the Employee’s statutory claims under the Fair Labor Standards Act (“FLSA”) and New York’s Labor Law (“NYLL”) were within the scope of the arbitration clause. Slip op. at *13-14.

Finally, the Court held that the arbitration clause did not deny the Employee of due process of law, rejecting the Employee’s argument that it was deprived of due process because it did not personally participate in the selection of the arbitrator named in the arbitration clause. Slip op. at *14-16.

Background

collective bargaining home health care

The Employer is a provider of home health care services which employs health and personal care workers that serve elderly clients. The Employee was a member of that staff.

The Employee was required to join a Union of home health care workers (the “Union”).

At or about the time when the Employee began work for Employer, the Union and Employer entered into a collective bargaining agreement (the “CBA”).

The CBA contained an “Adjustment of Disputes” provision (the “Arbitration Agreement”) that provided, in pertinent part:

B. The parties [the Union and Attending] further agree a goal of this Agreement is to ensure compliance with all federal, state, and local wage hour law and wage parity statutes. Accordingly, to ensure the uniform administration and interpretation of this Agreement in connection with federal, state, and local wage-hour and wage parity statutes, all claims brought by either the Union or Employees, asserting violations of or arising under the Fair Labor Standards Act . . . , 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.

1) The statute of limitations to file a grievance concerning the Covered Statutes shall be consistent with the applicable statutory statute of limitations. All such claims if not resolved in the grievance procedure, including class grievances filed by the Union, or mediation as described below shall be submitted to final and binding arbitration before Elliott Shriftman. . . .

. . . .

4) In the event an Employee has requested, in writing, that the Union process a grievance alleging a violation of the Covered Statutes and the Union declines to process a grievance regarding alleged violations of the Covered Statutes, through the grievance/mediation process or to arbitration following the conclusion of mediation, an Employee solely on behalf of himself/herself, may submit their individual claim to mediation, or following the conclusion of mediation, to arbitration. . . .

Slip op. at *3-4 (quoting Arbitration Agreement; emphasis supplied by Court).

On her own behalf, and on behalf of all similarly situated employees, Employee sued Employer in the U.S. District Court for the Eastern District of New York, alleging that Employer had violated the Fair Labor Standards Act (“FLSA”) and provisions of New York’s Labor Law by, among other things, “willfully fail[ing] to pay its workers overtime and spread-of-hours pay. . . .” Slip op. at *4-5.

The Employer moved to compel arbitration, but the district court denied the motion. The district court ruled that the CBA did not require that the Employee’s claims be resolved in arbitration.

The district court reached that conclusion on two alternative grounds. First, the district court ruled that the arbitration agreement “violated the Employer’s due process rights due process rights because the arbitrator had been preselected by the Union and [the Employer] without any input from [the Employee].” Slip op. at *5.

Second, and in any event, the district court held that the arbitration agreement was not mandatory, and that accordingly, the Employer was entitled to bring its claims in federal district court. To that end the district court determined that the Arbitration Agreement was “‘at best ambiguous,’ and does not satisfy the clear and unmistakable test applicable to the assessment of purported waivers of union members’ right to bring statutory claims in court when such waivers are part of a collective bargaining agreement’s arbitration provisions.” Slip op. at *5 (quoting district court decision; other quotation omitted).

The Employer appealed.

The Second Circuit’s Decision

Arbitrability Question 1
Thurgood Marshall U.S. Courthouse, 40 Centre Street, New York, NY 10007

The Second Circuit began by explaining that motions to compel arbitration “ordinarily” present courts with four questions:

(1) whether the parties agreed to arbitrate; (2) the “scope” of the arbitration agreement; (3) whether the plaintiff’s federal statutory claims are “nonarbitrable”; and (4) if some, but not all of the claims in the case are arbitrable, whether to stay the balance of the proceedings pending arbitration.

Slip op. at *6.

But this case presented only the first two questions—whether the parties agreed to arbitrate, and if so, what they agreed to arbitrate. Slip op. at *6.

The “clear and unmistakable” standard for determining whether parties to a collective-bargaining agreement agreed to arbitrate statutory claims was a standard that applied only to the second question, that is, the scope of the arbitration agreement. Slip op. at *8-10. According to the Second Circuit, “[t]he district court framed the sole relevant inquiry as whether ‘[a] clause purporting to require arbitration of a [FLSA] claim that is contained in a collective bargaining agreement’ clearly and unmistakably requires arbitration.” Slip op. at *8 (quoting district court decision).

