Blind Justice: Can Individuals Be Bound to Arbitration Clauses They Can’t Read?

By Michael Heller

The First U.S. Circuit Court of Appeals in Boston recently declined to enforce an arbitration clause in the Container Store’s loyalty program against blind customers. The ruling followed a trend of other circuits requiring a minimum level of notice for arbitration agreements to be binding.

In the case, Nat’l Fed’n of the Blind v. Container Store, Inc., No. 16-2112, 2018 U.S. App. LEXIS 26122 (1st Cir. Sept. 14, 2018)(available at https://bit.ly/2xVaxUY), a unanimous circuit panel that included retired U.S. Supreme Court Justice David Souter, sitting by designation, examined whether an arbitration clause in the retailer’s loyalty program agreement was binding to blind customers.

The plaintiffs alleged that the Container Store’s sign-up process wasn’t handicap accessible. The retailer’s in-store touch screen interface required the customers to announce their private account information to clerks, creating privacy concerns. The complaint alleged violations of the Americans with Disabilities Acts and under the state laws where the plaintiffs joined the loyalty program, Massachusetts, California, Texas and New York.

Three of the plaintiffs signed up for the loyalty program in-store, and one registered online. The in-store customers signed up on a touch-screen device with the aid of an employee, but there was no evidence that they were notified by that they were agreeing to waive any rights to court by signing up for the program, which included an arbitration clause.

The plaintiff who signed up on her home computer said she didn’t recall being presented with the arbitration agreement.

The court held that no valid agreement to arbitrate was formed with the in-store customers because they did not receive a “minimum level of notice,” pursuant to the Americans with Disabilities Act that they were waiving any rights to pursue future ADA claims in court. The court held that an agreement was formed with the online customer, but that it was void as illusory under Texas state law.

The Container Store contended the suit was an attack on the validity of the entire agreement, but the appeals panel agreed with the plaintiffs that the problem was that there was no valid contract formed for arbitration.

Traditionally, courts have upheld the rule that an inability to read a contract is not a defense to contract formation. But “at the same time,” the opinion noted, “a party cannot enter into a contract to arbitrate when it does not know or have reason to know the basic terms of the offer.”

The unanimous opinion authored by First Circuit Judge O. Rogeriee Thompson, and joined by Senior Circuit Judge Bruce M. Selya, as well as retired Supreme Court Associate Justice Souter, cited recent case law that has begun to carve out an exception where a party is not made aware that they are entering into an agreement in the first place.

In Noble v. Samsung Elecs. Am., Inc., 682 Fed. App’x. 113 (3d. Cir. 2017), the Third Circuit examined an agreement to arbitrate that was buried deep within a lengthy smartwatch operation manual. The court held that no agreement to arbitrate was formed because a customer cannot be deemed to have consented to a writing that does not even appear to be a contract.

In Sgouros v. TransUnion Corp., 817 F.3d 1029 (7th Cir. 2016), the Seventh Circuit held that a link to a service agreement on a credit-score website did not properly identify itself as an agreement containing an arbitration clause and therefore did not create a valid agreement to arbitrate.

In Norcia v. Samsung Telecomms. Am., LLC, 845 F.3d 1279 (9th Cir. 2017), the Ninth Circuit acknowledged a rule that, “an offeree, regardless of apparent manifestation of his consent, is not bound by inconspicuous contractual provisions of which he was unaware, contained in a document whose contractual nature is not obvious.”

And in Nicosia v. Amazon.com Inc., 834 F.3d 220, (2d Cir. 2016), a Second Circuit panel held that where a customer was not required to manifest assent to conditions of use containing an arbitration provision, they were not bound to those terms.

These cases, the Nat’l Fed’n of the Blind opinion noted, demonstrated that courts recognize that parties cannot be bound by an agreement to arbitrate that they are not given notice of.

But the opinion noted that parties can be bound to an agreement to arbitrate that they were not made aware of in situations where it is clear that parties are entering into a contractual relationship. The court referenced obtaining a loan, employment and being admitted into a nursing home as situations where a contractual relationship could be presumed.

Companies seeking to ensure the enforceability of their arbitration clauses should take these recent developments into account. The burden imposed by these cases are seemingly minimal: only that parties are made aware that they are entering into a contractual relationship.

In addition, as this case shows, special considerations have to be taken into account for people with disabilities.

The author is a Brooklyn Law School student who is a CPR Institute Fall 2018 Intern.

Amicus Preview, Part 2: The Independent Contractors Want Their FAA Sec. 1 Exemption

By Sara Higgins and Russ Bleemer

The respondents’ amicus briefs urging the U.S. Supreme Court to affirm the First U.S. Circuit Court decision in New Prime Inc. v. Oliveira, No. 17-340, which was argued earlier this month, focus on statutory history and the plain meaning of the Federal Arbitration Act.

They argue that independent contractors are exempt from FAA application like other transportation workers under a “contract of employment.” That exemption is in the act itself, in Sec. 1, which states, “. . . nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”

In other words, the unions, scholars and think tanks excerpted below say the protections the 1925 FAA drafters provided to transportation employees also goes to independent contractors.  Some amicus argue that the term “employees” meant something different then than it means now.

One brief tackles the arbitrability issue that is before the Court, too. Though most amicus filers on both sides focused on the merits of whether the FAA applies to independent contractors, the source of the arbitrability decision–on whether the matter will be heard in arbitration to be made by either a court or an arbitrator–also is expected to be a part of the Supreme Court’s opinion.

The material below covers the respondents’ friend-of-the-court briefs backing independent truck driver Dominic Oliveira. For the petitioner’s briefs, which were filed first, as well as for background on the case and links to deeper dives into the facts and the issues, see the immediately previous CPR Speaks feature, Sara Higgins, “Amicus Preview: New Prime’s New Look at Mandatory Arbitration,” CPR Speaks (Oct. 2)(available at https://bit.ly/2zNqYUF).

In support of Respondent Oliveira:

  1. American Association for Justice
  • AAJ, which represents trial lawyers, offers a broad historical argument that says that the FAA Sec. 1 exemption from the law’s application includes all transportation workers, not just seamen and railway workers.
  • The Washington, D.C.-based association is concerned that the Federal Arbitration Act constructions by petitioner New Prime undermine the right of U.S. workers to pursue their statutory and common-law rights in a judicial forum.
  • AAJ believes it is clear that all workers in the transportation sector, whether “employees” or “independent contractors,” were meant to be exempted from the FAA.
  • New Prime’s narrow construction belies the FAA enactment history, Congressional intent, and basic principles of contract construction as applied by the Court and elsewhere. Independent vehicle owner-operators and others contracting to perform work themselves certainly existed at the time the FAA was passed, and had Congress not wished the exemption to apply to all who actually worked in the transportation sector, it would have said so.
  • That Congress meant to exempt all workers in the transportation section from the FAA– not limited or reliant upon how that worker happened to be paid—is consistent with the Court’s decisions and other Congressional action.
  • In historical context, the use of the term “contracts of employment” routinely included the “employment” of “independent contractor” drivers and, hence, is not meant to exclude any drivers from the benefit of the exception. The Sec. 1 exemption, which was urged by American Federation of Labor lobbyists at the 1925 FAA enactment, the brief notes, “would surely have included all members of one of its most important affiliates, the Teamsters.”
  1. Public Citizen, Inc.
  • The Washington consumer advocacy group, a frequent participant in federal arbitration litigation on behalf of consumers and employees, submits its amicus brief to address one of the two issues raised by petitioner New Prime: whether, when a contract contains an arbitration provision including a clause delegating questions of the arbitrability of a matter to an arbitrator, the FAA requires a court to compel arbitration of the issue whether the FAA even applies to the contract.
  • The brief notes that both the amicus and the parties focus more on the merits issue—that is, whether the FAA exemption applies to all transportation workers—and pay insufficient attention to the arbitrability issue before the Court.
  • Although New Prime’s argument—that the FAA requires a court to refer the issue of its own applicability to an arbitrator without first addressing a substantial argument that the FAA doesn’t not apply to the contract containing the delegation clause the court is being asked to enforce—seems counterintuitive, Public Citizen says its amicus brief addressing the issue may assist the Court in reaching a decision that adds clarity to arbitration law and helps define the limits of the Court’s rulings on the subject.
  • The FAA cannot, and does not, require a court to enforce any arbitration agreement unless the court determines that the FAA applies to that agreement.
  • “The requirement that a court decide whether the contract at issue is excluded from the FAA’s coverage by section 1 before ordering arbitration of any issue (including the section 1 issue itself) is critical, because any order compelling arbitration under the FAA is necessarily applying the FAA to give effect to a purported agreement to arbitrate. A court may not apply the FAA where the FAA itself provides that it is inapplicable.”
  • New Prime’s invocation of its delegation clause and the principle of “severability” cannot justify application of the FAA to a contract to which the FAA does not apply.
  1. Sheldon Whitehouse, D., R.I.
  • Whitehouse, a former state attorney general and U.S. Attorney, invokes Alexis de Tocqueville, Blackstone, and Machiavelli at the outset of his brief, which launches a broadside at the Court’s arbitration jurisprudence. He writes that he files the brief “to draw attention to the Court’s steady march of decisions eroding the Constitution’s Seventh Amendment protections and to warn of the Court’s perilous destabilization of its own institutional reputation.”
  • “Over the past decade,” states Whitehouse, “a predictable conservative majority of the Supreme Court has handed down an accommodating string of 5-4 decisions closing off ordinary citizens’ pathways to the courtroom. Corporate victories at the Supreme Court have undermined civil litigants’ constitutional right to have their claims heard before a jury of their peers, and have whittled to a nub the protective role courts and the jury system were designed to play in our society. Such victories have allowed corporations to steer plaintiffs out of courtrooms and into arbitration, where the odds can be stacked in favor of big business. The Court’s recent arbitration decisions regarding the [FAA], aggrandizing its reach and undermining the original purpose of the Seventh Amendment, are an example.”
  • “[T]his grant of certiorari has the same seeming inevitability as those 5-4 decisions in cases preceding it. Accordingly, amicus fears that the outcome of this case may be preordained—not by the FAA’s plain language, but instead by the trajectory of the recent pattern of 5-4 partisan decisions (decisions in which the Court divides 5-4 with the Republican-appointed majority voting as a bloc). With numbingly predictable inevitability, these cases seem to be won by the ‘more powerful and wealthy’ corporate citizens.”
  • Whitehouse’s legal arguments surrounded two key points in urging the Court to back the First Circuit: “A clear policy preference has emerged for denying citizens their day in court,” and the Court “compromises its legitimacy when it jettisons neutral principles to reach a desired outcome.”
  1. Historians
  • The amicus brief was prepared on behalf “scholars of American labor and legal history [who] have a professional interest in accurate and valid inferences from the historical record”: Shane Hamilton, University of York; Jon Huibregtse, Framingham State University; James Gray Pope, Rutgers Law School; Imre Szalai, Loyola University New Orleans College of Law; Paul Taillon, University of Auckland; and Ahmed White, University of Colorado School of Law.
  • By operation of the ejusdem generis canon, which indicates that a statutory provision should be interpreted in accordance with the words nearby—“of the same kind”–the FAA exemption’s residual clause (“any other class of workers”) does not cover only common law employees in the wake of the statute’s enumeration of railroad workers and seamen. If Congress had intended the FAA exemption to cover only common-law employees, as New Prime now reads it, Congress would have disrupted the statutory dispute resolution schemes for “seamen” and “railroad employees” that it had wanted to avoid unsettling.
  • Relying on more than three dozen agency determinations, the brief notes that the Transportation Act covered railroad workers who would not have counted as employees under the common law of agency. Similarly, shipping arbitration “covered ‘any question whatsoever’ in a seaman’s dispute, including those that did not turn on whether the seaman was anyone’s ‘employee’ under the common law of agency.”
  • The FAA would have disrupted the Transportation Act had it only exempted common-law employees. The theory appears to be that the FAA Sec. 1 exemption applies to independent contractors, which the brief barely mentions, though it notes that independent contractors were covered for railway workers disputes under the Transportation Act of 1920 and seamen disputes under the Shipping Commissioners Act of 1872.
  1. Constitutional Accountability Center
  • The Washington, D.C., think tank and public interest law firm, devoted to a progressive interpretation of the Constitution’s text and history, is concerned with “ensuring meaningful access to the courts, in accordance with constitutional text, history, and values.” Heavily citing numerous dictionary definitions, the Center argues that New Prime’s argument badly misinterprets the view of the definition of employees when the FAA was passed. The Center backs affirming the First Circuit interpretation.
  • When Congress enacted the FAA, “employment” was a broad and general term that did not connote a master-servant relationship. Dictionaries of the era, however, defined the word “employment” by consistently giving it a broad meaning—one that encompassed paying another person for his or her work, whether or not the common-law criteria for a master-servant relationship were satisfied. The word “employee” gradually influenced, and limited, the meaning of the term employment, but only well after the FAA was enacted.
  1. Massachusetts, et al.
  • Fourteen states and the District of Columbia filed an amicus brief because they state that they enforce laws that protect the public interest, including those that set fair labor standards and promote the health and safety of all working people. Employees who are misclassified as independent contractors are often denied many basic workplace protections and benefits that they are entitled to receive—and employers who fail to properly classify and pay their workers gain an unfair competitive advantage. The states and the District of Columbia “have an interest in seeing that transportation sector workers such as Respondent Dominic Oliveira get their day in court, as Congress intended.”
  • Because states have limited resources, they rely on individual employees to supplement the efforts of attorneys general through private enforcement actions. “And many transportation companies engage in exploitative labor practices while at the same time using mandatory arbitration agreements with unreasonable forum selection clauses to attempt to prevent their misclassified drivers from pursuing otherwise available legal remedies.”
  • The FAA Sec. 1 language of the transportation workers’ exemption excludes interstate truck drivers from the FAA’s scope, regardless of whether they are employees or independent owner-operators. This conclusion becomes especially clear in light of the history surrounding Congress’s regulation of leases between independent truck drivers and authorized motor carriers.
  • Both of New Prime’s arguments are foreclosed by the FAA’s plain language, read in its proper historical context.
  1. Employment Law Scholars
  • The amicus brief signers are 35 law professors who have taught and written about employment law. They submit this brief because they believe that the FAA should be construed consistent with how all other statutes and related case law treat issues of worker status.
  • Petitioner New Prime and its amicus supporters ask the Court to interpret contracts of employment as used in the FAA based solely on the labels used in particular contracts, drawing distinctions between independent contractors and employees where there is no sound basis to do so.
  • “Allowing worker status to be decided by contract would set the FAA apart from every other federal statute governing workers. It would lead to inconsistency and uncertainty in the workplace because worker status would vary based on contract or the label chosen for each worker.” In New Prime, it could jeopardize the Fair Labor Standards Act’s mission that “prevent[s] parties from contracting away employees’ rights to minimum wages and overtime compensation,” the brief notes, adding that the Court “must not, through the FAA, endorse this type of race to the bottom.”
  • Many federal and state statutory schemes do not distinguish between common law employees and independent contractors.
  • The reality of the working relationship, not the face of the contract, determines workers status under federal employment statutes.
  1. Owner-Operator Independent Drivers Association Inc.
  • The 45-year-old Grain Valley, Mo.-based association submitted its amicus brief to inform the court that owner-operator truck drivers are a class of workers engaged in interstate commerce, and how their lease agreements with motor carriers, such as petitioner New Prime, are contracts of employment as set out in the FAA Sec. 1 exemption.
  • The amicus brief is filed by the largest international trade association representing the interests of independent owner-operators, small-business motor carriers, and professional drivers. The association notes that the question of whether the contracts of owner-operators are subject to the FAA will determine whether owner-operators will continue to have any meaningful opportunity to protect their small businesses from the type of predatory behavior described in defendant Oliveira’s brief. “Especially important,” the association notes, “is the right to bring an action in federal court for damages and injunctive relief specifically granted to owner-operators by Congress in 1995.”
  • Congress looked to two factors when it formed FAA Sec. 1’s scope: “the maintenance of a smooth operating transportation system and Congressional concerns for enacting specific regulations governing the contracts of transportation workers.” The legislative and regulatory history demonstrates that motor carrier/owner-operator contracts are among those Congress exempted from FAA application by Sec. 1 to achieve the goals in the statute’s adoption: The “provision of different procedures and forums to resolve disputes under those contracts demonstrate precisely the type of contract for employment of persons engaged in interstate commerce that Congress intended to exempt from the FAA.”
  1. International Brotherhood of Teamsters, National Employment Law Project Inc., Economic Policy Institute, and National Employment Lawyers Association
  • Like AAJ and the state amicus briefs, the four-party amicus brief also is concerned about the misclassification of independent contractors by employers, which, among other things, cuts off employers’ responsibility for taxes and liability on behalf of and to their workers. The brief is concerned that a ruling in favor of petitioner New Prime would create incentives for more companies to misclassify their employees as independent contractors in order to evade worker protections.
  • The interest in this case by the amicus filers—a big union, an employment lawyers’ association that focuses on plaintiffs’ representation; an employees’ advocacy research organization, and an economics policy think tank–is to ensure that drivers involved in interstate commerce, including those classified as independent contractors, are afforded the FAA Sec. 1 exemption granted to contracts of employment in the transportation industry.
  • The brief also states that Prime’s errant suggestion that employment relationships under the FAA should be identified by the terms of the contract alone may affect misclassification analysis under other statutes.
  • Truck drivers, like respondent Oliveira, “are frequently misclassified by their employers as independent contractors. This treatment excludes drivers from basic labor and employment protections like the minimum wage, health and safety, and discrimination protections, to name a few.”
  • The brief says that the Supreme Court doesn’t need to determine whether Oliveira was misclassified by New Prime, “because he and the company entered into a contract of employment that should be exempt under the plain language of the Federal Arbitration Act.”
  • Alternatively, the brief argues, if the Court decides that the employee versus independent contractor relationship must be decided in order to determine FAA applicability, “it should take into account the independent contractor misclassification problems endemic in the trucking industry, the impacts on workers, other employers, and state budget and tax coffers, and on employers’ economic incentives to misclassify more drivers that will result.”
  • And if the Court finds that the contract-of-employment analysis requires a determination of whether a worker is an independent contractor, that determination must consider all incidents of the relationship and not be limited to the unilaterally imposed terms of the contract.
  • The FAA’s plain text shows that the Court should find that truckers’ independent contractor arrangements are “contracts of employment” and exempt from the FAA’s coverage. The brief emphasizes the policy consequences of a holding to the contrary.
  • Independent contractor misclassification and the unlawful and exploitative working conditions it engenders are rampant across the economy, but particularly prominent in the trucking sector.
  • Bad-actor employers misclassify works in attempts to avoid tax and other liability, imposing significant societal costs on the public, law-abiding employers, and workers.
  1. Statutory Construction Scholars
  • The amicus brief was written on behalf of 14 law school professors engaged in the teaching and study of statutory construction principles. They believe that a “shared commitment” to certain standards of analytical care “leads to only one conclusion in this case–that application of key canons of statutory construction” to the FAA contracts-of-employment language “applies to all transportation workers without exclusion of workers who are deemed to be independent contractors, and without the legally protected status of “employees.”
  • “The First Circuit’s opinion in Oliveira v. New Prime Inc., reflects a well-reasoned, thoughtful approach to statutory construction. Petitioner attempts to upend that decision and contorts the canons of statutory construction beyond their reasonable parameters in a miscarriage of justice.”
  • The petitioner’s conclusion that the FAA’s contracts-of-employment statutory exception is limited to only those with the legal status of “employees” is not sound.
  • First, the words in statutes are read in light of their ordinary, plain meaning. Those words, the brief notes, “are understood from the perspective of what was meant when they were drafted.” [Emphasis is in the brief.] The petitioner’s argument, “which rests on modern dictionary definitions instead of inquiring into the terms’ meaning at the time the FAA was enacted, fails to comply with those canons of statutory construction and should be disregarded.”
  • The ejusdem generis canon (see above) does not support limiting contracts of employment to employees.
  • Reading the residual exclusion of the FAA’s Sec. 1 to include all transportation workers does not negate FAA Sec. 2 language, which must be read independently because it has a different substantive mandate.

