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Archive for January, 2010

SCOTUS Update: United States Supreme Court Grants Certiorari in Jackson v. Rent-A-Center West, Inc. Arbitration Unconscionability Case

January 18th, 2010 Unconscionability, United States Court of Appeals for the Ninth Circuit, United States Supreme Court 5 Comments »

On September 23, 2009 we reported on the Ninth Circuit’s decision in Jackson v. Rent-A-Center West, Inc., ___ F.3d ___, slip op. (9th Cir. Sept. 9, 2009), petition for cert. granted  Jan. 15, 2010 (No. 09-497).  (Prior post here)  As reported in Disputing, on January 15, 2010, the United States Supreme Court agreed to hear Rent-a-Center West’s appeal.  (Disputing post here

As we discussed nearly four months ago Rent-A-Center concerns an important “who” question that arises in unconscionability cases:  When the parties clearly and unmistakably agree that the arbitrators will decide arbitrability questions, who gets to decide whether the arbitration clause is unenforceable on unconscionability grounds? 

We think the question answers itself.  But the Ninth Circuit, in a 2-1 decision, held that the court decides the unconscionability question irrespective of the parties clearly expressed intent to the contrary.  We argued that the Ninth Circuit should have applied a severability analysis of sorts, and referred the unconscionability question to the arbitrators.  The “Analysis” section of our prior post is reprinted in pertinent part below:  

There is logic to the rule adopted by the majority in that unconscionability is a state law defense that goes to the enforceability of an agreement.  When a party challenges the enforceability of an arbitration agreement, the court ordinarily decides it – unless the parties clearly and unmistakably agree otherwise.  And while the parties clearly and unmistakably agreed to arbitrate arbitrability,  that agreement was – as is often the case – simply a component of the rest of the arbitration agreement.  If the entire arbitration agreement is unenforceable because of unconscionability, then so too must be the agreement to arbitrate arbitrability. 

The problem with the majority’s logic is that it does not distinguish between the enforceability of the clear and unmistakable agreement to arbitrate arbitrability and the enforceability of the parties’ agreement to arbitrate all other disputes.  The Rent-A-Center parties envisioned that a dispute concerning the enforceability of their agreement to arbitrate all other disputes would be decided by the arbitrators.  That is what the parties’ agreement said, and the United States Supreme Court has said that parties can enter into such agreements, provided they are clear and unmistakable. 

We think courts would better advance the purposes of the Federal Arbitration Act by engaging in a severability analysis of sorts when confronting questions like the one in Rent-A-Center.   When parties agree not only to arbitrate the merits of controversies unrelated to the arbitration clause, but also clearly and unmistakably agree to arbitrate arbitrability, the latter agreement is tantamount to an arbitration agreement within an arbitration agreement.  One agreement concerns who decides disputes concerning the existence, formation or enforceability of the other agreement.  And the other agreement concerns the parties’ obligation to arbitrate all other disputes.  Each should be analyzed separately under Federal Arbitration Act Section 2. 

What the court did in Rent-A-Center was assume that, if any part of the arbitration agreement was unenforceable for any reason, then the entire arbitration agreement – including the clear and unmistakable agreement to arbitrate arbitrability – must fail.  Perhaps ironically, the Court found support for this analysis in the Prima Paint/Buckeye Check Cashing line of cases that hold that an enforceability challenge directed at the contract as a whole – as opposed to the arbitration agreement specifically – must be decided by the arbitrators rather than the court.  Because the challenge here was to a stand-alone arbitration agreement that included a clear and unmistakable agreement to arbitrate arbitrability, the Court simply assumed that Federal Arbitration Act Section 2 required the Court to decide it.  But doing so was inconsistent with the parties’ clearly expressed intent that the arbitrators would decide arbitrability questions, at least arbitrability questions that did not concern the enforceability of the parties’ agreement to arbitrate arbitrability. 