The district court therefore conflated the first two questions and applied the “clear and unmistakable” standard to both. The district court erred in doing so, said the Second Circuit, because “the clear and unmistakable standard does not reflect disfavor of union-negotiated arbitration agreements[,]” but instead “ensures that employees’ right to bring statutory claims in court is not waived by operation of confusing, “very general” arbitration clauses[,]” which, for example, might be reasonably construed to be limited to claims concerning the construction or application of a collective bargaining agreement, even though they might also be reasonably construed to encompass both contract and statutory claims. Slip op. at *9 (citations and quotations omitted).

The Second Circuit said “we ask not whether the parties clearly and unmistakably agreed to arbitrate, but whether, once we have established that an agreement exists, that agreement clearly and unmistakably encompasses the plaintiff’s statutory claims.” Slip op. at *9-10. “The clear and unmistakable standard,” the Court explained, is “therefore. . . specific to the scope question and has no bearing on whether there is an agreement to arbitrate in the first instance.” Slip op. at *10.

Having clarified how the clear and unmistakable standard is supposed to be applied, the Court addressed whether the arbitration agreement was permissive or mandatory, and if mandatory, whether statutory claims were  clearly and unmistakably within its scope. The Court held that the arbitration agreement was mandatory and clearly and unmistakably encompassed the statutory claims. Slip op. at *9.

Collective Bargaining Agreement’s Arbitration Clause is Mandatory

 The Court concluded that “[t]he Union was legally authorized to negotiate collective bargaining agreements on [the Employee’s] behalf[,]” citing 29 U.S.C. § 159(a), which provides that unions “selected for purposes of collective bargaining by the majority of the employees shall be the exclusive representatives of all the employees. . . for the purposes of collective bargaining. . . .” 29 U.S.C. § 159(a). The Employee was, accordingly, bound by the CBA, including the Arbitration Agreement.  

The Court next determined that the Arbitration Agreement, when construed as a whole, unambiguously imposed mandatory arbitration on the Employee, not simply an option to arbitrate or litigate. That provision, said the Court, “states that its goal is to ‘ensure the uniform administration and interpretation of [the CBA],’ and that the means by which it will achieve that goal is to require that all claims under the Covered Statutes, brought by the Union or employees, ‘be subject exclusively . . . to the grievance and arbitration procedures described below.” Slip op. at *11 (quoting Arbitration Agreement; emphasis added by Court). The Provision further “states that ‘all [claims under the Covered Statutes,] if not resolved in the grievance procedure, . . . shall be submitted to final and binding arbitration.’” Slip op. at *11-12. “On its face,” said the Court, “this language simply does not allow an employee to choose to proceed in a judicial forum.” Slip op. at *12.

The Court explained why it concluded the district court’s interpretation of the arbitration agreement was incorrect. The district court had “focused on subsection (4) of [the Arbitration Agreement][,]” which “states that where an employee has requested that ‘the Union process a grievance alleging a violation of the Covered Statutes,’ but the Union has declined to process that grievance, the employee ‘may submit [this] individual claim to mediation, or following the conclusion of mediation, to arbitration.’” Slip op. at *12 (quoting Arbitration Agreement; emphasis supplied by Court). The district court interpreted “‘may’. . . to mean that employees can ‘choose whether to arbitrate’ or pursue their claims in court.” Slip op. at *12 (quoting district court decision).

But the Second Circuit disagreed. Subsection (4) of the Dispute Resolution Provision, said the Court, “is best read as clarifying that when the Union declines to process particular grievances on employees’ behalf, aggrieved employees have two options[:]” “They ‘may’ either (1) submit their claims to meditation and arbitration or (2) abandon the claims entirely.” Slip op. at *12.

The Court said that its interpretation of “may” “makes sense of the provision in isolation but also in the context of the entire agreement.” Slip op. at *12-13 (quotation and citations omitted).

Interpreting “may” differently “is to bring subsection (4) into conflict with the rest of Article 8(B), which. . . manifestly reflects an intent to require arbitration.” Slip op. at *13. The district court’s interpretation, said the Court, “makes little sense in light of [subsection 1 of the Arbitration Agreement]’s requirement that ‘all [claims under the Covered Statutes,] if not resolved in the grievance procedure . . . shall be submitted to final and binding arbitration” Slip op. at *13 (quoting Arbitration Agreement; emphasis supplied by Court).