Steve Viscelli, et al.

  • Steve Viscelli is a University of Pennsylvania sociologist who studies work, labor markets, and public policy related to freight transportation, automation and energy. He submitted the brief to provide a better picture of the economic incentives at work in the trucking industry. He provides an analysis of trucking industry’s employment evolution to a “Lease-Operator” model from owner-operators in urging the Court to avoid requiring arbitration to settle employment disputes in the industry.
  • Viscelli is joined by six current or former owner-operators or Lease-Operator truck drivers, whose situations are used as examples in the brief. Also joining the brief as amicus parties is two nonprofits, the Wage Justice Center, a Los Angeles advocacy group for economic justice and fair pay, and REAL Women in Trucking Inc., a trade group that advocates for better working conditions (see http://www.realwomenintrucking.com).
  • The brief explains that New Prime, like other trucking firms, mostly now operates under a relatively new economic structure, the Lease-Operator model. The drivers lease their rigs directly from the company they work for, and often still may owe the company after they are paid for runs. The system often harms employees by misclassifying them as independent contractors.
  • “Because Lease-Operators lease a truck and pay for fuel, maintenance, and insurance, firms can potentially shift a significant amount of capital and operating costs to them, translating into much lower labor costs per unit of work. And, though Lease-Operators are often nominally free to choose what loads they haul, they are generally under greater pressure than employees to accept whatever work is offered to them and to spend more days working because they need to work many more hours per day and days per year to meet fixed expenses and then earn take-home pay at levels even close to what they would earn as company drivers.”
  • The FAA Sec. 1 exclusion prohibits courts from applying the statute to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1. The brief says that the Court should include the employment arrangements of drivers like respondent OIiveira, who are misclassified by their employers within the definition of contracts of employment.
  • “Workers who must arbitrate their claims are 59% less likely to win than those who take their case to federal court and 38% less likely to win than workers litigating in state courts. The median award in mandatory arbitration is 21% of the median award in the federal courts and 43% of the median award in the state courts. [Citations omitted.] . . . Employers who misclassify employees stand to gain significantly by using forced arbitration to resolve disputes. This Court should not read the FAA in a way that allows them to require arbitration of disputes about the nature of employment in the industry.”

Higgins was a 2018 CPR Institute summer intern and is a student at Northeastern University School of Law. Bleemer edits Alternatives to the High Cost of Litigation, published by the CPR Institute with John Wiley & Sons (see http://www.cpradr.org/news-publications/alternatives and altnewsletter.com).

Amicus Preview: New Prime’s New Look at Mandatory Arbitration

By Sara Higgins

For the second year in a row, the Supreme Court is kicking off its new term with a focus on arbitration.

This year’s case, New Prime, Inc. v. Oliveira, No. 17-340—which will be argued tomorrow, the Court’s third day of arguments in the new term—focuses on whether the Federal Arbitration Act Sec. 1 exemption language from the act’s application for certain “contracts of employment” encompasses independent contractor agreements.

The case—an appeal from Oliveira v. New Prime Inc., 857 F.3d 7 (1st Cir. 2017)(available at https://bit.ly/2tEzlkr)—is potentially significant for many workers, though it isn’t attracting the attention of the 2017-2018 term’s kickoff argument, Epic Systems v. Lewis.  That case, decided in May, strongly backed the use of mandatory arbitration in conjunction with waivers of class arbitration and litigation processes in workplace disputes. See CPR Speaks blog coverage at https://bit.ly/2xPvFMk; see analysis at Russ Bleemer, “While Plaintiffs’ Lawyers Strategize, the Supreme Court’s Strong Backing Likely Will Grow Mandatory Processes,” 36 Alternatives 97 (July/August 2018)(available at https://bit.ly/2QsxLJ5).

The Court is still one justice short of the longstanding nine-judge bench, as the Senate continues its fight over the nomination of D.C. Circuit Court Judge Brett M. Kavanaugh to succeed retired Justice Anthony Kennedy.

So a 4-4 outcome looms. The Court could order a rehearing after its decision to include Kavanaugh or another new justice if a party asks for it. See Court Rule 44, available at https://bit.ly/2NE6ouV.

Despite a shift to a “gig” economy for many workers, the number of independent contractors the New Prime case focuses on actually shrunk since about a decade ago, according to a report earlier this year by the U.S. Department of Labor’s Bureau of Labor Statistics, to 6.9% of total U.S. employment in 2017, from 7.4% in 2005.

But the more than 10 million workers in these arrangements often see mandatory arbitration in their work agreements, as do millions more in so-called contingent employment situations which, depending on their agreements, may be covered by whatever the Court decides in New Prime.

The Court’s FAA backing in general employment cases in Epic Systems points to a similar decision in New Prime. But groups backing individual independent contractors are drawing a contrast, and argue that these workers should be treated different and not compelled to arbitrate against the companies with which they contract.

The case is summarized at Mark Kantor, “U.S. Supreme Court Grants Cert to Decide “Who Decides” “Independent Contractor” Employment Arbitration Case,” CPR Speaks blog (available at https://bit.ly/2RpwP9E), and Ginsey Varghese, “Supreme Court Will Decide Independent Contractor Arbitration Case,” 36 Alternatives 59 (April 2018)(available at https://bit.ly/2xW5MdN).

Below are highlights of amicus views filed in the case that back the petitioner, trucking company New Prime, along with statements about the filing party’s interest in the case.  The petitioners’ amicus supporters were required to file first. In a CPR Speaks post to follow shortly, we will examine the views of the respondent employees’ friend-of-the-Court supporters.

In support of petitioner New Prime seeking reversal:

  1. American Trucking Associations, Inc.
  • American Trucking Associations is an Arlington, Va.-based group that represents the trucking industry with members including companies and state organizations. ATA regularly represents “the common interests of the trucking industry in courts.” Many of its member companies contract with owner-operators who may enter into agreements to arbitrate disputes that arise during the course of their business relationship.
  • The amicus brief says that the First Circuit decision upends the expectation that the FAA will require motor carriers and their independent contractors to arbitrate any disputes that arise between them under their agreements, including in some cases the question whether a given dispute is arbitrable. Even where both sides agreed to arbitrate, “[t]his sweeping, idiosyncratic holding . . . would mean that owner-operators and carriers . . . could never expect those agreements to be enforced under the FAA. . . .” The decision undermines the federal policy favoring arbitration, to the detriment of motor carriers and independent owner-operators.
  1. The U.S. Chamber of Commerce and the Society for Human Resource Management
  • The Chamber regularly files amicus curiae briefs in business cases, and has emphasized an anti-class action stance that incorporates a strong endorsement for individual arbitration in many Supreme Court and federal appellate court cases. The Chamber notes that its members and affiliates regularly rely on arbitration agreements in their contractual relationships. The SHRM, based in Alexandria, Va., represents 300,000 human resources professionals world-wide.
  • The brief says that independent contractors are not covered by the FAA Sec. 1 exemption from arbitration for “contracts of employment.” The brief says that participants on both sides in the “rapidly expanding” independent contractor market “rely upon the enforceability of agreements between businesses and independent contractors.”
  • If the decision below is allowed to stand, the brief says, “untold thousands of arbitration agreements would be called into question.”
  • Before the First Circuit decision, courts uniformly understood that FAA Sec. 1 “’contracts of employment’ means what it says: a contract between an employer and an employee—not an agreement with an independent contractor to perform work.”
  • The panel majority also failed to recognize that its interpretation is inconsistent with the context in which the Sec. 1 exemption was enacted—against the backdrop of other federal laws that recognize the long-established distinction between employees and independent contractors.
  1. Cato Institute
  • The conservative Washington, D.C., think tank focuses on free enterprise and often speaks out on the freedom to contract: “This case is important to Cato because it concerns the freedom of individuals and businesses to structure their economic relations through contractual agreement.”
  • Cato takes an historical approach to criticizing the appellate court decision and urging reversal. At the time of the FAA’s 1925 enactment, Cato wrote, contracts of employment referred to traditional employer–employee relationships, not independent contractor arrangements. Courts embraced the same distinction in applying the common law, as did the legal dictionaries and treatises of the time. The FAA’s text is plain: only certain agreements establishing traditional employer– employee relationships are exempt from the FAA’s scope—that is, transportation workers like the seamen and railway employees the statute names.
  • Statutory history, including contemporaneous state laws, confirms that the FAA’s contracts-of-employment exemption is limited to traditional employer– employee relationships, and doesn’t include independent contractors.
  1. New England Legal Foundation
  • NELF is a conservative free-market advocacy group in Boston.
  • It makes a statutory construction argument to restrict the FAA Sec. 1 exclusion from application for transportation workers to the enumerated seamen and railroad employees, and the phrase “any other class of workers” is narrowed by the “ejusdem generis” rule, meaning “of the same kind.” This means that undefined statutory terms should be construed consistently with their immediate context, not in isolation from that context.
  • This also means that statutory terms should be interpreted consistently with the statute’s overarching purpose—here, the FAA’s purpose to enforce arbitration agreements according to their terms. This purpose, coupled with the traditional statutory construction rules, mandates a narrow interpretation of the exemption contained within Section 1 of the FAA.
  • The NELF argues that, based on the immediate context of the phrase “contracts of employment” in 9 U.S.C. Sec. 1, the FAA’s purpose, and a plausible historical explanation for the exemption, “contracts of employment,” must define an employer-employee relationship, not an independent contractor relationship.
  • When interpreted properly, in its immediate context, “contracts of employment” modifies “seamen” and “railway employees,” which are the two prominent classes of transportation employees in the statute, not independent contractors.
  • The FAA’s overarching purpose counsels in favor of enforcing, not exempting, arbitration agreements under the FAA.
  • The FAA’s exemption for seamen and railroad workers allowed those employees to sue employers for work-related injuries under two contemporaneous statutes—“a liberalized tort remedy.” Notes the NELF, “Since independent contractors are not covered by the [those acts], Congress would have no reason to exempt them from the FAA’s scope.”

