Part II: More on Workplace ADR Under the Biden Administration

In “Part I: How Workplace ADR Will Evolve Under the Biden Administration,” CPR intern Antranik Chekemian reviewed on CPR Speaks the first half of comments during an online panel discussion hosted in late February by CPR’s Employment Disputes Committee and its Government & ADR Task Force.  Washington, D.C., arbitrator Mark Kantor focused on prospects for legislative changes for employment and labor ADR issues, and possible regulation, while Mark Gaston Pierce, Visiting Professor and Executive Director of the Georgetown University Law Center Workers’ Rights Institute, covered labor developments in decisions of the National Labor Relations Board, where he served as chairman from 2011 to 2017.  After their presentations, panel moderator Arthur Pearlstein, who is Director of Arbitration for the Federal Mediation & Conciliation Service, turned to panelist Kathryn Siegel, a shareholder in Littler Mendelsohn’s Chicago office, before concluding with a general discussion. Highlights from the second half of the program appear below.

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By Antranik Chekemian

Kathryn Siegel mainly focused on the Equal Employment Opportunity Commission, which, like the National Labor Relations Board, also has five members.

Siegel noted that she did not expect to see drastic EEOC policy changes during the Biden administration. Even though the chair has recently been changed by President Biden, a Republican majority still exists in the commission.

The general counsel at the Feb. 24 seminar date, Sharon Fast Gustafson, was fired by Biden March 5, and replaced by veteran EEOC attorney Gwendolyn Young Reams, who is now Acting General Counsel. Gustafson was a Republican appointee whose term would not have expired until August 2023.

Still, Siegel pointed out, “There is still going to be a Republican [board] majority through at least July of 2022, possibly through the end of 2022 because of the terms of the Republicans,” she said.  Siegel concluded that this will prevent the Biden-appointed chair from advancing Democratic policy initiatives and significant changes through at least the middle of next year.

Regarding the impact of the changes in the EEOC on arbitration/mediation, Siegel noted the “conclusion of the two six-month pilot programs relating to the agency’s conciliation and mediation efforts.”

She provided insights on the program. “The message of the… pilot was to mediate early, mediate often, mediate late, and mediate all the time,” she said. She emphasized that parties could mediate at any stage of any charge, and that it did not have to be at the outset.

She added that the parties in Category B charges—those that require more EEOC investigation to substantiate and pursue–were the ones that were being invited to mediation.  Siegel said, “What we saw during this pilot program was that you could really mediate even the EEOC’s high-priority charges that advanced an issue of law that the EEOC potentially wanted to litigate, that had . . . kind of bad facts in it.”

After the mediation pilot’s conclusion, however, there is not going to be an opportunity to mediate high priority charges. Siegel noted that even though this is a big change, it would not be difficult to adapt to this change as the pilot program was only six months long.

She also discussed the pilot program on conciliation that was launched around the same time as the mediation pilot program. The conciliation program also was officially dropped in January. Siegel, however, noted that a rule was established just before the EEOC’s chair changed. “That final rule as to the new EEOC conciliation and how that will be handled is in place for now,” she said.

Siegel added that the rule will last until the Democrats get the majority back sometime in 2022. She said that the conciliation process rule change provided that the “EEOC must provide factual support for its reasonable cause finding and its damages calculations as part of the conciliation process.”

She then discussed another 2020 change she observed with the EEOC regarding “the number of investigations and how robust those investigations were.” Even for charges that were classed as Category B, she said, requests for position statements were lower than before, and the investigations ended more quickly. She noted that this could have been the result of both the Trump administration and Covid-19, and predicted that investigations will likely ramp up again as things get back to normal post-pandemic.

“Part of that speed in which charges were pushed through and right-to-sues were issued was a result of pressure from the administration to clear a backlog,” she said, adding to “expect that there will be a little bit of the brakes put on, slowing down, to make sure that each charge gets due time in investigation.”

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Moderator Arthur Pearlstein then directed a question to panelist Mark Kantor regarding how administrative actions could potentially affect class action waivers and arbitration. Pearlstein further asked Kantor to clarify the 2019 U.S. Supreme Court Lamps Plus decision.