Collective Bargaining Agreement’s Arbitration Clause Clearly and Unmistakably Encompasses Statutory Claims

Having concluded the arbitration agreement was mandatory, the Court turned to whether the Employee’s statutory claims were within the scope of that agreement. The Court held that the Arbitration Agreement clearly and unmistakably encompassed those claims, and consequently, the Employee was required to arbitrate those claims.  

The Second Circuit explained “that both this Circuit and other sister circuits have interpreted the clear and unmistakable standard to require specific references in the [collective bargaining agreement] either to the statutes in question or to statutory causes of action generally.” Slip op. at *13 (quotation and citation omitted).

The Court explained that a “vague directive” such as “‘any disputes . . . shall be subject to’ a grievance and arbitration procedure. . .” does not suffice, but that, here, the Arbitration Agreement “specifically cites. . . statutes. . . .” including “the FLSA, the New York Home Care Worker Wage Parity Law, and [New York’s Labor Law], and requires claims under those statutes to proceed pursuant to [the Arbitration Agreement]’s grievance and arbitration procedures.” Slip op. at *14 (citations and quotations omitted). The Arbitration Agreement thus clearly and unmistakably required arbitration of those statutory claims.  

The Employee’s brought claims under the FLSA and the NYLL, those claims are clearly and unambiguously within the scope of the Arbitration Agreement, and consequently, the Employee was required to arbitrate those claims. Slip op. at *14.  

The Arbitration Agreement does not Deny the Employee Due Process of Law   

The district court concluded that the Arbitration Agreement denied the Employee “due process because ‘the worker apparently has no part in the selection of the arbitrator.’” Slip op. at *14-15. The Second Circuit disagreed.

The Employee was a member of the Union, and under applicable law, including 29 U.S.C. § 159(a), the “Union had authority to negotiate on behalf of Abdullayeva, and so the fact that she did not personally participate in the selection of the arbitrator does not violate due process.” See slip op. at *15. As the U.S. Supreme Court explained in Pyett, “unions ‘may agree to the inclusion of an arbitration provision in a collective-bargaining agreement in return for other concessions from the employer.’” Slip op. at *15 (quoting Pyett, 556 U.S. at 257). And “‘courts must rigorously enforce arbitration agreements according to their terms, including terms that specify with whom [the parties] choose to arbitrate their disputes.’” Slip op. at *15 (quoting American Exp. Co. v. Italian Colors Restaurant, 570 U.S. 228, 233 (2013) (emphasis in original; citation omitted).

The Union was the Employer’s representative “authorized to negotiate ‘conditions of employment,’ including arbitration clauses, with the Employer on behalf of [the Employer’s employees].” The Arbitration Agreement, “including its proviso that ‘claims. . . shall be submitted to final and binding arbitration before Elliot Shriftman,’ was the product of the Union’s negotiation with [the Employer].” Slip op. at *15-16.

New York law requires that “arbitration procedures must generally conform to the ‘due process right of notice and opportunity to defend.’” Slip op. at *16 (quoting Beckman v. Greentree Sec., Inc., 87 N.Y.2d 566, 570 (1996)). But the Employee did “not argue that [the Arbitration Agreement’s] procedures are lacking in notice, or that the selected arbitrator is biased or would conduct arbitration proceedings in bad faith.” Slip op. at *16.

Thus, “the challenged portion of the [Arbitration Agreement], which simply ‘specifies with whom’ arbitration will be conducted in accordance with established Supreme Court precedent, does not violate due process.” Slip op. at *16 (quoting American Exp. Co., 570 U.S. at 233).

Photo Acknowledgements

The photos featured in this post were licensed from Yay Images and are subject to copyright protection under applicable law.  

Does a Clear and Unmistakable Delegation Provision Require the Parties to Arbitrate Disputes About the Existence of an Arbitration Agreement?

April 27th, 2019 Arbitrability, Arbitration Agreements, Arbitration and Mediation FAQs, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Arbitration Provider Rules, Authority of Arbitrators, Existence of Arbitration Agreement, Federal Arbitration Act Section 2, Federal Arbitration Act Section 3, Federal Arbitration Act Section 4, Rights and Obligations of Nonsignatories, Separability, Severability, United States Court of Appeals for the Fifth Circuit, United States Supreme Court Comments Off on Does a Clear and Unmistakable Delegation Provision Require the Parties to Arbitrate Disputes About the Existence of an Arbitration Agreement?
Arbitrability Question 5 | Delegation Clause | Delegation Provision

Parties can, and frequently do, agree to include in their contract a so-called
“Delegation Provision” that clearly and unmistakably delegates to the arbitrators questions of arbitrability. (See, e.g., Loree Reinsurance and Arbitration Law Forum posts here, here, here, and here.) Questions of arbitrability include questions concerning: (a) the scope of an arbitration agreement, that is, whether the parties agreed to arbitrate particular disputes or categories of disputes; (b) the validity or enforceability of an arbitration agreement “upon upon such grounds as exist at law or in equity for the revocation of any contract[,]” 9 U.S.C. § 2; or (c) whether an arbitration agreement has been formed or concluded, that is, whether an arbitration agreement exists in the first place. (See Loree Reinsurance and Arbitration Law Forum post here.)