 Customized Logistics and Delivery Association

  • CLDA is a nonprofit Washington trade association that advocates for the interests of delivery companies. New Prime is of significant interest to CLDA because of the common industry practice of using independent owner-operators to transport cargo. These independent owner-operators are crucial to the structure of many of the carriers’ businesses, as they often provide the equipment and services carriers need to meet the changing demands of their businesses. Carriers frequently rely on arbitration provisions in their contracts with owner-operators to ensure that both parties have an efficient and cost-effective means through which they can resolve their disputes.
  • The CLDA relies on a general argument about arbitration’s effectiveness in urging the nation’s top Court to reverse.
  • The First Circuit decision, which applied an overly expansive interpretation of the FAA exception, would render unenforceable the arbitration agreements used by the largest segment of the CLDA membership—small operators with one to 50 operators and annual revenue below $1 million. That would leave both the carriers and owner-operators subject to the threat of lengthy and costly litigation.
  • The First Circuit decision “not only conflicts with the holdings of other federal courts, it directly conflicts” with the FAA’s central goal, “to ensure that arbitration agreements between contracting parties are enforceable by the parties, thereby safeguarding each party’s access to an efficient and cost-effective alternative to litigation.”
  • “In order to achieve these goals, the determination of ‘whether a contract qualifies as a ‘contract of employment’’ within the meaning of Section 1 of the FAA “requires a categorical approach that focuses solely on the words of the contract.” In re Swift Transportation Co. Inc., 830 F.3d 913, 920 (9th Cir. 2016)(Ikuta, J., dissenting).
  • The CLDA states that “[c]ourts should not be allowed to make factual determinations regarding the employment relationship of the contracting parties for two reasons. First, to do so deprives the parties of the benefits of arbitration by forcing the parties to expend valuable resources in a preliminary court battle. Second, a threshold factual determination means that the parties must essentially litigate the merits of the case. This in turn creates uncertainty as to the enforceability of the contract at execution.”

 

The author was a 2018 CPR Institute summer intern and is a student at Northeastern University School of Law. Alternatives editor Russ Bleemer assisted with research.

American Bar Association Adopts Resolution 105 to Promote Diversity in ADR

By Franco Gevaerd

On August 6, 2018, the American Bar Association (“ABA”) House of Delegates adopted Resolution 105 proposed by the ABA Section of Dispute Resolution. The resolution urges international and domestic ADR providers to “expand their rosters with minorities, women, persons with disabilities, and persons of differing sexual orientations and gender identities” and to “encourage the selection of diverse neutrals.” The resolution also urges ADR users to select and use diverse neutrals.

Resolution 105 is a by-product of the ABA Mission Goal III (“Goal III”) adopted in 2008 – which aims to eliminate bias and enhance diversity in the legal profession – and of the ABA Resolution 113 adopted in 2016, which urges all providers and users of legal services to expand and create opportunities at all levels of responsibility for diverse attorneys.

The Resolution 105 report contextualizes the problem of underrepresentation of diverse neutrals in ADR and identifies two main issues, namely i) the “roster issue” and ii) the “selection problem.”

The “roster issue” is the primary issue of underrepresentation of diverse neutrals on ADR provider rosters. The report shows data collected from ADR providers and other studies, such as the 2014 ABA Section of Dispute Resolution Snapshot Survey, which demonstrate that ADR is one of the least diverse fields in the legal profession.

The “selection problem” is the aggravating issue regarding the low percentage of selection of those diverse neutrals who are on the roster. In this regard, the report suggests that the combination of confidentiality and network-based culture during the selection process favors implicit bias and obscurity, which consequently leads to this low percentage.

Conna Weiner, one of CPR’s Distinguished Neutrals, was very involved in the group effort seeking passage of Resolution 105 in her role as co-chair of the ABA Section of Dispute Resolution Women in Dispute Resolution Committee over the past bar year. “Resolution 105 and the accompanying report are important steps forward in ensuring that corporate users and their outside counsel are aware of the serious diversity issues in ADR and add this concern to their attempts to enhance diversity in the profession as a whole,” Ms. Weiner noted. She suggested that inside counsel, for example, might consider urging their outside counsel to send them lists of diverse arbitrators and mediators for consideration in addition to requiring outside counsel to use diverse teams of lawyers for their matters.

The ABA will be rolling out Resolution 105 this Fall with materials and toolkits to assist stakeholders. The full resolution and report can be accessed here.

Over the past few years, ADR providers and other organizations have undertaken initiatives to increase diversity in dispute resolution. ArbitralWomen, for example, is a strong advocate for the increased representation of women in international arbitration. Its initiatives include a mentorship program and moot funding. Another example is the Pledge on Equal Representation of Women in International Arbitration, which has now more than 2,900 signatories and aims to increase the number of women appointed as arbitrators on an equal opportunity basis. Many other organizations are continuously working to improve diversity in ADR, such as the ABA Section of Dispute Resolution Diversity Committee, the Committee on Diversity of the New York State Bar Association’s Dispute Resolution Section and the ADR Inclusion Network.

Since the establishment of its National Task Force on Diversity in ADR in 2006, CPR has also undertaken many initiatives to increase diversity on its Panel of Distinguished Neutrals and in ADR generally. Those initiatives include the following:

  • CPR’s Diversity Commitment – CPR’s Commitment encourages law firms and corporations to include qualified diverse neutrals on any list of mediators or arbitrators they propose.
  • Diversity Statement in nomination letters – CPR’s Dispute Resolution Services (“DRS”) recently added a Diversity Statement to the nomination letters sent to parties. The language of the diversity statement reinforces CPR’s commitment to diversity and inclusion in ADR, reminds ADR users of the benefits of diversity for the quality of decision-making, and encourages them to remain cognizant of the role that implicit bias can play in the selection process.
  • Young Lawyer Rule” – CPR recently incorporated to its non-administered arbitration rules (Domestic and International versions) a “Young Lawyer Rule”. The rule aims to increase the number of “stand-up” opportunities for young attorneys to examine witnesses and present arguments at arbitral hearings.
  • CPR Award for Outstanding Contribution to Diversity in ADR – Created in 2007, this award recognizes a person or organization having significantly contributed to diversity in the alternative dispute resolution field. The winners of the 2018 Award were international arbitrator and CPR Distinguished Neutral Lucy Greenwood and ICC’s Mirèze Philippe, co-founder of ArbitralWomen, for their long-standing commitment to diversity and focus on data and transparency in addressing diversity in ADR.

As for diversity on its Panel of Distinguished Neutrals, 27% of CPR’s roster in fiscal year 2018 was composed of diverse neutrals, of which 17% were women and 10% were male minorities. Regarding appointments, 31% of all arbitrators selected in 2018 were diverse, of which 27% were women. In the 2018 fiscal year, the selection of women as neutrals increased by 8% in comparison to fiscal year 2017.

Although there has been generally some progress on ADR provider rosters in terms of diversity, the numbers are still far from satisfactory and only show improvement in terms of gender diversity. The representation of other diverse groups has not significantly improved over the past few years, signaling that there is a need for increased efforts and initiatives focusing on greater inclusion of these groups.

One example is the underrepresentation of the LGBTQ+ community in ADR. Olivier André (CPR), together with William Crosby (Interpublic Group), Linda Kagan (The Kagan Law Group) and Jeffrey T. Zaino (American Arbitration Association) recently addressed this issue on a panel focused on “Developing a Career in ADR” at the LGBT Bar 30th Annual Conference, held in New York in August 2018.

All speakers on the panel concurred that more initiatives needed to address the inclusion of the LGBTQ+ community in the field. Messrs. André and Zaino explained that their respective organizations are committed to increasing LGBTQ+ diversity on their panels and are actively looking for qualified applicants for their rosters.

Furthermore, Mr. André pointed out the importance of self-identification by applicants to the CPR Panel of Distinguished Neutrals. He explained that CPR always strives to nominate arbitrator and mediator candidates who are both qualified for the dispute and diverse.  Therefore, it is important for CPR Neutrals to provide information about themselves so that the institution can include as many diverse candidates as possible on the lists sent to the parties.

The underrepresentation of the LGBTQ+ community is also reflected in the legal profession as a whole. One of the most recent initiatives undertaken by the ABA to address this issue was to launch a survey in partnership with the Burton Blatt Institute at Syracuse University.  The survey aims to examine the opportunities and challenges facing legal professionals in the 21st century focusing on diversity and inclusion for lawyers with disabilities and/or who identify as LGBTQ+. The survey is open to all legal professionals and can be accessed here.

In conclusion, increased diversity on the ADR provider rosters not only offers the parties more options to select neutrals better suited for their cases, but also increases the quality of decision-making and reinforces the integrity of arbitration as a legitimate dispute resolution process. With Resolution 105, the ADR community has taken another important step to increase diversity in the field.

 

The author is a CPR Institute Legal Intern. He holds a LL.B. from Pontifical Catholic University of Paraná (Brazil) and a LL.M. in International Commercial Law and Dispute Resolution from Pepperdine Law/Straus Institute for Dispute Resolution.

A Report on the CPR European Congress on Business Dispute Management (Part II)

EU flagBy Vanessa Alarcón Duvanel

This is the third post of a new CPR Speaks feature, “The European View,” offering valuable insights and perspectives from CPR’s European Advisory Board (EAB).

On 31 May 2018, CPR held its annual European Congress on Business Dispute Management in London. Organized by CPR’s European Advisory Board (the “EAB”) and kindly hosted by SwissRe in the incredible Gherkin building, the event convened European and American practitioners for a successful day of discussion led by four interesting panels. 

This blog piece reports on two panel discussions that took place in the afternoon of the European Congress on Business Dispute Management on 31 May 2018 in London, in the Gherkin Building, kindly hosted by SwissRe.

The afternoon session started with the keynote address of MasterCard Europe President Javier Perez who shared with the audience the important role of ADR in MasterCard’s business worldwide. In a thought-provoking speech, Mr. Perez emphasized MasterCard’s partnership approach with its clients according to which MasterCard does not initiate disputes (litigation or arbitration) against its clients, and rather uses ADR as a means to save the trust relationship.

Climate change and ADR

Moderated by Daniel Schimmel (CPR EAB member, Foley Hoag), the first panel of the European Congress’ afternoon session had four speakers: Kate Cook (Matrix Chambers); Dr. Karl Mackie CBE (CEDR); Nicola Peart (Three Crowns LLP); and Peter Stewart (Interfax Global Energy). Starting from the 2015 Paris Agreement, the panelists discussed how climate change may affect ADR.

The 2015 Paris Agreement signals a significant change and represents concrete actions and timeframes to reduce emissions and adapt to the impact of climate change. It contains strong procedural rules and verification obligations and tells States what to do in respect to climate change. Things have evolved in recent years and changes have been implemented. All States recognize nonetheless that there is a significant gap between where we are and where we should be.

Almost everything in the Paris Agreement is measurable: one can establish whether water is clean/cleaner, what the average temperature is, the number of miscarriages, etc.  Liability can be disputed. Climate change matters are therefore likely to generate disputes and ADR processes. Below are a couple of scenarios mentioned by the panelists:

  1. The risk of investment-treaty claims. Under the Paris Agreement, States must each year implement measures towards the overall long-term objective of stabilization of the temperature; also known as the 2o C global temperature target. The means to maintain the average temperature increase well below 2o C are multiple and include, g., low carbon, no carbon, renewable energyand new building standards.

    These measures and changes in legislation may affect investments and lead to investment treaty claims by foreign investors. The measures may also create incentives for foreign investment such as when a State implements incentives on renewable energy. The arrival of foreign renewable energy firms may not please everyone and if the State subsequently takes a step back and imposes a moratorium on foreign investment, this policy change may constitute a breach of the doctrine of legitimate expectations and lead to a fair and equitable treatment claim by the foreign investor (subject to an applicable treaty). This was the case in the NAFTA case Windstream Energy LLC v. Government of Canada (PCA Case No. 2013-22, 27 September 2016).

