main image

Archive for the ‘United States Court of Appeals for the Second Circuit’ Category

New Clear and Unmistakable Outcome Exception to the Old Clear and Unmistakable Rule? (Part II)

August 15th, 2019 Arbitrability, Arbitrability | Clear and Unmistakable Rule, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Authority of Arbitrators, Class Action Arbitration, Class Action Waivers, Class Arbitration Waivers, Clause Construction Award, Clear and Unmistakable Rule, FAA Chapter 1, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 2, FINRA Arbitration, First Options Reverse Presumption of Arbitrability, Manifest Disregard of the Agreement, Manifest Disregard of the Law, United States Court of Appeals for the Fifth Circuit, United States Court of Appeals for the Second Circuit, United States Supreme Court No Comments »
Clear and Unmistakable Rule | Analysis

Part I of this post discussed how the Second and Fifth Circuits, in  Metropolitan Life Ins. Co. v. Bucsek, ___ F.3d ___, No. 17-881, slip op. (2d Cir. Mar. 22, 2019), and 20/20 Comms. Inc. v. Lennox Crawford, ___ F.3d ___, No. 18-10260 (5th Cir. July 22, 2019), suggest a trend toward what might (tongue-in-cheek) be called a “Clear and Unmistakable Outcome Exception” to the First Options Reverse Presumption of Arbitrability (a/k/a the “Clear and Unmistakable Rule”).

Under this Clear and Unmistakable Outcome Exception to the Clear and Unmistakable Rule, courts consider the merits of an underlying arbitrability issue as part of their analysis of whether the parties clearly and unmistakably agreed to arbitrate arbitrability issues.

But the Clear and Unmistakable Outcome Exception runs directly counter to the U.S. Supreme Court’s decision in Schein v. Archer & White Sales, Inc., 586 U.S. ___, 139 S. Ct. 524 (January 8, 2019), and thus contravenes the Federal Arbitration Act as interpreted by Schein. 139 S. Ct. at 527-28, 529-31.

This Part II analyzes and discusses how Met Life and 20/20 Comm. effectively made an end run around Schein and considers what might have motivated those Courts to rule as they did.

Making an End Run Around Schein?

Clear and Unmistakable Rule | Circumvent | End Run

When, prior to 20/20 Comm. we wrote about Met Life, we said it “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.” (See here. )

But after the Fifth Circuit decided 20/20 Comm. this July, in comments we made to Russ Bleemer, Editor of Alternatives, the Newsletter of the International Institute for Conflict Prevention & Resolution (“CPR”)—which were reproduced with our consent in Mr. Zhan Tze’s CPR Speaks blog article about 20/20 Comm. (here)—we expressed the belief that the Fifth Circuit was (whether intentionally or unintentionally) making an end run around Schein, effectively creating an exception to the Clear and Unmistakable Rule.

After analyzing 20/20 Comm. and comparing it to the Second Circuit’s Met Life decision, we concluded that the Second Circuit’s decision also ran counter to Schein.

Schein’s Abrogation of the “Wholly Groundless Exception” to the Clear and Unmistakable Rule

Clear and Unmistakable Rule | Jettison

In Schein the U.S. Supreme Court abrogated the so-called “wholly groundless exception” to the Clear and Unmistakable Rule. Prior to Schein certain courts, including the Fifth Circuit, held that even when parties clearly and unmistakably agreed to arbitrate arbitrability questions, courts could effectively circumvent the parties’ agreement and decide for itself arbitrability challenges that it determined were “wholly groundless.”  

The rationale Schein used to jettison the “wholly groundless exception” to the Clear and Unmistakable Rule is incompatible with the rationales the Second and Fifth Circuit used to support their decisions in Met Life and 20/20 Comm.

Under FAA Section 2, the Schein Court explained, “arbitration is a matter of contract, and courts must enforce arbitration contracts according to their terms.” Schein, 139 S. Ct. at 529 (citation omitted). When those contracts delegate arbitrability questions to an arbitrator, “a court may not override the contract[,]” and has “no power to decide the arbitrability issue.” 139 S. Ct. at 529. That is so even where a Court “thinks that the argument that the arbitration agreement applies to a particular dispute is wholly groundless.” 139 S. Ct. at 529.