Typically, a “delegation provision” states in clear and unmistakable terms that arbitrability questions are to be decided by the arbitrators. For example, by making part of their contract Rule 8.1 of the 2018 version of the International Institute for Conflict Prevention and Resolution (CPR)’s Non-administered Arbitration Rules, parties agree to the following broad Delegation Provision:

Rule 8: Challenges to the Jurisdiction of the Tribunal

8.1 The Tribunal shall have the power to hear and determine challenges to its jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement. This authority extends to jurisdictional challenges with respect to both the subject matter of the dispute and the parties to the arbitration.

CPR Non-Administered Arbitration Rule 8.1 (2018) (emphasis added).

Who Gets to Decide whether the Parties Entered into a Delegation Provision?

Federal Arbitration Act  | Who Gets to Decide? | Delegation Provision

Suppose that Agent A, without the knowledge and consent of Party A, purports to bind Party A to a written contract with Party B, which includes a broad arbitration agreement that expressly incorporates by reference, and makes part of the purported contract, the 2018 version of CPR’s Non-administered Arbitration Rules. Party B and Agent A deal with each other concerning the subject matter of the contract, and a dispute arises.

Party B demands arbitration of the dispute, and serves an arbitration demand on Party A, who is understandably surprised at being named a party in an arbitration proceeding concerning a purported agreement of which it had no knowledge, objects to the arbitration demand, and Party B commences an action to compel arbitration.

In the proceeding to compel arbitration, Party A argues that Agent A had no actual or apparent authority to bind it to the agreement that contained the arbitration agreement. Party B responds that because the Delegation Clause made part of the agreement requires arbitration of issues concerning the “existence” of the arbitration agreement, Party A must arbitrate the issue of whether Agent A had authority to bind it to the agreement.

Must Party A arbitrate the issue whether Agent A had authority to bind it to the agreement because the agreement contains a Delegation Provision? If the only consideration were the text of Rule 8.1, then the answer would be “yes.”

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Can Arbitrators Exceed their Powers by Making an Award in Manifest Disregard of the Parties’ Agreement?

April 17th, 2019 Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Challenging Arbitration Awards, Confirmation of Awards, Contract Interpretation, Contract Interpretation Rules, Exceeding Powers, Grounds for Vacatur, Manifest Disregard of the Agreement, Nuts & Bolts, Nuts & Bolts: Arbitration, Outcome Risk, Practice and Procedure, United States Court of Appeals for the Eighth Circuit, United States Supreme Court, Vacatur Comments Off on Can Arbitrators Exceed their Powers by Making an Award in Manifest Disregard of the Parties’ Agreement?
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Suppose arbitrators decide an issue within the scope of their authority but do so in manifest disregard the parties’ contract. Do they exceed their authority by making an award that has not even a barely colorable basis in the parties’ contract or in applicable law?

The answer to that question, is, of course, “yes,” and over the years we’ve discussed in a number of posts how arbitrators can exceed their powers under Federal Arbitration Act Section 10(a)(4) or Section 301 of the Labor Management Relations Act by making awards in manifest disregard of the parties’ agreement. (See Loree Reinsurance and Arbitration Law Forum Posts here, here, here, here, here, here, here, here, and here.) As discussed in those posts, the U.S. Supreme Court has on multiple occasions ruled that commercial and labor arbitrators can exceed their powers by making an award that manifestly disregards—or does not “draw its essence” from—the parties’ agreement. See Stolt-Nielsen S.A. v. AnimalFeeds Int’l Inc., 130 S.Ct. 1758, 1768-70 (2010); Oxford Health Plans LLC v. Sutter, 133 S.Ct. 2064, 2067, 2068 (2013); Eastern Associated Coal Corp. v. Mine Workers, 531 U.S. 57, 62 (2000); Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 599 (1960); Paperworkers v. Misco, Inc., 484 U.S. 29, 38 (1987).

