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Posts Tagged ‘U.S. Supreme Court’

Henry Schein Case: CPR Interviews Loree and Faulkner on Supreme Court’s Grant of Certiorari

June 24th, 2020 Arbitrability, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Law, Arbitration Practice and Procedure, Arbitration Provider Rules, Arbitration Providers, Authority of Arbitrators, FAA Chapter 1, Federal Arbitration Act Section 2, International Institute for Conflict Prevention and Resolution (CPR), United States Court of Appeals for the Fifth Circuit, United States Supreme Court Comments Off on Henry Schein Case: CPR Interviews Loree and Faulkner on Supreme Court’s Grant of Certiorari
Henry Schein | Supreme Court | Cert. Granted
Steps and columns on the portico of the United States Supreme Court in Washington, DC.

On Monday, June 15, 2020 the International Institute of Conflict Protection and Resolution (“CPR”) interviewed our good friend and colleague Richard D. Faulkner and Loree & Loree partner Philip J. Loree Jr. about the U.S. Supreme Court’s grant of certiorari in Henry Schein Inc. v. Archer and White Sales Inc., No. 19-963. To watch and listen to the video-conference interview, CLICK HERE.

The petition for and grant of certiorari arose out of the Fifth Circuit’s remand decision from the United States Supreme Court’s decision in Henry Schein Inc. v. Archer & White Sales Inc., 139 S. Ct. 524 (2019) (available at https://bit.ly/2CXAgPw) (“Schein I”).

If you’ve been following our posts about the Schein I and the remand decision, Archer and White Sales Inc. v. Henry Schein Inc., 935 F.3d 274 (5th Cir. 2019) (available at http://bit.ly/2P9FGMU) (“Schein II”), then you know that the arbitration proponent, Henry Schein, Inc. (“Schein”), petitioned for rehearing en banc of Schein II in fall 2019. (See here, herehere, and here.) In October 2019, while the petition for rehearing en banc was pending, Philip J. Loree Jr. published in Alternatives an article entitled “Back to Scotus’s Schein: A Separability Analysis that Resolves the Problem with the Fifth Circuit Remand,” 37 Alternatives 131 (October 2019).

The Fifth Circuit denied the petition for rehearing en banc on December 6, 2019. But Schein, a Melville, N.Y.-based dental equipment distributor, filed on January 30, 2020 a petition for certiorari, which asked the U.S. Supreme Court to review the Fifth Circuit’s Schein II ruling.

The Petition asks the U.S. Supreme Court to determine “[w]hether a provision in an arbitration agreement that exempts certain claims from arbitration negates an otherwise clear and unmistakable delegation of questions of arbitrability to an arbitrator.” (Petition at I)

We wrote about the Petition in a post CPR Speaks, CPR’s blog, published on February 19, 2020, which was entitled “Schein Returns: Scotus’s Arbitration Remand Is Now Back at the Court.” And we also published in the April 2020 issue of CPR Alternatives an article about the Petition, which was entitled “Schein’s Remand Decision Goes Back to the Supreme Court. What’s Next?,” 38 Alternatives 54 (April 2020) (the “April 2020 Alternatives Article”). 

As noted in the April 2020 Alternatives Article, Schein’s filing of the petition for certiorari prompted Archer & White Sales Inc. (“Respondent” or “Archer & White”), a Plano, Texas, distributor, seller, and servicer of dental equipment, to file a conditional cross-petition (the “Cross Petition”), which in the event the Court granted the Petition asked the Court to determine “[w]hether the parties clearly and unmistakably agreed to arbitrate arbitrability by incorporating the AAA Rules into their contract.”

The Cross-Petition ultimately prompted Rick Faulkner and Phil Loree Jr. to co-author a two-part article for Alternatives entitled “Schein’s Remand Decision: Should Scotus Review the Provider Rule Incorporation-by-Reference Issue?” Part I was published in the May 2020 issue of Alternatives. Part II was published in the June 2020 issue.