The Court should have limited its inquiry to whether the parties’ agreement to arbitrate arbitrability was substantively unconscionable.  If not, then the Court should have directed that the arbitrators decide the question whether the remainder of the arbitration clause was substantively unconscionable.  Had the Court looked at the problem from that perspective, we believe it would have concluded that the unconscionability defense did not apply to the parties’ clear and unmistakable agreement to arbitrate, and that, accordingly, the arbitrators had to decide whether the challenge to the remainder of the arbitration clause had merit.  

.  .  .  . 

So we think the Court should have enforced the agreement to arbitrate arbitrability by committing to the arbitrators the question whether the parties’ agreement to arbitrate all other claims was unconscionable because it was allegedly one-sided.  Had it done so, it would have given full force and effect to the parties’ clearly expressed intentions, the pro-enforcement policies of Federal Arbitration Act Section 2, and the letter and spirit of First Options.

 We shall keep readers apprised of developments as and when they occur.  It will be interesting to see how the United States Supreme Court decides this case.

Some New and Useful Resources for Arbitration and Mediation Fans Courtesy of Don Philbin and Victoria Pynchon

January 17th, 2010 ADR Social Media, General, Twitter 2 Comments »

Our friends Victoria Pynchon and Don Philbin recently contributed to the ADR blogosphere some excellent, new resources.  First, Victoria has transferred stewardship of her IP ADR Blog  — which focuses on arbitration, mediation and negotiation issues pertinent to intellectual property disputes — to our friend Professor Eric van Ginkel, and started a new blog with a broader scope:  the Commercial ADR Blog.  The blog’s tag line is “Business Solutions to Justice Issues,” and, as its title suggests, it covers the entire spectrum of  issues pertinent to commercial ADR.  You can visit it here, or access it via our blogroll. 

The Commercial ADR Blog reflects the high-quality writing and insightful analysis that we have come to expect from Victoria’s Settle It Now blog, and the IP ADR Blog.  It also has a very pleasing layout and uses pictures very effectively — another characteristic of Victoria’s blogs, especially Settle It Now.  In fact, every time I check out Settle It Now or Commercial ADR, I make a mental note to learn how to use effectively the pictures function in WordPress!   (By the way, another blog that uses pictures effectively is Disputing, Karl Bayer’s and Victoria VanBuren’s excellent blog.)  

Few in the ADR business are as indefatigable as Victoria Pynchon, but our friend, and LinkedIn Commercial and Industry Arbitration and Mediation Group Co-Manager Don Philbin is in her league.  Don’s latest contribution to the world of ADR is the ADR Highlight Reel, which you can read here or access via the link in our blogroll.  Don avidly follows more than 100 blogs, many or most of which touch on ADR, or ADR-related topics, like brain science.  Don traditionally flagged articles that he thought were particularly interesting and distributed copies of them by snail mail, and later, by e mail.  With the advent of Twitter, Don set up a system that allows him to tag articles, which, along with a brief description, are automatically posted on Twitter via an RSS feed.  The ADR Hightight Reel consolidates in a single blog post the links to all of Don’s recommended ADR articles for a given period. 

Don’s is an incredibly valuable resource.  Many of us spend hours surfing the web or plowing through Google Reader to keep abreast of ADR-related developments.  Don does all of that work for us and makes it available in one highly accessible format.  Even if you already follow Don on Twitter, and receive his recommendations on a real time basis, article by article, having those recommendations in one spot is a real big plus. 

I suppose a skeptic might question whether he or she should rely on a third person to cull through the 100s of articles pertinent to ADR regularly posted in the blogosphere.  But I can assure readers that Don casts a very wide net with a fairly narrow mesh (I apologize — Sometimes I simply cannot resist fishing-related metaphors, even so-so ones like this!).  The chances of Don not featuring a truly relevant ADR article in his ADR Highlight Reel are, in my humble opinion and experience, slim to none.

Let us all extend our heartfelt thanks to Victoria Pynchon and Don Philbin for their wonderful, new contributions to the ADR blogosphere.