In our April 12, 2019 post (here) we reviewed how it is that the limited review powers courts have to vacate commercial and labor arbitration awards are designed to provide a limited, but very important, safety net to protect parties against egregious, material violations of arbitration agreements. Without that limited protection, the risks associated with agreeing to arbitrate would be intolerably high and parties would be much less apt to opt for arbitration over court litigation.

Courts vacate arbitration awards where arbitrators act outside the scope of their authority by ruling on issues that the parties did not agree to submit to them. That’s what happened in Brock Indus. Servs., LLC v. Laborers’ Int’l Union., __ F.3d ___, No. 17-2597, slip op. (7th Cir. April 8, 2019), which we discussed in our April 12, 2019 post here.

But to obtain vacatur of an award based on manifest disregard of the agreement, however, an award challenger must satisfy an exceedingly demanding standard. We’ve addressed the parameters of that standard in a number of other posts. (See, e.g., here, here, here, here, here, here, here, here, and here. Our blog has also tried to give a feel for how Courts apply (or are supposed to apply) the standard by comparing the U.S. Supreme Court decision in Stolt-Nielsen, which held that an award should be vacated for manifest disregard of the agreement, to the Supreme Court decision in Oxford, which held that an award should not be vacated under that manifest disregard standard. (See Loree Reinsurance and Arbitration Law Forum posts here, here, and here.) And from time-to-time we’ve reported on other cases that have applied the standard.

While challenges to awards based on manifest disregard of the agreement are not uncommon, a very large majority of those challenges are either virtually certain to fail or at least highly unlikely to succeed. It is a relatively small universe of remaining, close cases that pose the biggest challenges for parties and courts.

Today we’ll look at one of those close cases, which was decided by the Eighth Circuit Court of Appeals and explain why the case failed to satisfy the demanding standard, even though, at least at first glance, it may be difficult to square the arbitration award with the parties’ agreement.

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If an Arbitration Panel Rules on an Issue the Parties did not Agree to Submit to that Panel, Should a Court Vacate the Award?

April 12th, 2019 Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Authority of Arbitrators, Award Vacated, Awards, Enforcing Arbitration Agreements, Exceeding Powers, FAA Chapter 3, Federal Policy in Favor of Arbitration, Grounds for Vacatur, Practice and Procedure, United States Court of Appeals for the Seventh Circuit, Vacatur 2 Comments »

Introduction: Arbitration as a Way to Resolve those Disputes—and Only those Disputes—Parties Submit to Arbitrators

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The “first principle” of labor and commercial arbitration law is that “arbitration is a matter of consent, not coercion” —put differently, arbitration “is a way to resolve those disputes—but only those disputes—that the parties have agreed to submit to arbitration.” Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 678-80 (2010) (citation and quotations omitted); First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943 (1995) (citations omitted); Granite Rock Co. v. International Brotherhood of Teamsters, 561 U.S. 287, 295 & n.7, 294 n.6 (2010); AT&T Technologies, Inc. v. Communications Workers, 475 U. S. 643, 648 (1986). That first principle is integrally intertwined with “the central or primary purpose of the [Federal Arbitration Act (“FAA”)][,]” which is “to ensure that  private agreements to arbitrate are enforced according to their terms.”Stolt-Nielsen, 559 U.S. at 679 (citations and quotations omitted).

What happens if the parties agree to submit one category of disputes to a two-person arbitration panel and to submit another category of disputes to a three-person panel?

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Second Circuit Denies Motion to Compel Appraisal because Insurer Sought to Submit Question of Law to Appraisers

April 7th, 2019 Applicability of Federal Arbitration Act, Appraisal, Arbitrability, Arbitration Agreements, Authority of Arbitrators, Federal Arbitration Act Section 2, Federal Arbitration Act Section 3, Federal Arbitration Act Section 4, Practice and Procedure, Rights and Obligations of Nonsignatories, United States Court of Appeals for the Second Circuit Comments Off on Second Circuit Denies Motion to Compel Appraisal because Insurer Sought to Submit Question of Law to Appraisers
Appraisal

In the Second Circuit, appraisal provisions in insurance policies and other contracts are, as a matter of federal common law, considered arbitration agreements for purposes of the Federal Arbitration Act. Bakoss v. Certain Underwriters at Lloyds of London Issuing Certificate No. 0510135, 707 F.3d 140, 143 (2d Cir. 2013). That is because they “clearly manifest[] an intention by the parties to submit certain disputes to a specified third party for binding resolution.” McDonnell Douglas Finance Corp. v. Pennsylvania Power & Light Co., 858 F.2d 825, 830 (2d Cir. 1988); Bakoss, 707 F.3d at 143. That appraisal clauses typically do not use the term “arbitration” is of no moment—all that counts “is that the parties clearly intended to submit some disputes to their chosen instrument [appraisal] for the definitive settlement of certain grievances under the Agreement.” Id. (quotations omitted); see Bakoss, 707 F.3d at 143.