  2. New contracts with ADR clauses. The obligations imposed upon States by the Paris Agreement and the 1997 Kyoto Protocol have led to new contracts, many of which contain ADR clauses. One example of this is an international emission system developed under the Kyoto Protocol, whereby parties that exceeded their emission reduction commitments may sell the excess so-called “assigned amount units” (AAUs). Disputes arising out of this system are resolved by arbitration under the Permanent Court of Arbitration (PCA)’s Optional Rules for Arbitration of Disputes Relating to the Environment and/or Natural Resources (“Environmental Rules”).[1] For example, a dispute could arise in respect to a carbon emission registered project if, after the investor has invested, it turns out that the carbon credit was miscalculated, which could affect the value of the investment.
  3. Investment funds. Several investment funds are dedicated to climate change, including the Green Climate Fund (GCF). States, corporations and individuals who contribute to such a ‘green planet’ fund sign a contribution agreement with ADR clauses. In turn, the fund enters into contracts for its investments and these transactions contain arbitration clauses.

Data available to the panelists show that not all companies have reacted to climate change in the same manner. The measures required can be important and may give management the feeling that they are losing the agenda. The panelists praised certain companies, including CPR members in the oil & gas industry, for their efforts in lowering emissions from both their own operations as well as from the plants they operate on.

The entire panel agreed that climate-related disputes involve complex issues that ordinary state courts cannot deal with and require a very thoughtful and structured process.  In this context, mediation is here again an efficient solution able to address the specificities of climate-change cases, such as the need for a fast resolution, the political implications, the status of the parties (NGOs, multinationals, government), etc.

Climate change is one of the new fields to watch and learn about, for ADR practitioners.

Complex financing of dispute resolution

The last panel of the day was moderated by Mark McNeil (EAB member, Sherman & Sterling) and composed of two lawyers, Matthew Bate (Winston & Strawn) and Robert Wheal (White & Case), along with a representative of litigation finance and funding providers, Leeor Cohen (Burford Capital).

Starting with a short reminder of the origin of disputes financing, the panel then discussed the important aspects to consider when working with third party funders, the advantages and downsides of financing of claims, the impact on arbitration and the concept of portfolios of claims.

Initially, ADR financing was developed for parties who could afford the costs of “access to justice.” The concept has evolved and increased in many respects and all claimants now have the option to consider whether they wish their claim to be funded, insured, or otherwise monetarized. More and more well-financed companies use third party funders who have become a risk management tool, most particularly in so-called fee-shifting jurisdictions where court and arbitrators apply the loser-pays rule.

From the perspective of the lawyer trialing the case, the success of ADR financing depends on the good relationship with the funder; a good collaboration is important to avoid the risk that the funder withdraws its funding.

The rapid expansion of ADR financing testifies to its success. Yet, the panel identified potential downsides and risks associated with third party funding:

  • Financing of ADR is a complex world and the panelists described funding contracts as a “nightmare.” Getting to a funding contract also takes significant time and involves lengthy due diligence, questionnaires and the signing of NDAs. Third party beauty contests quickly multiply the work as funders have different approaches and hence different sets of questions.
  • The use of a party funder often limits the party’s ability to negotiate a settlement. By the time the parties reach a settlement, the funder will have spent money and will often want to be involved and approve any settlement amount. A so-called “waterfall provision,” according to which the funder gets first a portion of any settlement amount and the client receives something only if anything is left, impacts on settlement negotiation.
  • A funder may influence the conduct of the proceedings. Some funding agreements contain language reserving the funder’s right participate in decisions relating to the conduct of the proceedings, including with a right to agree to finance the case only as long as it is satisfied that it is worth pursuing. According to the panelists, this could translate negatively on the conduct of the proceedings and the claim must remain 100% with the claimant.

The financing of claims affects the arbitral proceedings in various ways. Respondents have sought disclosure of third party funding agreements, or applied for security for cost on the ground that the claimant’s need for funding suggests that it will not have the necessary funds to pay the costs of the arbitration if it is ordered to. Claimants have sought in their statement of costs recovery of funding costs, which the panelists confirmed, under most arbitration rules the arbitrators have the power to award.

Finally, the panel discussed the debated concept of portfolios of claims, i.e., the financing of multiple claims together. Under this structure, the funder calculates its return based on the performance of the entire portfolio and not each individual claim. Portfolio financing brings down the cost of financing by grouping several claims of a single claimant; it also secures the availability of financing throughout the proceedings. Several law firms have preferred to stay away from portfolios of claims and favor the financing of claims individually.

***

The European Advisory Board will share the date of 2019 CPR European Congress on Business Dispute Management within the coming months.

_____________________________________

[1]  https://pca-cpa.org/wp-content/uploads/sites/175/2016/01/Optional-Rules-for-Arbitration-of-Disputes-Relating-to-the-Environment-and_or-Natural-Resources.pdf ; see also, for more details: https://pca-cpa.org/en/services/arbitration-services/environmental-dispute-resolution/

Vanessa Alarcon Duvanel is a member of White & Case’s international arbitration group and is based in the firm’s Geneva office. She is also the Secretary of CPR’s European Advisory Board. She can be reached at vanessa.alarcon@whitecase.com.

 

A Report on the CPR European Congress on Business Dispute Management (Part I)

EU flagBy Vanessa Alarcón Duvanel

This is the second post of a new CPR Speaks feature, “The European View,” offering valuable insights and perspectives from CPR’s European Advisory Board (EAB).

On 31 May 2018, CPR held its annual European Congress on Business Dispute Management in London. Organized by CPR’s European Advisory Board (the “EAB”) and kindly hosted by SwissRe in the incredible Gherkin building, the event convened European and American practitioners for a successful day of discussion led by four interesting panels. 

This blog piece reports on the exchanges and discussions heard at the European Congress.  Summarizing this full day and four panels into one blog article would have deprived the readers of too many insightful views and ideas shared at the Congress. Therefore, we have split this reporting in two parts: a Part I sharing the morning panel sessions, and a Part II covering the afternoon panels.

The event kicked off with welcoming remarks by Maurice Kuitems, (EAB Chair, Fluor Corporation) and Olivier André (CPR), following by Elena Jelmini Cellerini, (EAB Member, SwissRe), and Nicola Parton (Swiss Re). Ms. Parton offered an inspiring message on the role of ADR and the importance of sustainable dispute resolution mechanisms, a goal that requires full respect of transparency principles and responsiveness to issues raised by our counterparts.

Make ADR great again! The in-house counsel’s perspective

Kenneth B. Reisenfeld (BakerHostetler) moderated the first panel of the day, which was exclusively composed of in-house counsels: James Cowan (CPR EAB Member, Shell International Ltd); Noah J. Hanft (CPR); Isabelle Robinet-Muguet (EAB Vice-Chair, Orange); and Gill Mansfield (Media Law Services).

The first question put to the panelists was whether there was a past renaissance about ADR, or has the ADR process gotten off track. The industry has come a long way since its early years. Many concepts have developed and there are now growing concerns that arbitration is not fulfilling its promises of being fast, confidential and efficient. These criticisms are legitimate and impossible to ignore in light of the high costs and duration of certain arbitral proceedings or the inclusion of U.S.-style disclosures in arbitral proceedings.

There is consequently a real need to make ADR great again, and to find business solutions to business disputes. The panel shared the in-house perspective on some of the means to improve the ADR process:

  1. Involving the business people

All speakers agreed that involving their colleagues from the “business side” is certainly not an easy step, yet it is important and a critical task of the legal department. When a dispute arises, the company’s business does not freeze and the project team has little time to devote to a dispute. The business team’s approach to the dispute will be different from that of the litigators and their early involvement can help define the ADR process in a more business sensitive manner, as opposed to a pure litigation proceeding.

Achieving adequate collaboration from the business people in a dispute requires a cultural environment sensitive to ADR and its benefits. This is only possible with sufficient trainings and an overall commitment of the management to ADR.  As the panelists phrased it several times, the business people must be able to understand the “importance of taking ownership of the matter.”

  1. Early case assessment (ECA)

For the panel, an early case assessment (ECA) is a critical element to any dispute resolution mechanism. It should be the first step in any dispute and is fundamental to understanding the business needs. A good ECA will serve in many ways: it will help shape the ADR process; guide the relationship with outside counsel; and highlight the skills and expertise to look for in the designation of a mediator or arbitrator, or in the selection of experts.

  1. Mediation

According to the panel, using mediation and appointing a commercially minded neutral can improve the efficiency of the dispute resolution mechanism. The financial savings can be significant, particularly in cases where the appointment of a neutral with relevant skills allows the parties to negotiate entirely (or partially) without having to involve outside counsel.

  1. Multi-tier / Step dispute resolution clauses

The speakers briefly touched upon multi-tier dispute resolution clauses, whereby in case of a dispute the parties undertake to take certain steps prior to commencing arbitration in an attempt to amicably settle the dispute. Some of the panelists view such clauses as a thoughtful way of bringing mediation into the process early, and a means to facilitate the involvement of the business people. Other panelists do not consider mandatory mediation as an efficient tool. Every dispute is different and settlement negotiations and/or mediation may sometimes be more appropriate at a later stage. An ADR-friendly corporate culture should also render multi-tier clauses unnecessary.

  1. Diversity

All panelists concurred that a lot of work has been done but so much remains to be accomplished in order to bring more diversity to the ADR process—particularly with respect to age and geographical location. From the panel’s perspective, the in-house counsels have a central role to play in this issue. They can, for example, ask the lawyers to “dig deeper” and present new names on the list of arbitrators, to encourage new appointments, which in turn will contribute to broadening the existing pool of experienced arbitrators for large and complex commercial disputes and will consequently increase the efficiency of arbitral proceedings.

The Progress and impact of the European Directive on mediation: Where do we stand and what’s next?

The panel was composed of mediation experts from various European horizons: Alexander Oddy (EAB Member, Herbert Smith Freehills) who served as moderator; Vanja Bilić, PhD (Ministry of Justice of the Republic of Croatia); Professor Pablo Cortés (Leicester Law School, University of Leicester; Martin Brink, PhD (Van Benthem & Keulen); Ivana Gabrić (Končar – Electrical Industry, Inc.); and Tsisana Shamlikashvili (President, Russian National organization of Mediators, Founder of the Center for Mediation and Law, Head of Federal Institute of Mediation).

The European Union has enacted two “mediation” directives, namely: (1) the “European Directive 2005/52/EC on the facilitation and access to ADR and the promotion of amicable settlement” (the “EU Directive on mediation”), following which some member States have amended their domestic rules to impose mediation prior to litigation; and (2) the “Directive 2013/11/EU of the European Parliament and of the Council of 21 May 2013 on alternative dispute resolution for consumer disputes” (the “Consumer Directive on ADR”) which imposes mandatory mediation to all businesses with consumers.

The panelists extended the scope of their discussion beyond its title and the impact of the EU Directive on mediation to include private initiatives taken by corporations to impose mandatory mediation, independently from legislation.

Both the European Mediation Directive and the Consumer Directive on ADR have had a positive impact on ADR.  There is, however, still room for improvement. As with any major change, it will take time. All speakers agreed that improving the use of mediation requires increasing awareness of the benefits of mediation. The potential to save money and time and to salvage the business relationship is significant with mediation, and users need more knowledge of these advantages. One avenue mentioned by different speakers to raise awareness about mediation consists of allowing the management to witness a mediation proceeding in order to understand concretely how it works and how it deploys its benefits for the company.

Ivana Gabrić shared Končar’s success story of imposing mandatory mediation. In 2005, unrelated to any legislative action, the company decided to introduce a mandatory mediation policy for all of its contracts. Within a few years, the policy led to the elimination of all court litigation. Today, Končar has no pending litigations. In light of the success, the management extended the policy to labor disputes.

The EU Mediation Directive also triggered changes beyond the borders of the EU, such as in Russia where—Tsisana Shamlikashvili reported—mediation represents a big cultural change. In a country where courts are very busy and obtaining a judgment has become part of the ordinary business (regardless of the time it takes and any ability to enforce upon such judgement), introducing mediation is equivalent to changing mentalities and requires significant effort. But, the progress is on-going and the efforts deployed to convince the users of the benefits of mediation are starting to pay off.

Stay tuned for part II reporting on the panels discussing “Climate change and ADR” and “Complex financing of ADR.”

 

Vanessa Alarcon Duvanel is a member of White & Case’s international arbitration group and is based in the firm’s Geneva office. She is also the Secretary of CPR’s European Advisory Board. She can be reached at vanessa.alarcon@whitecase.com.

 

Epic Systems vs. #MeToo: What Now?

By Anna M. Hershenberg & Sara Higgins

Panelists and audience members came together to discuss workplace dispute resolution in the wake of the U.S. Supreme Court’s Epic Systems v. Lewis decision, analyzing the impact of mandatory arbitration and class actions waivers in light of the #MeToo movement as it continues to raise awareness of the pervasive culture of sexual harassment in the workplace, and society generally.

More than 100 in-house employment counsel from Fortune 500 companies, corporate defense attorneys, counsel from the plaintiff’s bar, as well as noted academics and neutrals attended a CPR Institute mini-symposium last month on the intersection of the Supreme Court’s decision in Epic Systems v. Lewis, No. 16-285 (May 21)(available at https://bit.ly/2rWzAE8) and the #MeToo movement.

The two-panel program discussed anticipated responses from state and federal legislatures and the plaintiff’s bar, the pros and cons of mandatory arbitration for employment disputes and what makes an employment disputes program successful in light of new, competing priorities from the perspective of all stakeholders.

The event started with a CPR members-only meeting of CPR’s Employment Disputes Committee members.  The meeting featured an exclusive interview with Anil K. Chaddha, Lead Counsel of Labor, Employment and Benefits at General Motors, about his experience with employment ADR throughout his career.

The program was then opened up to the public where CPR Institute Chief Executive Officer and President Noah Hanft led off by noting that CPR is working to bridge the gap between the two sides of these types of contentious discussions, and provides an avenue for discourse and cooperation between plaintiff’s counsel and corporate defense to tackle common issues.  [Follow CPR Events at www.cpradr.org/events-classes/upcoming, on Facebook and on Twitter].

