Posts Tagged ‘Federal Arbitration Act’

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Guest Post: The Argument for Judicial Power to Void Mandatory Arbitration Agreements and Class Action Waivers on State Public Policy Grounds

August 17th, 2009 Class Action Arbitration, Class Action Waivers, Commercial and Industry Arbitration and Mediation Group, Massachusetts Supreme Judicial Court 1 Comment »

By Professor Peter Friedman         

In my recent two-part guest post published in Disputing about recent state court decisions striking down mandatory arbitration clauses and class action waivers in consumer, online transactions, I concluded that those courts were “acting in legitimate ways [by requiring contract] disputes to be resolved in ways that provide relief for and deterrence of wrongdoing.”   (Part I here; Part II here)  In particular, I applauded the  New Mexico Supreme Court and the Supreme Judicial Court of the Commonwealth of Massachusetts for making explicit the purely public policy grounds for invalidating mandatory arbitration clauses and class action waivers in consumer transactions.  See  Feeney v. Dell Inc., ___ Mass. ___ (July 2, 2009); Fiser v. Dell Computer Corp., ___ P.3d ___ (N.M. June 27, 2009). The courts concluded that the provisions deprived consumers of any meaningful remedies for the defendants’ alleged breaches of contract and that those provisions were therefore in conflict with strong state policies in favor of consumer protection.

It is worth examining more closely, however, my reasons for believing the courts in these cases were acting in judicially legitimate ways.  It might be suggested, for example, that, if a court could strike these particular provisions down on public policy it had articulated without explicit statutory support, there would be nothing to stop courts from striking down any arbitration provisions on judicially formulated public policy grounds. Continue Reading »

Introducing Guest-Blogger Professor Peter Friedman: “The Argument for Judicial Power to Void Mandatory Arbitration Agreements and Class Action Waivers on State Public Policy Grounds”

August 17th, 2009 Class Action Arbitration, Class Action Waivers, Commercial and Industry Arbitration and Mediation Group, Consolidation of Arbitration Proceedings, Guest Posts, Uncategorized Comments Off on Introducing Guest-Blogger Professor Peter Friedman: “The Argument for Judicial Power to Void Mandatory Arbitration Agreements and Class Action Waivers on State Public Policy Grounds”

Today we present a guest post by Professor Peter Friedman concerning the argument for judicial power to void class action waivers and arbitration agreements based on state public policy grounds. 

I met Peter through the LinkedIn Commercial and Industry Arbitration Group (learn about the group here).   He’s a Visiting Assistant Professor at the University of Detroit Mercy Law School, where he teaches Contracts and Core Concepts.  He also teaches U.S. Contract Law at the University of Windsor and the Universiteit van Amsterdam.  He is currently on leave from the Case Western University School of Law, where he has been on the faculty since January 1996.  He’s a very smart, creative guy who is devoted to the law, critical analysis of important legal issues, and, even more importantly, legal education.    

Prior to entering the academic world, Peter spent eleven years immersed in the practice of commercial litigation in New York City, most recently as a partner in the New York City office of Akin Gump Strauss Hauer & Feld LLP.  He graduated with his J.D. from the University of Michigan Law School in 1984 and his A.B. in Ancient Greek and Latin from Brown University in 1981.

Since August 2008, Peter has written a blog, Ruling Imagination: Law and Creativity, that explores the ways law affects creative endeavors and the ways creativity informs the practice of law.  Prior to Ruling Imagination, he authored What is Fair Use?, a blog he wrote in connection with an assignment in one of his legal writing classes in which his students drafted cross-motions for summary judgment for a copyright infringement lawsuit.  Just this month Peter has also begun a blog, 1L Contracts, in which he intends to explore issues connected with the law of contracts as they arise through the coming academic year in his Contracts class at Detroit Mercy. Continue Reading »

Global Arbitration Review Quotes Loree Reinsurance and Arbitration Law Forum’s Critical Analysis of ReliaStar Life Ins. Co. v. EMC Nat’l Life Co.