We Just Published our 100th Post!

January 12th, 2010 General Comments Off on We Just Published our 100th Post!

The Loree Reinsurance and Arbitration Law Forum, which was formed in March 2009,  is happy to announce that it just published its 100th post, Arbitration Nuts & Bolts: Vacating Arbitration Awards – Part III.B: Evident Partiality (Enforcing the Parties’ Expectations of Neutrality).  While we do not consider this to be a monumental landmark in the short history of this blog, we are proud of it all the same. 

We would therefore like to take this opportunity to thank our readers for their support, and to express our sincere hope that our first 100 posts have proved to be a useful resource.  Having said that, it is time to get cracking on our next 100 posts!

Arbitration Nuts & Bolts: Vacating Arbitration Awards – Part III.B: Evident Partiality (Enforcing the Parties’ Expectations of Neutrality)

January 12th, 2010 Awards, Evident Partiality, Nuts & Bolts, Nuts & Bolts: Arbitration, Practice and Procedure 3 Comments »


Part III.A of the evident partiality segment of this series discussed the parties’ reasonable expectations of neutrality.  Today we consider how those expectations are enforced. 

“Evident partiality” challenges typically arise out of one of two scenarios.  First, there are “presumed bias” cases in which the arbitrator’s relationship to the parties or the controversy would lead a reasonable person to conclude that the arbitrator was biased, even though the challenger cannot prove actual bias.    Second, there are evident partiality challenges based on allegations of actual bias.  For example, suppose a neutral said on the record during the proceedings prior to deliberations:  “Party A, frankly I have distrusted your company’s business motives for many years, but hearing your witnesses’ testimony has simply confirmed what I’ve suspected all along.”  While the chances of an arbitrator making such a statement (let alone on the record) are exceedingly slim to non-existent, it would provide the basis for an evident partiality challenge (which would probably succeed) based on proof of actual bias. 

The difference between “presumed” and “actual” bias is simply one of proof.  One is based on circumstantial evidence and the other on direct evidence.  Our focus will be on “presumed bias” cases, because they arise with greater frequency.  Actual bias is very difficult to prove, and if it or something approaching it can be established, then that proof would in any (or most any) event meet the standards necessary to establish evident partiality.    Continue Reading »

Stolt-Nielsen Oral Argument Analysis: Part IV

January 6th, 2010 Authority of Arbitrators, Awards, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, Practice and Procedure, United States Supreme Court 1 Comment »


Stolt-Nielsen turns on the allocation of power between courts and arbitrators.   No matter how thoroughly and neatly you parse the issues, the question that repeatedly and continuously begs for an answer is:  who decides?  Answer that question as it relates to one issue and it pops up again in relation to the next. 

Up until Bazzle the Supreme Court did an admirable job of delineating the bounds of arbitral versus judicial authority.  The lines were blurred in Bazzle, where under the peculiar facts there was a question whether the agreement precluded class arbitration.  (See our Disputing guest post here.)  The question required interpretation of ambiguous contract language – a task arbitrators have both the authority and the competence to perform – so it was remanded to the arbitrators.  The four-Justice plurality said the question was not one of arbitrability, but concerned the “kind” of arbitration to which the parties agreed.  

But many of the lower courts — including the United States Court of Appeals for the Second Circuit — read Bazzle to mean that arbitrators have the authority under a broad arbitration agreement to determine whether the parties agreed to class arbitration when their agreements say nothing about class or consolidated arbitration.   That is a very different question from whether an arbitration agreement precludes class arbitration, and it is not one that the parties in Stolt-Nielsen clearly and unmistakably submitted to the arbitrators.      

