Archive for the ‘Conflict between Arbitration Clause and Another Clause’ Category

CPR’s March 27 Appellate Arbitration Video Panel: Jules, Flowers Foods, Goff, and Bruce

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The International Institute for Conflict Prevention & Resolution (“CPR”) presented on March 27, 2026, the latest instalment of its long-running hot-topics in arbitration video series: “Hot Topics: The Supreme Court’s March on Arbitration.” Our good friend and colleague Russ Bleemer, editor of Alternatives to the High Cost of Litigation, moderated the presentation. The panelists were our other good friends and colleagues Professor Angela Downes and Richard D. Faulkner— plus the author, Philip J. Loree Jr.

This developments in arbitration video looked backward to the March 25, 2026, Supreme Court argument in Flowers Foods, Inc. v. Brock, No. 24-935 (U.S. argued Mar. 25, 2026), forward to the March 30 argument in Jules v. Andre Balazs Properties, No. 25-83 (U.S. argued Mar. 30, 2026), and sideways to certain consequential circuit decisions, including USAA Savings Bank v. Goff, No. 25-1730, slip op. (7th Cir. Mar. 19, 2026), and Bruce v. Adams & Reese, LLP, No. 25-5210, slip op. (6th Cir. Feb. 25, 2026). This was the eighteenth CPR arbitration video presentation this panel (or most of it), has given during the past four or five years.

The March 27, 2026, Video

The March 27 program is best understood not as a one-off webinar, but as the newest installment in a continuing conversation about where appellate arbitration law is heading. CPR’s December 2025 year-end program had already previewed Jules and Flowers Foods, the two U.S. Supreme Court arbitration-law  cases the Court has thus far accepted this 2025 Term for review.

What the March 27, 2026, Video Shows About the Current State of Arbitration Law

This latest arbitration video shows that the four featured matters are different on their facts but closely related in what they reveal about the present state of arbitration law. None is a frontal assault on arbitration. Each instead concerns a doctrinal pressure point: where post-award litigation belongs, who falls within the FAA’s Section 1 transportation-worker exemption, when courts will conclude that arbitrators exceeded the bounds of the contract by not interpreting it, and how far Congress’s Ending Forced Arbitration Act (“EFAA”) carve-out extends once sexual-harassment or sexual-assault claims are pleaded together with other claims not covered by the EFAA.

In that respect, Jules remained the centerpiece. Jules asks whether a federal court that properly exercised federal question jurisdiction over an action, and then stayed that action pending arbitration under FAA Section 3, may later adjudicate post-award FAA motions without having a new and independent basis for subject-matter jurisdiction. The question is narrow only on the surface. In practical terms, it concerns whether a federal court that has federal question jurisdiction over the merits dispute, and pursuant to FAA Section 3 stays  the litigation pending arbitration of the merits dispute, may, at the request of one of the parties, and without having a new and independent basis for subject matter jurisdiction (such as diversity), complete the job after the award returns, or whether the parties must instead start over in state court. The CPR panel’s discussion came only days before the March 30 argument, which made the presentation a timely and useful preview of one of the Court’s most important FAA jurisdiction-related  cases since Badgerow v. Walters, 596 U.S. 1 (2022), and Smith v. Spizzirri, 601 U.S. 472 (2024).

Readers who view the March 27, 2026 presentation and the subsequent March 30, 2026 oral argument can see that the panelists’ comments were largely or entirely on the mark. CPR Speaks followed the argument with a very thoughtful same-day report, Supreme Court Hears Case on Federal Courts’ Powers to Confirm Arbitration Awards. A decision likely will issue before the close of the October 2025 Term in late June.

Flowers Foods concerns the scope of FAA Section 1’s transportation-worker exemption. But both Jules and Flowers Foods share an important feature: both concern where the FAA stops, and both therefore affect whether arbitration disputes will be resolved in court, in arbitration, or in some jurisdictional or procedural limbo between the two. The March 27 program accordingly framed Flowers not as an isolated exemption dispute, but as part of the Court’s broader and continuing effort to define the FAA’s boundaries with greater textual precision.