Kantor noted that Lamps Plus provides that “the presumption is that arbitration is individualized and there is not collective arbitration unless the arbitration clause clearly provides for that.” He also said, however, that “in most circumstances . . . the question of what the arbitration clause says would be delegated to the arbitrator.”

In Lamps Plus, Inc. v. Varela, 139 S.Ct. 1407 (2019), the U.S. Supreme Court provided that because the individualized form of arbitration was envisioned by the Federal Arbitration Act, “Courts may not infer from an ambiguous agreement that parties have consented to arbitration on a classwide basis.” The decision further notes that the class arbitration lacks the benefits of individualized arbitration. “It [class arbitration] sacrifices the principal advantage of arbitration – its informality – and makes the process slower, more costly, and more likely to generate procedural morass than final judgment.”

Kantor said, “A very large number of arbitration clauses in employment agreements, consumer contracts and the like . . . expressly waive the right to bring a class proceeding in arbitration as well as in court.”

He concluded that “a regulatory measure from an independent agency or an executive agency would prohibit that claim . . . in a contract so long as it was aimed at all forums. Not focusing on arbitration has a good chance of passing muster under [Epic Systems v. Lewis] and that might override the literally millions of clauses out there in existing contracts that provide for waivers of class proceedings.”

Pearlstein then noted the “obvious difficulty in getting major legislation passed regarding labor and employment issues” and asked the panelists about the chances of less-dramatic piecemeal legislation passing in Congress. He also asked about the Biden administration’s role with administrative actions and whether it means agencies like the National Labor Relations Board and the EEOC “become more important than they have ever been, or, certainly, in a long time?”

Siegel said that rulemaking has already been used a substitute for doing things at the NLRB, and that this was effective in dictating policy goals. She added that this was an alternative presented at the agency level as a common law substitute. “They did not want to have to wait for the case to come up before them to rule,” she said, and “in lieu of waiting for Congress and having to pass legislation that is not exactly what they would want and as a compromise, that would be an alternative.”

Mark Gaston Pearce said that “rulemaking will show up and go the other direction and use up a lot of agency resources in that regard.” Regarding a piecemeal legislative approach, Pearce noted that it’s “more likely than a wholesale acceptance of a statute like the PRO Act, because there may not be enough Democratic senators — much less Republicans — that are going to buy into the entire measure, but as Mark Kantor suggests, it’s very possible that they can tag on particular key measures of the PRO Act into must-have legislation in order to get some of that across.”

There was a question from the audience asking whether there is proposed federal legislation that would restrict waivers of jury trials, which companies might use as an alternative to class-action waivers.


Mark Kantor responded that he was not aware of any standalone legislation aiming at prohibiting jury-trial waivers. He said, “We do know that several states have enacted legislation, for example, California and Georgia, achieving that result in their own state courts, but at the federal level, again, you’re going to run into the filibuster, so it’s unlikely you would find Republican support in the Senate for legislation like that, and it is equally unlikely that you could obtain 60 votes, a closure vote to override filibuster. It’s not going to be budget reconciliation, which means you’re looking at appending it to a must-pass legislation.”

Panelist Kathryn Siegel also noted that states attempt to accomplish certain goals when it’s not possible at the federal level, especially in the context of arbitration limits. “We have seen states,” she said, “such as Illinois, trying to . . . make their own rules as to arbitration and when you can require arbitration of disputes.” She further added even though such laws are going to be preempted by the FAA, many states pass them “hoping that they have crafted it in a way that it avoids the issues that other states have had or that no one will notice.”

An attendee asked the panel whether they “expect a Biden majority to overturn the NLRB’s General Motors decision by re-implementing the specific tests for evaluating discipline for conduct that occurred during protected concerted activity, instead of the Wright Line standard.”

According to the new standard provided by the General Motors decision, the NLRB General Counsel must show that “(1) the employee engaged in Section 7 activity, (2) the employer knew of that activity, and (3) the employer had animus against the Section 7 activity, which must be proven with evidence sufficient to establish a causal relationship between the discipline and the Section 7 activity.”