Schein explained that its conclusion was supported not only by the FAA’s text, but also by U.S. Supreme Court precedent. Citing and quoting cases decided under Section 301 of the Labor Management and Relations Act, the Court explained that courts may not “‘rule on the potential merits of the underlying’ claim that is assigned by contract to an arbitrator, ‘even if it appears to the court to be frivolous[,]’” and that “[a] court has “‘no business weighing the merits of the grievance’” because the “‘agreement is to submit all grievances to arbitration, not merely those which the court will deem meritorious.’” 139 S. Ct. at 529 (quoting AT&T Technologies, Inc. v. Communications Workers, 475 U.S. 643, 649–650 (1986) and Steelworkers v. American Mfg. Co., 363 U.S. 564, 568 (1960)).

This “principle,” said the Schein Court, “applies with equal force to the threshold issue of arbitrability[]”—for “[j]ust as a court may not decide a merits question that the parties have delegated to an arbitrator, a court may not decide an arbitrability question that the parties have delegated to an arbitrator.” 139 S. Ct. at 530.

Exception to Clear and Unmistakable Rule? Why the Second and Fifth Circuit Decisions Conflict with Schein

Continue Reading »

New Clear and Unmistakable Outcome Exception to the Old Clear and Unmistakable Rule? (Part I)

August 13th, 2019 Arbitrability, Authority of Arbitrators, Class Action Arbitration, Class Action Waivers, Clear and Unmistakable Rule, FAA Chapter 2, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 2, FINRA Arbitration, First Options Reverse Presumption of Arbitrability, United States Court of Appeals for the Fifth Circuit, United States Court of Appeals for the Second Circuit, United States Supreme Court 1 Comment »
Federal Arbitration Act Secction 1 6

Arbitration law is replete with presumptions and other rules that favor one outcome or another depending on whether one thing or another is or is not clear and unmistakable. Put differently, outcomes often turn on the presence or absence of contractual ambiguity.

There are three presumptions that relate specifically to questions arbitrability, that is, whether or not an arbitrator or a court gets to decide a particular issue or dispute:   

  1. The Moses Cone Presumption of Arbitrability: Ambiguities in the scope of the arbitration agreement itself must be resolved in favor of arbitration. Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983). Rebutting this presumption requires clear and unmistakable evidence of an intent to exclude from arbitration disputes that are otherwise arguably within the scope of the agreement.
  2. The First Options Reverse Presumption of Arbitrability:  Parties are presumed not to have agreed to arbitrate questions of arbitrability unless the parties clearly and unmistakably agree to submit arbitrability questions to arbitration. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 942-46 (1995)
  3. The Howsam/John Wiley Presumption of Arbitrability of Procedural Matters: “‘[P]rocedural’ questions which grow out of the dispute and bear on its final disposition are presumptively not for the judge, but for an arbitrator, to decide.” Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002) (quoting John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 557 (1964)) (internal quotation marks omitted). To rebut this presumption, the parties must clearly and unmistakably exclude the procedural issue in question from arbitration.

These presumptions usually turn solely on what the contract has to say about the arbitrability of a dispute, not on what the outcome an arbitrator or court would—or at least should—reach on the merits of the dispute.

Some U.S. Circuit Courts of Appeal, including the Fifth Circuit, recognized an exception to the First Options Reverse Presumption of Arbitrability called the “wholly groundless exception.” Under that “wholly groundless exception,” courts could decide “wholly groundless” challenges to arbitrability even though the parties have clearly and unmistakably delegated arbitrability issues to the arbitrators. The apparent point of that exception was to avoid the additional time and expense associated with parties being required to arbitrate even wholly groundless arbitrability disputes, but the cost of the exception was a judicial override of the clear and unmistakable terms of the parties’ agreement to arbitrate.  

