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Some Interesting Questions Raised by the Pyett Decision

April 7th, 2009 Arbitrability, Authority of Arbitrators, Legislative Developments, United States Supreme Court 4 Comments » By Philip J. Loree Jr.

On April 4 we reported on 14 Penn Plaza LLC v. Pyett, ___ U.S. ___ (2009) (Thomas, J.) (available here), as did many others last week.  Professor Sarah Cole of the ADR Prof Blog  published a thoughtful and well-written piece on Pyett (available here), which raised some interesting questions.   For example, Professor Cole observed that “if the Arbitration Fairness Act passes, it would not surprise me to see a subsequent effort to overturn the Pyett decision.”   As discussed in a series of posts we are publishing on the Fairness Act (Part I available here), the Act would render arbitration agreements falling within the scope of the FAA invalid and unenforceable to the extent they require predispute arbitration of consumer, employment, franchise and statutory civil rights disputes. 

The Fairness Act would not provide a direct basis for an attack on Pyett because it exempts collective bargaining agreements from its scope, and Pyett concerned a collective bargaining agreement.  But Professor Cole’s point is that the Fairness Act may lead to an “effort to overturn Pyett”, not that the Fairness Act would, in and of itself, abrogate Pyett.   Her comments are right on the mark. 

As discussed in our April 4 post, the rationale of Pyett was largely based on  Gilmer v. Interstate/Johnson Lane Corp.,  500 U.S. 20 (1991), in which the Court held that an individual employee could be compelled to arbitrate ADEA claims under a private agreement with a securities exchange governed by the FAA.  Gilmer found that “nothing in the text of the ADEA or its legislative history explicitly precludes arbitration.  .  .  .” and that arbitration would not undermine the ADEA’s “remedial and deterrent function.”   500 U.S. at 28.  The Pyett Court concluded that “[t]he Gilmer Court’s interpretation of the ADEA fully applies in the collective-bargaining context.”  Slip op. at 9. 

The Fairness Act would abrogate Gilmer because (a) the arbitration clause at issue required Gilmer to arbitrate an employment dispute; and (b) in any event, a claim under the ADEA would likely be considered “a dispute arising under [a].  .  . statute intended to protect civil rights” for the purpose of the Fairness Act.  The abrogation of Gilmer would undermine the rationale of Pyett and would provide a basis for an effort to overturn Pyett.       

Another interesting point raised by Professor Cole concerns the requirement that the Union and the employer “clearly and unmistakably” agree to arbitrate statutory claims:  “While unions and employers may clearly and unmistakably require union members to arbitrate ADEA claims, it is not clear what the standard governing the interpretation of  ‘clear and unmistakable’  is.”  That is certainly true.  We suspect that courts may be guided in part by cases involving another “clear and unmistakable” rule that applies in both labor and commercial arbitration— namely, that arbitrator determinations of their own jurisdiction are subject to de novo review by courts unless the parties “clearly and unmistakably” agree that the arbitrators are to decide arbitrability questions.  See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 945 (1995) (FAA);  AT&T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 649 (1986) (labor).   One potential controversy may arise in labor arbitrations where:  (a) the parties’ arbitration agreement is ambiguous concerning the arbitrability of statutory claims; and (b) the parties submit a statutory claim to the arbitrator for determination without any party reserving its rights on arbitrability grounds.  That scenario seems oddly reminiscent of what happened in Gardner-Denver.  .  .  . 


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4 Responses to “Some Interesting Questions Raised by the Pyett Decision”

  1. Jessica Boe says:

    I’m going to start reading these blogs, they are great for fueling a potential career in law!


  2. Philip J. Loree Jr. says:

    Thank you, Jessie!

    Given that you are my niece, I know that your comments are completely objective and unbiased! But all kidding aside, I hope you are enjoying the posts and will continue to read them.

    Uncle Phil

  3. […] Some Interesting Questions Raised by the Pyett Decision, Philip J. Loree Jr., Loree Reinsurance and Arbitration Law Forum, April 7, 2009. […]

  4. […] (2009) (Thomas, J.), and published a follow-up post on April 7, 2009 (posts available here and here).     The question before the Court was whether “a collective bargaining agreement that […]