The two-part article argued that, if the Court granted the Petition, it should also grant the Cross-Petition, and address the issue whether the parties, by agreeing to arbitrate “in accordance with” the American Arbitration Assocation’s Commercial Arbitration Rules, clearly and unmistakably agreed to arbitrate arbitrability issues.

But as it turned out, the Court granted the Petition, but denied the Cross-Petition, one of the issues addressed in the interview.

Our good friend Russ Bleemer, Editor of Alternatives, conducted the interview, and did a great job editing the articles Rick and I wrote about Schein for Alternatives. He also wrote for the CPR Speaks Blog an excellent summary of where things stand in light of the Court’s grant of the Petition. The video of the interview is embedded into that blog post. You can request copies of the articles Rick and Phil wrote about Schein by emailing CPR at alternatives@cpradr.org.  

We also shout-out CPR’s Tania Zamorsky, who, among other things, is the blog master of CPR Speaks, and who coordinated the effort to share copies of the video on CPR’s social media outlets.

Photo Acknowledgment

The photo featured in this post was licensed from Yay Images and is subject to copyright protection under applicable law.

OTO LLC v. Kho: U.S. Supreme Court Denies Certiorari | International Institute for Conflict Prevention and Resolution Interviews Philip J. Loree Jr. and Richard D. Faulkner About the Denial

June 10th, 2020 Arbitrability, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Law, Arbitration Practice and Procedure, California Supreme Court, Challenging Arbitration Agreements, Enforcing Arbitration Agreements, FAA Chapter 1, Federal Arbitration Act Section 2, Gateway Disputes, Gateway Questions, International Institute for Conflict Prevention and Resolution (CPR), Substantive Arbitrability, Unconscionability, United States Supreme Court Comments Off on OTO LLC v. Kho: U.S. Supreme Court Denies Certiorari | International Institute for Conflict Prevention and Resolution Interviews Philip J. Loree Jr. and Richard D. Faulkner About the Denial
OTO LLC v. Kho

On June 8, 2020 the United States Supreme Court declined to review OTO LLC v. Kho, a controversial decision of the California Supreme Court, which held that an arbitration agreement was, in the circumstances, unconscionable to the extent that it purported to require an employee to arbitrate wage claims.

The California Supreme Court held that the agreement in OTO was both procedurally and substantively unconscionable under California law, and its decision that the agreement was substantively unconscionable turned on how the agreement’s procedures were less streamlined, and more akin to litigation procedures, than those available under California’s so-called Berman administrative hearing scheme, which California uses to resolve wage claims.

Also on June 8, 2020, CPR Speaks, the blog of the International Institute for Conflict Prevention and Resolution (“CPR”) published an excellent post on OTO, written by Harvard Law School student and CPR Intern Seorae Ko. The post explains the background of the case in more detail and discusses the arguments advanced in favor of and in opposition to the petition for certiorari.

On June 9, 2020, our friend and colleague Russ Bleemer, Editor of Alternatives to the High Cost of Litigation, CPR’s newsletter, interviewed our friend and colleague Richard D. Faulkner, an arbitrator, arbitration-law practitioner, and former trial judge, and the author, Philip J. Loree Jr., about the OTO denial of certiorari and what it means for practitioners. As always, Russ did a great job conducting the interview.

Today, June 10, 2020, CPR posted that video conference interview on CPR Speaks, and you can watch it HERE.

Contacting the Author

If you have any questions about this article, the interview, arbitration, arbitration-law, or arbitration-related litigation, then please contact Phil Loree Jr., at (516) 941-6094 or at PJL1@LoreeLawFirm.com.

Philip J. Loree Jr. is a partner and founding member of Loree & Loree. He has 30 years of experience handling matters arising under the Federal Arbitration Act and in representing a wide variety of clients in arbitration, litigation, and arbitration-related litigation.