August 10th, 2009 Arbitrability, Authority of Arbitrators, United States Court of Appeals for the Second Circuit 2 Comments »

On April 28, 2009 we published “ReliaStar Life Insurance Co. v. EMC National Life Co.: Critical Analysis of an Important Reinsurance Arbitration Decision,”  available here.  On July 13, 2009 the London-based  Global Arbitration Review published an interesting article about the Second Circuit’s decision in ReliaStar, which quoted from our critical analysis:  

Writing shortly after the appeal court’s decision, Philip Loree Jr of New York firm Loree & Loree, said the court had “violated New York contract interpretation rules.” He said that, according to New York law, “to ascertain whether a contract is ambiguous, courts are required to focus on what is said, not what is omitted.” “Given that the pre-eminent purpose of the Federal Arbitration Act is to enforce the parties’ arbitration agreement as written, this case may be one of those rare Second Circuit decisions that warrant rehearing and reversal en banc,” he added.

You can find the article (subscription only) here:  ‘Bad Faith’ Costs Decision Upheld, Global Arbitration Review, July 13, 2009, our summary of the decision here, our critical analysis here, and further commentary here.  Disputing’s coverage of the case can be found here and here.

Disputing Guest Post: Class And Consolidated Arbitration Under the Federal Arbitration Act: What Issues Will The United States Supreme Court Confront in Stolt-Nielsen, S.A. V. AnimalFeeds Int’l Co.?

August 6th, 2009 Arbitrability, Authority of Arbitrators, Consolidation of Arbitration Proceedings, Guest Posts, United States Court of Appeals for the Second Circuit, United States Supreme Court 3 Comments »

 The Loree Reinsurance and Arbitration Law Forum is delighted to guest post once again on Karl Bayer’s and Victoria VanBuren’s wonderful ADR blog, Disputing.  Because Victoria and I have both written fairly extensively about Hall Street Assoc. v. Mattel, Inc, 128 S. Ct. 1396 (2008), and about two of the most frequently cited cases construing Hall Street’s dictum on manifest disregard of the law — Citigroup Global Markets, Inc. v. Bacon, 562 F.3d 349 (5th Cir. 2009) and Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), petition for cert. granted June 15, 2009 (No. 08-1198) –  and because the United States Supreme Court has granted certiorari in Stolt-Nielsen, we thought that our joint-readership might appreciate an analysis of the issues that the Supreme Court will likely address – or at least face — in that case.  That’s what we have set out to do in a four-part guest post, Part I of which was published today.  (Check it out  here.)

As readers may already know, the issue before the United States Supreme Court is whether it is consistent with the Federal Arbitration Act to impose class arbitration on parties whose arbitration agreement is silent on that point.  This is the same issue that the Supreme Court set out to decide in Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003), but ultimately never did because a plurality of the Court ruled that there was a disputed issue of contract interpretation as to whether the agreements in that case were, in fact, silent on class arbitration, which resulted in a remand to the arbitrator.  But in Stolt-Nielsen the panel ruled, and the parties agreed, that the contracts are silent on this key point, so the Supreme Court will presumably confront the issue head on. 

The Supreme Court’s decision next Term may have some important ramifications for both commercial and consumer arbitration.  And soon-to-be Justice Sotomayor may provide the swing vote in the case.  So for some advance coverage, tune into Disputing….

The Texas Supreme Court Says Court – Not Arbitrator — Gets to Decide Lack of Capacity Issue Notwithstanding the Severability Doctrine

July 21st, 2009 Arbitrability, Authority of Arbitrators, Texas Supreme Court Comments Off on The Texas Supreme Court Says Court – Not Arbitrator — Gets to Decide Lack of Capacity Issue Notwithstanding the Severability Doctrine

Karl Bayer’s and Victoria VanBuren’s Texas-based  Disputing blog recently reported on In re Morgan Stanley & Co., Inc., __ S.W.3d __ (Texas 2009) (No. 07-0665), in which the Texas Supreme Court held that whether a contracting party had the capacity to enter into a contract containing an arbitration agreement was for the court to decide, notwithstanding that, under the severability (a/k/a “separability”) doctrine, a challenge to the validity or enforceability of a contract as a whole, including the arbitration agreement, is generally for the arbitrators to decide under a broad arbitration clause.  Ms. VanBuren did an excellent job summarizing the case and explaining its significance in her post, “Texas Supreme Court Holds that the Court, not the Arbitrator Should Decide the Issue of Capacity to Contract,” and we recommend that anyone interested in learning more about the case read her thoughtful and nicely-written post. 

