Remember when Maria sang “Let’s start at the very beginning, it’s a very good place to start”? Well, that seems to be what federal circuit courts are doing with their arbitration decisions recently. This article will run through some "Do Re Mi's" of arbitration law, as articulated by those decisions (and will close with some arbitration cases on SCOTUS’s docket).
- In most circuits, arbitrators cannot subpoena documents in advance of an in-person hearing. The 9th Circuit affirmed that applies within its jurisdiction as well. CVS Health Corp. v. Vividus, __ F.3d __, 2017 WL 6519942 (9th Cir. Dec. 21, 2017).
- When an arbitration agreement calls for application of arbitral rules, and those rules give the arbitrator power to rule on her own jurisdiction, then the district court should send any dispute over arbitrability to the arbitrator. The 4th Circuit confirmed that holding applies to JAMS rules, just as it does to AAA rules. Simply Wireless, Inc. v. T-Mobile US, Inc., __ F.3d __, 2017 WL 6374105 (4th Cir. Dec. 13, 2017).
- Claims under the Fair Labor Standards Act are subject to arbitration. Rodriguez-Depena v. Parts Authority, Inc., __ F.3d __, 2017 WL 6327827 (2d Cir. Dec. 12, 2017). (The Second Circuit is at least the third federal circuit to reach that conclusion.)
- An arbitration agreement that carves out injunctive relief means what it says. Archer & White Sales v. Henry Schein, Inc., __ F.3d __, 2017 WL 6523680 (Dec. 21, 2017). The arbitration agreement called for arbitration of any dispute under the agreement “except for actions seeking injunctive relief and disputes related to [intellectual property].” Plaintiff brought an antitrust action seeking damages and injunctive relief. Applying the exception, the district court denied the motion to compel arbitration and the appellate court affirmed.
- Independent contractors are not “agents” that can be bound as a non-signatory to arbitration clause. Oudani v. TF Final Mile, LLC, __ F.3d __, 2017 WL 5587648 (1st Cir. Nov. 21, 2017) (refusing to compel arbitration of class action brought by independent contractors for wage-and-hour claims).
- Ambiguous awards can be sent back to the arbitrator. Herll v. Auto-Owners Ins. Co., __ F.3d __, 2018 WL 296870 (8th Cir. Jan. 5, 2018) (sending ambiguous “appraisal award” back to arbitrator under Minnesota’s Revised Uniform Arbitration Act.)
- If the losing party failed to raise an argument in arbitration, it can’t use that argument to vacate the arbitration award. Laborers’ Pension Fund v. W.R. Weis Co., __ F.3d __, 2018 WL 316555 (7th Cir. Jan. 8, 2018) (finding in an ERISA dispute that one party “waived its statutory-interpretation argument by failing to raise it in the arbitration.”)
- First Amendment arguments will not get a putative class out of arbitration with a private party. Okay, this is not an arbitration law “basic” point, but instead one that confirms the ingenuity of plaintiffs’ class action lawyers. These plaintiffs opposed arbitration “on First Amendment grounds” and asserted there was state action because the FAA and judicial interpretations of it encourage arbitration to the point that AT&T’s actions are attributable to the state. Roberts v. AT&T Mobility, __ F.3d __, 2017 WL 6275537 (9th Cir. Dec. 11, 2017). The 9th Circuit found no state action, and noted that plaintiffs’ arguments that the FAA violates consumers’ constitutional rights are incompatible with the Supreme Court’s decisions on arbitration.
Now that we’ve run through those reminders on issues that arise frequently in arbitration law, let’s talk about some unsettled issues. On January 19, 2018, SCOTUS considered two cases involving delegation clauses and how lower courts should put its Rent-a-Center, West decision into practice:
- New Prime, Inc. v. Oliveira — this case comes from the First Circuit and raises the question whether the court should determine that the FAA applies before enforcing a delegation clause. Why does that matter? In this case a worker successfully argued the FAA did not govern, because he was an exempt transportation worker, and therefore the court refused to compel arbitration. [Jan. 22 update: SCOTUS’s order list today does not include this as a grant or deny, so it will likely be considered again in February.]
- Applied Underwriters Captive Risk Assurance Co. v. Minnieland Private Day School — this case comes from the Fourth Circuit and raises this question: Can a defense to arbitration that applies to the arbitration agreement as a whole ever be specific to the delegation clause? [Disclosure: I was involved with this petition.] [ Jan. 22 update: SCOTUS denied cert.]
SCOTUS is also being asked to review a decision of the California Court of Appeal that refused to compel arbitration based on a state statute. That California statute gives courts the discretion to deny enforcement of an arbitration provision when there is a possibility of conflicting rulings in pending litigation with third parties. The cert petition asks whether the FAA preempts that California statute and will be considered in February.
Last month, SCOTUS denied cert in another California arbitration case. That petition, Betancourt v. Prudential Overall Supply, challenged California’s rule that private attorney general disputes cannot be arbitrated. (SCOTUS passed on the same issue in 2015.)
Here’s hoping that in 2018 SCOTUS sticks with its recent practice of deciding at least one arbitration case per year!
By Liz Kramer