The panel also highlighted two significant circuit courts of appeals decisions that underscore how much important arbitration doctrine is shaped outside the U.S. Supreme Court. In Goff, the Seventh Circuit addressed a rare circumstance in which a court vacated an award on the ground that the arbitrator had, disregarded the parties’ contract and thus did not even arguably interpret it. That issue is significant not because courts often vacate awards on that basis, but because they rarely do. Oxford Health Plans LLC v. Sutter, 569 U.S. 564, 569, 572-73 (2013), made clear how narrow the path is for setting aside an award under FAA Section 10(a)(4) when the arbitrator is at least arguably construing the agreement. A decision like Goff therefore commands attention because it tests the line between genuine contract interpretation and an arbitrator’s substitution of her own notions of “[economic] justice” or “sound policy.” See id. at 569; Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 672, 675 (2010).

Bruce, in turn, is one of the most important circuit-court decisions construing the EFAA. The Sixth Circuit adopted what is sometimes called the entire-case rule: when a case includes an EFAA-covered sexual-harassment dispute, the statute renders the arbitration agreement unenforceable as to the whole case, not merely as to the EFAA-covered claims. See Bruce, slip op. at 17-19. Whether one agrees or disagrees with that reading, the decision is consequential because it gives the statute a broader practical effect than a claim-by-claim approach would have done. The March 27 CPR program usefully placed Bruce in the same conversation as Jules, Flowers Foods, and Goff because all four cases illuminate a common theme: appellate courts are increasingly defining arbitration law through technical yet consequential disputes over scope, forum, remedy, and statutory carve-outs, rather than through  generalized debates about whether the federal policy in favor of arbitration should in a given case drive an arbitration-friendly outcome.

The presentation also illustrated the value of continuity among panelists. Professor Downes, Rick Faulkner, Russ Bleemer, and the author bring different vantage points to the discussion: academic, arbitral, appellate- and district-court practitioner, and editorial. Because the same group has returned repeatedly over several years, the programs have developed into something more useful than mere episodic commentary.

For readers of The Arbitration Law Forum, the key takeaway is straightforward. The March 27 program is worth watching not only for its discussion of the four featured cases, but also for the broader picture it paints. The doctrinal stakes of the Supreme Court’s arbitration docket are larger than they first appear. Lower federal courts continue to generate important arbitration law at a brisk pace. And many of the most consequential disputes now concern not whether arbitration will or should be enforced in the abstract, but how courts define the boundaries of arbitral power, arbitral forum, and arbitral exception. This eighteenth CPR presentation captures, in one discussion, several of the issues likely to shape arbitration-law practice in the months and years ahead.

Contacting the Author

If you have any questions about this article, arbitration, arbitration law, or arbitration-related litigation, then you may contact the author at pjl1@loreelawirm.com or +1 (516) 941-6094.

Philip J. Loree Jr. is principal of The Loree Law Firm, a New York attorney who focuses his practice on arbitration and arbitration-law matters. The Loree Law Firm’s website is https://loreelawfirm.com/.

ATTORNEY ADVERTISING NOTICE: Prior results do not guarantee a similar outcome.

Photo Acknowledgment

The photo featured in this post was licensed from Yay Images and is subject to copyright protection under applicable law.

 

Clause Conflicts: Supreme Court, New York County Finds Arbitration and Jurisdiction/Venue Clauses do not Conflict

September 30th, 2024 American Arbitration Association, Applicability of Federal Arbitration Act, Application to Stay Arbitration, Arbitrability, Arbitrability | Clear and Unmistakable Rule, Arbitrability | Existence of Arbitration Agreement, Arbitration Agreements, Arbitration Law, Arbitration Practice and Procedure, Arbitration Provider Rules, Arbitration Providers, Authority of Arbitrators, Clear and Unmistakable Rule, Conflict between Arbitration Clause and Another Clause, Drafting Arbitration Agreements, FAA Chapter 1, Federal Arbitration Act Enforcement Litigation Procedure, Formation of Arbitration Agreement, Gateway Disputes, Gateway Questions, Jurisdiction Clause, New York County, New York State Courts, State Courts, Stay of Arbitration, Venue Comments Off on Clause Conflicts: Supreme Court, New York County Finds Arbitration and Jurisdiction/Venue Clauses do not Conflict

clauseWhat happens if a contract containing a broad arbitration clause also contains a clause that provides for federal or state court personal jurisdiction and venue over claims that would also fall within the scope of the arbitration clause? If you’ve ever worked on an insurance or reinsurance case in which the policy or contract contained both an arbitration agreement and a service of suit clause, then you’re probably familiar with how courts typically deal with apparent conflicts of that sort.

