Arbitration is a creature of contract. So is the law concerning contracts with an arbitration clause the same as the law concerning any other contract? Almost. One must always bear in mind the “separability” or “independence” of the arbitration agreement — the autonomy principle.
The drive in the Second Circuit to clarify the rules regarding confirmation and enforcement of various types of arbitration awards continues. The latest addition is the decision in BSH Hausgerate GmbH v. Kamhi, 17 Civ. 5776, 2018 U.S. Dist. LEXIS 34597 (S.D.N.Y Mar. 2, 2018) (Sweet, J.). Federal district courts have occasionally decided that an arbitration award is ambiguous or incomplete or indefinite, and therefore should be remanded to the arbitrator for clarification rather than confirmed by the court. Judge Sweet seeks to bring clarity to the law concerning the judicial treatment of international arbitral awards in particular, holding that “ambiguity” is not a cognizable basis for refusing to enforce (or “confirm”) such an award.
Arbitration is often promoted as faster, cheaper, more predictable, and more controllable than litigation. But to many, arbitration’s promise comes up short on delivery. Why? A prime reason is that many parties do not make use of their ability to shape a proceeding that fulfills those promises, and end up with an arbitration that is more time consuming, more expensive, and less predictable than it could have been.
The courts undoubtedly have the power to grant provisional remedies in aid of a pending arbitration – including temporary restraining orders, preliminary injunctions, and attachments. As a recent Fifth Circuit decision reminds us, the courts also can grant such remedies in aid of an arbitration that has yet to be commenced. Indeed, those remedies may be available under state law, even if the future arbitration is governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”), and even if the arbitration will be sited in a state other than the one in which the interim remedy is sought.
Published in Law 360 (February 15, 2018)
In a series of articles over the past several months, we asked whether “class arbitration” — meaning the utilization of the Fed.R.Civ.P. 23 class action protocol in an arbitration proceeding — is ultimately viable in U.S. jurisprudence. We suggested that it arguably is not, considering the fundamental nature of arbitration. And we noted that the U.S. Supreme Court had not addressed core issues that will ultimately determine the viability of a class arbitration award, nor had the various Courts of Appeal grappled with those issues. But the courts in the Second Circuit have begun to do so.
Under 28 U.S.C. § 1782, “[t]he district court of the district in which a person resides or is found may order him to . . . produce a document for use in a proceeding in a foreign or international tribunal . . . .” Courts in the Second Circuit appear to be coming around to accepting that a commercial arbitration can be “a foreign or international tribunal” for these purposes. Swell. But there is one more thing: they are also likely to treat a subpoena under that statute like a subpoena under Fed. R. Civ. P. 45, and therefore require that the court have personal jurisdiction — general, preferably — over the subpoena target. See, Australia and New Zealand Banking Group Ltd. v. APR Energy Holding Ltd., 2017 U.S. Dist. LEXIS 142404 (S.D.N.Y. Sept. 1, 2017) (“ANZ Bank”).
Typically, the issue of whether a party is bound by an arbitration agreement is raised in a judicial motion to compel under Section 4 of the Federal Arbitration Act (9 U.S.C. § 4). The issue also may be raised in a judicial application to stay an arbitration, as to which the Section 4 procedure applies as well. Occasionally, however, the issue is decided by an arbitrator in the first instance. When the matter eventually reaches a court — e.g., in the context of a post-arbitration motion to confirm or to vacate an award (FAA §§ 9, 10) — and the arbitrator’s decision regarding party arbitrability is to be reviewed, that facet of the judicial proceeding is likely to resemble one for an application under FAA § 4. That is, the judicial review will be de novo, the Section 4 procedure will likely be adopted, and the court will not be restricted to the record before the arbitrator — additional evidence will be permitted.
Arbitration is of course a creature of contract, and so a party may not be compelled to arbitrate unless it has agreed, or is deemed to have agreed, to arbitrate a dispute. An offeree may be deemed to have manifested its agreement to an arbitration regime by various sorts of conduct, including in some instances inaction in the face of notice. However, there is a line in the sand in that regard in the Sixth Circuit when it comes to employer-employee relations. That is, an employer’s notice of its institution of a mandatory arbitration policy or program is, without more, insufficient to compel an employee to arbitrate a subsequent dispute. Something more is required in order to be able to infer the employee’s knowing assent to the new term of employment.
Litigators in the U.S. often take for granted the ease with which they can obtain discovery from non-parties in our federal and state courts. One might assume that the “presumption in favor of arbitrability” embodied in the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. (“FAA”), would have been implemented with, among other things, a statutory grant of subpoena power to arbitrators that is virtually coextensive with that of a federal district court. No so, however. And depending on the place of arbitration, a party’s ability to compel document production from a non-party, much less to depose that witness, prior to a hearing, may be very limited indeed. Problems and issues abound.
What makes an on-line arbitration agreement binding against a website user? In Meyer v. Uber Technologies, Inc., 2017 U.S. App. LEXIS 15497 (2d Cir. Aug. 17, 2017), the U.S. Court of Appeals for the Second Circuit issued a second decision on this issue, providing additional elucidation following its 2016 decision in Nicosia v. Amazon, Inc. 834 F.3d 220 (2d Cir. Aug. 24, 2016).The Nicosia and Meyer cases each involved an on-line agreement with a user who claimed not to have read the company’s terms and conditions, including an arbitration clause. In Meyer, Uber’s agreement to arbitrate was held to be enforceable against the user; in Nicosia, Amazon’s was not—at least on the record before the Court of Appeals.