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Posts Tagged ‘Section 1’

Confirming Awards Part I | Post-Award Federal Arbitration Act Enforcement Litigation | Section 9 of the Federal Arbitration Act | Businessperson’s Federal Arbitration Act FAQ Guide

June 12th, 2020 Arbitrability, Arbitration and Mediation FAQs, Arbitration as a Matter of Consent, Arbitration Law, Arbitration Practice and Procedure, Awards, Confirmation of Awards, Consent to Confirmation, Convention on the Recognition and Enforcement of Foreign Arbitral Awards, FAA Chapter 1, FAA Chapter 2, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 1, Federal Arbitration Act Section 2, Federal Arbitration Act Section 9, Judicial Review of Arbitration Awards, Nuts & Bolts, Nuts & Bolts: Arbitration, Petition or Application to Confirm Award, Small Business B-2-B Arbitration 5 Comments »
confirm awards

Favorable arbitration awards are wonderful things, but they do not enforce themselves. Sometimes the other side voluntarily complies, but if not, there is little the arbitrator can do to help.

Arbitrators are not judges and do not have the authority to garnish wages, seize property, foreclose on encumbered property, freeze bank accounts, impose contempt sanctions, and so forth. Parties can delegate to arbitrators broad adjudicatory and remedial authority, but that is relevant only to the nature and scope of their awards and does not confer power on the arbitrators to enforce their awards coercively.

Apart from its potential preclusive effect in subsequent litigation or arbitration, an arbitration award stands on the same footing as any other privately prepared legal document, and for all intents and purposes it is a contract made for the parties by their joint agent of sorts—the arbitrator or arbitration panel. It may be intended by the arbitrator or panel, and at least one of the parties, to have legal effect, but it is up to a court to say what legal effect it has, and, if necessary, to implement that legal effect through coercive enforcement.

A judgment, by contrast, is an official decree by a governmental body (the court) that not only can be coercively enforced through subsequent summary proceedings in the same or other courts (including courts in other states and federal judicial districts), but is, to some extent, self-enforcing. A judgment, for example, can ordinarily be filed as a statutory lien on real property, and applicable state or federal law may, for example, authorize attorneys to avail their clients of certain judgment-enforcement-related remedies without prior judicial authorization.

The Federal Arbitration Act, and most or all state arbitration statutes, provide for enforcement of arbitration awards through a procedure by which a party may request a court to enter judgment on the award, that is to “confirm” it. Once an award has been reduced to judgment, it can be enforced to the same extent as any other judgment. See, e.g., 9 U.S.C. § 13 (Under Federal Arbitration Act, judgment on award “shall have the same force and effect, in all respects, as, and be subject to all the provisions of law relating to, a judgment in an action; and it may be enforced as if it had been rendered in an action in the court in which it is entered”); Fla. Stat. § 682.15(1)( “The judgment may be recorded, docketed, and enforced as any other judgment in a civil action.”); N.Y. Civ. Prac. L. & R. § 7514(a) (“A judgment shall be entered upon the confirmation of an award.”).

Chapter One of The Federal Arbitration Act (the “FAA”), and most or all state arbitration statutes, authorize courts to confirm domestic awards in summary proceedings. State arbitration-law rules, procedures, limitation periods, and the like vary from state to state and frequently from the FAA, and state courts may apply them to FAA-governed awards (provided doing so does not frustrate the purposes and objectives of the FAA).

Chapter 2 of the FAA provides some different rules that apply to the confirmation of domestic arbitration awards that fall under the Convention on the Recognition of Foreign Arbitral Awards (the “Convention”), and the enforcement of foreign arbitration awards falling under the Convention (i.e., awards made in territory of a country that is a signatory to the Convention).

Our focus here is on the Federal Arbitration Act’s requirements for confirming arbitration awards made in the U.S., including awards that fall under Chapter 2 of the Federal Arbitration Act. These awards fall into two categories: (a) awards that fall under Chapter One of the Federal Arbitration Act only (“Chapter One Domestic Awards”); and (b) awards made in the U.S. that fall under the Convention, and thus under both Chapter One and Chapter Two of the Federal Arbitration Act (“Chapter Two Domestic Awards”).