The first panel, titled “Was Epic Systems Really Epic: Responses to Epic and the Next Battlegrounds for Mandatory Arbitration,” was moderated by Washington, D.C. based neutral Mark Kantor, who is an adjunct professor at Georgetown University Law Center and a member of CPR’s Panel of Distinguished Neutrals.

Kantor broke down the Epic Systems case and discussed both its immediate impact and far-reaching implications with panelists Christopher C. Murray, a shareholder in the Indianapolis office of Ogletree, Deakins, Nash, Smoak & Stewart, P.C., who co-chairs the firm’s Arbitration and Alternative Dispute Resolution Practice Group, and Fran L. Rudich, a partner in Rye Brook, N.Y.’s Klafter Olsen & Lesser.

In Epic Systems, Kantor explained, the Supreme Court upheld the enforceability of class action waivers. He noted that, in writing for the majority, Justice Neil Gorsuch concluded:

The policy may be debatable but the law is clear: Congress has instructed that arbitration agreements like those before us must be enforced as written. While Congress is of course always free to amend this judgment, we see nothing suggesting it did so in the NLRA—much less that it manifested a clear intention to displace the Arbitration Act. Because we can easily read Congress’s statutes to work in harmony, that is where our duty lies.

The panel largely agreed that, from the employer’s perspective, this holding decisively shifts the balance in favor of mandatory arbitration with class action waivers.

From the employees’ perspective, Rudich previewed the plaintiff’s bar’s anticipated response: plaintiffs’ attorneys will now make concerted efforts to bring multiple, individual cases against the same employer as a workaround to class action waivers.  Rudich warned, “be careful what you wish for,” because employers that seek to avoid class matters are going to get exactly that, numerous individual employment dispute arbitrations, potentially with repetitive evidentiary and discovery requests.

The panel also discussed the burgeoning federal and state laws taking aim at mandatory arbitration, including that more states are poised to adopt California-style private attorney general (“PAGA”) laws to supersede employment class actions.

After a brief intermission, a second panel, “Epic Systems v. #MeToo: What Now? Best Practices for Workplace Disputes Program Design,” which included Sarah E. Bouchard, a Philadelphia-based partner in Morgan, Lewis & Bockius LLP; Lisa J. Banks, a named partner in Washington, D.C.’s Katz, Marshall & Banks LLP; Peter J. Cahill, Executive Director and Associate General Counsel at Ernst & Young LLP in New York; Diane Dann, Senior Vice President of Employment Law at Mastercard Inc. in Purchase, N.Y., and Kathleen McKenna, a partner at event host Proskauer, took the stage to focus on practical guidance for designing workplace disputes programs in the midst of the #MeToo movement.

The panelists discussed the legal, business and public relations implications for implementing employment disputes programs with mandatory arbitration in today’s climate.  They debated whether carving sexual harassment claims out of mandatory arbitration – like Microsoft, Uber and Lyft have done — is workable solution.

The employer-side and employee-side counsel agreed that the Tax Cuts and Jobs Act of 2017’s conditioned use of nondisclosure agreements (NDAs) in sexual harassment suits may make it harder to settle these types of claims.  Because the law attempts to disincentive the use of NDAs without regard to the wishes of the victim, it forces the parties to find work-arounds to the law where (as often happens) victims do not wish to have these disputes resolved publicly.  The panelists explained that most victims don’t want to be Gretchen Carlson — the journalist and advocate who brought a 2016 sexual harassment complaint against the chairman of Fox News – but instead want to move on with their lives without calling attention to the situation.

Panelists seemed to agree generally that incorporating opt-in or opt-out clauses into workplace dispute resolution programs might be a useful tool for assault victims who aren’t interested in publicly calling out their attackers.

Some tips for preventing sexual harassment in the workplace that the panel discussed included thoroughly vetting new hires’ pasts; evaluating the corporate culture from the top down; training bystanders who witness harassment to report it, and serving less alcohol – and more water — at business functions.

The panelists concluded that the #MeToo movement is broader than just sexual harassment – it has challenged how women are treated in the workplace and how they are compensated.

The program was followed by a networking cocktail reception.

 

Hershenberg is Vice President of Programs and Public Policy at the CPR Institute. Higgins is a CPR Institute Summer 2018 intern.

Kavanaugh on Mediation

By George Somi

While the CPR Speaks blog traced the arbitration history of President Trump’s Supreme Court nominee, District of Columbia U.S. Circuit Court of Appeals Judge Brett M. Kavanaugh, in a series of recent posts—collected here—the circuit judge’s mediation history is much quieter.

That’s not unusual. While mediation periodically appears as part of the procedural history in appellate cases, the process itself generally isn’t a key part of the decisions.

But Kavanaugh, a 12-year appeals court veteran, was a member of a D.C. Circuit panel that issued an unpublished opinion where mediation was at the heart of the case.

In Judicial Watch Inc. v. United States DOJ, 719 Fed. Appx. 21 (D.C. Cir. 2018), the D.C. Circuit Court panel affirmed in a per curiam decision a federal district court’s ruling in favor of a Department of Justice summary judgment motion in a Freedom of Information Act suit.

The plaintiff, Judicial Watch, is a Washington, D.C., not-for-profit conservative watchdog group that files many FOIA suits primarily against Democrats and climate scientists— most of which have been dismissed.

In 2013, it filed a FOIA action seeking withheld Justice Department documents originating from settlement discussions with the House Judiciary Committee. Comm. on Oversight & Gov’t Reform v. Holder, 979 F. Supp. 2d 1 (D.D.C 2013).

The U.S. District Court granted summary judgment for the Justice Department on the FOIA request, first holding that Judge Amy Berman Jackson’s statements during Holder prohibited disclosure of the documents the nonprofit group sought.

Second, the court held the Justice Department could not release any records because of District Court Local Rule 84.9, which prohibits “parties… from disclosing any written or oral communications made in connection with or during any mediation session.”

After the D.C. Circuit remanded the case for clarification regarding the scope of Judge Jackson’s statements—she noted that she had not made a formal sealing order—the trial granted summary judgment a second time based on Local Rule 84.9 only.

Judicial Watch appealed solely on the basis that Local Rule 84.9 did not apply to the documents it specifically sought from the DOJ. It did not challenge the District Court’s conclusion that Local Rule 84.9 prohibited the DOJ from disclosing documents under FOIA.

The D.C. Circuit held that the District Court did not abuse its discretion in ruling that the documents that Judicial Watch sought from the DOJ were made in connection with a formal mediation under Rule 84.9.

The appellate panel described the lower court case:

In a November 27, 2012 status hearing in Holder, before the parties engaged in any mediation—formal or otherwise—Judge Jackson suggested that mediation would be appropriate in the case.  . . . The next time the parties met before Judge Jackson, she repeated her offer to impose court-ordered mediation and expressed dismay at the “pace of the negotiations.” . . .  At these status hearings, Judge Jackson emphasized that she had selected an individual—visiting Senior District Judge Barbara J. Rothstein—to mediate the parties’ dispute. On March 18, 2013, Judge Jackson finally ordered the parties to participate in the court’s formal mediation program.  . . .

In this unique factual and procedural context, we conclude that the district court did not abuse its discretion in concluding that the documents Judicial Watch sought from the [Justice] Department were “made in connection with” the formal mediation in Holder under Local Rule 84.9.

The court cited “Judicial Watch’s failure to challenge whether a district court’s collateral interpretation of Local Rule 84.9 can qualify as an exemption under FOIA.” Crucially, the court added that it “explicitly reserve[d] judgment on when (if ever) a district court’s collateral interpretation of its local rules can serve as the basis of a FOIA exemption.”

The panel, which along with Circuit Judge Kavanaugh included Circuit Judge Karen Lecraft Henderson and Senior Circuit Judge Douglas H. Ginsburg, affirmed the dismissal of the Judicial Watch suit.

 

The author, a student at Brooklyn Law School, is a CPR Institute Summer 2018 intern.

Supreme Court Declines Case on Attorney-Client Arbitration Provisions

By Sara Higgins

A surprise term-ending addition by the U.S. Supreme Court on June 25 brought the number of arbitration cases for its fall 2018-2019 term to three.  See Lewis Tan, “Ready To Reverse? Supreme Court Will Revisit Class Arbitration,” 36 Alternatives 98 (July/August 2018)(available at https://bit.ly/2JnrFWf).

It could have been even more.

On that same day, the U.S. Supreme Court rejected an additional arbitration case that could have changed the relationship between lawyers and their clients when it comes to arbitration. But the denial of certiorari means a Maine case that requires a heightened level of description by lawyers as to the effects of an arbitration provision stands for practitioners in the state.

In Snow v. Bernstein, Shur, Sawyer & Nelson, P.A., 2017 ME 239 (2017)(available at  https://bit.ly/2zSfDEZ), cert. denied, No. 17-1279, 2018 WL 1306038 (U.S. June 25, 2018), a dispute arose between a law firm, Bernstein, Shur, Sawyer & Nelson, P.A., and Susan Snow, a client who retained the firm in May 2012 to represent her in a civil action.

In hiring the firm, Snow signed an engagement letter that required her to submit all disputes arising out of or relating to the agreement or the services provided by the law firm, including malpractice, to binding arbitration.

Snow filed a malpractice suit against the firm for allegedly mishandling her case. Bernstein moved to compel arbitration under the engagement agreement, but Snow contested that, when signing the agreement, she was not informed of the specific rights she was signing away.

The Maine Superior Court awarded Snow’s motion to stay arbitration, and the decision was upheld by Maine’s Supreme Judicial Court of Maine. But the U.S. Supreme Court denied Bernstein’s appeal for writ of certiorari.

In upholding the Maine Superior Court’s decision, the state’s Supreme Judicial Court found the arbitration provision to be unenforceable as a matter of public policy. Bernstein’s argument was twofold.

First, the Portland, Maine-based firm contended that the arbitration agreement was enforceable because the clear language—“any other dispute that arises out of or relates to this agreement or the services provided by the law firm”—“unambiguously informed Snow” of the arbitration agreement’s scope and effect.

Second, Bernstein argued that if Maine attorneys are obligated to obtain informed consent from clients before entering into arbitration agreements, such an obligation “singles out” arbitration agreements and is preempted by the Federal Arbitration Act.

The Supreme Judicial Court rejected both of Bernstein’s arguments. On the first point, the Court determined that under the Maine Rules of Professional Conduct, Bernstein was obligated to fully inform Snow as to the scope and effect of the arbitration agreement. Citing fiduciary-duty rules, and informed consent, as well as Maine Ethics Commission opinions, the Court concluded:

[T]o enforce a contractual provision that prospectively requires a client to submit malpractice claims against the law firm to arbitration, an attorney must have first obtained the client’s informed consent as to the scope and effect of that provision. This policy is based on the long-standing principal that attorneys owe a fiduciary duty of “undivided loyalty” to their clients[.]

Snow v. Bernstein, Shur, Sawyer & Nelson, P.A., 2017 ME 239, ¶ 18, cert. denied, No. 17-1279, 2018 WL 1306038 (U.S. June 25, 2018).

Given this consideration, the Court held that Maine attorneys must obtain a client’s informed consent regarding the scope and effect of any contractual provision that prospectively requires the client to submit malpractice claims against those attorneys to arbitration.

To obtain the client’s informed consent, the attorney “must effectively communicate, . . . [and] ensure that the client understands, the differences between the arbitral forum and the judicial forum . . . to ensure that the client is informed ‘to the extent reasonably necessary to permit the client to make [an] informed decision[].” Snow, 2017 ME 239, ¶ 19 (citation omitted).

This will differ depending on the individual client’s capacity to understand that information. In this instance, the Court examined the context of the arbitration provision and determined that the phrase “any other dispute that arises” was essentially buried in a larger clause describing fee dispute resolution.

The Court did not find Bernstein’s argument compelling because, when read in context, the arbitration provision was not sufficiently clear to inform Snow that she was agreeing to submit malpractice claims against her attorney to arbitration. Bernstein was obligated to explain to Snow what rights she was signing away in the arbitration provision, including the availability of bringing malpractice claims in court, and the difference between arbitral and judicial forums.

Ultimately, “the letter itself failed to specifically emphasize that disputes against Bernstein regarding its legal services would be subject to arbitration.” The undisputed evidence supported the conclusion that Bernstein did not fully inform Snow as to the scope and effect of the agreement to arbitration, as required by the Maine Rules of Professional Conduct and the Maine Professional Ethics Commission opinions interpreting those rules. Snow, 2017 ME 239, ¶ 22. The Superior Court therefore did not err in concluding that the arbitration provision was unenforceable for violating public policy, according to the Supreme Judicial Court.

On the second point, if there exists an obligation for Maine Lawyers to obtain informed consent from clients before entering arbitration agreements with their clients, Bernstein argued that this obligation violates the Federal Arbitration Act because it “singles out” arbitration.

Bernstein’s argument relied heavily on the Doctor’s Associates case, in which the U.S. Supreme Court held that “Congress precluded States from singling out arbitration provisions for suspect status, requiring instead that such provisions be placed upon the same footing as other contracts.” Snow, 2017 ME 239, ¶ 25, quoting Doctor’s Assocs. Inc. v. Casarotto, 517 U.S. 681 (1996). Therefore, Maine’s top Court noted, in instances where a state law single out arbitration contracts specifically, the FAA will preempt that state law. Id.

But the Maine Supreme Judicial Court did not accept Bernstein’s contention, holding that the requirement in question does not single out arbitration because the requirement does not apply strictly to arbitration agreements.

The obligation to obtain informed consent of one’s client before waiving significant rights is unrelated to arbitration in particular, “and is rooted” in fiduciary duty principles “unrelated to arbitration.”

Accordingly, the Superior Court did not err in concluding that Bernstein’s obligation to full inform Snow of the scope and effect of the arbitration agreement was not preempted by the Federal Arbitration Act.