Stolt-Nielsen presents the United States Supreme Court with a unique opportunity to draw a sharper and stronger line between the arbitrable and non-arbitrable in cases concerning class or consolidated arbitration.  Whether or not the Court will seize it is an open question, because, as explained in Part III, AnimalFeeds has articulated a plausible argument that Stolt-Nielsen has not established the predicate for the Court’s grant of certiorari:  that the parties’ agreements were silent on class arbitration.  If at least five justices are satisfied with the (we believe, unsatisfactory) status quo concerning class arbitration, or otherwise believe that the best course is to allow class arbitration to continue (and even flourish), then AnimalFeed’s argument may provide an interpretive path for a ruling that the case is not properly before the Court.   

Today we explain why accepting AnimaFeeds’ argument would contravene the letter and spirit of the Federal Arbitration Agreement, breed further litigation, and undermine confidence in arbitration as an effective alternative dispute resolution mechanism.   More to the point, we discuss why and how the Court can reach the merits of Stolt-Nielsen consistently with how Stolt-Nielsen presented the question.     Continue Reading »

The LinkedIn Commercial and Industry Arbitration and Mediation Group is Now More than 500 Members Strong!

January 6th, 2010 Commercial and Industry Arbitration and Mediation Group, Mediation 2 Comments »

On May 21, 2009 Disputing and the Loree Reinsurance and Arbitration Law Forum announced the formation of the LinkedIn Commercial and Industry Arbitration and Mediation Group (post available here), an open forum for the discussion of industry and commercial ADR.   At that time the group was 29 members strong — now it is more than 500 members strong, and still growing.   

Some LinkedIn groups are a little dull, featuring little or no meaningful discussion and lots of shameless self promotion.  But this group is a lively one that enjoys debating issues and sharing information and experiences.  Discussions have been frequent and spirited, the group is internationally and professionally diverse, and group members have access to several ADR blog feeds, as well as articles posted by other group members.  It is an excellent networking and learning opportunity for anyone interested in commercial and industry ADR.

Membership in the group is recommended to those interested in keeping abreast of current events pertinent to arbitration (including consumer arbitration), tracking judicial and legislative developments relevant to arbitration law, learning more about the subject, or simply sharing information.  We are proud to have as members a number of commercial and industry arbitrators, attorneys, law professors, industry people and arbitration professionals.   

Membership is also recommended if you are a mediator, a business person who utilizes mediation to resolve disputes, an attorney who represent clients in mediation or a person interested in learning about mediation or sharing information on the subject.  The group’s membership features a number of highly-accomplished mediators and well-known ADR bloggers.  Not being a mediator myself, I have learned much about mediation simply through group participation.    

We welcome new members.  The group is not a forum for, and does not permit, advertising or blatant self-promotion, so our members need not be concerned about being subject to sales pitches, and the like. 

If you are already a member of LinkedIn, please click here to apply for membership in the group. If you are not a LinkedIn member, click here, and you will be guided through the process of creating a profile (which does not need to be completed in one step).  Once your profile is started, and you have a log-in name and password, you can apply for membership in the group (which entails no more than clicking on a button).  Joining LinkedIn is free, as is joining the group. 

We hope you’ll join the conversation!

Arbitration Nuts & Bolts: Vacating Arbitration Awards – Part III.A: Evident Partiality (Expectations of the Parties)

January 4th, 2010 Awards, Evident Partiality, Grounds for Vacatur, Nuts & Bolts, Nuts & Bolts: Arbitration, Practice and Procedure 5 Comments »


In this Part III of our Nuts & Bolts feature on vacating arbitration awards (Parts I and II  here and here) we consider the second statutory ground for vacating an award under the Federal Arbitration Act:  “where there was evident partiality…in the arbitrators…” 9 U.S.C. 10(a)(2).  What constitutes “evident partiality” or arbitral bias has been the subject of numerous judicial decisions setting forth various standards and applying them to a wide range of fact patterns.  The decisions are not easy to reconcile (some may, indeed, be irreconciliable) and generally the standards are of limited utility in practice.  Matters are complicated by judicially-created rules concerning disclosure of potential conflicts of interest and the consequences that may or may not flow from a breach of those rules.  To say “evident partiality” is an elusive subject understates the case.        Continue Reading »