In Milligan v. CCC Info. Servs. Inc., ___ F.3d ___, No. 18-cv-1405, slip op. (2d Cir. April 3, 2019) the Second Circuit affirmed a district court decision that denied an insurer (the “Insurer”)’s motion to compel, under the Federal Arbitration Act, appraisal of a dispute concerning the Insurer’s obligation to indemnify the insured (the “Insured”) for total loss of a leased vehicle. The Second Circuit held that the dispute the Insurer sought to submit to appraisal concerned interpretation of the policy, and thus presented a question of law that was outside the scope of the appraisal clause.

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Arbitrability of Arbitrability Questions: the Second Circuit Pushes Back (a little)

April 3rd, 2019 Arbitrability, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Authority of Arbitrators, Contract Interpretation, Contract Interpretation Rules, Federal Arbitration Act Section 2, Federal Arbitration Act Section 3, Federal Arbitration Act Section 4, Stay of Arbitration, United States Court of Appeals for the Second Circuit, United States Supreme Court 1 Comment »
Thurgood Marshall U.S. Courthouse

Abitrability Questions
Thurgood Marshall U.S. Courthouse, 40 Centre Street, New York, NY 10007

In a January 16, 2019 post (here) on the U.S. Supreme Court’s decision in Schein v. Archer & White Sales, Inc., 586 U.S. ____, slip op. (January 8, 2019), we explained that arbitrability questions are ordinarily for courts to decide, but parties may, by way of a “delegation provision,” clearly and unmistakably agree to submit them to arbitration. See, e.g., First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 942-46 (1995); Rent-A-Center, West, Inc. v. Jackson, 130 S. Ct. 2772, 2777 (2010). (See also Loree Reinsurance and Arbitration Law Forum posts herehere, and here.)

Typically, a “delegation provision” states in clear and unmistakable terms that arbitrability questions are to be decided by the arbitrators. It might, for example, state that the parties agree to submit to arbitrators questions concerning their “jurisdiction,” or the “existence, scope, or validity” of the arbitration agreement.

The U.S. Court of Appeals for the Second Circuit, however, does not require the parties to expressly state in their agreement that they agree to submit arbitrability questions to the arbitrators. The Second Circuit has found that the parties may “clearly and unmistakably” submit arbitrability questions to arbitration when they agree to a very broad arbitration clause. See Wells Fargo Advisors, LLC v. Sappington, 884 F.3d 392, 394, 396 (2d Cir. 2018) (An agreement “to arbitrate any dispute, claim or controversy that may arise between you and Wells Fargo Advisors, or a client, or any other person[, and] . . . giving up the right to sue Wells Fargo Advisors . . . in court concerning matters related to or arising from your employment” “demonstrate[d] the parties’ clear and unmistakable intent to arbitrate all questions of arbitrability.”); PaineWebber Inc. v. Bybyk, 81 F.3d 1193, 1199 (2d Cir. 1996) (A contractual provision that “any and all controversies . . . concerning any account, transaction, dispute or the construction, performance, or breach of this or any other agreement . . . shall be determined by arbitration” and that “the parties are waiving their right to seek remedies in court” clearly and unmistakably demonstrated “parties’ intent to arbitrate all issues, including arbitrability.”) (emphasis omitted); Alliance Bernstein Investment Research and Management, Inc. v. Schaffran, 445 F.3d 121 (2d Cir. 2006) (NASD Code Rule 10324, which authorized arbitrators “to interpret and determine the applicability of all provisions under [the] Code[]” was a clear and unmistakable delegation to arbitrators of arbitrability questions concerning interpretation of the NASD Code.).

In Metropolitan Life Ins. Co. v. Bucsek, No. 17-881, slip op. (2d Cir. Mar. 22, 2019), the Second Circuit was faced with an unusual situation where party A sought to arbitrate against party B, a former member of the Financial Industry Regulatory Authority (“FINRA”)’s predecessor, the National Association of Securities Dealers (“NASD”), a dispute arising out of events that occurred years after party B severed its ties with the NASD.