Bernstein’s last shot at an appeal, by writ of certiorari to the Supreme Court, was denied last month. The result is that the requirement by the Supreme Judicial Court that Maine attorneys fully inform a client of the scope and effect of a contractual provision requiring the client to submit any malpractice claims against the firm to arbitration stands.

 

The author is a 2018 CPR Institute summer intern.

Kavanaugh on Arbitration

By Russ Bleemer, Sara Higgins & George Somi

President Trump’s nominee to the U.S. Supreme Court, Brett Kavanaugh, has worked on a healthy dose of arbitration cases during his tenure on the federal appeals court following his confirmation, after a three-year Senate battle, in 2006. In this unusually lengthy post, presented in installments this week, CPR has taken a look at 21 of these cases. 

Overview

Kavanaugh’s arbitration decisions mostly adhere to the portrait of the nominee recently presented by both his supporters and detractors—that of a deeply conservative justice who leans hard toward business arguments and away from employees’ interests, and harbors a suspicion of government bureaucracy indicated most prominently by his disdain for federal agency law interpretations. See, e.g., Elliott Ash and Daniel L. Chen, “Kavanaugh is radically conservative. Here’s the data to prove it.” Washington Post (July 10)(available at https://wapo.st/2mdYxrf); Jess Bravin and Brent Kendall, “Who Is Brett Kavanaugh?” Wall Street Journal (July 9)(available at https://on.wsj.com/2NGECOf).

But, characteristic of judiciary views of ADR, Kavanaugh’s work in arbitration cases is less predictable on which party gets his backing, because he tends to stick to a narrow statutory interpretation.  For the Federal Arbitration Act cases, he attributes the stance to reflecting Congress’s preference for the practice. In a case involving another 1940’s labor statute, Kavanaugh joined a panel backing union claims in arbitration, reinstating an award against a big employer.

The arbitration-related decisions below are dominated by labor cases, a function of Kavanaugh’s place on the District of Columbia Circuit Court of Appeals, the federal appellate court which is a frequent site for appeals of National Labor Relations Board cases.

Kavanaugh’s views in those cases have received widespread praise from his conservative backers, and have inspired concerns about the future vitality of unions from the oppositions. Jeff Stein, “3 Ways Trump’s Supreme Court pick could transform U.S. labor law,” Washington Post (July 10)(available at https://wapo.st/2LaIBRN).

Kavanaugh’s views of the law on the relationship between management and labor surely will be a flashpoint during his confirmation hearings. See, e.g., Erin Mulvaney, “Brett Kavanaugh ‘Looks for Ways to Rule for Employers’” Nat’l Law Journal (July 12)(available at https://bit.ly/2Ld4qA8).

One of those cases in particular has fired up labor organizations, who looked beyond the ADR implications and cited an erosion of National Labor Relations Act protections in Kavanaugh’s decision. The case, Verizon New England Inc. v. Nat’l Labor Relations Bd., has been cited as emblematic of the nominee’s anti-worker stance. One major union pointed to the arbitration case as soon as Kavanaugh was nominated, calling on the Senate to vote against the nomination. More below.

Kavanaugh’s arbitration views, if confirmed, will emerge early in his tenure. The U.S. Supreme Court already has scheduled three arbitration cases for the 2018-2019 term scheduled to begin Oct. 1. Lewis Tan, “Ready To Reverse? Supreme Court Will Revisit Class Arbitration,” 36 Alternatives 98 (July/August 2018)(available at https://bit.ly/2JnrFWf).

The following are highlights of cases in which Circuit Judge Kavanaugh participated that involve arbitration based on searches of the D.C. Circuit Court of Appeals website and commercial databases. The first three are authored by the nominee, and the remainder are cases in which he was a panel member. The final entry reviews a brief on a regulatory pricing issue that emanated from arbitrations on which Kavanaugh participated as part of a big legal team in a Fourth U.S. Circuit Court of Appeals case.

  1. Verizon New England Inc. v. Nat’l Labor Relations Bd., 826 F.3d 480 (D.C. Cir. 2016) (available at https://bit.ly/2NKd8Yn).

Kavanaugh began the opinion by setting out the parameters of labor arbitration agreements in a simple-to-understand fashion, stating that unions may collectively bargain to waive certain National Labor Relations Act rights, and agree to arbitration.  He noted that the National Labor Relations Board may intervene by reviewing a decision where the loser says it has been deprived of an NLRA right.

“But consistent with the national labor policy favoring arbitration,” Kavanaugh’s first paragraph concluded, “the Board reviews the arbitration decisions under a highly deferential standard.  . . .”

And, consistent with the conservative justice’s suspicion of the reach of administrative agencies’ powers, the opinion restored an arbitrator’s award in favor of the telecommunications company.  The award had been confirmed by an administrative law judge, but overturned by the National Labor Relations Board.

The opinion is controversial because the union had agreed to bar its members from picketing, and was taken to arbitration by the company.  The union lost because its members put signs in their car windows during a dispute.

Rather than focusing on fundamental NLRA rights, Kavanaugh stuck to arbitration procedure in reversing the NLRB—noting the appellate panel’s review is for reasonableness, not de novo—and adopted a stance in which the union had agreed to the picketing restriction.

He wrote that the NLRB violated its own “highly deferential standard” for reviewing an arbitration decision, known as the Spielberg-Olin standard, when it issued its decision.  Olin Corp., 268 N.L.R.B. 573, 574 (1984); Spielberg Manufacturing Co., 112 N.L.R.B. 1080, 1082 (1955).

The NLRB “misapplied its highly deferential standard for reviewing arbitration decisions,” wrote Kavanaugh. “Under that standard, the Board should have upheld the arbitration decision in this case. The Board acted unreasonably by overturning the arbitration decision.”

He added later in the opinion, “All agree that the National Labor Relations Act allows a union to waive its members’ Section 7 right to display pro-union signs in vehicles parked on company property.” Kavanaugh supported a limited inquiry by the panel into the arbitrator’s decision, but says the award should be restored because it “was not a ‘palpably wrong’ interpretation of the collective bargaining agreement.”

Fellow D.C. Circuit panelists concurred in the result but questioned the appropriate NLRB review standards of the arbitration, and the Kavanaugh’s deferral standard toward the NLRB decision.

The case was cited by the Communications Workers of America on Monday in its announcement asking senators to oppose Kavanaugh’s nomination. See https://bit.ly/2uieX6L.

2. Nat’l Postal Mail Handlers Union v. Am. Postal Workers Union, 589 F.3d 437 (D.C. Cir. 2009) (available at https://bit.ly/2zqyEOB).

In an arbitration case between two unions at odds over their respective division of mail-handling duties, Kavanaugh, writing for a unanimous appellate panel, noted that the arbitrator “probably erred as a matter of contract interpretation,” but backed a federal district court ruling upholding the arbitration award.

He wrote, “[I]n light of the deference courts must afford to a labor arbitrator’s contract interpretation—including an arbitrator’s decision on arbitrability where, as here, the parties agree to present that issue to the arbitrator—we agree with the District Court that we must uphold the arbitrator’s decision in this case.”

3. U.S. Dep’t of the Navy v. Fed. Labor Relations Auth., 665 F.3d 1339 (D.C. Cir. 2012) (available at https://bit.ly/2NaiBpX).

Writing for the panel, Kavanaugh overturned an arbitral decision finding that the Navy had a duty to bargain with unions representing civilian employees before removing free bottled water provided to workers at a Newport, R.I., facility, after the Navy determined that water available from water fountains was no longer unsafe.

In 2005, the Navy had issued an email informing base personnel that previously contaminated drinking water was now safe, and that federal appropriations law precluded the Navy from providing bottled water given that safe and drinkable tap water was available.

Civilian employees at the base are represented by two unions: (i) the National Association of Government Employees, Local R1–134, known as NAGE, and (ii) the Federal Union of Scientists and Engineers, Local R1–144, known as FUSE. NAGE negotiated a collective bargaining agreement with the Navy; FUSE had a grievance procedure agreement with the Navy, but no collective bargaining agreement.

These unions filed grievances under their negotiated dispute resolution procedures, arguing that the Navy had a duty to bargain with them before removing the bottled water. When the grievances were not resolved through negotiation, the unions sought binding arbitration.

The arbitrator found that any change regarding the bottled water “required conferring and negotiating between the parties bound by the Collective Bargaining Agreement(s).”

“The arbitrator declined to consider the Navy’s argument that federal appropriations law barred it from providing bottled water,” according to the Kavanaugh opinion, adding, “The arbitrator said that looking to federal appropriations law ‘would be looking outside of the Collective Bargaining Agreement between the parties.’”

The Navy filed exceptions to the arbitration award with the Federal Labor Relations Authority, arguing that (1) the arbitrator refused to consider its argument that federal appropriations law precluded it from providing bottled water, and (2) the arbitrator’s findings drew no distinction between NAGE and FUSE, even though only NAGE had a collective bargaining agreement with the Navy.

The Federal Labor Relations Authority declined the Navy’s exceptions and affirmed the arbitrator’s conclusion that the Navy was obligated to bargain before removing the bottled water. The Navy petitioned for review in the D.C. Circuit.

Writing for the majority, Kavanaugh vacated the arbitrator’s decision on the grounds that federal appropriations law barred Navy from providing free bottled water to employees when safe drinkable tap water was available. After finding that the statute governing federal labor relations explicitly relieves agencies of the duty to bargain over any matter that would be “inconsistent with any Federal law or any Government-wide rule or regulation” 5 U.S.C. § 7117(a)(1), the Court turned to the issue of whether providing bottled water under these circumstances would violate federal appropriations law.  The panel concluded that it did.

Applying the “necessary expense” doctrine in the construction of appropriations laws, Kavanaugh wrote “[p]roviding bottled water when safe and drinkable tap water is available would serve no purpose other than accommodating employees’ personal tastes—a purpose that generally cannot justify the expenditure of appropriated funds.”

Kavanaugh vacated the arbitral award and remanded to the Federal Labor Relations Authority to determine the more fundamental question of whether the tap water is in fact safe to drink. “If the water at the Newport facilities is safe to drink,” wrote Kavanaugh, “then the Authority must rule for the Navy.” 

4. Kelleher v. Dream Catcher L.L.C., 2018 U.S. App. LEXIS 9831, *1.

This per curiam D.C. Circuit panel decision affirmed a lower court ruling that the petitioner contractor had forfeited its contract right to compel arbitration by delaying its request for eight months after a complaint had been filed. The petitioner had, instead, filed an answer, rather than a pre-answer motion to compel. The district court had found that the delay causes substantial prejudice to the respondent and the court.

The appeals panel, in the unpublished opinion, backed the district court and refused to stay the matter or compel arbitration.

5. Leidos Inc. v. Hellenic Republic, 881 F.3d 213 (Feb. 2, 2018)

Kavanaugh joined a unanimous circuit panel in denying a request to modify a large arbitration award related to services provided by the petitioner to Greece during the 2004 Olympics by allowing a currency conversion, to dollars from Euros, where the Euro had been devalued.  The long history in the case contemplated payment in Euros.

6. Nat’l R.R. Passenger Corp. v. Fraternal Order of Police, Lodge 189 Labor Comm., 855 F.3d 335 (D.C. Cir. 2017)(Available at https://bit.ly/2N4SctW).

Kavanaugh was in the majority on a panel that affirmed, 2-1, a district court’s decision to vacate an arbitration award in favor of a police officer on the grounds that it was contrary to law.  He did not write the decision.

In the case, a union–the Fraternal Order of Police, Lodge 189–brought arbitration on an employee’s behalf against Amtrak. The employee was an Amtrak Police Department in the Canine Unit officer who was fired after Amtrak’s Inspector General found that the officer had lied about co-owning a home in Maryland with her supervisor.

After the officer unsuccessfully appealed the decision within Amtrak, she sought arbitration pursuant to the collective bargaining agreement’s grievance procedure. On her behalf, the Fraternal Order of Police claimed that she had been fired without just cause. Without reaching that claim, the arbitrator determined that the officer should be reinstated because the Inspector General’s investigator, when interviewing her, had not fully complied with the contract’s Rule 50 procedures.

The rule provides procedures for investigating officers—the “Police Officers Bill of Rights”– incorporated into the collective bargaining agreement.

The arbitrator ruled that the National Railroad Passenger Corp., better known as Amtrak, must reinstate, with backpay and lost seniority, the fired employee.

Pursuant to the Railway Labor Act, Amtrak brought an action in district court, seeking an order setting aside the arbitrator’s award. The district court, relying on the Inspector General Act of 1978, 5 U.S.C. app. 3, §§ 1-13, and U.S. Department of Homeland Security v. FLRA (DHS), 751 F.3d 665, 672 (D.C. Cir. 2014), agreed with the railroad, vacating the arbitrator’s award to the officer because the Amtrak Inspector General could not legally be governed by Rule 50 of the contract. Nat’l R.R. Passenger Corp., 142 F. Supp. 3d at 90.

The appellate panel decision cited limited grounds on which a court may set aside an arbitration award, specifically where a contractual provision is contrary to “law or public policy.” United Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29, 42 (1987).

The D.C. Circuit panel agreed with the district court’s finding that the arbitrator had improperly applied Rule 50 of the Collective Bargaining Agreement to the Amtrak Inspector General.

The opinion relied on U.S. Department of Homeland Security v. FLRA, 751 F.3d 665, 672 (D.C. Cir. 2014(“DHS”)), which held that under the Inspector General Act of 1978, “public sector unions and agencies can neither add to nor subtract from the OIG’s investigatory authority through collective bargaining.” 751 F.3d at 671.

7. Newco Ltd. v. Gov’t of Belize, 650 F. App’x 14 (D.C. Cir. 2016)(unpublished), cert. denied, 137 S. Ct. 619 (2017) (available at https://bit.ly/2mkxTxj).

Kavanaugh once again joined a panel decision affirming a district court’s order to enforce an international arbitral award.