This segment addresses FAQs concerning the confirmation of Chapter One Domestic Awards and focuses on the substantive requirements for confirming Chapter One Domestic Awards under the Federal Arbitration Act. The next segment will discuss the procedural requirements for confirming such Awards. Future posts will answer some additional FAQs concerning the confirmation of such Awards, and another future segment will review special requirements applicable to the confirmation of Chapter Two Domestic Awards.

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How Much Time do I have to Serve and File a Motion to Confirm a U.S.-Made Arbitration Award under the Federal Arbitration Act?

March 24th, 2020 Applicability of Federal Arbitration Act, Arbitration Agreements, Arbitration and Mediation FAQs, Arbitration Law, Arbitration Practice and Procedure, Awards, Confirmation of Awards, FAA Chapter 1, FAA Chapter 2, Federal Arbitration Act 202, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 1, Federal Arbitration Act Section 2, Federal Arbitration Act Section 207, Federal Arbitration Act Section 9, New York Convention 1 Comment »
Statute of Limitations, Confirm

Chapter One of the Federal Arbitration Act authorizes courts to confirm arbitration awards falling within the scope of the Act, if the parties implicitly or expressly agree that a judgment may be entered on the award.

To confirm an award is to reduce it to a judgment of the court, which can be enforced like any other judgment. For some detailed information on confirming arbitration awards, see here.

But how much time do you or your business have to confirm an arbitration award that is made in the United States? The answer depends on whether your arbitration award falls under Chapter One of the Federal Arbitration Act or also under Chapter Two of the Federal Arbitration Act, which implements the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”). Because some arbitration awards made in the United States are completely domestic, while others are not, and different limitation periods apply to applications to confirm them.

If the award falls under Chapter One of the Federal Arbitration Act, but not Chapter Two, then your application to confirm must be made within one-year of the date on which the “award was made.” 9 U.S.C. § 9. But if your domestic award falls under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, then your application to confirm must be made “[w]ithin three years after. . . [the]. . . award. . . is made.” 9 U.S.C. § 207.

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Businessperson’s Federal Arbitration Act FAQ Guide II: Three Threshold Questions about the Federal Arbitration Act

January 21st, 2020 Arbitration Practice and Procedure, Businessperson's FAQ Guide to the Federal Arbitration Act, Convention on the Recognition and Enforcement of Foreign Arbitral Awards, FAA Chapter 1, FAA Chapter 2, FAA Chapter 3, FAA Preemption of State Law, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 1, Federal Arbitration Act Section 2, Federal Arbitration Act Section 4, Federal Courts, Federal Question, Inter-American Convention on International Commercial Arbitration, New York Arbitration Law (CPLR Article 75), New York Convention, Nuts & Bolts: Arbitration, Panama Convention, Practice and Procedure, Rights and Obligations of Nonsignatories, Small Business B-2-B Arbitration, State Arbitration Law, State Arbitration Statutes, State Courts, United States Court of Appeals for the Second Circuit, United States Supreme Court 1 Comment »
Federal Arbitration Act | Arbitrator

This second instalment of the Businessperson’s Federal Arbitration Act FAQ Guide addresses three threshold questions pertinent to the Federal Arbitration Act (the “FAA” or “Federal Arbitration Act”):

1. Does Chapter 1 of the FAA apply to my arbitration agreement?

2. Assuming it does, will a federal district court have subject matter jurisdiction over FAA litigation concerning the agreement or any awards made under it?

3. Does the Federal Arbitration Act apply in state court?

Does Chapter 1 of the FAA Apply to My Arbitration Agreement?

If your written arbitration agreement is contained in a maritime contract or a contract affecting commerce, or concerns a dispute arising out of such a contract, then it falls under Chapter 1 of the Federal Arbitration Act, unless it falls within Section 1’s exemption for contracts of employment of transportation workers engaged in interstate commerce. (See here.) It may also fall under Chapters 2 or 3 of the FAA, which implement the New York and Panama Conventions.

In our first instalment of this FAQ guide (here) we explained that Federal Arbitration Act Section 2, as interpreted by the U.S. Supreme Court, applies to written, pre-dispute arbitration agreements in: (a) “maritime contract[s]” (“Maritime Contracts”); or (b) “contract[s] evidencing a transaction involving commerce. . . .” (“Contracts Affecting Commerce”). It also applies to written post-dispute arbitration agreements “to settle by arbitration a controversy thereafter arising out of such [Maritime Contracts or Contracts Affecting Commerce], or the refusal to perform the whole or any part thereof. . . .” 9 U.S.C. § 2; see Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 273-282 (1995)Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 55-58 (2003).

