Published in Bloomberg Law (June 14, 2018)

The majority of a divided (5-4) SCOTUS recently held that a waiver of “class arbitration” in agreed terms of employment is indeed enforceable. In doing so, the Court advanced the legal analysis of “class arbitration” that was begun several years ago by Justice Antonin Scalia, confirmed that arbitration is fundamentally a creature of contract, and concluded, among other things, that the NLRA was not in conflict with and did not override or displace the FAA.

Continue Reading SCOTUS Throws a Haymaker at “Class Arbitration”: a Waiver of Class Arbitration in an Employment-Related Agreement Is Indeed Enforceable

Lest we forget, many are the arbitrations that are subject to state arbitration law rather than the Federal Arbitration Act (“FAA”). And one should never underestimate the differences between those regimes. For example, under the FAA, the grounds for vacatur of an award are few and narrowly construed. See FAA §10(a), (9 U.S.C. §10(a)). Accordingly, federal court doctrine permitting vacatur of an award on public policy grounds affords only a very narrow opening, including in cases of sexual harassment in the workplace. State law may be less limiting, however, concerning the significance of public policy in such cases.

Continue Reading #MeAgain: New York Appellate Court Applies State Law to Vacate Arbitration Award As a Violation of Public Policy (Prohibiting Workplace Harassment)

Arbitration is a creature of contract, and an arbitrator’s powers are in effect defined by the parties’ arbitration agreement. Paradoxically, although an arbitration agreement can be written (double-spaced) on one side of a cocktail napkin, in some cases it may grant greater authority to an arbitrator than a judge has.

Continue Reading An Arbitrator’s Power May Be Greater Than That of a Judge

Published in Law 360 (May 22, 2018)

The cost of arbitration, including attorneys’ fees, can be substantial, commensurate with the matters in dispute. Your desire to settle a dispute that is going to arbitration is often as or more substantial. But sometimes your adversary is not willing to settle at your very rational number. What next — increase your settlement offer or reduce your demand? How about using the anticipated arbitration costs to your advantage? Consider incentivizing your adversary with a “sealed settlement offer,” which could eventually make a settlement offeree pay a heavy price in such costs for miscalculation or intransigence.

Continue Reading Arbitration Jiu Jitsu: Increasing the Pressure to Settle With a “Sealed Settlement Offer”

In a proceeding under the Federal Arbitration Act (“FAA”) to determine if a dispute must be arbitrated, a federal district court performs a more limited function than in a plenary civil action. On an application to stay an action allegedly referable to arbitration, the court decides only if “the issue involved in such suit or proceeding is referable to arbitration under [a written arbitration] agreement.” 9 U.S.C. § 3. On a petition to compel arbitration, the court decides only whether “[1] the making of the agreement for arbitration or [2] the failure to comply therewith” are in issue. 9 U.S.C. § 4. If the court is satisfied that the two matters are not in issue, it must direct the parties to arbitrate in accordance with the agreement. But if either matter is in issue, the court must proceed summarily to trial. Id.

Continue Reading Must Your Dispute Be Arbitrated? You May Be Entitled to Discovery to Find Out.

On April 30, 2018, the U.S. Supreme Court granted certiorari to review an unpublished Ninth Circuit decision in Varela v. Lamps Plus, Inc., No. 16-56085 (9th Cir. Aug. 3, 2017). See Lamps Plus, Inc. v. Varela (No. 17-988, U.S. Sup.). Lamps Plus framed the question presented to the Supreme Court as follows: “Whether the Federal Arbitration Act [“FAA”] forecloses a state-law interpretation of an arbitration agreement that would authorize class arbitration based solely on general language commonly used in arbitration agreements.”

Continue Reading Supreme Court Will Determine If Silence in an Arbitration Clause May Be Judicially Interpreted to Permit Class Arbitration

The Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1, et seq., provides the usual means of enforcing an arbitration agreement by compelling a party to arbitrate rather than litigate. Thus, the FAA enables an aggrieved party to seek “an order directing that such arbitration proceed in a manner provided for in such agreement.” 9 U.S.C. § 4.

Continue Reading When Seeking to Compel Arbitration, a Motion to Dismiss Is Sometimes the First Step

Is there such a thing as an arbitration joke? Here is a test. Two plaintiffs walk into a court, claiming that each was wrongfully terminated by a bank (UBS). The bank moves to compel arbitration by plaintiff one; and it moves to dismiss the judicial claim of plaintiff two because that plaintiff had already brought his claim in an arbitration that he commenced. The Court finds that both plaintiffs are bound by arbitration agreements with UBS and that their claims are within the scope of the arbitration clauses. The punchline: “the court denies UBS’s motion to dismiss [plaintiff two’s] claims and to compel arbitration of [plaintiff one’s] claims.” See Zoller v. UBS Secs. LLC, 2018 U.S. Dist. LEXIS 44170 (N.D. Ill. Mar. 9, 2018) (emphasis added).

Continue Reading Whiplash: When a Court Finds That the Parties’ Claims Are Within the Scope of a Valid Arbitration Agreement, But It Will Not Compel Arbitration

An ex parte proceeding in a U.S. court to “recognize,” “enforce,” or “confirm” an arbitration award against a foreign sovereign is improper. The U.S. Court of Appeals for the Second Circuit issued a lengthy and instructive decision to that effect in Mobil Cerro Negro, Ltd. v. Bolivarian Republic of Venez., 863 F.3d 96 (2d. Cir. 2017). Its lesson is that in the United States, the only way to enforce (or recognize or confirm) an arbitral award issued against a sovereign entity by the International Centre for Settlement of Investment Disputes (“ICSID”) (and probably otherwise as well) is in compliance with the Foreign Sovereign Immunities Act (“FSIA”).

Continue Reading When Seeking to Enforce an ICSID Arbitration Award Against a Foreign Sovereign, Think FSIA First

As discussed in an earlier post, obtaining discovery from a non-party to an arbitration often is easier said than done. Depending on the law of the place of arbitration, arbitrators may not be able to compel document production or testimony from a non-party before a hearing on the merits. This can impair a claimant’s ability to prove its claims considerably, or in some cases altogether inhibit a potential claimant from learning the facts necessary to identify the correct respondent(s) or to articulate a competent claim. Moreover, while Fed. R. Civ. P. 27 permits pre-action discovery to “perpetuate testimony regarding [a] matter that may be cognizable,” many federal courts have interpreted the phrase “perpetuate testimony” to mean that Rule 27 may only be used to “preserve testimony which could otherwise be lost,” rather than as a “substitute for discovery.” Ash v. Cort, 512 F.2d 909, 912 (3d Cir. 1975); accord Bryant v. Am. Fedn. of Musicians of the United States, 666 Fed. Appx. 14, 16 (2d Cir. 2016); In re Allegretti, 229 F.R.D. 93, 96 (S.D.N.Y. 2005) (“[Rule 27] is not a method of discovery to determine whether a cause of action exists; and, if so, against whom the action should be instituted.”)).

Continue Reading Pre-Arbitration Discovery: Turn to State Law Where the Federal Rules are Inadequate