The dispute between Newco Limited and the Government of Belize over an agreement to develop the country’s international airport was submitted to arbitration. A Miami arbitral tribunal issued an award in favor of Newco for $4.3 million. Belize agreed to pay the award on the condition that payment be made in Belize dollars rather than in U.S. dollars as required by the agreement, and that the parties first subtract unpaid taxes owed by Newco to Belize before paying the award.

Newco brought suit to enforce the award in the D.C. District Court. Belize brought its own suit in the Belize Supreme Court. Belize obtained an anti-suit injunction against Newco from the Belize court, while Newco’s federal court suit was stayed as Newco litigated in Belize.

The Belize Supreme Court ultimately agreed with Belize that the nation could subtract unpaid taxes and pay the remainder of the award in Belize dollars. But Newco refused to agree to the conditions and renewed its effort to enforce the arbitral award in the D.C. federal district court. Belize moved to dismiss the suit on a variety of grounds, including international comity, public policy, and forum non conveniens. The District Court rejected Belize’s arguments and enforced the award. Newco Ltd. v. Belize, No. 08-2010, 2015 WL 9810457 (D.D.C. Aug. 7, 2015).

The D.C. Circuit Court opinion, joined by Kavanaugh, affirmed this decision. The panel first rejected Belize’s request that the award not be enforced on the basis of international comity, finding that it failed to provide support for its assertion that the doctrine of international comity is a “’rule[] of procedure of the territory’ where the enforcement action is brought”—that is, the United States.

The panel noted that the allegations must be one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the New York Convention.

Belize also alleged that the U.S. federal court should have refused to enforce the arbitral award “based on an alleged public policy interest in international comity.” The opinion noted that under the New York Convention, courts may decline to enforce an arbitral award if “enforcement of the award would be contrary to the public policy of that country.” New York Convention art. V(2)(b).

The opinion added that courts should rely on the public policy exception only “in clear-cut cases” where “enforcement would violate the forum state’s most basic notions of morality and justice.” Termorio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928, 938 (D.C. Cir. 2007) (citations omitted). In this case, the panel determined that Belize did not show that enforcement “would violate the most basic U.S. notions of morality and justice.”

Finally, the appellate court found Belize’s contention that the district court should have dismissed the enforcement action on forum non conveniens grounds squarely foreclosed by precedent. See TMR Energy Ltd. v. State Property Fund of Ukraine, 411 F.3d 296 (D.C. Cir. 2005)(forum non conveniens does not apply to U.S. actions to enforce arbitral awards against foreign nations).

8BCB Holdings Ltd. v. Gov’t of Belize, 650 Fed. Appx. 17 (D.C. Cir. 2016)(available at https://bit.ly/2umHHuV).

In another 2016 unpublished opinion concerning a disputed Belize arbitration, D.C. Circuit Judge Kavanaugh was on a panel affirming the D.C. District Court’s enforcement of an international arbitral award, this time made in the U.K.

In 2005, BCB Holdings Limited and Belize Bank Limited—two Belize banking companies—signed an agreement with the nation’s prime minister addressing matters like their tax treatment.

In 2008, the firms invoked the agreement’s arbitration clause when the government repudiated the agreement. In 2009, an arbitral tribunal in London ruled against Belize, ordering that the country pay the banking companies about $20.5 million, plus interest and costs. Belize’s high court prevented the award’s enforcement, holding that it contravened the country’s separation-of-powers system.

BCB Holdings and Belize Bank sought to confirm the foreign arbitral award under the Federal Arbitration Act and New York Convention in the U.S. District Court for the District of Columbia. They also sought recognition and enforcement of the foreign money judgment pursuant to the District of Columbia Foreign Money Judgments Recognition Act and to covert the award and its associated costs and interest to U.S. dollars. The District Court enforced the award.

On an appeal by the Belize government, the D.C. Circuit affirmed the federal district court’s ruling. The court held that under the FAA, the doctrine of international comity was not a “rule of procedure” and, therefore, it did not constitute a basis for denying the arbitral award’s enforcement.

Second, in response to Belize’s contention that there was a corrupt bargain between the former Belize prime minister and the two companies, the panel held that Belize had not demonstrated that enforcement “would violate the most basic U.S. notions of morality and justice.” The court reasoned that the arbitral tribunal didn’t find any corruption and that Belize’s high court never contemplated corruption when it refused to enforce the award.

Finally, the court held that while parties are time-barred to enforce arbitral awards within three years, 9 U.S.C. § 207, “the District Court equitably tolled the statute of limitations so that their claims were not time-barred.” The two companies diligently pursued their rights to the arbitral award in the face of a 2010 Belize criminal statute that imposed imprisonment and fines on those who violated an injunction by the country’s highest court—violations which included pursuing enforcement of an arbitration against Belize. Once that statute was deemed unconstitutional in 2014, BCB Holdings and Belize Bank filed the enforcement action in the U.S. district court within six months.

9. GSS Grp. Ltd. v. Nat’l Port Auth. of Liberia, 822 F.3d 598 (D.C. Cir. 2016)(available at https://bit.ly/2L3c7fe).

D.C. Circuit Judge Kavanaugh was on a panel affirming the district court’s denial of motion to enforce an international arbitral award, but did not write the opinion.

The D.C. Circuit agreed with a Washington, D.C., federal district court finding that issue preclusion barred relitigating personal jurisdiction over the Port Authority, and that GSS failed to demonstrate that the government Liberia was liable for the Port Authority’s alleged contract breach.

Following the end of a second civil war in Liberia in 2003, the Liberian Port Authority, a wholly Liberian-owned corporation that manages, operates and maintains all Liberian ports, awarded GSS a multi-million dollar contract to build a container park at the port in the nation’s capital, Monrovia. GSS is a British Virgin Islands corporation based in Israel.

Although Liberia’s Interim Public Procurement Policy and Procedures mandated that the Port Authority award such contracts through “open competitive bidding,” the Port Authority did not do so. As a result, in 2005, the Liberian Contract and Monopolies Commission informed the Port Authority that the GSS contract was invalid and reminded it that all contracts must result from competitive bidding.

The Port Authority subsequently petitioned the commission for a single-source exemption, which allows a Liberian entity to dispense with competitive bidding if, “there is an urgent need” for the contract and “engaging in bid proceedings . . . is impractical due to unforeseeable circumstances.” The commission granted the exemption on Aug. 12, 2005, and the parties re-negotiated the contract 10 days later.

The contract alarmed the International Contact Group on Liberia, a multinational advisory board including representatives of the United States, the United Nations, the European Union, the Economic Community of West African States and the World Bank. In response to concerns over the contract’s validity and monetary value, the Port Authority and GSS amended the contract again.

Nevertheless, on Dec. 30, 2005, the National Transitional Government’s chairman directed the Port Authority to cancel the GSS contract. A Feb. 16, 2006, letter from the Port Authority notified GSS that the single-source exemption to competitive bidding was mistakenly granted, and therefore the Port Authority considered the contract “null and void ab initio.”

On March 15, 2006, GSS invoked the contract’s arbitration clause, which provided that disputes arising under the agreement were to be arbitrated in London and in accordance with the laws of England and Wales, against the Port Authority, but not against Liberia. “Meanwhile,” the D.C. Circuit opinion notes, “a separate Liberian governmental organization—the Liberian Public Procurement and Concession Commission —sought a Liberian-court declaration that the contract, including the arbitration provision, was invalid.”

Because of the Liberian judicial proceedings, the Port Authority refused to participate in the London arbitration; GSS appointed the sole arbitrator. On Feb. 8, 2008, the Liberian court held that the contract was unenforceable.

But one month later, the arbitrator determined that he had jurisdiction. In June 2008, he concluded that the Port Authority was liable for the cancellation. In May 2009, the arbitrator awarded GSS more than $44.3 million.

GSS filed a June 2009 petition in the D.C. federal district court to confirm the London arbitral award. The petition was dismissed for lack of personal jurisdiction. GSS appealed and the D.C. Court of Appeals affirmed.

In March 2012, GSS filed a second district court to confirm the arbitral award, naming Liberia as the sole respondent, and amending three weeks later to add the Port Authority.

GSS’s second petition claimed that the Port Authority was Liberia’s agent and, therefore, Liberia was liable for the big London award. “Because Liberia, as a sovereign, may not assert a personal-jurisdiction defense,” the D.C. Circuit noted, “GSS believed that its second petition cleared the hurdle that blocked its first.”

The district court disagreed and denied GSS’s motion to enforce the award because, it stated, that GSS failed to prove that the Port Authority acted as Liberian government agent. GSS appealed and the D.C. Circuit panel, joined by Circuit Judge Kavanaugh, affirmed, refusing to enforce the arbitral award on the basis of issue preclusion, lack of subject-matter jurisdiction, and a failure to demonstrate an agency relationship between Liberia and the Port Authority.

10. Cont’l Transfert Technique, Ltd. v. Fed. Gov’t of Nigeria, 603 Fed. Appx. 1, (D.C. Cir. 2015)(unpublished).

D.C. Circuit Judge Kavanaugh was on a panel affirming the District Court’s enforcement of an international arbitral award, but he did not write the unpublished opinion.

In 1999, Continental Transfert Technique Ltd., a Nigerian corporation, initiated arbitration against Nigeria’s Ministry of the Interior in a dispute relating to the creation of a computerized residence permit and alien card system.

In 2008, a London arbitration awarded Continental ₦29.6 billion in Nigerian naira in damages—in today’s dollars, more than $82 million—along with $247,500 in legal fees and expenses, and more than £253,000 in arbitral costs.

Continental sought enforcement under the District of Columbia Uniform Foreign Money Judgments Recognition Act at the U.S. District Court for the District of Columbia.

The U.S. federal court confirmed the arbitral award under the New York Convention pursuant to Federal Arbitration Act, recognized the arbitral judgment under the D.C. Recognition Act, converted the award into U.S. dollars, and awarded Continental pre- and post-judgment interest. Nigeria appealed to the D.C. Circuit, arguing that the U.K. court’s order was not a “judgment” under the D.C. Recognition Act and that the U.K. award was obtained fraudulently because Continental had not informed the London court ordering enforcement about a Nigerian court’s restraining order.

The D.C. Circuit, relying on Church of Scientology of California v. United States, 506 U.S. 9, 12 (1992), held that it had no authority to decide legal questions if its judgments cannot provide redress. Since Nigeria had not presented any challenge to the arbitral award’s confirmation under the New York Convention, the court had no appellate jurisdiction to hear Nigeria’s challenges regarding the District Court’s recognition of the U.K. judgment under the D.C. Recognition Act.

Nigeria’s remaining challenges, the D.C. Circuit held, were without merit. For instance, the court, relying on Rule 54(c) of the Federal Rules of Civil Procedure, held that conversion of arbitral awards from a foreign currency into U.S. dollars was warranted even though such relief was not explicitly requested by Continental in its complaint.

11. Nat’l Treasury Employees Union v. Fed. Labor Relations Auth., 754 F.3d 1031 (D.C. Cir. 2014)(available at https://bit.ly/2KOB6Up).

The union petitioned the court for review of the respondent’s determination that overruled an arbitrator’s finding of unfair labor practices against the employer, the Internal Revenue Service, in a dispute over workloads.

In a unanimous panel decision that Kavanaugh joined, the D.C. Circuit held that the Federal Labor Relations Authority correctly determined “that the IRS did not make any unilateral change” in the work rules, a holding “consistent with the Arbitrator’s factual finding that the IRS ‘divide[d] up an ever-growing pool of cases among virtually the same number of existing Case Advocates without making other reasonable adjustments.’” [Citation to the arbitration decision omitted.]

That, the opinion said, “was the critical finding,” under authority precedent, and required no notice to the union or opportunity to bargain.  “The IRS responded to outside factors,” according to the D.C. Circuit, “but initiated no change of its own to its policies, practices, or procedures.”  It denied review of the petition and didn’t reinstate the arbitrator’s unfair practices determination.

12. Oakey v. U.S. Airways Pilots Disability Income Plan, 723 F.3d 227 (D.C. Cir. 2013) (available at https://bit.ly/2L3cs1u).

This is another opinion in which Kavanaugh joined a panel decision but did not write it.  The decision affirms a federal district court’s dismissal of a claim arising under the Employee Retirement Income Security Act for lack of jurisdiction because the claim is grounded in the application and interpretation of a collective bargaining agreement, and would need to be arbitrated if it is unable to be resolved informally.

The appeals panel held that the former pilot Oakey’s dispute fell under the Railway Labor Act, which has been applied to disputes between air carriers and their employees since 1936 and includes a mandatory arbitration provision, depriving the district court of jurisdiction.

Petitioner Oakley submitted a claim for disability benefits under a company plan to the retirement board, which approved the claim effective Jan. 30, 2002. In January 2003, US Airways notified Oakey he was to be “furloughed” on Feb. 4, 2003, as part of a fleet reduction. In March 2003, the plan administrator advised Oakey that, based on his furlough date, his disability benefits had terminated on Feb. 4, 2003.

In November 2003, Oakey filed an action under ERISA against US Airways and the plan for benefits allegedly owed to him. Oakey’s complaint asserts that that the 1997 Amendment was ineffective because it was not signed by an Air Line Pilots Association representative, and that as a result, Oakey’s disability coverage was governed by a 1975 Disability Plan, which didn‘t terminate benefits upon an employee’s furlough.

The district court granted the plan’s motion–on the ground that the RLA’s mandatory arbitration provision deprived the district court of jurisdiction–and dismissed the action in March 2012. Oakey v. U.S. Airways Pilots Disability Income Plan, 839 F. Supp. 2d 225 (D.D.C. 2012).

Upon de novo review of the district court’s grant of a motion to dismiss for lack of subject matter jurisdiction, the D.C. Circuit appellate panel, joined by Judge Kavanaugh, affirmed.

The appeals panel cited earlier opinions in which it addressed the interplay between the RLA and ERISA and “concluded that the latter (and later-enacted) statute, notwithstanding its broad preemption of state law remedies, has no preemptive effect on other federal enactments—including the RLA.” Air Line Pilots Ass’n Int’l v. Northwest Airlines Inc., 627 F.2d 272 (D.C. Cir. 1980)(emphasis is in the opinion).

