September 23rd, 2009
Arbitrability, Unconscionability, United States Court of Appeals for the Ninth Circuit
I. Introduction
We have explained in prior posts the First Options/AT&T Technologies rule that arbitrators get to decide arbitrability when the parties clearly and unmistakably so agree. (See, e.g., here and here.) That’s all well and good, but what happens when: (a) two parties sign an arbitration agreement which says, among other things, that the arbitrators shall decide any claim, including any claim concerning the applicability, formation or enforceability of the arbitration agreement; and (b) despite that clear and unmistakable agreement to arbitrate arbitrability, one of the parties challenges the arbitration agreement in court on unconscionability grounds?
That is, for all practical purposes, what happened in Jackson v. Rent-A-Center West, Inc., ___ F.3d ___, slip op. (9th Cir. Sept. 9, 2009) (here). And the United States Court of Appeals for the Ninth Circuit ruled 2-1 that the court gets to decide the question. Continue Reading »
September 21st, 2009
Arbitrability, Authority of Arbitrators, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, Guest Posts, Practice and Procedure, United States Court of Appeals for the Second Circuit, United States Supreme Court
On September 1, 2009 Disputing published Part IVA of our four-part guest post on Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), petition for cert. granted June 15, 2009 (No. 08-1198). In Part IVA (here) we considered whether the question in Stolt-Nielsen was one for the court or the arbitrators to decide, and predicted that at least five Justices of the United States Supreme Court will hold that the court must decide it. If we are correct, then the Supreme Court will consider on a de novo basis whether the arbitration panel had the authority to impose class arbitration on the Stolt-Nielsen parties.
Today, Disputing published Part IVB of our guest post (here) in which we consider how the Supreme Court might rule on the merits of the question. We believe that at least five Justices will rule that the arbitrators should not, in the face of the agreements’ silence, have imposed class arbitration where, as here, there is no basis in the Federal Arbitration Act, New York state law or federal maritime law for implying consent to class arbitration.
The Supreme Court’s decision in Stolt-Nielsen may have some important ramifications for both commercial and consumer arbitration. So for advance coverage, tune into Disputing….
August 10th, 2009
Arbitrability, Authority of Arbitrators, United States Court of Appeals for the Second Circuit
On April 28, 2009 we published “ReliaStar Life Insurance Co. v. EMC National Life Co.: Critical Analysis of an Important Reinsurance Arbitration Decision,” available here. On July 13, 2009 the London-based Global Arbitration Review published an interesting article about the Second Circuit’s decision in ReliaStar, which quoted from our critical analysis:
Writing shortly after the appeal court’s decision, Philip Loree Jr of New York firm Loree & Loree, said the court had “violated New York contract interpretation rules.” He said that, according to New York law, “to ascertain whether a contract is ambiguous, courts are required to focus on what is said, not what is omitted.” “Given that the pre-eminent purpose of the Federal Arbitration Act is to enforce the parties’ arbitration agreement as written, this case may be one of those rare Second Circuit decisions that warrant rehearing and reversal en banc,” he added.
You can find the article (subscription only) here: ‘Bad Faith’ Costs Decision Upheld, Global Arbitration Review, July 13, 2009, our summary of the decision here, our critical analysis here, and further commentary here. Disputing’s coverage of the case can be found here and here.
August 6th, 2009
Arbitrability, Authority of Arbitrators, Consolidation of Arbitration Proceedings, Guest Posts, United States Court of Appeals for the Second Circuit, United States Supreme Court
The Loree Reinsurance and Arbitration Law Forum is delighted to guest post once again on Karl Bayer’s and Victoria VanBuren’s wonderful ADR blog, Disputing. Because Victoria and I have both written fairly extensively about Hall Street Assoc. v. Mattel, Inc, 128 S. Ct. 1396 (2008), and about two of the most frequently cited cases construing Hall Street’s dictum on manifest disregard of the law — Citigroup Global Markets, Inc. v. Bacon, 562 F.3d 349 (5th Cir. 2009) and Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), petition for cert. granted June 15, 2009 (No. 08-1198) – and because the United States Supreme Court has granted certiorari in Stolt-Nielsen, we thought that our joint-readership might appreciate an analysis of the issues that the Supreme Court will likely address – or at least face — in that case. That’s what we have set out to do in a four-part guest post, Part I of which was published today. (Check it out here.)