The district court rejected A’s arguments, ruling that: (a) this particular arbitrability question was for the Court to decide; and (b) the dispute was not arbitrable because it arose years after B left the NASD, and was based on events that occurred subsequent to B’s departure. The Second Circuit affirmed the district court’s judgment.

After the district court decision, but prior to the Second Circuit’s decision, the U.S. Supreme Court decided Schein, which—as we explained here—held that even so-called “wholly-groundless” arbitrability questions must be submitted to arbitration if the parties clearly and unmistakably delegate arbitrability questions to arbitration. Schein, slip op. at *2, 5, & 8.

The Second Circuit faced a situation where a party sought to arbitrate a dispute which clearly was not arbitrable, but in circumstances under which prior precedent, including Alliance Berstein (cited above), suggested that the parties clearly and unmistakably agreed to arbitrate arbitrability.

To give effect to the parties’ likely intent that they did not agree to arbitrate arbitrability questions that arose after B left the NASD, the Second Circuit had no choice but distinguish and qualify its prior precedent without falling afoul of the Supreme Court’s recent pronouncement in Schein. That required the Second Circuit to modify, to at least some extent, the contractual interpretation analysis that courts within the Second Circuit are supposed to engage to ascertain whether parties “clearly and unmistakably” agreed to arbitrate arbitrability in circumstance where they have not specifically agreed to arbitrate such issues.

Metropolitan Life is an important decision because it means in future cases where parties have not expressly agreed to arbitrate arbitrability questions, but have agreed to a very broad arbitration agreement, the question whether the parties’ have nevertheless clearly and unmistakably agreed to arbitrate arbitrability questions may turn, at least in part, on an analysis of the merits of the arbitrability question presented.

It is easy to see how applying Metropolitan Life in future cases could raise some interesting and challenging questions for parties, their attorneys, and the courts. We may look at those challenges in more detail in a future post, but for now, let’s take a careful look at the Second Circuit’s decision.

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Up Narrow Arbitration Clause Creek without a Papalote?—Narrow Arbitration Clauses and the Difference between Interpretation and Performance

March 26th, 2019 Appellate Practice, Arbitrability, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Authority of Arbitrators, Federal Arbitration Act Section 4, Federal Policy in Favor of Arbitration, Practice and Procedure, Presumption of Arbitrability, United States Court of Appeals for the Fifth Circuit 1 Comment »
Narrow Arbitration Clauses: Papalote
Hang Glider or Papalote

I am told “papalote” is a Spanish word meaning “kite” or “hang glider.” It also appears in the name of a party to a recent decision of the U.S. Court of Appeals for the Fifth Circuit concerning narrow arbitration clauses, Papalote Creek II, L.L.C. v. Lower Colo. River Auth., No. 17-50852, slip op. (5th Cir. Mar. 15, 2019) (“Papalote II”). The party was Papalote Creek II, L.L.C. (“Papalote”). It won the appeal.

What was the appeal about? Narrow arbitration clauses, and in particular whether a dispute about maximum, aggregate liability under a wind-energy purchase and sale contract was a dispute “with respect to performance” within the meaning of the parties’ narrow arbitration clause.

The appeal was not the first, but the second, and the procedural history was tangled, both in terms of what transpired in the disputed arbitration and in the district court. The first appeal, Papalote I, resulted in a remand because at the time the district court compelled arbitration, the district court lacked subject matter jurisdiction. The issue on which the arbitration proponent sought arbitration was not ripe, even though it became ripe during the time Papalote I was pending. See Lower Colo. River Auth. v. Papalote Creek II, L.L.C., 858 F.3d 916 (5th Cir. 2017) (“Papalote I”).

By the time Papalote I was decided, the arbitration panel had ruled against Papalote, the arbitration opponent. But Papalote I obligated the district court to vacate the arbitration award and to reconsider the issue of whether arbitration should be compelled under the narrow arbitration clause.

On remand the district court adhered to its previous decision that the dispute fell within the scope of the narrow arbitration clause, which resulted in another order to compel arbitration and the second appeal, Papalote II.

On the second appeal the Fifth Circuit reversed the district court’s decision on arbitrability, ruling that the dispute was not about “performance,” but about “interpretation.” Going forward that means that the parties will either have to settle their dispute or litigate it in court, even though they’ve both no doubt already spent not only a good deal of time, but money, litigating about arbitration, and arbitrating a dispute they did not mutually consent to arbitrate. (Perhaps for Papalote that’s not necessarily a bad outcome, but it’s just speculation on our part.)