Section 2’s requirement that an arbitration agreement be “written” seems simple enough, and, for the most part, it is, at least in wholly domestic arbitrations to which Chapters 2 or 3 of the FAA do not concurrently apply. But there are some caveats.

First, just because a contract is required to be “written” doesn’t necessarily mean the arbitration agreement must be signed. The arbitration agreement between the parties need only be in writing, although the arbitration-agreement proponent would need to show that the parties assented to the writing.

For example, suppose A agrees to provide services for B and further agrees that any disputes arising out of or relating to their agreement will be submitted to arbitration. A and B proceed to memorialize their agreement in a writing, including the agreement to arbitrate, spelling out the essential terms of their agreement. While the writing is not signed or initialed, both parties agree that it reflects the essential terms of the parties’ bargain. The written memorialization of the agreement is sufficient to establish a “written” agreement, even though it is not signed by the party opposing its enforcement. 

Second, provided there is a written agreement between at least two parties,  persons who are not parties to that agreement (“nonparties”) may, in appropriate circumstances, enforce the agreement or be bound by it if general principles of state law permit that result. Such general principles include “‘assumption, piercing the corporate veil, alter ego, incorporation by reference, third-party beneficiary theories, waiver and estoppel[.] . . .’” . Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631 (2009) (citations omitted). This Term the United States Supreme Court is to determine whether such principles apply in cases governed by Chapter 2.

As respects whether a “contract” “evidenc[es] a transaction involving commerce,” the U.S. Supreme Court has interpreted Section 2 broadly to mean the Federal Arbitration Act applies to arbitration agreements in contracts or transactions that “affect” commerce, that is, to any contract or transaction that Congress could regulate in the full exercise of its Commerce Clause powers. See Allied-Bruce, 513 U.S. at 281-82; U.S. Const. Art. I, § 8, Cl. 3 (giving Congress power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes”).

Whether a contract “affects” commerce depends on the facts concerning, among other things, the parties, the contract’s subject matter, and the actual or contemplated transactions constituting the contract’s performance or contemplated performance. See Alafabco, 539 U.S. at 56-57. A party does not have to demonstrate that the contract has a “specific” or “substantial” “effect upon interstate commerce if in the aggregate the economic activity in question would represent a general practice subject to federal control.” Id. (citations and quotations omitted).  The question is whether the “aggregate economic activity in question” “bear[s] on interstate commerce in a substantial way.” Id. at 57.

Assuming that Chapter 1 of the FAA Applies to my Arbitration Agreement, Will a Federal District Court have Subject Matter jurisdiction over FAA Litigation Concerning the Agreement or any Awards Made under it?

Not necessarily. Unless an arbitration agreement also falls under Chapters 2 or 3 of the FAA, then there must be an independent basis for federal subject matter jurisdiction.

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The Federal Arbitration Act: a Businessperson’s FAQ Guide

January 15th, 2020 Applicability of Federal Arbitration Act, Arbitration Agreements, Arbitration and Mediation FAQs, Arbitration Practice and Procedure, Arbitration Providers, Arbitration Risks, Businessperson's FAQ Guide to the Federal Arbitration Act, Enforcing Arbitration Agreements, FAA Chapter 1, FAA Chapter 2, FAA Chapter 3, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 1, Federal Arbitration Act Section 10, Federal Arbitration Act Section 11, Federal Arbitration Act Section 2, Federal Arbitration Act Section 3, Federal Arbitration Act Section 4, Federal Arbitration Act Section 9, First Principle - Consent not Coercion, Nuts & Bolts: Arbitration, Practice and Procedure, Repeat Players, Small and Medium-Sized Business Arbitration Risk, Small Business B-2-B Arbitration 3 Comments »
Federal Arbitration Act | Text Added

This is the first in a series of posts that will pose and answer several important questions about the Federal Arbitration Act (the “Federal Arbitration Act” or “FAA”), and FAA practice and procedure. The Federal Arbitration Act is the federal statute that governs arbitration agreements that “affect commerce,” making them irrevocable, valid and enforceable to the same extent as contracts generally. It provides for the expedited enforcement (including the challenge) of arbitration awards, empowers arbitrators to issue hearing subpoenas that are enforceable in court against third parties, and authorizes Courts in appropriate circumstances to compel arbitration, stay litigation, and appoint arbitrators.