As readers may already know, the issue before the United States Supreme Court is whether it is consistent with the Federal Arbitration Act to impose class arbitration on parties whose arbitration agreement is silent on that point. This is the same issue that the Supreme Court set out to decide in Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003), but ultimately never did because a plurality of the Court ruled that there was a disputed issue of contract interpretation as to whether the agreements in that case were, in fact, silent on class arbitration, which resulted in a remand to the arbitrator. But in Stolt-Nielsen the panel ruled, and the parties agreed, that the contracts are silent on this key point, so the Supreme Court will presumably confront the issue head on.
The Supreme Court’s decision next Term may have some important ramifications for both commercial and consumer arbitration. And soon-to-be Justice Sotomayor may provide the swing vote in the case. So for some advance coverage, tune into Disputing….
July 17th, 2009
Arbitrability, Class Action Arbitration, Class Action Waivers, Massachusetts Supreme Judicial Court
Introduction
In part I of a two-part post (here), we summarized the Supreme Judicial Court of Massachusetts’ decision in Feeney v. Dell Inc., ___ Mass. ___, slip op. (July 2, 2009). The Court there refused to enforce an arbitration agreement in a consumer contract because it contained a class action waiver that the Court found violative of Massachusetts public policy favoring class actions under G.L., c. 93A, and which the Court found not to be severable from the remainder of the arbitration agreement. The Court also refused to enforce on public policy grounds a choice-of-law clause providing that Texas law – which apparently permits class action waivers — would govern the parties’ agreement. In this part II we discuss whether the decision comports with the Federal Arbitration Act.
The critical issue in Feeney was whether a state public policy against class action waivers was preempted by the Federal Arbitration Act, the preeminent purpose of which is to enforce according to their terms arbitration agreements falling within its scope. With all due respect to the SJC, we think Feeney was a tough case and that the preemption issue was a close call. The Court obviously worked hard to justify the outcome and drilled down on the preemption issue, but at the end of the day its arguments simply proved too much. Continue Reading »
June 30th, 2009
Arbitrability, Authority of Arbitrators, United States District Court for the Eastern District of New York, United States Supreme Court
On April 4 we reported on 14 Penn Plaza LLC v. Pyett, 129 S. Ct. 1456 (2009) (Thomas, J.), and published a follow-up post on April 7, 2009 (posts available here and here). The question before the Court was whether “a collective bargaining agreement that clearly and unmistakably requires union members to arbitrate [Age Discrimination in Employment Act ("ADEA")] claims is enforceable as a matter of federal law.” The Court told us the answer was “yes.” 
That answer, of course, begs the question whether any particular collective bargaining agreement (”CBA”) “clearly and unmistakably” requires arbitration of statutory claims. The Court in Shipkevich v. Staten Island Univ. Hosp., No. 08-CV-1008 (FB)(JMA), 2009 WL 1706590 (E.D.N.Y. June 16, 2009) recently considered, among other things, whether the CBA before it clearly and unmistakably required arbitration of claims under Title VII of the Civil Rights Act of 1964 (”Title VII”), New York State civil rights legislation, and New York City’s Human Rights Law, and said the answer was “no.” So let’s take a brief look at Shipkevich to get some perspective on what “clear and unmistakable” means. Continue Reading »
June 24th, 2009
Arbitrability, Authority of Arbitrators, California State Courts, Grounds for Vacatur
Introduction
Under the Federal Arbitration Act and federal labor law, arbitrators can decide arbitrability questions subject only to deferential review, provided the parties “clearly and unmistakably” delegate that power to them. California’s state arbitration law follows this familiar federal rule.
