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Posts Tagged ‘State Law Contract Interpretation Rules’

SCA v. Armstrong: Anatomy of the Lance Armstrong Arbitration Award—Part III.B.2: Panel’s Authority to Decide the SCA Parties’ Sanctions Claims

April 2nd, 2015 Arbitrability, Arbitration Practice and Procedure, Attorney Fees and Sanctions, Authority of Arbitrators, Awards, Contract Interpretation, Functus Officio, Judicial Review of Arbitration Awards, Practice and Procedure, State Arbitration Law, State Arbitration Statutes, State Courts, United States Supreme Court Comments Off on SCA v. Armstrong: Anatomy of the Lance Armstrong Arbitration Award—Part III.B.2: Panel’s Authority to Decide the SCA Parties’ Sanctions Claims

Part III.B.2

Panel’s Analysis of the Merits of the Arbitrability Issue (Panel Issue No. 1)

Now that we’ve discussed why we think the Court will review the arbitrator’s threshold arbitrability decision de novo, let’s take a closer look at the Panel’s analysis of the arbitrability issue and whether the Texas state courts will conclude that the Panel had the jurisdiction to decide the SCA Parties’ sanctions claims.

yay-15706730-digitalThe procedural posture of  the jurisdictional issue before the Panel is unusual because the Panel, with the parties’ consent, had previously made a partial final award expressing its views on jurisdiction. The intent was to permit expedited judicial review of the issue. The Panel’s 2-1 ruling finding jurisdiction was confirmed by the trial court, which means that the trial court will almost certainly reject Armstrong’s putative challenge to the Panel’s jurisdiction.

The Armstrong Parties’ appeal to the intermediate court of appeals was dismissed for lack of appellate jurisdiction, presumably because the intermediate court of appeals concluded that the trial court’s order confirming the partial final award was not a final order or judgment from which an appeal could be taken. The Armstrong Parties sought temporary relief and mandamus review in the Texas Supreme Court, but the Supreme Court denied those requests.

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Issue No. 1 is simply whether the parties agreed  to submit to arbitration the SCA Parties’ claims against Armstrong relating to Armstrong’s alleged procurement of the consent award through perjury, fraud and other deceptive means. The key question is whether the SCA Parties’ disputes fell within the broad scope of the parties’ arbitration agreement. And the answer is driven in large part by the presumption in favor of arbitration, under which ambiguities about the scope of an arbitration agreement are resolved in favor of arbitration.

By comparison, recall that the answer to the question who decides arbitrability questions was driven by a presumption against arbitration: courts presume that arbitrability questions are for the court to decide unless the parties “clearly and unmistakably” agree to delegate those questions to the arbitrators. The whole point of agreeing to arbitrate is to have arbitrators decide disputes about the merits, and so when the question is whether the parties empowered the arbitrators to decide the merits of a party’s claim for relief, courts presume those questions are for the arbitrators to decide.

The presumption of arbitrability applies to case governed by the Federal Arbitration Act as well as cases falling under the Texas General Arbitration Act. It provides that ambiguities in the scope of an arbitration agreement are to be resolved in favor of arbitration. See, e.g., Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983); Mitsubishi Motors v. Soler Chrysler Plymouth, 473 U.S. 614, 626 (1985); G.T. Leach Builders, LLC v. Sapphire V.P. LP, No. 130497, at *21-22 & nn. 14 & 16 (Tex. Mar. 20, 2015); Branch Law Firm, L.L.P. v. Osborn, 447 S.W.3d 390, 394-98 & n.10 (Tex. App. 14 Dist. 2014). That means that if the scope provision of an arbitration agreement is susceptible to more than one interpretation, and at least one of those interpretations would require the dispute to be submitted to arbitration, then the court, as a matter of law, must find that the parties agreed to submit the dispute to arbitration. Continue Reading »

U.S. Supreme Court Grants Certiorari in Another Class Arbitration Case: Can the Federal Arbitration Act Spare DIRECTV an Extended Stay in Class-Arbitration-Waiver Purgatory?

March 31st, 2015 Appellate Practice, Arbitrability, Arbitration Agreements, Arbitration Practice and Procedure, California State Courts, Choice-of-Law Provisions, Class Action Arbitration, Class Action Waivers, Contract Interpretation, FAA Preemption of State Law, Practice and Procedure, State Courts, United States Supreme Court Comments Off on U.S. Supreme Court Grants Certiorari in Another Class Arbitration Case: Can the Federal Arbitration Act Spare DIRECTV an Extended Stay in Class-Arbitration-Waiver Purgatory?

On March 23, 2015 the U.S. Supreme Court granted certiorari in DIRECTV, Inc. v. Imburgia, No. 14-462. If decided on its merits, the case will be by our count the fifth U.S. Supreme Court decision concerning class arbitration decided on its merits during the period 2010 forward.

yay-1341284-digitalImburgia is a decision by the California Court of Appeals, Second District, Division One of which the California Supreme Court denied review. Like many other Federal Arbitration Act cases, it presents some interesting vertical conflict of law questions, but the California Court of Appeals does not appear to have resolved them in the way the U.S. Supreme Court presumably intended them to be resolved under the Volt and Mastrobuono lines of cases. 

The case centers  on a class-action waiver non-severability provision included in a consumer contract DIRECTV entered into in 2007, about four years before the U.S. Supreme Court ruled in Concepcion that the Federal Arbitration Act preempted California’s Discover Bank rule. The Discover Bank rule provides that class action waivers are unenforceable in litigation or arbitration proceedings. See, generally, AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1753 (2011).

yay-3535433-digitalBefore Concepcion not only did the California state courts hold that the Federal Arbitration Act did not preempt the Discover Bank rule, but so did the U.S. Court of Appeals for the Ninth Circuit. Thus, at the time, the risk companies like DIRECTV and others with consumer class arbitration exposure had was that applicable state law would not only ban class arbitration waivers, but applicable federal law would permit that to happen.

So companies like DIRECTV and others built into their arbitration agreements a fail-safe mechanism under which the entire arbitration agreement would be rendered uneneforceable if state law rendered the class arbitration waiver unenforceable. In other words, the companies understandably viewed class action litigation to be a more favorable alternative than class arbitration if forced to choose between the two. Continue Reading »