Loree & Loree represents private and government-owned-or-controlled business organizations, and persons acting in their individual or representative capacities, and often serves as co-counsel, local counsel or legal adviser to other domestic and international law firms requiring assistance or support.

Loree & Loree was recently selected by Expertise.com out of a group of 1,763 persons or firms reviewed as one of Expertise.com’s top 18 “Arbitrators & Mediators” in New York City for 2019, and now for 2020. (See here and here.)

ATTORNEY ADVERTISING NOTICE: Prior results do not guarantee a similar outcome.

Photo Acknowledgment

The photo featured in this post was licensed from Yay Images and is subject to copyright protection under applicable law.

CPR Speaks Publishes Philip J. Loree Jr.’s Post on Schein’s Return to the U.S. Supreme Court

February 20th, 2020 Arbitrability, Arbitrability | Clear and Unmistakable Rule, CPR Speaks Blog of the CPR Institute, Delegation Agreements, Federal Arbitration Act Section 2, Federal Arbitration Act Section 3, Federal Arbitration Act Section 4, Gateway Disputes, Gateway Questions, International Institute for Conflict Prevention and Resolution (CPR), Loree & Loree, Questions of Arbitrability, Section 3 Stay of Litigation, Separability, Stay of Litigation, Stay of Litigation Pending Arbitration, United States Court of Appeals for the Fifth Circuit, United States Supreme Court 2 Comments »
Schein II
Steps and columns on the portico of the United States Supreme Court in Washington, DC.

If you’ve been following our posts on Henry Schein Inc. v. Archer & White Sales Inc., 139 S. Ct. 524 (Jan. 8, 2019) (available at https://bit.ly/2CXAgPw) (“Schein I”), and the U.S. Court of Appeals for the Fifth Circuit decision on remand, Archer and White Sales Inc. v. Henry Schein Inc., 935 F.3d 274 (5th Cir. 2019) (available at http://bit.ly/2P9FGMU) (“Schein II”), then you know that the arbitration proponent, Henry Schein, Inc. (“Schein”), petitioned for rehearing en banc. (See here, here, here, and here.)

Well, unfortunately, the Fifth Circuit denied that petition on December 6, 2019. But apparently Schein was at least as disappointed with that ruling as we were, and so Schein filed on January 30, 2020 a petition for certiorari, asking the U.S. Supreme Court to review the Fifth Circuit’s Schein II ruling. A copy of the Petition is here.

We were delighted—not because we get to write still more articles and posts about Schein I and Schein II, but because, with all due respect to the Fifth Circuit, we think that Schein II was wrongly decided, and that consequently, Schein has been denied the benefit of the arbitration agreement and Delegation Agreement for which it freely bargained. And we hope that the U.S. Supreme Court grants Schein’s petition, reverses the Fifth Circuit decision, and directs the Fifth Circuit to compel arbitration of the parties’ arbitrability dispute as required by the parties’ Delegation Agreement.

On February 19, 2020, our friends at CPR Speaks, the blog of the International Institute for Conflict Prevention and Resolution (“CPR”), published a post we authored about this development, entitled Schein Returns: Scotus’s Arbitration Remand Is Now Back at the Court, which you can review here.

The post discusses the background of Schein I and Schein II, the events leading up to the petition for certiorari, some of the reasons why we believe Schein II was wrongly decided, and how we believe that it should be decided if SCOTUS grants the petition.

Many thanks to our good friend, Russ Bleemer—a New York attorney who is the editor of CPR’s Alternatives, an international ADR newsletter published by John Wiley & Sons, Inc., for his very helpful edits. And a shout-out also to CPR’s Tania Zamorsky, who, among other things, is the blog master of CPR Speaks.

About the Author

Philip J. Loree Jr. is a partner and founding member of Loree & Loree. He has nearly 30 years of experience handling matters arising under the Federal Arbitration Act and in representing a wide variety of clients in arbitration, litigation, and arbitration-related litigation. He is a former partner of the litigation departments of the New York City firms of Cadwalader, Wickersham & Taft LLP and Rosenman & Colin LLP (now known as Katten Munchin Rosenman LLP).

