April 16th, 2009
Arbitrability, Authority of Arbitrators, Legislative Developments, United States Supreme Court
Will the Arbitration Fairness Act of 2009 Apply to Nondomestic Agreements and Awards Falling Under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards?
Introduction
In Parts I and II we discussed how the Arbitration Fairness Act of 2009 (the “Fairness Act”) will likely lead to litigation concerning whether, and if so, to what extent, Proposed Section 2(c) abrogates: (a) the severability doctrine; and (b) the rule that arbitrators may determine their own jurisdiction if the parties clearly and unmistakably agree, with that determination subject only to deferential judicial review (the “Own Jurisdiction Rule”). In Parts IIIA-C we discussed two constructions of Proposed Section 2(c): one that would abrogate severability and the Own Jurisdiction Rule in all cases falling under Chapter 1 of the FAA (the “Broad Construction”); and one that would limit the scope of Proposed Section 2(c) to Chapter 1 cases where one of the parties contends that the arbitration agreement requires arbitration of a consumer, employment, franchise or statutory civil rights dispute (the “Narrow Construction”).
In this Part IV we consider whether Proposed Section 2(c) of the Fairness Act applies to agreements and awards falling under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention” or the “Convention”), which are governed by Chapter 2 of the FAA. While the matter is not entirely free from doubt, Proposed Section 2(c) of the Fairness Act will probably be construed not to apply to awards and agreements falling under the New York Convention. Thus, the doctrine of severability and the Own Jurisdiction Rule will probably continue to apply in cases falling under FAA Chapter 2, even if courts adopt the Broad Construction of the Fairness Act in cases governed by Chapter 1. Continue Reading »
April 11th, 2009
Arbitrability, Authority of Arbitrators, Legislative Developments, United States Supreme Court
Part IIIC: Is the Narrow Construction Sustainable?
Introduction
In Part IIIB (here) we discussed in general terms the “Narrow Construction” of the Arbitration Fairness Act of 2009 (the “Fairness Act”), which would limit the scope of Proposed Section 2(c) to situations where the party resisting arbitration claims that the arbitration agreement requires predispute arbitration of consumer, franchise, employment or statutory civil rights disputes. We also set forth the five premises on which the Narrow Construction is based. This Part IIIC addresses the validity of those premises. [Because this post frequently refers to Proposed Section 2 and its subsections, we have reproduced at the end the pertinent parts of Proposed Section 2.]
The Narrow Construction is fairly complex. A court choosing it would have to determine each of its five premises to be valid. In addition, the validity of Premise 3 is interlinked to that of Premise 5: Premise 3 is easier to accept when viewed without regard to Premise 5 and Premise 5 is harder to accept when viewed in isolation from Premise 3. If a court believes that Premise 3 is reasonable, but has reservations about its validity, when it considers Premise 3 in conjunction with Premise 5, it may conclude that both are invalid. But if it is confident that Premise 3 is valid, that confidence might lead it to conclude that Premise 5 is valid. These are important considerations that a party advocating one construction or the other should take into account in structuring its argument. Continue Reading »
April 7th, 2009
Arbitrability, Authority of Arbitrators, Legislative Developments, United States Supreme Court
On April 4 we reported on 14 Penn Plaza LLC v. Pyett, ___ U.S. ___ (2009) (Thomas, J.) (available here), as did many others last week. Professor Sarah Cole of the ADR Prof Blog published a thoughtful and well-written piece on Pyett (available here), which raised some interesting questions. For example, Professor Cole observed that “if the Arbitration Fairness Act passes, it would not surprise me to see a subsequent effort to overturn the Pyett decision.” As discussed in a series of posts we are publishing on the Fairness Act (Part I available here), the Act would render arbitration agreements falling within the scope of the FAA invalid and unenforceable to the extent they require predispute arbitration of consumer, employment, franchise and statutory civil rights disputes. Continue Reading »
April 6th, 2009
Arbitrability, Authority of Arbitrators, Legislative Developments
Part IIIB: Interpreting Proposed Section 2(c) Narrowly
Introduction