Chapter One of the Federal Arbitration Act, and the many court decisions construing it, constitute the main body of arbitration law governing arbitration agreements in contracts “affecting commerce.” That body of arbitration law also includes state law governing contracts generally as well as state arbitration law, where applicable. More on that another day.

Before addressing specific FAQs, we review why arbitration law is important and what small businesses can do to help protect themselves in today’s challenging arbitration environment. We next provide an overview of Chapter One of the Federal Arbitration Act, summarizing its provisions.

This guide, including the instalments that will follow in later posts, is not designed to be a comprehensive recitation of the rules and principles of arbitration law. It is designed simply to give clients, prospective clients, and other readers general information that will educate them about the legal challenges they may face and how engaging a skilled, trustworthy, and experienced arbitration attorney can help them confront those challenges more effectively.

Why is Federal Arbitration Act Arbitration Law Important and How can Small Businesses Protect Themselves in Today’s Challenging Arbitration Environment?

Arbitration can be a very effective way of resolving a wide range of disputes arising out of many legal and commercial relationships. It can benefit the parties if they make informed decisions about agreeing to it, craft their agreement accordingly, invest ample time and resources into the dispute-resolution process, proactively manage it, and make reasonable strategic and tactical decisions aimed at maximizing the odds of a beneficial outcome. It can benefit the courts and the general public by shifting to the private sector dispute-resolution costs that the public-sector (funded by tax payers) would otherwise bear.

Arbitration is not a perfect form of dispute resolution (and none is, including court litigation). That is so even when: (a) parties carefully draft their arbitration agreements and arbitrate in good faith; and (b) arbitrators, arbitration service providers and courts do their best to ensure the integrity, reliability, and cost-efficiency of the process and otherwise strive to protect the legitimate contractual expectations of the parties.

But at least over the last few decades or so, arbitration has, in the eyes of many, become a less attractive alternative to court litigation than it was intended to be, could be, and once was. One reason for the decline is because courts and arbitrators do not always enforce arbitration agreements in a way most likely to promote arbitration, even though they may believe in good faith that their decisions make arbitration a more attractive alternative to litigation.

The Arbitration Cottage Industry: Repeat Players versus Outsiders

Yet another reason is that arbitration has evolved into a cottage industry consisting of arbitration providers; and professional arbitrators (whether affiliated or not with one or more arbitration providers or arbitration societies). This industry serves (or is supposed to serve) relatively large businesses as well as smaller businesses, individuals, and consumers.

But it is a business that frequently pits repeat playersbusinesses which frequently use an arbitration provider’s services, usually because they regularly appoint in their arbitration agreements the arbitration provider as administratoragainst outsidersbusinesses or individuals who find themselves in an arbitrations administered by an arbitration provider before which they do not find themselves on a regular basis, usually because they either do not regularly appoint the arbitration provider as administrator in their arbitration agreements, or because they do not ordinarily agree to arbitrate in the first place.

Repeat players generate more revenue for arbitration providers and their stable of arbitrators over time than do outsiders. In theory that shouldn’t matter, for at least ostensibly, providers and arbitrators offer the market neutral dispute resolution services that are not supposed to favor repeat players, outsiders, or anyone else.

But economic realities can make that ostensible goal difficult to achieve in practice, even for exceedingly-well-intentioned providers and arbitrators. Those economic realities suggest an actual or potential conflict of interestthat is, a conflict between the provider’s and arbitrator’s interest in neutrality and their interest in an arbitration outcome that will not dissuade the repeat player from continuing regularly to use the provider’s services.

Businesses, particularly smaller business that are not arbitration provider repeat players, thus may find themselves in a challenging environment, one in which they probably did not anticipate being when they agreed to arbitrate. They are outsiders in an arbitration system that may be administered by an organization, and presided over by one or more arbitrators, who may consciously or unconsciously habor, or at least labor under, institutional predispositions that could tip the scales in favor of the repeat player and against the outsider.  

The potential for such free-floating institutional bias or predisposition ordinarily will not, without more, support an argument that the arbitrator has a material conflict of interest. The reasons that is so are, for present purposes, beyond the scope of this post, but irrespective of whether arbitration law provides or should provide any relief from such a conflict, the economic realities described pose risks for outsiders, whose odds of success on the merits might not be what they would otherwise be if the tables were turned, and they, not their adversaries, were the repeat players.