A service of suit clause—commonly found in, among others, London Market insurance and reinsurance policies and contracts—is a consent to personal jurisdiction provision that provides for personal jurisdiction in a court of competent subject-matter jurisdiction selected by the plaintiff or petitioner. See, e.g., Brooke Group Ltd. v. JCH Syndicate 488, 87 N.Y.2d 530, 534 (1996). It might provide, for example: “‘in the event of the failure of the Underwriters hereon to pay any amount claimed to be due’ the underwriters will, ‘at the request of the Insured. . . submit to the jurisdiction of a Court of competent jurisdiction within the United States.’” JCH Syndicate 488, 87 N.Y.2d at 534 (quoting service-of-suit clause).

At least at first glance, service of suit clauses appear to conflict with the kind of broad arbitration agreements typically found in reinsurance treaties and many London Market policies written for the U.S. excess and surplus lines market. Submitting to the jurisdiction of a court of competent jurisdiction in the event of a party’s failure to pay any amount claimed to be due under a contract seems antithetical to submitting the same failure to pay claim to arbitration.

Contentions of this sort have—not surprisingly—been made, but the Courts usually resolve them by harmonizing the service-of-suit clause with the arbitration clause, finding that the service-of-suit clause complements the arbitration clause by facilitating arbitration enforcement litigation. See, e.g., Pine Top Receivables of Illinois, LLC v. Transfercom, Ltd., 836 F.3d 784, 787 (7th Cir. 2016) (“Read as a whole, the reinsurance agreement[’s service of suit clause] requires Transfercom to submit to the jurisdiction of any court of competent jurisdiction chosen by PTRIL, whether it be to determine the arbitrable nature of the dispute, to confirm an arbitration award, to compel arbitration, or to resolve on the merits, a claim not subject to arbitration—including PTRIL’s breach of contract claim”); The Pointe on Westshore LLC v. Certain Underwriters at Lloyd’s of London, 670 F. Supp. 3d 1342, 1349-53 (M.D. Fla. 2023) (citing numerous cases).

As today’s case—Kennelly v. Myron & Selina Siegel Family Ltd. P’ship LP, No. 654950/2023, 2024 N.Y. Slip Op. 33278 (Sup. Ct. N.Y. Co. Sept. 17, 2024)—aptly demonstrates, apparent conflicts between arbitration agreements and venue or jurisdiction provisions in other types of contracts are addressed in a similar manner. They are resolved according to state law contract interpretation principles, and if the contract provisions can be harmonized, then the interpretation that gives effect to both provisions must prevail.

Clause Conflicts: Background

The interpretation issue in Kennelly arose out of an operating agreement (the “Operating Agreement”) for a limited liability company (the “LLC”). Two members and a manager (the “Arbitration Petitioners”) demanded arbitration against another member and another manager (the “Arbitration Respondents”), alleging that the LLC “and. . . [the Arbitration Respondent manager] failed to pay [those Arbitration Petitioners] all of the monies owed to [them] under the Operating Agreement, including the proper distributive share of [the LLC’s] net profits, and failed to properly manage and operate the venture’s property.” 2024 N.Y. Slip Op. at * 3. The Arbitration Petitioners sought between $1 million and 10 million dollars in damages, as well as interest, legal fees and expenses. Id.