Loree & Loree represents private and government-owned-or-controlled business organizations, and persons acting in their individual or representative capacities, and often serves as co-counsel, local counsel or legal adviser to other domestic and international law firms requiring assistance or support.

You can contact Phil Loree Jr. at (516) 941-6094 or at PJL1@LoreeLawFirm.com.

Photo Acknowledgment

The photo featured in this post was licensed from Yay Images and is subject to copyright protection under applicable law.

SCOTUS Denies Americo and Jupiter Medical Cert. Petitions: All Eyes now on DIRECTV. . . .

May 19th, 2015 American Arbitration Association, Appellate Practice, Arbitrability, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Arbitration Provider Rules, Arbitrator Selection and Qualification Provisions, Awards, Choice-of-Law Provisions, Class Action Arbitration, Class Action Waivers, Confirmation of Awards, Consent to Class Arbitration, Contract Interpretation, FAA Preemption of State Law, Federal Arbitration Act Enforcement Litigation Procedure, Judicial Review of Arbitration Awards, State Courts, United States Supreme Court Comments Off on SCOTUS Denies Americo and Jupiter Medical Cert. Petitions: All Eyes now on DIRECTV. . . .

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On March 28, 2015 we reported (here) that the U.S. Supreme Court (“SCOTUS”) had asked for a response to the petition for certiorari in Americo Life, Inc. v. Myer, 440 S.W.3d 18 (Tex. 2014). In Americo the Texas Supreme Court held that an arbitration award had to be vacated because it was made by a panel not constituted according to the parties’ agreement. The parties’ agreement, among other things, incorporated the American Arbitration Association (the “AAA”)’s rules, which at the time the parties entered into the contract followed the traditional, industry arbitration rule that party-appointed arbitrators may be partial, under the control of the appointing party or both. But by the time the dispute arose the AAA Rules had been amended to provide that the parties are presumed to intend to require parties to appoint only neutral arbitrators—that is, arbitrators that are both impartial and independent.

Five Justices of the nine-member Texas Court determined that the parties had agreed that party-appointed arbitrators need not be impartial, only independent. Because the AAA had, contrary to the parties’ agreement, disqualified the challenging party’s first-choice arbitrator on partiality grounds, the panel that rendered the award was not properly constituted and thus exceeded its powers. See 440 S.W.3d at 25. (Copies of our Americo posts are here and here.)

yay-12776482As reported here and here, the losing party requested Supreme  Court review to determine whether the Texas Supreme Court should have deferred to the AAA’s decision on disqualification rather than independently determining whether the parties intended to require party-appointed arbitrators to be neutral. The petition argues that there is a split in the circuits on the issue.

On Monday, May 18, 2015, SCOTUS denied the petition for certiorari.  (You can access the Court’s May 18, 2015 Order List here.)

On Monday May 4, 2015, SCOTUS also denied the petition for certiorari in another Federal Arbitration Act case, Jupiter Medical Center, Inc. v. Visiting Nurse Assoc., No. 14-944, which was decided by the Florida Supreme Court. (You can access the Court’s May 4, 2015 Order List here.) Jupiter Medical Center, like Americo, concerned a post-award challenge under Section 10(a)(4) of the Federal Arbitration Act, and also like Americo, was decided by a state supreme court. In Jupiter Medical, however, the Florida Supreme Court rejected the post-award challenge.