On June 11, 2009 the California Court of Appeal, Fourth District, Division 3, held that the parties to an arbitration agreement did not “clearly and unmistakably” agree to arbitrate arbitrability by incorporating the Commercial Rules of the American Arbitration Association into their contract, because at the time the parties agreed to arbitrate, the rules were silent on whether arbitrators could decide arbitrability questions. See Gilbert Street Developers, LLC v. La Quinta Homes, LLC, ___ Cal. Rptr.3d ___, slip op (Cal. App. 4th Dist. June 11, 2009) (certified for publication) (copy available here). The Court so held even though the parties agreed that the arbitration would be “conducted in accordance with the Rules of the American Arbitration Association existing at the date [of the arbitration]. . . . ,” and by the date of the arbitration the rules had been amended to provide expressly that the arbitrators had the authority to determine their own jurisdiction. See slip op. at 2-3. The Court also held that the operation of a “buyout” clause in the parties’ agreement did not fall within the scope of the parties’ arbitration clause because it involved discretionary matters, which were expressly excluded from arbitration. See slip op. at 15-16. Continue Reading »
June 8th, 2009
Arbitrability, Authority of Arbitrators, United States Court of Appeals for the Tenth Circuit
Introduction
Arbitrability disputes come in various forms. Some involve broad arbitration clauses, some narrow clauses, and some clauses that are neither broad nor narrow. Chelsea Family Pharmacy, PLLC v. Medco Health Solutions, Inc., ___ F.3d ___ (10th Cir. 2009) (available here) provides a relatively simple illustration of how courts may decide controversies concerning relatively narrow arbitration clauses and the results that may ensue. Continue Reading »
May 18th, 2009
Arbitrability, Authority of Arbitrators, Nuts & Bolts, Nuts & Bolts: Reinsurance, Reinsurance Arbitration
Introduction
In today’s Nuts & Bolts post we take a brief look at honorable engagement clauses, which are sometimes referred to as “honorable undertaking” clauses. Honorable engagement clauses are, for practical purposes, a species of choice of law clause. Generally, they confer upon arbitration panels a degree of freedom to depart from the strict rules of law and evidence, and to interpret the contract as an honorable engagement rather than literally according to its terms. They are premised on the now arguably outmoded historical concept that a reinsurance contract is more than a contract, but an honorable undertaking, a deal that is closed when the parties shake hands over a cocktail (or three), and one by which the parties are honor-bound to abide. They also recognize that reinsurance is an arcane business with its own peculiar set of customs, practices and norms, and that, if the parties so agree, arbitrators should be reasonably free to apply these norms in deciding a case, even if a court faced with the same facts would or could not.
Honorable engagement clauses are more common in older reinsurance contracts than in those written today. But many reinsurance disputes arise out of long-tail asbestos or environmental claims arising out of decades-old contracts, a great many of which contain these clauses. And the clauses can have some significant implications in those disputes. Continue Reading »
May 7th, 2009
Arbitrability, Authority of Arbitrators, Legislative Developments, United States Supreme Court
On April 29 — a/k/a “Arbitration Fairness Day” – - Senator Russ Feingold (D-WI) introduced the Senate’s version of the Arbitration Fairness Act of 2009 (S. 931). The Senate’s version tracks the House version in many respects, but there are some important differences between the two.
The Senate Arbitration Fairness Act adds a Chapter 4 to the Federal Arbitration Act, rather than amending Section 2 of Chapter 1. This Proposed Chapter 4 consists of two sections: Section 401, entitled “Definitions”; and Section 402, entitled “Validity and Enforceability.” Proposed Section 402(a) states: ”In General – Notwithstanding any other provision of this title, no predispute arbitration agreement shall be valid or enforceable if it requires arbitration of an employment, consumer, franchise, or civil rights dispute.” Proposed Section 402(b) provides:
(1) IN GENERAL – An issue as to whether this chapter applies to an arbitration agreement shall be determined under Federal law. The applicability of this chapter to an agreement to arbitrate and the validity and enforceability of an agreement to arbitrate to which this chapter applies shall be determined by the court, rather than the arbitrator, irrespective of whether the party resisting arbitration challenges the arbitration agreement specifically or in conjunction with other terms of the contract containing such agreement.
(2) COLLECTIVE BARGAINING AGREEMENTS – Nothing in this chapter shall apply to any arbitration provision in a contract between an employer and a labor organization or between labor organizations, except that no such arbitration provision shall have the effect of waiving the right of an employee to seek judicial enforcement of a right arising under a provision of the Constitution of the United States, a State constitution, or a Federal or State statute, or public policy arising therefrom. Continue Reading »