The Operating Agreement (at Section 12.13) contained an arbitration agreement, which provided, in pertinent part:

Each Member agrees that the arbitration procedures set forth below shall be the sole and exclusive method for resolving and remedying claims for money damages arising out of a breach of this agreement (the ‘Disputes’); provided that nothing in this Section 12.13 shall prohibit a party hereto from instituting litigation to enforce any Final Determination (as defined below). The Members hereby acknowledge and agree that except as otherwise provided in this Section 12.13 or in the Commercial Arbitration Rules (the ‘Rules’) promulgated by the American Arbitration Association as in effect from time to time, the arbitration procedures and any Final Determination hereunder shall be governed by, and shall be enforced pursuant to the United States Arbitration Act, 9 U.S.C. § 1, et seq. . . .

(b) . . . . The arbitration shall be conducted in New York, NY, under the Rules as in effect from time to time. The arbitrator shall conduct the arbitration so that a final result, determination, finding, judgment and/or award (the “Final Determination”) is made or rendered as soon as practicable.

(c) Any applicable Member may enforce any Final Determination in any state or federal court of competent jurisdiction. For the purposes of any action or proceeding instituted with respect to any Final Determination, each party hereto hereby irrevocably submits to the jurisdiction of such courts, irrevocably consents to the service of process by registered mail or personal service and hereby irrevocably waives, to the fullest extent permitted by law, any objection which it my have or hereafter have as to personal jurisdiction, the laying of the venue of any such action or proceeding bought in any such court and any claim that any such action or proceeding brought in any court has been brought in an inconvenient forum.

2024 N.Y. Slip Op. 33278 at *4 (quoting Operating Agreement, § 12.13).

Section 12.14 of the Operating Agreement, “Venue,” stated:

Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with this Agreement or the transactions contemplated hereby or thereby may be brought in any state or federal court in The City of New York, Borough of Manhattan, and each Member hereby consents to the exclusive jurisdiction of any court in the State of New York (and of the appropriate appellate courts therefrom) in any suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objections which he, she or it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Each Member hereby waives the right to commence an action, suit or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with this Agreement or the transactions contemplated hereby or thereby in any court outside of The City of New York, Borough of Manhattan.

2024 N.Y. Slip Op. 33278 at *4 (quoting Operating Agreement, § 12.14).

The Arbitration Respondent brought a special proceeding in Supreme Court, New York County (the “special proceeding”), which sought, among other things,  to stay the arbitration on the ground that the Arbitration Petitioner’s  claims were not arbitrable. According to the Arbitration-Respondent (petitioner in the special proceeding), “the Operating Agreement’s separate venue provision, Section 12.14, conflicts with the arbitration provision and, as such, there was no meeting of the minds. . . .” N.Y. Slip Op. 33278 at *7. The Court rejected this argument. N.Y. Slip Op. 33278 at *7 & 8.

Clause Conflicts: Discussion

At the outset the Court noted that the parties agreed that the Federal Arbitration Act (“FAA”) applied, and that where, as here, the existence of an arbitration agreement is at issue, the court decides the question. N.Y. Slip Op. 33278 at *6-7 (citations omitted). It pointed out that there is no dispute that the parties entered into the Operating Agreement and that the Agreement is binding. In the arbitration provision,  Section 12.13, the parties unambiguously agreed that arbitration pursuant to the American Arbitration Association (“AAA”)’s Commercial Arbitration Rules was the “‘sole and exclusive method for resolving and remedying claims for money damages arising out of a breach’ of the Operating Agreement.” N.Y. Slip Op. 33278 at *7.

The Court explained that the alleged conflict between Section 12.13 and Section 12.14 was false. Under New York contract interpretation rules, courts must avoid interpretations that would render contractual provisions without meaning, and if reasonably possible, allegedly conflicting provisions should be harmonized, giving both force and effect. N.Y. Slip Op. 33278 at *7 (citations omitted).

The Court cited five cases where New York courts had harmonized similar apparent conflicts between arbitration clauses and jurisdiction-related clauses, including one involving a clause providing for “exclusive jurisdiction” in New York State courts. N.Y. Slip Op. 33278 at *7.  Three of these were decided by the Appellate Division, First Department, and two by the Supreme Court, New York County. See N.Y. Slip Op. 33278 at *7 (citing cases).