Earlier this year the U.S. Supreme Court in Schein v. Archer & White Sales, Inc., 586 U.S. ___, slip op. at *1 (January 8, 2019) abrogated the “wholly groundless” exception. Schein, slip op. at *2, 5, & 8. “When,” explained the Court, “the parties’ contract delegates the arbitrability question to an arbitrator, the courts must respect the parties’ decision as embodied in the contract.” Schein, slip op. at 2, 8. The “wholly groundless” exception, said the Court, “is inconsistent with the statutory text and with precedent[,]” and “confuses the question of who decides arbitrability with the separate question of who prevails on arbitrability.” Schein,slip op. at 8.    

But since Schein both the Second and Fifth Circuits have decided First Options Reverse Presumption of Arbitrability cases by effectively conflating the question of who gets to decide an arbitrability issue with the separate question of who should prevail on the merits of that arbitrability issue. The Courts in both cases determined whether the parties clearly and unmistakably agreed to arbitrate arbitrability questions by considering, as part of the clear and unmistakable calculus, the merits of the arbitrability question.

These two cases suggest a trend toward what might (tongue-in-cheek) be called a “Clear and Unmistakable Outcome Exception” to the First Options Reverse Presumption of Arbitrability. But the problem with that trend is that it runs directly counter to the Supreme Court’s decision in Schein, and thus contravenes the Federal Arbitration Act as interpreted by Schein.

In Part I of this post we discuss the Second Circuit and Fifth Circuit decisions. In Part II we analyze and discuss how— and perhaps why — those courts effectively made an end run around Schein.

Continue Reading »

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.  

Look Through: Second Circuit Holds that District Courts Must “Look Through” a Section 9 Petition to Confirm to Ascertain Subject Matter Jurisdiction

May 13th, 2019 Amount in Controversy, Arbitration Practice and Procedure, Awards, Confirmation of Awards, Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Diversity Jurisdiction, FAA Chapter 1, FAA Chapter 2, FAA Chapter 3, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 10, Federal Arbitration Act Section 11, Federal Arbitration Act Section 4, Federal Arbitration Act Section 9, Federal Courts, Federal Question, Look Through, Petition to Modify Award, Petition to Vacate Award, Subject Matter Jurisdiction, United States Court of Appeals for the Second Circuit Comments Off on Look Through: Second Circuit Holds that District Courts Must “Look Through” a Section 9 Petition to Confirm to Ascertain Subject Matter Jurisdiction
Look Through

In Landau v. Eisenberg, ___ F.3d ___, No. 17-3963, slip op. (May 1, 2019) (per curiam), the U.S. Court of Appeals for the Second Circuit recently held that district courts must “look through” a Section 9 petition to confirm an arbitration award to determine whether the court has subject matter jurisdiction to adjudicate the petition. District courts must therefore ascertain whether the district court would, absent an arbitration agreement, have had subject matter jurisdiction over the underlying controversy that resulted in the arbitration, and ultimately the award.

While the Second Circuit ruled in a per curiam decision, the issue it decided was of first impression. But it followed on the heels of, and heavily relied on, Doscher v. Sea Port Grp. Sec., LLC, 832 F.3d 372, 379-89 (2d Cir. 2016), which held that district courts should look through a Section 10 or 11 petition to ascertain the existence of federal subject matter jurisdiction. Doscher instructed federal courts to focus not on whether the Section 10 and 11 FAA award review and enforcement process presented substantial federal questions, but on the same thing they would have focused on had they been asked to compel arbitration of the controversy: whether the underlying controversy, in keeping with the well-pleaded complaint rule, would have been within the Court’s subject matter jurisdiction had it not been submitted to arbitration. See Doscher, 882 F.3d at 379-89.  

While Eisenberg and Doscher concerned the question whether federal-question subject matter jurisdiction exists over FAA Sections 9, 10, and 11 petitions, the reasoning of those cases also applies to the question whether there is federal subject matter jurisdiction over such petitions based on the diversity jurisdiction.

The Problem Addressed by Eisenberg and Doscher

Problem | Issue

The Federal Arbitration Act is “something of an anomaly in the realm of federal legislation: It bestows no federal jurisdiction but rather requires for access to a federal forum an independent jurisdictional basis over the parties’ dispute.” Vaden v. Discover Bank, 556 U.S. 49, 59 (2009).