Morgan Stanley illustrates that the severability doctrine —  first espoused by the United States Supreme Court in Prima Paint v. Conklin Mfg. Corp., 388 U.S. 395, 403-04 (1967) and later clarified in Buckeye Check Cashing v. Cardengna, 546 U.S. 440, 449 (2006) — is not without its limits.  Severability is a legal fiction, which Courts apply for the purpose of determining whether arbitrators have the authority to determine certain disputes concerning the enforceability or validity of a contract containing an arbitration clause.  It deems the arbitration clause to be an agreement which stands on its own footing from the contract in which it is contained.  Continue Reading »

Feeney v. Dell Inc.: A Critical Analysis

July 17th, 2009 Arbitrability, Class Action Arbitration, Class Action Waivers, Massachusetts Supreme Judicial Court 3 Comments »

Introduction

In part I of a two-part post (here), we summarized the Supreme Judicial Court of Massachusetts’ decision in Feeney v. Dell Inc., ___ Mass. ___, slip op. (July 2, 2009).  The Court there refused to enforce an arbitration agreement in a consumer contract because it contained a class action waiver that the Court found violative of Massachusetts public policy favoring class actions under G.L., c. 93A, and which the Court found not to be severable from the remainder of the arbitration agreement.  The Court also refused to enforce on public policy grounds a choice-of-law clause providing that Texas law — which apparently permits class action waivers — would govern the parties’ agreement.  In this part II we discuss whether the decision comports with the Federal Arbitration Act.

The critical issue in Feeney was whether a state public policy against class action waivers was preempted by the Federal Arbitration Act, the preeminent purpose of which is to enforce according to their terms arbitration agreements falling within its scope.  With all due respect to the SJC, we think Feeney was a tough case and that the preemption issue was a close call.  The Court obviously worked hard to justify the outcome and drilled down on the preemption issue, but at the end of the day its arguments simply proved too much.  Continue Reading »

Feeney v. Dell Inc.: The Massachusetts Supreme Judicial Court Says Class Action Waiver in Arbitration Agreement Governed by the Federal Arbitration Act Violates Massachusetts Public Policy

July 16th, 2009 Arbitrability, Class Action Arbitration, Class Action Waivers, Massachusetts Supreme Judicial Court 3 Comments »

Introduction

The validity of class action waivers in arbitration agreements is a controversial subject at the moment.  There is an obvious tension between the pro-enforcement policies of the Federal Arbitration Act and competing state and federal policies favoring class action arbitration or litigation as a vehicle for vindicating consumer rights.  The United States Supreme Court may provide some hint of where it stands on this issue when it decides the Stolt-Nielsen case (blogged here and here), which raises the related issue whether imposing class action arbitration is consistent with the Federal Arbitration Act when the parties’ contract is silent on that score.  And the Supreme Court may directly address the issue of whether class action waivers comport with federal policy if it decides to grant certiorari in the American Express Merchants’ Litigation (blogged here).  Today we examine a case in which the question was whether a state policy in favor of consumer class actions could trump the enforcement of an arbitration agreement containing a class-action waiver. 

On July 2, 2009, in Feeney v. Dell Inc., ___ Mass. ___, slip op. (July 2, 2009), the Massachusetts Supreme Judicial Court (the “SJC”) ruled that a class action waiver contained in a consumer arbitration agreement violated a fundamental Massachusetts public policy favoring class actions, even though the parties had agreed that Texas law, which allows class action waivers, would govern their agreement.  This violation of Massachusetts public policy, said the Court, rendered the arbitration agreement unenforceable because the class action waiver was unenforceable and could not be severed from the remainder of the arbitration agreement.  But, in an interesting turn of events, the Court dismissed the consumers’ claims with leave to replead, because they failed to state a claim under Mass. G.L., c. 93A, the applicable consumer protection law. 