The Court had little difficulty harmonizing the arbitration (Section 12.13) and jurisdiction and venue clause (Section 12.14). The arbitration clause applied only to claims for money damages. That arbitration clause further provided that “the arbitration mandate [did] not ‘prohibit a party hereto from instituting litigation to enforce  any’ final arbitration determination.” N.Y. Slip Op. 33278 at *8 (quoting Section 12.13). The jurisdiction and venue clause said that “any ‘suit, action, or proceeding’ seeking to enforce any provision of the Operating Agreement, or any matter arising out of the agreement, ‘may be brought in any state or federal court’ located in new York County and that the parties consent to exclusive jurisdiction in any such court.” N.Y. Slip Op. 33278 at *8 (quoting Section 12.14).

From that, in turn, the Court drew three conclusions, which collectively demonstrated that the clauses were in harmony:

  1. Because Section 12.13 required arbitration only of monetary relief claims, claims for “equitable or other relief —e.g., specific performance or to stay or compel arbitration—must be brought in a court, and Section 12.14 would apply to any such suit.” N.Y. Slip Op. 33278 at *8 (citation omitted; emphasis in original).
  2. The arbitration clause (Section 12.13) refers to suits brought to enforce arbitration awards and Section 12.14 governed jurisdiction and venue for those suits. N.Y. Slip Op. 33278 at *8.
  3. The ejusdem generis canon of contract construction indicates that the specific should prevail over the general, and here the arbitration clause is “a specific, mandatory clause” while the jurisdiction and venue provision is “a general clause. . . .” Id.  

The Court thus held that “the plain language of Sections 12.13 and 12.14 permits an interpretation that does not result in an irreconcilable conflict between the two provisions or in one provision being rendered meaningless.” N.Y. Slip Op. 33278 at *8.

Delegation of Arbitrability to the Arbitrator

There were two other issues before the Court, one of which we’ll briefly address. The Arbitration Respondent argued that the Arbitration Petitioner’s claims were all “derivative in nature and should be precluded on that ground as well.” N.Y. Slip Op. 33278 at *8. In response, the Arbitration Petitioner argued that whether the claims were derivative [i.e., would have to be brought on behalf of the LLC], and if so, whether they were subject to arbitration, presented questions of arbitrability—questions the parties had delegated to the arbitrator by incorporating the AAA Commercial Rules into their contract. The Arbitration Respondent also apparently made arguments about “lack of proper service or notice,” but the Court’s opinion does not provide details on those claims.

The Arbitration Petitioner argued that these questions concerning the allegedly derivative nature of the claims, and proper service and notice, all had to be submitted to arbitration. The Court agreed with the Arbitration Petitioner.

The parties did not dispute that they had agreed to arbitrate according to the AAA Commercial Rules, which provided “that the ‘arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.’” N.Y. Slip Op. 33278 at *9 (quotation and citation omitted).

Citing Second Circuit and New York state court authority, the Court explained that incorporation of the AAA Commercial Rules into an arbitration agreement delegates arbitrability questions to the arbitrator. See N.Y. Slip Op. 33278 at *9 (citing and quoting Contec Corp. v. Remote Solution, Co., 398 F.3d 205, 208 (2d Cir. 2005); other citations omitted); see, e.g., post here. The Court therefore held that the derivative-claim, notice, and service claims raised questions of arbitrability, which the Arbitration Respondent was required to submit to arbitration. N.Y. Slip Op. 33278 at *10.

Contacting the Author

If you have any questions about this article, arbitration, arbitration-law, arbitration-related litigation, then please contact Philip J. Loree Jr., at (516) 941-6094 or PJL1@LoreeLawFirm.com.

Philip J. Loree Jr. is principal of the Loree Law Firm, a New York attorney who focuses his practice on arbitration and associated litigation. A former BigLaw partner, he has nearly 35 years of experience representing a wide variety of corporate, other entity, and individual clients in matters arising under the Federal Arbitration Act, as well as in insurance or reinsurance-related and other matters.

ATTORNEY ADVERTISING NOTICE: Prior results do not guarantee a similar outcome.

 Photo Acknowledgment

The photo featured in this post was licensed from Yay Images and is subject to copyright protection under applicable law.