Section 4 of the FAA, which governs motions to compel arbitration, provides that to determine the “independent jurisdictional basis” the court must ascertain whether “save for such agreement, [the district court] would have jurisdiction. . . of the subject matter of a suit arising out of the controversy [claimed to be arbitrable][:]”

[a] party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement.


9 U.S.C. § 4 (emphasis added).

The Supreme Court held in Vaden that “§ 4 of the FAA does not enlarge federal court jurisdiction,” 556 U.S. at 66, and district courts must “look through” the petition to the controversy between the parties to ascertain whether the court had subject matter jurisdiction over the controversy. 556 U.S. at 62. District courts must therefore “assume the absence of the arbitration agreement and determine whether it would have jurisdiction under title 28 without it.” Id. at 63.

But section 4 of the FAA expressly specifies the circumstances under which a federal district court will have jurisdiction over an application to compel arbitration, whereas Sections 9, 10, and 11 of the FAA—which address applications to confirm, vacate, and modify awards—say nothing about subject matter jurisdiction. The availability of relief under those portions of the FAA is not conditioned on either the existence of a lawsuit over which the Court already has subject matter jurisdiction (and which may have been stayed pending arbitration under Section 3 of the FAA) or on a party having previously invoked the court’s jurisdiction by filing a proceeding to compel arbitration under Section 4.

Sections 9, 10, and 11 of the FAA do not in and of themselves vest jurisdiction in a district court simply because they are part of a federal statute—the FAA requires an independent basis for federal subject matter jurisdiction. But what determines subject matter jurisdiction, the nature of the petition to confirm, vacate, or modify the award, or the nature of the underlying dispute that ultimately resulted in the arbitration award?   

Continue Reading »

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.

Continue Reading »

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.

Continue Reading »

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.

Continue Reading »

Second Circuit Sets Evident Partiality Standard for Party-Appointed Arbitrators on Industry Tripartite Arbitration Panels

July 26th, 2018 Appellate Practice, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Awards, Evident Partiality, Federal Arbitration Act Enforcement Litigation Procedure, United States Court of Appeals for the Second Circuit, United States District Court for the Southern District of New York Comments Off on Second Circuit Sets Evident Partiality Standard for Party-Appointed Arbitrators on Industry Tripartite Arbitration Panels

Section 10(a)(2) of the Federal Arbitration Act (the “FAA”) authorizes courts to vacate awards “where there was evident partiality.  .  .  in the arbitrators.  .  .  .” 9 U.S.C. § 10(a)(2). As respects neutral arbitrators, the U.S. Court of Appeals for the Second Circuit has long held that “[e]vident partiality may be found only where a reasonable person would have to conclude that an arbitrator was partial to one party to the arbitration.”  Scandinavian Reinsurance Co. Ltd. v. Saint Paul Fire and Marine Ins. Co., 668 F.3d 60, 64 (2d Cir. 2012) (quotations and citations omitted).

But, particularly in industry and labor arbitration, the parties do not necessarily intend that party-appointed arbitrators on tripartite panels are neutral, that is, disinterested in the outcome, impartial and independent. Can a party vacate an award based on the “evident partiality” of a non-neutral, party-appointed arbitrator, and if so, what standard applies to such a challenge? Continue Reading »

Class Arbitration: Second Circuit in Jock II Rejects Jock I Bootstrapping Bid and Nixes Class Certification Award that Purported to Bind Non-Parties

July 26th, 2017 Arbitrability, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Class Action Arbitration, Consent to Class Arbitration, Exceeding Powers, Judicial Review of Arbitration Awards, United States Court of Appeals for the Second Circuit Comments Off on Class Arbitration: Second Circuit in Jock II Rejects Jock I Bootstrapping Bid and Nixes Class Certification Award that Purported to Bind Non-Parties

Arbitration law’s “first principle” is “arbitration is a matter of consent, not coercion[,]” and class arbitration is no exception. (See, e.g., here.) In Jock v. Sterling Jewelers, Inc., 703 Fed.Appx. 15 (2d Cir. 2017) (summary order), the U.S. Court of Appeals for the Second Circuit enforced that principle by vacating and remanding the district court’s judgment, which confirmed in part a class arbitration class certification award that purported to bind non-parties, that is, persons (other than named class representatives), who had not opted into the putative class.