Given the “strong, comprehensive, express statement that ERISA is not to be read as displacing by implication any pre-existing federal legislation,” the Northwest court concluded that ERISA has no effect on RLA Section 204’s “mandate[ that] the carrier or the union [] refer disputes over the application or interpretation of bargaining agreements covering [rates of pay, rules, or working conditions’ terms including employee pensions], if they cannot be resolved informally, to arbitration.” Id. at 275-76 (quoting 45 U.S.C. § 184)(emphasis in the opinion).

Oakey argued that even if Northwest’s preclusion rule survives, it does not apply to his case because, he contended, that for the rule to apply (1) the claim must involve interpretation or construction of the collective bargaining agreement’s terms, and (2) the interpretative issue must be dispositive or conclusive of the claim.

The Court rejected this argument, holding that Oakey’s dispute, over which version of the plan agreement controls, is plainly such a dispute: regardless of the version of the plan agreement is controlling, its interpretation or application governs the outcome.

13. Belize Soc. Dev. Ltd. v. Gov’t of Belize, 668 F.3d 724 (D.C. Cir. 2012)(available at https://bit.ly/2ufkwTa).

Kavanaugh was in the minority in a 2-1 panel decision backing a writ of mandamus to end a stay of enforcement for an arbitration award.

In his dissent, Kavanaugh wrote that he would dismiss the appeal for lack of appellate jurisdiction and deny the petition for a writ of mandamus.

The case involved a petition to confirm and enforce a London arbitration award against the Government of Belize. The D.C. Circuit panel reversed a federal district court order to stay the proceeding pending the outcome of related litigation in Belize.

Following the respondent’s request, the appellate court opted to treat the appeal as an application for a writ of mandamus. The circuit court concluded that the stay order exceeded the district court’s proper exercise of authority and remanded the case for further proceedings.

In his dissent, Kavanaugh wrote that a mandamus order by the court was an unnecessary step that should be reserved for extraordinary situations. “Even if we think the District Court erred under the Federal Arbitration Act by entering a temporary stay,” he wrote, “its error was hardly ‘extraordinary.’ Mandamus for this case is akin to using a chainsaw to carve your holiday turkey. Indeed, if you ask me which is the more extraordinary–the District Court’s temporary stay or this Court’s invocation of mandamus jurisdiction under these circumstances–I would say the latter.”

14. New York & Presbyterian Hosp. v. N.L.R.B., 649 F.3d 723 (D.C. Cir. 2011) (available at https://bit.ly/2uBhNDd).

 A unanimous D.C. Circuit panel in which Kavanaugh joined rejected arguments by a New York hospital that an NLRB review of an arbitration agreement, backing a finding of a National Labor Relations Act violation, was erroneous. Kavanaugh was not the author of the opinion which supported a determination in favor of a union.

The case provided an interesting look at pre-ADR discovery.

The panel unanimously rejected the New York & Presbyterian Hospital’s petition for review of a decision and order by the NLRB, which found the Hospital in violation of National Labor Relations Act Section 8(a)(5) (at 29 U.S.C. § 158(a)(5)), for failing to produce information requested by the labor union with which the hospital has a collective bargaining agreement, the New York State Nurses Association.

The petition arose from an alleged violation of the collective bargaining agreement. In 2004, the union filed a grievance alleging that the hospital hired nurse practitioners in a nonunion capacity to do bargaining unit work. The employer denied the grievance on May 18, 2005, explaining that the nurse practitioners were “not Hospital employees” and thus did “not fall within the Hospital’s span of control nor [were] they governed by the Hospital’s Policies and Procedures.

NYSNA subsequently filed an unfair labor practice charge with the NLRB against both the Hospital and Columbia University. (The Hospital is affiliated with Columbia University School of Medicine, the opinion notes, adding that nearly all of its physicians are members of Columbia’s faculty and employed directly by Columbia.)  The charged alleged that they were “a single employer or alter egos of one another” responsible for “restrain[ing] and coerc[ing] nurse practitioners at [the Hospital] in exercising their Section 7 rights by employing nurse practitioners to work at [the Hospital] under terms and conditions of employment different from those specified in the collective bargaining agreement . . . covering nurse practitioners who work at the hospital.”

Acting pursuant to board policy, the NLRB’s regional director deferred consideration of the union’s unfair labor practice charge to the arbitration over NYSNA’s grievance. Columbia then informed the union and the hospital that, as a nonsignatory to the collective bargaining agreement, it did not intend to participate in the arbitration.

In preparing for the arbitration, the union made a number of information requests concerning the employment of nurse practitioners who were not designated as union-represented employees working on the hospital premises, but the hospital refused to provide the documentation.  And the arbitrator apparently failed to decide whether the hospital was obligated to produce the requested information.

An administrative law judge subsequently determined that the hospital was obligated to turn over the requested information. The hospital sought review in court, and the NLRB cross-applied for enforcement of its decision and order.

The hospital argued that union failed to demonstrate the relevance of its request; attacked the evidentiary foundation of the Board’s decision and order, and raised a number of additional arguments. But the majority, joined by Kavanaugh, rejected the Hospital’s arguments and denied its petition for review.

15. Winston & Strawn, LLP v. Doley, 384 F. App’x 1 (D.C. Cir. 2010) (unpublished decision available on Westlaw https://bit.ly/2LbfPn9).

Kavanaugh joined a panel decision that affirmed a district court order denying a motion for reconsideration of its summary judgment ruling. In the unpublished opinion, the Court rejected the contention of clients of the Winston & Strawn law firm that the district court erred in not staying the litigation proceedings to allow arbitration to go forward.

The Court held that this argument failed under the rule established in Khan v. Parsons Global Services, Ltd., 521 F.3d 421 (D.C.Cir.2008)–that a party is deemed to have waived the right to compel arbitration if it actively participated in the lawsuit.

Because at the time the client-appellants filed their motion to stay proceedings they already had filed a Federal Rule of Civil Procedure 12(b)(6) motion, the appellants already were actively participating in the suit, and the district court did not err in holding that they had waived their right to compel arbitration.

16. Verizon Washington, D.C. Inc. v. Communications Workers of Am., AFL-CIO, 571 F.3d 1296 (D.C. Cir. 2009) (available at https://bit.ly/2L3un8b).

A panel opinion in which Kavanaugh joined but didn’t write reinstated an arbitrator’s award in favor of union employees which had been overturned by a federal district court. The opinion said that the arbitrator’s award for the union and against Verizon had properly drawn its essence from the collective bargaining agreement in a case under a section of the Labor Management Relations Act of 1947 at 29 U.S.C. § 185(a).

17. Cephas v. MVM Inc., 520 F.3d 480 (D.C. Cir. 2008).

This unanimous panel decision Kavanaugh joined was about a statute of limitations issue that would allow a worker to proceed with a grievance against his employer under a collective bargaining agreement.

A federal district court rejected the filing as out-of-time under, respectively, the Labor Management Relations Act, because it “preempts a claim for breach of a CBA cast in terms of state contract law,”  and the National Labor Relations Act.

But the panel said that the lower court got the applicable limitation period wrong, and ruled it was in the District of Columbia Code. The ruling allowed the grievance by the employee—a federal court worker employed by a government contractor–to proceed, possibly to arbitration. 

18. Am. Postal Workers Union v. U.S. Postal Serv., 550 F.3d 27 (D.C. Cir. 2008)(available at https://bit.ly/2mdhomh).

In a case involving the arcane collective bargaining issue of classifying work roles in bargaining units, a unanimous panel in an opinion in which Kavanaugh joined but did not write conducted a de novo review supporting the arbitrator’s classification. The question was about the interpretation of the award, not its validity. The opinion noted the award was on the classification, not the work undertaken by the jobholder. It stated that the award had that focus, but, ultimately, the panel reversed the district court determination for a further inquiry on whether the award excluded disputed work, rather than the position, from the bargaining unit. 

19. Lessin v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 481 F.3d 813 (D.C. Cir. 2007)(available at https://bit.ly/2uclfVp).

Kavanaugh joined a panel decision affirming the District Court’s denial of petitioner’s motion to vacate an arbitral award in his favor because it didn’t approach the damages he sought, in a straightforward application of the Federal Arbitration Act.

In January 2000, the plaintiff transferred almost $5.3 million in Yahoo! Securities and a $2.1 million margin balance to his Merrill Lynch brokerage account. At Merrill Lynch he executed a Retail Account Profile stating that his investment objective was “growth” and that his risk tolerance was “aggressive.” Less than a year later, by October 2000, Lessin’s account had lost almost 100% of its value.

In February 2003, pursuant to a standard brokerage contract to arbitrate disputes before a panel of the National Association of Securities Dealers, plaintiff Lessin filed a statement of claim against Merrill Lynch and his broker for between $5 million and $10 million in compensatory damages as well as for punitive damages. The three-arbitrator NASD panel heard evidence over a six-day period. The panel found Merrill Lynch, but not the broker, liable to Lessin for nearly $33,000 in compensatory damages, and Lessin filed a motion to vacate the award in the D.C. Superior Court, which Merrill Lynch removed to the federal district court.

Reviewing the district court’s confirmation of the arbitration award for clear error as to findings of fact and de novo questions of law, the D.C. Circuit affirmed the district court’s denial of Lessin’s motion to vacate. The Court noted its limited jurisdiction to review arbitral awards under the Federal Arbitration Act, and rejected Lessin’s contention that the arbitration panel engaged in misconduct by refusing to hear pertinent and material evidence from one of his designated expert witnesses.

The panel also found no evidence on the record that the panel’s refusal to hear testimony from Lessin’s second expert deprived Lessin of a fair hearing, concluding that, given the evidence before the panel, Lessin failed to demonstrate that the award violated an explicit public policy.

20. Democratic Republic of Congo v. FG Hemisphere Assocs. LLC, 508 F.3d 1062 (D.C. Cir. 2007)(https://bit.ly/2Ji1L6p).

D.C. Circuit Judge Kavanaugh joined a panel affirming a federal district court’s denial of motions to vacate default judgments surrounding the enforcement of international arbitration awards, but he did not write the opinion.

FG Hemisphere’s predecessor-in-interest brought action in the district court against the Democratic Republic of Congo under the Foreign Sovereign Immunities Act, seeking to confirm arbitration awards it had secured against the DRC. The DRC failed to appear in court, and default judgment was entered against it in the cases September 2004 and January 2005. The district court denied the DRC’s subsequent motions to vacate the judgments. The D.C. Circuit reversed and remanded for further proceedings.

At that point, the DRC raised its objections about service of process. The lower court denied motions to vacate for faulty service.

The D.C. Circuit Court of Appeals affirmed the district court’s ruling, reasoning that the DRC had waived its right to challenge service of process pursuant to Rules 12(g) and 12(h)(1) of the Federal Rules of Civil Procedure. The DRC had participated in 13 months of post-default judgment litigation to hold off the judgment creditor’s execution against its properties before finally claiming inadequate service of process and making any mention of personal jurisdiction issues.

21. GTE South Inc. v. Morrison, 199 F.3d 733 (4th Cir. 1999)(available at https://bit.ly/2KRa8LT).

In addition to service in the White House under President George W. Bush, Kavanaugh was an attorney at Kirkland & Ellis before ascending to the D.C. Circuit. He participated as one of five Kirkland attorneys named on the brief for the appellant, GTE South Inc., in a Fourth Circuit case, GTE South, Inc. v. Morrison.  A total of 13 attorneys appeared on the brief from Kirkland, co-counsel Hunton & Williams, and the company. Kavanaugh was a team member and not the counsel of record.

At issue was the Virginia State Corporation Commission’s determination of prices in arbitration proceedings brought by new entrants into Virginia’s telephone markets. In an effort to end monopolies by local exchange carriers, Congress enacted the Telecommunications Act of 1996, which required local telephone companies that were monopolies to make available their facilities and services to would-be competitors at “just, reasonable, and nondiscriminatory” negotiated prices. If such negotiations failed, prices would be determined in arbitration before a state utility commission, such as the Virginia state corporation.

GTE, an incumbent company in this scenario, challenged the results of arbitration and filed suit against would-be competitors, Cox Fibernet Commercial Services Inc., AT&T Communications of Virginia Inc., and two MCI units, as well as the Virginia corporation’s commissioners, alleging that the state’s pricing decisions failed to meet the Telecommunications Act requirements. The district court granted summary judgment against GTE.

In its amended brief to the Fourth Circuit, the Kirkland team addressed the Supreme Court’s decision in AT&T Corp. v. Iowa Utils. Bd., 522 U.S. 366 (1999) (confirming FCC rulemaking power with respect to the Telecommunications Act) by arguing that the Federal Communication Commission’s pricing rules could not be applied retroactively.

Second, the team argued that Virginia pricing decisions violated the Telecommunications Act because the act’s plain terms required prices based on all of GTE’s costs, including the recovery of historical costs.

Third, if the rules applied retroactively to GTE, a remand to the Virginia corporation would be necessary.

Fourth, GTE argued that the court had to determine whether the FCC’s pricing methodology was at odds with the Telecommunications Act; if the court were to decide it lacked such jurisdiction, it should stay the appeal until deliberations on the substantive challenges to the rules were completed in the Eighth Circuit.

Finally, the amended brief contended that the Virginia corporation’s “Hatfield Model” pricing—a forward-looking methodology for estimating costs, differing from projections based on GTE’s actual past costs—violates the FCC’s requirements.

The brief was unsuccessful.  The Fourth Circuit affirmed the federal district court’s ruling for summary judgment against GTE, upholding arbitration agreements issued by the Virginia state corporation.  It held that the FCC’s pricing methodology and determinations were not precluded by any retroactivity principles and that the Virginia corporation appropriately relied on the best available information to set prices.

Bleemer edits Alternatives for the CPR Institute; Higgins is a student at the Northeastern University School of Law in Boston and a CPR Institute Summer 2018 intern. Somi, a student at Brooklyn Law School, also is a CPR Institute Summer 2018 intern.