yay-5257980-digitalSupreme Court watchers interested in arbitration cases will have to get their fix next term from DIRECTV v. Imburgia, which we discussed here. Will SCOTUS hold that the California intermediate Court did not give effect to the presumption of arbitrability? Will SCOTUS go even further and explain that, just as a statute cannot be interpreted “‘to destroy itself,'” AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1748 (2011) (quoting  American Telephone & Telegraph Co. v. Central Office Telephone, Inc., 524 U.S. 214, 227-228 (1998) (quotation omitted)), so too cannot state law contract interpretation rules be applied in a way that would destroy an arbitration agreement to which the Federal Arbitration Act applies? Cf. Volt Info. Sciences, Inc. v. Trustees of Leland Stanford Junior Univ., 489 U.S. 468,  (1989) (“The question remains whether, assuming the choice-of-law clause meant what the Court of Appeal found it to mean, application of Cal. Civ. Proc. Code Ann. § 1281.2(c) is nonetheless pre-empted by the FAA to the extent it is used to stay arbitration under this contract involving interstate commerce.  .  .  . [because] “it would undermine the goals and policies of the FAA.”)

Stay tuned for DIRECTV.  .  .  .

 

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. Text has been added to image 2 (counting from top to bottom). Hover your mouse pointer over any image to view the Yay Images abbreviation of the photographer’s name.

All Eyes on Americo. . . .SCOTUS Expected to Rule on Petition for Certiorari at Upcoming May 14, 2015 Conference

May 12th, 2015 American Arbitration Association, Appellate Practice, Arbitrability, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Arbitration Provider Rules, Arbitrator Selection and Qualification Provisions, Awards, Confirmation of Awards, Contract Interpretation, Evident Partiality, Judicial Review of Arbitration Awards, State Courts Comments Off on All Eyes on Americo. . . .SCOTUS Expected to Rule on Petition for Certiorari at Upcoming May 14, 2015 Conference

yay-677327-digitalOn March 28, 2015 we reported (here) that the U.S. Supreme Court had asked for a response to the petition for certiorari in Americo Life, Inc. v. Myer, 440 S.W.3d 18 (Tex. 2014). In Americo the Texas Supreme Court held that an arbitration award had to be vacated because it was made by a panel not constituted according to the parties’ agreement. The parties’ agreement, among other things, incorporated the American Arbitration Association (the “AAA”)’s rules, which at the time the parties entered into the contract followed the traditional, industry arbitration principle that party-appointed arbitrators may be partial, under the control of the appointing party or both. But by the time the dispute arose the AAA Rules had been amended to provide that the parties are presumed to intend that appointed arbitrators must be neutral.

Five Justices of the nine-member Court determined that the parties had agreed that party-appointed arbitrators need not be impartial, only independent. Because the AAA had, contrary to the parties’ agreement, disqualified the challenging party’s first-choice arbitrator on partiality grounds, the panel that rendered the award was not properly constituted and thus exceeded its powers. See 440 S.W.3d at 25. (Copies of our Americo posts are here and here.)

yay-34842-e1424841353823The losing party is requesting Supreme  Court review to determine whether the Texas Supreme Court should have deferred to the AAA’s decision on disqualification rather than independently determining whether the parties intended to require party-appointed arbitrators to be neutral. The petition argues that there is a split in the circuits on the issue.

At this week’s May 14, 2015 conference, the Court will presumably decide whether or not to grant certiorari.

In our March 28, 2015 post (here) we argued  that Americo‘s unique facts make it poor candidate for certiorari. At the time the parties agreed to arbitrate, the AAA rules “provided that ‘[u]nless the parties agree otherwise, an arbitrator selected unilaterally by one party is a party-appointed arbitrator and not subject to disqualification pursuant to Section 19.'” 440 S.W.3d at 23 (quoting AAA Commercial Rule § 12 (1996)). Section 19 permitted the AAA to disqualify neutral arbitrators for partiality, but, under Section 12, absent an agreement to the contrary, party-appointed arbitrators were not subject to disqualification under Rule 19. When the AAA Rules were amended to reverse the traditional presumption about partiality of party-appointed arbitrators, the Rules were also amended to authorize the AAA to determine whether party-appointed arbitrators were neutral.