Because the Second Circuit held in an earlier appeal, Jock v. Sterling Jewelers, Inc., 646 F.3d 113, 124 (2d Cir. 2011) (“Jock I”), that the “issue of whether the agreement permitted class arbitration was squarely presented to the Arbitrator,” see id., the district court concluded that holding was law of the case, and confirmed in part an award certifying a class that “included absent class members, i.e., employees other than the named plaintiffs and those who have opted into the class.” 703 Fed. Appx. at 17-18.

Photographer: stuartmilesThe Second Circuit vacated and remanded the judgment partially confirming the certification award because it purported to bind absent class 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 703 Fed. Appx. at 16, 17-18.

While in Jock I the parties had “squarely presented to the arbitrator” the issue of whether the agreement “permitted class arbitration,” Jock I did not address the more “narrow question” “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.” Id. at 18. The answer to that question is “no”— as Associate Justice Samuel A. Alito, Jr. suggested in his concurring opinion in Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 2071-72 (2013) (Alito, J., concurring), and as the Second Circuit confirmed in Jock II. See 703 Fed. Appx. at 16, 17-18.

Photo Acknowledgements:

All photos used in the text portion of this post are licensed from Yay Images and are subject to copyright protection under applicable law. The Yay Images abbreviations of the photographer’s name for each of the two images are:

Image 1: CartoonResource

Image 2: stuartmiles

 

Confluence of the Arcane: Headings Clauses, Arbitration Law and Reinsurance

November 28th, 2016 Arbitrability, Arbitration Agreements, Arbitrator Selection and Qualification Provisions, Contract Interpretation, Reinsurance Contracts, Uncategorized, United States Court of Appeals for the Second Circuit Comments Off on Confluence of the Arcane: Headings Clauses, Arbitration Law and Reinsurance

yay-20384852-digital

Introduction

A Headings Clause typically provides that contract provision headings and captions are for reference purposes only, and do not negate, modify or otherwise affect the provisions to which they relate. While arguments can be made for or against Headings Clauses, they are fairly common in commercial contracts.

Contract dispute outcomes rarely turn on the interpretation or application of these clauses. But on November 16, 2016, the U.S. Court of Appeals for the Second Circuit decided Infrassure, Ltd. v. First Mutual Trasp. Assur. Co., No. 16-306, slip op. (2d Cir. 2016) (summary order), which not only turned on the meaning and application of a headings clause, but did so in the context of an arbitration-law dispute in a reinsurance case. A confluence of the arcane, indeed!

yay-1291830-digital

 

Infrassure: Background

Infrassure was a dispute between the parties to a facultative reinsurance contract. The facultative reinsurance contract (the “Certificate”) contained two different arbitration clauses. One was in the body of the pre-printed contract (the “Form Arbitration Clause”). The other was in Endorsement No. 2 (the “Endorsement No. 2 Arbitration Clause”). Endorsement No. 2 was titled “LONDON ARBITRATION AND GOVERNING LAW (UK AND BERMUDA INSURERS ONLY).”

The Form Arbitration Clause provided for arbitration of “any dispute arising out of the interpretation, performance or breach of this Certificate.” It designated a specific set of arbitration rules to govern the arbitration, and provided that “[a]ll arbitrators will be disinterested active or former officers of insurance or reinsurance companies.”

The Endorsement No. 2 Arbitration Clause provided for arbitration of “[a]ny dispute, controversy or claim arising out of or relating to this agreement or the breach, termination or invalidity thereof,” and prescribed different arbitration rules. It did not require arbitrators to be active or former officers of insurance or reinsurance companies.

Which Arbitration Clause Applies?