Outsiders who find themselves in arbitration disputes with repeat players need all the help they can get.

Arbitration Law: Limited Relief, Arcane Rules, and Traps for the Unwary

The nature of arbitration law itself poses other challenges with which businesses (including repeat players) must grapple. Arbitration law authorizes courts to provide only very limited relief to parties who claim to be the victims of arbitration-agreement violations, whether committed by arbitrators or by an adverse party.

To make matters worse it is not unusual for certain judges to interpret and apply arbitration law in a way that makes it all the more difficult to obtain relief, even when granting that relief would, in all likelihood, promote arbitration as an attractive alternative to litigation, which is the main objective of arbitration law.

For example, courts will sometimes confirm arbitration awards that should have been vacated even though the facts reveal that the arbitrators egregiously violated the parties’ arbitration agreement by exceeding their powers, being guilty of fraud, corruption, or evident partiality, or committing prejudicial procedural misconduct. Courts seem conciously or unconsciously to go out of their way to avoid recognizing such grave improprieties, perhaps because the public might perceive the outcome – a vacated arbitration award and an arbitration do over – as disfavoring arbitration. And that is so even though vacatur would, in all likelihood, promote arbitration by enforcing the parties’ arbitration agreement and protecting reasonable expectations of fundamental fairness.

The same kind of scenario may play out in the context of a pre-arbitration dispute about compelling arbitration and staying litigation pending arbitration. Believing in good faith that they are promoting arbitration, and perhaps desiring an outcome that appears to favor arbitration—such as one that compels arbitration and stays litigation pending arbitration—Courts sometimes determine persons have consented to arbitration in circumstances where a comprehensive examination of the facts and applicable law may indicate otherwise.

Arbitration law doctrines, rules, and procedures remain somewhat arcane even though arbitration disputes and arbitration-related litigation are fairly common. Consequently, outcomes and rationales are often counterintuitive, unless the lawyer has thorough knowledge of and experience with arbitration law. We’ll discuss some examples in later posts.

Even apart from that, arbitation law’s procedural rules are fraught with traps for the wary, which are, among other things, designed to encourage early forfeiture of defenses that might otherwise be raised in FAA litigation. Most, if not all, of these rules nevertheless serve purposes which at least arguably promote arbitration as a viable alternative to litigation. If your attorney doesn’t know the rules well or doesn’t follow them, then your interests may be in jeopordy.

Protecting your Interests in Arbitration and Arbitration-Related Litigation

How can you best protect your interests in the seemingly informal, but sometimes covertly hostile, arbitration environment? First, you must make sure that you are represented by an attorney who has abundent knowledge of and experience in arbitration law and in representing parties in arbitrations and in FAA litigation.

This can make a huge difference – the author has, over the years, encountered situations where another lawyer did not, for example, detect or adequately preserve for judicial review issues that may otherwise have provided a basis for vacating an adverse award. As a consequence, these parties lost the race before it even started, and ended up being saddled with arbitration awards that, in a more perfect world, they may have been able to vacate.  Needless to say, situations like this are far less likely to occur if experienced arbitration counsel been involved from the start.

If you are already represented by an attorney in your arbitration, but find yourself facing challenging FAA enforcement litigation, or the prospect of such litigation, then your interests are best suited by hiring skilled and experienced counsel who regularly handle such litigation. Depending on the circumstances, your own needs, and other considerations, you may wish to retain a new lawyer to handle the FAA litigation, while continuing to retain your current lawyer for purposes of handling the merits of the underlying arbitration (but making sure the FAA litigation lawyer is consulted at each step along the way to help preserve and enhance the record for future FAA litigation).

Second, you should work closely with that attorney, advising him or her of all matters pertinent to your claims and defenses, including matters that may be peculiar to your particular business or industry, including customs, practice, and usage. Always be an active part of your case and work only with attorneys who allow and encourage you to do that.  

Third, you should keep yourself informed about arbitration-law related matters, as well as the legal rules and principles that bear on the merits of your case. This series of posts addresses numerous basic questions concerning the Federal Arbitration Act, and thus should be a useful educational aid for that purpose.

An Overview of the Federal Arbitration Act and its Provisions

The judicial and arbitral enforcement of arbitration agreements that affect interstate commerce is governed by the Federal Arbitration Act (the “FAA”), a statute first enacted in 1925 as the “United States Arbitration Act.” As originally enacted, the FAA consisted of 15 provisions, section 14 of which Congress repealed in 1947, renumbering as Section 14 former Section 15.