yay-8590418-digitalThis is one of those (relatively rare) cases where a question of arbitrability—that is, whether the parties agreed to delegate to the AAA the authority to make a final and binding determination on whether a party-appointed arbitrator may be disqualified—is intertwined so inextricably with the merits of the dispute alleged to be arbitrable that, for all intents and purposes, the arbitrability and merits questions are identical. In other words, the AAA’s authority to disqualify turns on whether the parties agreed to neutral or non-neutral party-appointed arbitrators–the precise issue the petition claims the AAA should itself decide. In situations like these, the court cannot abdicate its duty to determine arbitrability, even if that means deciding some or all of the disputes that are alleged to be arbitrable. See, generally, Litton Financial Printing Div. v. National Labor Relations Board, 501 U.S. 190, 208-09 (1991).

Of course, the Supreme Court may believe otherwise, or may have other reasons for wanting  to grant certiorari.  But in any event, we’ll probably know by Monday, May 18, 2015 whether the Court will take the case.

 

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. Text has been added to images 1 and 3 (counting from top to bottom). Hover your mouse pointer over any image to view the Yay Images abbreviation of the photographer’s name.

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 »

SCA v. Armstrong: Anatomy of the Lance Armstrong Arbitration Award—Part III.B.1: Panel Issue No. 1: the Panel’s Authority to Decide the SCA Parties’ Sanctions Claims

March 29th, 2015 Arbitrability, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Attorney Fees and Sanctions, Authority of Arbitrators, Awards, Confirmation of Awards, Contract Interpretation, Grounds for Vacatur, Practice and Procedure, State Courts, United States Supreme Court Comments Off on SCA v. Armstrong: Anatomy of the Lance Armstrong Arbitration Award—Part III.B.1: Panel Issue No. 1: the Panel’s Authority to Decide the SCA Parties’ Sanctions Claims

Part III.B.1

Panel Issue No. 1: the Armstrong Panel’s Authority to Decide the SCA Parties’ Sanctions Claims

Introduction

Part III.A of our Lance Armstrong Arbitration Award series identified (a) the categories of issues (the “Issue Categories”) that a court can address on a motion to vacate an arbitration award on the ground the arbitrators exceeded their powers (the “Issue Categories”); and (a) the four specific issues that the Panel addressed in its award (the “Panel Issues”).

Panel Issue No. 1 was, as phrased by the arbitrators: “Does this Arbitration Tribunal have the jurisdiction or authority to decide and resolve the existing disputes between the named parties?” That issue falls into Issue Category No. 1: Issues concerning whether the parties delegated to the arbitrators—or were required to delegate to the arbitrators—the power to decide particular disputes.

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Whether or not the Panel had the authority to decide the SCA Parties’ claims against  Armstrong and Tailwind (the “Armstrong Parties”) depends on whether at least one 0f the parties requested the arbitrators to adjudicate those claims; and the other party either: (a) expressly or impliedly consented to the arbitrators deciding the dispute; or (b) objected to the request, but the claims were within the scope of the parties’ written pre- or post-dispute arbitration agreement.   Disputes what issues the parties submitted—or were required to be submit—to arbitration present questions of arbitrability. See, e.g., Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83-86 (2002); First Options of Chicago, Inc. v. Kaplan, 543 U.S. 938, 942-45 (1995).

Relationship Between Arbitrability and the Post-Award Standard of Judicial Review

Ordinarily, questions of arbitrability are— in the allocation-of-decision-making-power scheme of things—for the court to decide, unless the parties have clearly and unmistakably agreed to delegate them to arbitrators. See, e.g., First Options, 543 U.S. at 944-45. Under a typical broadly-worded pre-dispute arbitration agreement, the vast majority of disputes that may arise between the parties—including disputes about arbitration procedure—are presumptively arbitrable, that is, they are subject to arbitration unless the parties clearly a nd unmistakably exclude them from arbitration. But when a dispute presents a question of arbitrability, then it is presumptively for the court to decide, that is, they are not subject to arbitration unless the parties clearly and unmistakably include them within the universe of disputes that must be submitted to arbitration.