In Part IIIA we discussed what we call the “Broad Construction” of the Arbitration Fairness Act of 2009, and showed how the Act could be construed to abrogate in all commercial disputes: (a) the doctrine of severability; and (b) deferential review under the Federal Arbitration Act (“FAA”) of arbitrator determinations of arbitrability in cases where the parties clearly and unmistakably submit arbitrability questions to the arbitrators (the “Own Jurisdiction Rule”). In this Part IIIB and in Part IIIC we discuss the “Narrow Construction”, which would limit the scope of Proposed Section 2(c) to situations where the party resisting arbitration claims that the arbitration clause requires predispute arbitration of consumer, franchise, employment or statutory civil rights disputes. Continue Reading »
April 4th, 2009
Arbitrability, Authority of Arbitrators, United States Supreme Court
On April 1 the United States Supreme Court decided 14 Penn Plaza LLC v. Pyett, ___ U.S. ___ (2009) (Thomas, J.), an interesting case that highlights some of the differences between labor arbitration governed by the National Labor Relations Act (“NLRA”) and arbitration governed by the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. (the “FAA”). 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.” Slip op. at 25. Reversing the United States Court of Appeals for the Second Circuit, the Court said “yes.” See slip op. at 25. Continue Reading »
April 1st, 2009
Arbitrability, Authority of Arbitrators, Legislative Developments
Part IIIA: Interpreting Section 2(c) of the Fairness Act to Apply to Domestic Arbitration Proceedings Involving Sophisticated, Commercial Entities
Introduction
In Part I we provided general background on the Arbitration Fairness Act of 2009 (the “Fairness Act”) and said it was likely to generate litigation over the allocation of power between courts and arbitrators in commercial arbitration proceedings involving sophisticated, commercial entities. In Part II we briefly discussed why litigation will likely occur if the Act becomes law.
In this Part IIIA we discuss what we call the “Broad Construction” of the Fairness Act, under which it is construed to abrogate in all commercial disputes: (a) the doctrine of severability; and (b) deferential review under Federal Arbitration Act (“FAA”) Sections 10 and 11 of arbitrator determinations of arbitrability in cases where the parties unambiguously submit arbitrability questions to the arbitrators. This construction would limit fairly significantly the power of arbitrators in commercial disputes involving sophisticated parties.
In Section IIIB we shall discuss the “Narrow Construction”, which would limit the scope of Section 2(c) to situations where the party resisting arbitration claims that the arbitration clause requires predispute arbitration of consumer, franchise, employment or civil rights disputes. This construction would not alter the allocation of power between courts and arbitrators in commercial disputes involving commercial entities.
[Note: We previously said we would cover both constructions in a single post. We have concluded, however, that it would be easier on our readers if we addressed each separately. ] Continue Reading »
March 30th, 2009
Authority of Arbitrators, Awards, Nuts & Bolts: Arbitration, functus officio
In this first “Nuts & Bolts” post we briefly review the general rules concerning the finality of arbitration awards under the Federal Arbitration Act (“FAA”), and note some of the consequences that flow from finality. Our principal focus is on Second Circuit finality rules. The rules in other circuits may differ. Continue Reading »
March 29th, 2009
General, Nuts & Bolts
From time to time we shall feature “Nuts & Bolts” posts, which are designed to provide basic information on reinsurance- or arbitration-related topics. These posts are intended to be a resource for in-house and outside counsel, arbitrators, law students, and other persons who are interested in reinsurance or arbitration law (or both). Our coverage is not intended to be comprehensive, but merely to provide some hopefully helpful background and a springboard for further research. Continue Reading »
March 26th, 2009
Arbitrability, Legislative Developments
Part II: Why the Fairness Act May Breed Litigation
In Part I of this multi-part post we provided some general background on the Fairness Act and said it was likely to generate litigation over the allocation of power between courts and arbitrators in commercial arbitration proceedings involving sophisticated, commercial entities. In this Part II we briefly discuss why litigation will likely occur if the Fairness Act becomes law. Continue Reading »