In 1970 Congress designated those remaining 14 provisions as “Chapter 1” of the FAA, and added a “Chapter 2,” which consists of various provisions implementing and enabling the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (a/k/a the “New York Convention”).

In 1988 Congress added two additional provisions to Chapter 1 of the FAA, Sections 15 and 16. In 1990 Congress added to the FAA a Chapter 3, which consists of provisions implementing and enabling the Inter-American Convention on International Commercial Arbitration (a/k/a the “Panama Convention”).

The majority of U.S. domestic arbitration disputes are decided under Chapter One of the FAA, 9 U.S.C. §§ 1-16. Of these 16 relatively sparse statutory provisions, Sections 1 through 14 have been on the statute books in largely the same form for about 95 years.

The provisions of Chapter One have not only been on the books for nearly 100 years, but they are fairly sparse, and certainly do not even come close to addressing expressly and comprehensively all of the many issues that may arise concerning the enforcement of arbitration agreements and awards.

Out of necessity, a robust body of judicial interpretations and applications of the provisions has arisen to attempt to address these problems. These interpretations and applications of the FAA often vary from one circuit court of appeals to the next, and the U.S. Supreme Court has, on many occasions over the last four decades (and even before) stepped in to resolve such circuit splits and attempt to make FAA law more uniform by developing and implementing various FAA rules and principals, a number of which were first created in cases arising out of Labor Management and Relations Act (“LMRA”)-governed labor arbitration cases.

But before delving into any of the gory details, let’s look at the domestic, commercial arbitration-law outline that Chapter One of the FAA provides. Our starting point is Section 2, which is sometimes referred to as the FAA’s “enforcement command.” 

The Federal Arbitration Act’s Enforcement Command: Section 2

Section 2 of the FAA is the provision that declares that arbitration agreements falling within its scope are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of of any contract.” 9 U.S.C. § 2.

It also tells us what arbitration agreements fall within the scope of Section 2 and the other provisions of FAA Chapter One: (a) “[a] written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof [;] or [(b)] an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal. . . .” 9 U.S.C. § 2.

Section 2’s scope provision therefore, and as interpreted by the U.S. Supreme Court, applies to written pre-dispute arbitration agreements in: (a) “maritime contract[s]” (“Maritime Contracts”); or (b) “contract[s] evidencing a transaction involving commerce. . . .” (“Contracts Affecting Commerce”). It also applies to written post-dispute arbitration agreements “to settle by arbitration a controversy thereafter arising out of such [Maritime Contracts or Contracts Affecting Commerce], or the refusal to perform the whole or any part thereof. . . .” 9 U.S.C. § 2; see Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 273-282 (1995); Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 55-58 (2003). As interpreted by the U.S. Supreme Court, Section 2’s use of the “word ‘involving,’ like ‘affecting,’ signals an intent to exercise Congress’ commerce power to the full.” Allied-Bruce, 513 U.S. at 277. More on that another day.

Under Section 2, “arbitration is a matter of contract, and courts must enforce arbitration contracts according to their terms.” Schein v. Archer & White Sales, Inc., 139 S. Ct. 524, 529 (2019).  Section 2 also “requires courts to place arbitration agreements on an equal footing with all other contracts.” Kindred Nursing Centers Ltd. P’ship v. Clark, 137 S. Ct. 1421, 1424 (2017) (quotations and  citations omitted).    

Section 1 of the FAA : Definitions and an Exemption

Section 1 of the FAA provides some definitions and exempts from the FAA a fairly limited universe of agreements that would otherwise fall within the scope of the Act. See 9 U.S.C. § 1. As respects the exemption, Section 1 provides that “nothing [in the FAA] shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1.

According to the United States Supreme Court, the exemption applies “only” to “contracts of employment of transportation workers.” Circuit City Stores, Inc. v. Adams, 532 U. S. 105, 119 (2001). But those “contracts of employment” include not only contracts establishing an employer-employee relationship, but also contracts establishing independent contractor relationships. New Prime Inc. v. Oliveira, 139 S. Ct. 532, 539-41, 544 (2019).