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Where as here, an arbitrability issue arises at the award enforcement (or back-end) stage of the proceedings—rather than the pre-arbitration,  arbitration-agreement-enforcement (or front-end) stage (i.e., on a motion to compel arbitration or stay litigation)—then whether or not an issue is a question of arbitrability affects the standard of review. The standard of review is, in essence, the degree of deference to  which a court pays the arbitrators’ decisions on matters that are material to applications to confirm, vacate or modify arbitration awards. Continue Reading »

United States Supreme Court Requests Response to Petition for Certiorari in Texas Party-Appointed Arbitrator Qualification Case

March 28th, 2015 American Arbitration Association, Appellate Practice, Arbitrability, Arbitration Agreements, Arbitration Practice and Procedure, Arbitration Provider Rules, Arbitrator Selection and Qualification Provisions, Authority of Arbitrators, Awards, Contract Interpretation, Evident Partiality, Grounds for Vacatur, Judicial Review of Arbitration Awards, State Arbitration Law, State Courts, Texas Supreme Court, United States Supreme Court Comments Off on United States Supreme Court Requests Response to Petition for Certiorari in Texas Party-Appointed Arbitrator Qualification Case

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On June 20, 2014 the Texas Supreme Court held in Americo Life, Inc. v. Myer, 440 S.W.3d 18 (Tex. 2014), that an arbitration award had to be vacated because it was made by a panel not constituted according to the parties’ agreement. The parties’ agreement, among other things, incorporated the American Arbitration Association (the “AAA”)’s rules, which at the time the parties entered into the contract followed the traditional, industry arbitration principle that party-appointed arbitrators may be partial, under the control of the appointing party or both. But by the time the dispute arose the AAA Rules had been amended to provide that the parties are presumed to intend that appointed arbitrators must be neutral.

Five Justices of the nine-member Court determined that the parties had agreed that party-appointed arbitrators need not be impartial, only independent. Because the AAA had, contrary to the parties’ agreement, disqualified the challenging party’s first-choice arbitrator on partiality grounds, the panel that rendered the award was not properly constituted and thus exceeded its powers. See 440 S.W.3d at 25. (Copies of our Americo posts are here and here.)

The losing party has petitioned the United States Supreme Court for a writ of certiorari, arguing that the Court should determine whether the Court should have deferred to the AAA’s decision on disqualification rather than independently determining whether the parties intended to require party-appointed arbitrators to be neutral. Continue Reading »

Third Circuit Opalinski Class Arbitration Arbitrability Case Cert. Petition Set for Conference

February 25th, 2015 Appellate Practice, Arbitrability, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Authority of Arbitrators, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, Drafting Arbitration Agreements, Judicial Review of Arbitration Awards, United States Court of Appeals for the Sixth Circuit, United States Court of Appeals for the Third Circuit, United States Supreme Court Comments Off on Third Circuit Opalinski Class Arbitration Arbitrability Case Cert. Petition Set for Conference

yay-10417208Classarb-e14248919879081 - CopyOn August 28, 2014 we posted an article discussing the United States Court of Appeals for the Third Circuit’s decision in Opalinski v. Robert Half Int’l Inc., 761 F.3d 326 (3rd Cir. 2014), which held that the question of consent to class arbitration was one of arbitrability. Prior to Opalinski the United States Court of Appeals for the Sixth Circuit ruled in Reed Elsevier, Inc. v. Crockett, 734 F.3d 594 (6th Cir. 2013), “that the question whether an arbitration agreement permits classwide arbitration is a gateway matter, which is reserved for judicial determination unless the parties clearly and unmistakably provide otherwise.” 734 F.2d at 599 (quotation and citation omitted).