The General Motors decision provided that the conflict between the anti-discrimination laws and the setting-specific standards explained below required the adoption of the Wright Line standard. The NLRB further cited the EEOC and mentioned that discrimination laws do not forgive abusive conduct when it arises from heated feelings about working conditions or because crude language is common in the workplace. The decision also characterized the setting-specific standards to be “wholly indifferent to employers’ legal obligations to prevent hostile work environments on the basis of protected traits.”

The General Motors case replaced several setting-specific standards:

  • The Atlantic Steel standard on workplace discussions with management: To determine whether abusive conduct by the employee during protected concerted activity was severe enough to lose the National Labor Relations Act’s protection, the Board had  applied a four-factor standard: (1) the place of the discussion; (2) the subject matter of the discussion; (3) the nature of the employee’s outburst; and (4) whether the outburst was, in any way, provoked by an employer’s unfair labor practice. General Motors noted that because the Board had not assigned any specific weight to any of these factors, the Board’s application of these factors resulted in inconsistent outcomes over the years. Furthermore, the second factor – the subject matter of the discussion – favored the protection of the employees as the Atlantic Steel factors only applied when the subject matter was related to Section 7 activity. NLRA Section 7 provides that “employees shall have the right to self-organization, to form, join, or assist labor organizations… and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid protection.” The Board in General Motors also criticized the shortcomings of the Atlantic Steel standard as it was “giving little, if any, consideration to employers’ right to maintain order and respect.”
  • The totality of the circumstances on social media posts and coworker discussions: The General Motors decision also replaced the totality of the circumstances standard that had applied to social-media posts and coworker discussions. “The Board’s flexibility in considering a wider of range of facts in each specific circumstance promises to create the same, if not more, inconsistency and unpredictability,” noted the decision.
  • The Clear Pine Mouldings Test for conduct taking place on the picket line: Cases that applied the 1978 Clear Pine Mouldings test had found that the employees lose NLRA protection only when “it involves an overt or implied threat or where there is reasonable likelihood of an imminent physical confrontation.” General Motors noted that, “As a result, the Board has found appallingly abusive picket-line misconduct to retain protection, including racially and sexually offensive language.”

The NLRB further concluded in General Motors that absent evidence of discrimination against Section 7 activity, there is no merit of “finding violations of federal labor law against employers that act in good faith to maintain civil, inclusive, and healthy workplaces for their employees. These results [from setting-specific standards] simply do not advance the Board’s mission of promoting labor peace or any of the other principles animating the Act.”

After the General Motors decision, the Trump-appointed Chairman, John F. Ring praised the decision. “For too long,” he stated, “the Board has protected employees who engage in obscene, racist, and sexually harassing speech not tolerated in almost any workplace today. Our decision in General Motors ends this unwarranted protection, eliminates the conflict between the NLRA and antidiscrimination laws, and acknowledges that the expectations for employee conduct in the workplace have changed.” President Biden replaced Ring on Jan. 20 with NLRB member Lauren McFerran; Ring’s board term continues through Dec. 16, 2022.

Panelist Mark Gaston Pearce noted that the applicability of the Wright Line standard during protected concerted activity should be fleshed out and that it was an overreach. Even though Pearce said he believed there was a need for a fix with respect to Title 7-type situations, the test could have been within the realm of the existing test–the Clear Pine Mouldings test.

Pearce further acknowledged Clear Pine Mouldings’ shortcomings, noting that under this test, “racial and sexual derogatory remarks were not sufficient to take protection away from the actor, because they were not violence or threats of violence.” He noted that the NLRB had failed to look at the situations from the viewpoint of the recipient of those kinds of remarks, and what kind of reaction that had.

Pearce expressed his concerns regarding the new Wright Line standard that when it comes to obscene or profane remarks made during the heat of the moment or during an exchange between someone engaged in protected concerted activity and management, noting that such circumstances should be treated differently.