The parties disputed which arbitration clause applied. Reinsurer Infrassure, Ltd. (“Infrassure” or the “Reinsurer”), argued for the Form Arbitration Clause, with its more stringent arbitrator qualification requirements. Cedent First Mutual Transportation Assurance Company (“First Mutual” or the  “Cedent”), a New York State captive insurer of the Metropolitan Transportation Authority, apparently wanted to appoint (or nominate) arbitrators or arbitrator candidates who were not current or former officers or directors of insurance or reinsurance companies. It therefore argued that the Endorsement 2 Arbitration Clause applied.

Infrassure, which is a Swiss company, argued that the Endorsement No. 2 Arbitration Clause did not apply because the title of the endorsement contained the parenthetical limitation “(UK and Bermuda Insurers only)” (the “Parenthetical Limitation”). It asserted in the alternative that the Endorsement No. 2 Arbitration Clause should be construed to impose the same arbitrator qualification criteria as the Form Arbitration Clause imposed.

The Headings Clause

Headings ClauseFirst Mutual argued that the Certificate’s headings clause (the “Headings Clause,” which the Court refers to as the “Titles Clause”) rendered inapplicable the Parenthetical Limitation. The Headings Clause stated: “The several titles of the various paragraphs of this Certificate (and endorsements … attached hereto) are inserted solely for convenience of reference and will not be deemed in any way to limit or affect the provisions to which they relate.”

“This argument [was] thin,” observed the Court, but a reported opinion was in order, because the dispute “requires us to construe wording that apparently has not been construed before, and that is in a contract that may share features with other standard forms and endorsements.” Slip op. at 4.

Court Holds that Headings Clause did Not Strip the U.K.-and-Bermuda-Insurer-only Limitation on the Scope of Endorsement No. 2

The Court, in an opinion by Circuit Judge Dennis Jacobs (an esteemed member of the reinsurance bar before he was appointed to the Second Circuit), held that the Headings Clause was “unambiguous,” but did not negate the Parenthetical Limitation, even though that limitation appeared in the heading or title of Endorsement No. 2.

The Parenthetical Limitation, said the Court, “is not part of the title itself, though it shares the same line and bolded format.” The Heading Clause’s “purpose.  .  .  is not to strip away an express indication as to the context in which a particular provision operative, but to ensure that the text of a provision is not discounted or altered by the words of its  heading.” Slip op. at 4.

Court finds Further Support for its Conclusion by Applying First Mutual’s Heading Clause Interpretation to other Contract Provisions

The Court found confirmation of the accuracy of its conclusion “by consulting other [Certificate] provisions,” including “critical” ones, which would “would have no meaning at all if the Titles Clause were mechanically applied.” Id.

To illustrate, the Court referred to paragraph 14 of the Certificate, which, states:

Program Policy Limits

Various as per the attached schedule.

Id. (emphasis in original)

The Court observed that applying the Ceding Company’s interpretation of the Headings Clause to Paragraph 14 would reduce that paragraph to “the cryptic provision, ‘Various as per the attached schedule.’” Id. The “heading ‘Program Policy Limits,’ instructs the reader that the phrase ‘Various as per the attached schedule refers to program policy limits, as opposed to some other concern of the reinsurance agreement.” Id. That heading, said the Court, does not purport to contradict, alter or otherwise ambiguate the text that follows, but explains what the otherwise contextually ambiguous (indeed, meaningless) text was intended to mean in the context of the whole contract.

According to the Court, “other provisions beside Paragraph 14 likewise would be rendered meaningless if the [Headings Clause] were applied in the way pressed by First Mutual.” Slip op. at 4.

Given the Court’s holding, it was unnecessary to consider Infrassure’s alternative argument that the arbitrator selection provisions of the Form Arbitration Agreement should be made part of the Endorsement No. 2 Arbitration Agreement. All the Court had to say about this argument was “we need not reach [it], which  is just as well for well for Infrassure.” Slip op. at 5.

 

Photo Acknowledgements:

All photos used in the text portion of this post are licensed from Yay Images and are subject to copyright protection under applicable law. The Yay Images abbreviations of the photographer’s name for each of the three images, in order of their appearance, are:

Image 1: VIPDesignUSA

Image 2: steheap

Image 3: speedfighter