 

 

yay-10343058Arbitrability-e1424891774286Opalinski “join[ed] the Sixth Circuit Court of Appeals in holding that the availability of class arbitration” is a substantive gateway question rather than a procedural one[,]” and thus “is a question of arbitrability.” 761 F.3d at 335. The Third Circuit’s decision turned on “the critical differences between individual and class arbitration and the significant consequences of that determination for both [a] whose claims are subject to arbitration[;] and [b] the type of controversy to be arbitrated.” Id. (emphasis and bracketed letters added). Where, as in Opalinski, the arbitration agreement did not “mention” class arbitration, the Court “believ[ed] the parties would have expected a court, not an arbitrator, to determine the availability of class arbitration[,]” and that was “especially so given the critical differences between individual and class arbitration and the significant consequences” of the class-arbitration-consent determination as respects “whose claims are subject to arbitration and the type of controversy to be arbitrated.” 761 F.3d at 335.

 

yay-34842-e1424891828235As we explained in our prior post, both Opalinski and Reed Elsevier followed on the heels of the U.S. Supreme Court’s 2013 decision in Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064 (2013), which in footnote pointed out that the award-challenger in Oxford had unreservedly submitted to the arbitrator the issue of whether class arbitration consent was one of arbitrability, but that the case before it would have been “different” had Oxford “argued below that the availability of class-arbitration is a so-called ‘question of arbitrability.’” 133 S. Ct. at 2068 n.2. The Oxford Court said that Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 680 (2010) “made clear that this Court has not yet decided” whether class-arbitration-consent presents a question of arbitrability. But “Oxford agreed that the arbitrator should determine whether its contract with Sutter authorized class procedures[,]” and “Oxford submitted that issue to arbitrator not once, but twice and the second time after Stolt-Nielsen flagged that it might be a question of arbitrability.” 133 S. Ct. at 2068 n.2. (emphasis added)

 

yay-4295955StandardReview-e1424891877565Had Oxford opted to request the Supreme Court to determine whether class-arbitration consent presented a question of arbitrability, and had the Court determined that it was such a question, then the Court would have determined “independently, that is, without deferring to the arbitrator’s decision” whether the parties consented to class arbitration. See BG Group plc v. Republic of Argentina, No. 12-138, slip op. at 6 (U.S. March 5, 2014); First Options of Chicago, Inc. v. Kaplan, 543 U.S. 938, 942 (1995). And we doubt that a majority of the Supreme Court would have upheld the Oxford award had it reviewed the class-arbitration-consent determination de novo. See, e.g., Oxford, 133 S. Ct. at 2071 (Alito, J., concurring) (“If we were reviewing the arbitrator’s interpretation of the contract de novo, we would have little trouble concluding that he improperly inferred “[a]n implicit agreement to authorize class-action arbitration.  .  .  from the fact of the parties’ agreement to arbitrate.”) (quoting Stolt-Nielsen, 559 U.S. at 685).

 

yay-14148680-digital-e1424891905695 - CopyAfter the Third Circuit denied rehearing en banc, the Opalinsky parties petitioned for certiorari. The petition has been distributed and is set to be considered at the Supreme Court’s March 6, 2015 conference. See Docket, Opalinski v. Robert Half Int’l Inc., No. 14-625.

The United States Supreme Court regularly holds private conferences at which it, among other things, votes on whether to grant particular petitions for certiorari. Four votes is required to grant a petition for cert. The vast majority of the many cert. petitions the Court considers considers are denied. When the Supreme Court grants a petition, it simply means that it has agreed to hear the case, which will then be fully briefed, and in most cases, orally argued. Neither the grant or denial of a petition for certiorari suggests approval or disapproval with the lower court’s decision on the merits.

It will be interesting to see if the U.S. Supreme Court is will agree to hear and determine the important arbitrability question addressed in Opalinski. If it does the Court will have an opportunity to provide some needed, uniform guidance on it, and perhaps even some indirect guidance on the related issue of whether, and if so, under what circumstances, consent to consolidated arbitration may present a question of arbitrability.