He further added that the Wright Line standard does not respond to what happens when management has provoked a response in the course of protected concerted activity. He further explained:

It may well be while that standard exists, these issues are going to have to be fleshed out before an arbitrator who is using the just-cause standard. Because of course if someone was provoked into something in a unionized setting, and it comes out in an arbitration, . . . [the] arbitrator has the ability to weigh those kinds of determinations and [make] an assessment as to whether or not there was just cause for them to act the way it did.

In a non-union setting, that opportunity does not present itself, so there is an inequitable situation there. Furthermore, if employees don’t know what they can say or how they should say, they will censor, self-censor and deny themselves the ability to engage in rights protected under the National Labor Relations Act. The Supreme Court says, and there are several cases that say, that the NLRB and the courts are not in the business of making civility codes.

A seminar attendee asked the panel, “What changes in labor arbitration should we expect with federal agencies like the VA, Capitol Police, Bureau of Prisons, military bases, etc.?”

Moderator Pearlstein first responded that the Capitol Police is not under the Federal Labor Relations Act authority. As to federal agencies in general, he said, “There are dramatic changes on the horizon once the makeup of the NLRB changes . . . and once things rotate into a Democratic majority.”

He said that “the changes under the Trump board at the NLRB were so dramatic, reversing so much precedent, that I think you’re going to start seeing quite a lot of change as that catches up.”

Regarding executive orders, Pearlstein noted that “the president has already reversed all the executive orders basically that applied to the federal workplace.”

There was a question asking whether the EEOC will go back to its prior policy criticizing mandatory arbitration once the Democrats get the majority.

Panelist Kathryn Siegel responded that the “EEOC and most of the federal agencies . . . once they are able to effectuate Democratic policies, they are going to pretend like the last four years were just a nightmare and return as quickly as possible to the policies and the plans that they had prior to the Trump election.”

Therefore, she said, it is likely that there will be a return to what was being advanced by Democrats four years ago.

Panelist Pearce added that NLRB’s “only issue was solely with respect to class-action waivers. The NLRB didn’t challenge mandatory arbitration, because the FAA . . . [and] other Supreme Court cases [concluded] that mandatory arbitration is the rule of the day.”

Pearce said the NLRB’s Epic Systems concern was “the flip handling of what constitutes concerted activity  . . and what kind of impact that will have on future cases.” He added, “Certainly, this Trump board did its best to clamp down on protected concerted activity definitions and issued some cases that really restricted that. I agree in that respect that the Biden board will go in the other direction.”

Another attendee asked: “Is there any attempt to have Congress address the extent to which the Federal Arbitration Act can be used?”

Said panelist Mark Kantor, “That is exactly what the FAIR Act will aim at. It will pass the House. It will get hearings and committee action in the Senate. but it seems highly unlikely that it will be enacted by the Senate over a filibuster in light of vote counting,” said Kantor (see links above to Kantor’s discussion in Part I, which also includes links to his CPR Speaks articles on the subject).

Moderator Arthur Pearlstein then asked whether there will be an effect on the market for labor and employment arbitration under the Biden administration.

Panelist Siegel replied that the NLRB Trump Board policy was to defer to arbitration as frequently and as early as possible. In 2019, the Board replaced the Babcock standard and returned to the less rigorous standards of Spielberg/Olin [cited and explained in Babcock] to defer to arbitration in cases alleging discharge and discipline in violation of NLRA Sections 8(a)(3) and (1).

Siegel noted that fewer cases were being decided by the Board when there was a parallel proceeding in arbitration. Considering the possibility of a new Board reverting to the Babcock standard which makes arbitration less likely, Siegel concluded that it followed that this could negatively affect the number of cases in the labor and employment arbitration market.

Finally, Mark Kantor mentioned that in its 2019 decision, New Prime Inc. v. Oliveira, “the Supreme Court made clear that the exclusion from enforcement of arbitration agreements under the Federal Arbitration Act for transportation workers did extend to an independent trucker, by application to independent contractors in the transportation field.”

