Arbitrability – Parties

Published in Law 360 (July 30, 2018)

Who may determine whether “class arbitration” has been authorized by the parties to an arbitration agreement — a court, an arbitrator, either? Considering the nature of “class arbitration,” is this a special case of the arbitrability delegation issue, or is this issue sui generis? And what does exploring the issue reveal about the larger question of whether “class arbitration” is an oxymoron?

Continue Reading Who May Determine Whether Class Arbitration Is Authorized?

When an agreement to arbitrate contains a clear and unmistakable “delegation” provision, gateway questions of arbitrability are for the arbitrator to decide. See, e.g., Kubala v. Supreme Prod. Servs., 830 F.3d 199, 201-02 (5th Cir. 2016), citing First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 942 (1995); Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63 (2010). But a determination of the delegation issue is not always obvious, and it is sometimes presented to an arbitrator, rather than to a court, in the first instance. In that case, a party challenging arbitrability may feel some trepidation about submitting its challenge to the very arbitrator who could ultimately be deciding the merits of the case. And another, possibly surprising, concern should be the risk that making such a challenge too vigorously in the arbitration proceeding will foreclose a fulsome judicial review of the arbitrator’s ruling on the scope of his or her own authority.

Continue Reading The Potential Pitfalls of Contesting Arbitrability in the Arbitration

Published in Law360 (June 22, 2018)

“Gateway” arbitration issues, including the validity, enforceability, and scope of an arbitration agreement, are presumptively to be decided by a court, rather than by an arbitrator. However, such gateway issues may be “delegated” to an arbitrator, e.g., AT&T Technologies, Inc. v. Communications Workers, 475 U.S. 643, 106 S.Ct. 1415 (1986), if the pertinent arbitration agreement clearly and unmistakably manifests the parties’ intention to do so, First Options of Chicago v. Kaplan, 514 U.S. 938, 115 S.Ct. 1920 (1985); Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 123 S.Ct. 588 (2002); Greentree Financial Corp. v. Bazzle, 539 U.S. 444, 123 S.Ct. 2402 (2003). But what if the arbitration agreement is in doubt — could such a purported delegation be enforced if one of the concerned parties did not execute the arbitration agreement in question? Spoiler alert: arguably not.

Continue Reading Can Arbitrability Questions Concerning a Non-Signatory to the Arbitration Agreement Be “Delegated” to an Arbitrator?

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

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

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

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.

Continue Reading Is “Class Arbitration” an Oxymoron — Another Shoe Drops in the Second Circuit

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.

Continue Reading A Belated Judicial Determination Regarding Whether a Party Is Bound By An Arbitration Agreement Requires a “De Novo” Proceeding

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.

Continue Reading An Employer’s Notice to Employees of a Mandatory Arbitration Program May be Insufficient Basis to Compel Arbitration