Bottom line: Irrespective of whether the parties considered the potential consequences associated with their narrow arbitration clause, at least one of them (and perhaps even both) may, at least to some extent, now feel like they’re up that proverbial creek without a paddle—or even a papalote….

This post takes a closer look at Papalote II, focusing exclusively on the issue whether the dispute fell within or without the scope of the parties’ narrow arbitration clause.

Narrow Arbitration Clauses: Papalote II Background

Narrow Arbitration Clauses

In Papalote II the Fifth Circuit held that a narrow arbitration clause that covered disputes about the “performance” of a contract did not cover a dispute concerning the meaning of an aggregate liability provision in a wind-energy contract. That dispute, said the Court, concerned the interpretation of the contract, not its performance, and therefore the arbitration opponent was not required to submit it to arbitration.

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Arbitration Nuts and Bolts: Federal Appellate Jurisdiction over Orders Compelling Arbitration and Staying Litigation

March 21st, 2019 Appellate Jurisdiction, Appellate Practice, Arbitrability, Arbitration Agreements, Arbitration and Mediation FAQs, Arbitration Practice and Procedure, Authority of Arbitrators, FAA Section 16, Federal Arbitration Act Section 3, Federal Arbitration Act Section 4, Nuts & Bolts, Nuts & Bolts: Arbitration, Practice and Procedure, Stay of Arbitration, Stay of Litigation, United States Court of Appeals for the Second Circuit 1 Comment »

Introduction

Appellate Jurisdiction 1

Today we look at federal appellate jurisdiction over orders compelling arbitration and staying litigation.

Sections 3 and 4 of the Federal Arbitration Act (the “FAA”) provide remedies for a party who is aggrieved by another party’s failure or refusal to arbitrate under the terms of an FAA-governed agreement. FAA Section 3, which governs stays of litigation pending arbitration, requires courts, “upon application of one of the parties,” to stay litigation of issues that are “referable to arbitration” “until arbitration has been had in accordance with the terms of the parties’ arbitration agreement, providing [the party applying for a stay] is not in default in proceeding with such arbitration.” 9 U.S.C. § 3. Faced with a properly supported application for a stay of litigation of an arbitrable controversy, a federal district court must grant the stay. 9 U.S.C. § 3.

Section 4 of the FAA authorizes courts to make orders “directing arbitration [to] proceed in the manner provided for in [the [parties’ written arbitration] agreement[,]” and sets forth certain procedures for adjudicating petitions or motions to compel arbitration. 9 U.S.C. § 4. It provides that when a court determines “an agreement for arbitration was made in writing and that there is a default in proceeding thereunder, the court shall make an order summarily directing the parties to proceed with the arbitration in accordance with the terms thereof.” 9 U.S.C. § 4 (emphasis added). Just as courts must grant properly supported applications for relief under Section 3, so too must they grant properly supported applications for relief under Section 4. See 9 U.S.C. §§ 3 & 4.

There is much to be said about the many issues that may arise out of applications to stay litigation, compel arbitration, or both, but our focus here is on the appellate jurisdiction of the U.S. Circuit Courts of Appeals over appeals from the grant or denial of such applications. Before a U.S. Circuit Court of Appeals can hear an appeal on the merits of a federal district court’s order and judgment, it must be satisfied that: (a) the federal district court had original subject matter jurisdiction (e.g., diversity jurisdiction or federal question jurisdiction); (b) there is still a “case or controversy” within the meaning of Article III of the U.S. Constitution (e.g., the controversy has not become moot by settlement or otherwise); and (c) the order or judgment appealed from is one over which it has appellate jurisdiction.

Appellate Jurisdiction and the FAA

Appellate Jurisdiction 2

Appellate jurisdiction refers to a Circuit Court of Appeals’ power to review, amend, vacate, affirm, or reverse the orders and judgments of the district courts within the judicial circuit over which the Court of Appeals presides. Generally, and outside the context of injunctions and the certification procedure of 28 U.S.C. § 1292(b), U.S. Courts of Appeal have jurisdiction to review only “final decisions” of district courts. See 28 U.S.C. §§ 1291, 1292. A “final decision” “is a decision that ends the litigation on the merits and leaves nothing more for the court to do but execute the judgment.” Green Tree Financial Corp. v. Randolph, 531 U.S. 79, 86 (2000) (citations and quotations omitted).

But Federal Arbitration Act litigation is quite different from ordinary litigation from both a substantive and procedural prospective, and so it comes as no surprise that the FAA features its own set of appellate jurisdiction rules.

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