The Rest of the FAA

The other provisions of Chapter 1 implement the enforcement command by lending judicial support to the enforcement of arbitration agreements and awards. These are briefly summarized below:

  • Section 3 – Requires courts to stay litigation in favor of arbitration.
  • Section 4 – Provides for courts to compel arbitration.
  • Section 5 – Provides for courts to appoint arbitrators when there has been a default in the arbitrator selection process.
  • Section 6 – Provides that motion practice rules apply to applications made under the FAA, thereby expediting the judicial disposition of such applications. 
  • Section 7 – Provides for the judicial enforcement of certain arbitration subpoenas.
  • Section 8 – Provides that where the basis for federal subject matter jurisdiction is admiralty, then “the party claiming to be aggrieved may begin his proceeding [under the FAA]…by libel and seizure of the vessel or other property….” 9 U.S.C. § 8.
  • Section 9 – Provides for courts to confirm arbitration awards, that is, enter judgment upon them.
  • Section 10 – Authorizes courts to vacate arbitration awards in certain limited circumstances.
  • Section 11 – Authorizes courts to modify or correct arbitration awards in certain limited circumstances.
  • Section 12 – Provides rules concerning the service of a motion to vacate, modify, or correct an award, including a three-month time limit.
  • Section 13 – Specifies papers that must be filed with the clerk on motions to confirm, vacate, modify, or correct awards and provides that judgment entered on orders on such motions has the same force and effect of any other judgment entered by the court.
  • Section 14 – Specifies that agreements made as of the FAA’s 1925 effective date are subject to the FAA.
  • Section 15 – Provides that “Enforcement of arbitral agreements, confirmation of arbitral awards, and execution upon judgments based on orders confirming such awards shall not be refused on the basis of the Act of State doctrine.”
  • Section 16 – Specifies when appeals may be taken from orders made under the FAA, and authorizing appeals from final decisions with respect to arbitration.

More to follow in future posts. . . .

You might also be interested in the following posts here, here, here, here, and here.

 

Photo Acknowledgment

The photo featured in this post was licensed from Yay Images and is subject to copyright protection under applicable law. L&L has added text to the photo.

New Prime v. Oliveira Part II: Federal Arbitration Act Section One “Contracts of Employment” Exemption Includes Independent Contractors

February 1st, 2019 Applicability of Federal Arbitration Act, Federal Arbitration Act Section 1, Federal Arbitration Act Section 2, Federal Arbitration Act Section 3, Federal Arbitration Act Section 4, Statutory Interpretation and Construction, United States Court of Appeals for the First Circuit, United States Supreme Court Comments Off on New Prime v. Oliveira Part II: Federal Arbitration Act Section One “Contracts of Employment” Exemption Includes Independent Contractors
Contracts of Employment 1
Federal Arbitration Act Section 1

Section 1 of the Federal Arbitration Act (the “FAA”) exempts from the FAA’s scope disputes involving “contracts of employment of . . . workers engaged in . . . interstate commerce.”  9 U. S. C. § 1. Does the FAA apply to an agreement to arbitrate disputes between an individual trucker and an interstate trucking company if the contract between them establishes an independent contractor relationship, not an employer-employee one?

In New Prime Inc. v. Oliveira, 586 ___ U.S. ___, slip op. (Jan. 15, 2019), the United States Supreme Court said that the FAA does not apply to such contracts. That was so, the Court explained, because in 1925, the year Congress enacted the FAA, the term “contracts of employment” was ordinarily understood to include not only contracts establishing an employer-employee (or master and servant) relationship, but also independent contractor relationships. Slip op. at 7. Consequently, a court does not have authority under the FAA to stay litigation under FAA Section 3—or to compel arbitration under FAA Section 4—if the parties’ agreement evidences such a “contract of employment,” including a contract of employment that establishes an independent contractor relationship rather than an employer-employee one. Slip op. at 6, 7 & 15.

In our first New Prime post, here, we focused our discussion on a threshold issue addressed by the Court: who gets to decide whether a contract falls within Section 1’s “contracts of employment” exemption when the parties have delegated arbitrability disputes to the arbitrators? The answer to that question, we explained, is “the courts.” For the inapplicability of the Section 1 exemption is an “antecedent” question that must be resolved before the Court can conclude that it has any power whatsoever to stay litigation under Section 1 or compel arbitration under Section 4. Slip op. at 3-4. (See, also, here.)

Today we shift our focus to the merits of the Section 1 exemption question that the U.S. Supreme Court proceeded to resolve.

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