The case is somewhat different from other decisions voiding class action waivers because the agreement was voided on state public policy grounds, rather than on state unconscionability grounds, and because the court refused to enforce not only the class action waiver but also a choice-of-law clause indicating the parties’ desire that Texas, not Massachusetts, law would govern the class action waiver issue.  The case gives rise to serious questions concerning federal preemption of Massachusetts state policy. 

In this part I of a two-part post, we summarize the Feeny case.  In part II, which will follow tomorrow or the next day, we shall provide our critical analysis.  Because the publicly available copy of the case does not feature official pagination, we have eliminated jump cites, but provide after quotes pertinent information about internal citations, quotations and the like.    Continue Reading »

KX Reinsurance Company v. General Reinsurance Corp.: Arbitrators May Not Retain Jurisdiction After Deciding All Submitted Issues

June 28th, 2009 Association of Insurance and Reinsurance Run-Off Companies (AIRROC), Authority of Arbitrators, Awards, Functus Officio, Grounds for Vacatur, Practice and Procedure, Reinsurance Arbitration, United States District Court for the Southern District of New York 1 Comment »

 Arbitration clauses in reinsurance contracts  typically recognize either expressly or impliedly that an arbitration proceeding has a beginning and an end.   The process usually begins with a demand for arbitration and the selection of an arbitration panel, and ends with the arbitrators holding a hearing on the merits and issuing a final award.  At that point the parties generally expect that the arbitrators will step down, and that any future dispute will be the subject of a new arbitration proceeding, perhaps with a different panel. Continue Reading »

The AAA Commercial Rules and the Pig in a Poke: Gilbert Street Developers, LLC v. La Quinta Homes, LLC

June 24th, 2009 Arbitrability, Authority of Arbitrators, California State Courts, Grounds for Vacatur 3 Comments »

Introduction

Under the Federal Arbitration Act and federal labor law, arbitrators can decide arbitrability questions subject only to deferential review, provided the parties “clearly and unmistakably” delegate that power to them.  California’s state arbitration law follows this familiar federal rule. 

On June 11, 2009 the California Court of Appeal, Fourth District, Division 3, held that the parties to an arbitration agreement did not “clearly and unmistakably” agree to arbitrate arbitrability by incorporating the Commercial Rules of the American Arbitration Association into their contract, because at the time the parties agreed to arbitrate, the rules were silent on whether arbitrators could decide arbitrability questions.  See Gilbert Street Developers, LLC v. La Quinta Homes, LLC, ___ Cal. Rptr.3d ___, slip op (Cal. App. 4th Dist. June 11, 2009) (certified for publication) (copy available here).  The Court so held even though the parties agreed that the arbitration would be “conducted in accordance with the Rules of the American Arbitration Association existing at the date [of the arbitration].  .  .  . ,” and by the date of the arbitration the rules had been amended to provide expressly that the arbitrators had the authority to determine their own jurisdiction.  See slip op. at 2-3.  The Court also held that the operation of a “buyout” clause in the parties’ agreement did not fall within the scope of the parties’ arbitration clause because it involved discretionary matters, which were expressly excluded from arbitration.  See slip op. at 15-16.  Continue Reading »

The Tenth Circuit Tackles a Narrow Arbitration Clause: Chelsea Family Pharmacy, PLLC v. Medco Health Solutions, Inc.

June 8th, 2009 Arbitrability, Authority of Arbitrators, United States Court of Appeals for the Tenth Circuit Comments Off on The Tenth Circuit Tackles a Narrow Arbitration Clause: Chelsea Family Pharmacy, PLLC v. Medco Health Solutions, Inc.

 Introduction

Arbitrability disputes come in various forms.  Some involve broad arbitration clauses, some narrow clauses, and some clauses that are neither broad nor narrow.  Chelsea Family Pharmacy, PLLC v. Medco Health Solutions, Inc., ___ F.3d ___ (10th Cir. 2009) (available here) provides a relatively simple illustration of how courts may decide controversies concerning relatively narrow arbitration clauses and the results that may ensue.  Continue Reading »

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