He noted that “the Court was very careful to signal that the interpretation was only to apply to the Federal Arbitration Act and not to any other legislation. There was nothing in that decision signaling that the Court might wish to rethink its interpretation of the exclusion to go beyond transportation workers into other industries.”

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The author, a second-year student at New York’s Benjamin N. Cardozo School of Law, is a CPR 2021 intern.

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CPR Launches New Administered Employment Arbitration Rules and Updates Its Employment-Related Mass Claims Protocol

The International Institute for Conflict Prevention & Resolution (CPR) has launched its first set of Administered Employment Arbitration Rules and updated its Employment-Related Mass Claims Protocol. 

The just-released 2021 Administered Employment Arbitration Rules (Employment Rules) incorporate many innovations from CPR’s 2019 Administered Arbitration Rules, and reflect the collaboration of counsel from the plaintiff’s bar, in-house employment counsel, corporate defense attorneys, and neutrals who contributed to their creation. 

CPR recognizes that employment disputes and employment arbitration programs differ from commercial arbitration in important ways. Among other things, employment arbitration agreements, programs, and procedures must ensure that the interests of individual workers, who as a practical matter often do not negotiate their terms, are adequately protected.

The new CPR Employment Rules give significant attention to due process concerns (described in more detail below), which are vital for individuals subject to mandatory arbitration programs.  These rules are an especially welcome contribution to the field, given the increasing frequency with which employment-related disputes are being arbitrated. (Alexander J.S. Colvin, “The growing use of mandatory arbitration,” Economic Policy Institute (April 6, 2018) (noting that 53.9 percent of nonunion private-sector employers now have mandatory employment arbitration procedures, and that percentage climbs to 65.1 percent among companies with 1,000 or more employees).

The following are some of the distinguishing features of the newly launched CPR Employment Rules:

  • Rule 1.4 (Due Process Protections):  Demonstrating the fundamental importance that CPR places on fairness to all parties, including in particular employees and individuals who may be subject to mandatory arbitration programs, CPR incorporates its Due Process Protections directly in the Rules at their outset. The provision is detailed, providing employers better guidance on when and how CPR will apply the due process requirements.
  • Rules 3.12-3.13 (joinder and consolidation, respectively): CPR has created an innovative procedure that uses an Administrative Arbitrator to address issues of joinder and consolidation when they arise prior to selection of an arbitrator, identifies factors to be considered, and makes clear that neither joinder nor consolidation is permitted if prohibited by the applicable arbitration agreement.
  • Rules 5-6 (selection of arbitrator): CPR’s Employment Rules provide for arbitration by a single arbitrator selected by the parties from a list using striking and ranking as the default procedure (like other employment arbitration providers); however, CPR’s Employment Rules also offer parties a variety of other options for arbitrator selection should they wish to innovate in this area, including allowing parties to propose arbitrators to be included on the slates for nomination or to use CPR’s unique screened selection process for three-arbitrator tribunals.
  • Rule 12.2(c) (hearings): Given the experiences gained during the Covid-19 pandemic, CPR’s Employment Rules make clear that an arbitrator may order remote hearings and provide factors to be considered in making this determination.
  • Rule 14 (emergency measures by emergency arbitrator): Clarifying a matter than can be ambiguous under other providers’ rules, CPR’s Employment Rules provide that their emergency procedures will apply automatically unless parties expressly agree they do not; at the same time, the emergency procedures are not exclusive, and parties still have the choice of going to court for emergency relief.
  • Rules 17 and 18 (administrative and arbitrator fees): CPR’s Employment Rules, consistent with most state law and with the Due Process Protections, provide that employers are generally required to pay arbitration fees but that the arbitrator has authority in appropriate cases to shift fees to the same extent a court would be able to do so. In addition, to address a matter that has become more commonly litigated, CPR’s Employment Rules set out detailed guidance to address cases where a party has refused to pay required fees to provide clarity on preserving the rights of the non-defaulting party.
  • Rule 20 (confidentiality): CPR’s Employment Rules provide that CPR and the arbitrator must maintain confidentiality. But, consistent with developing case law, these rules do not impose confidentiality by rule upon the parties. The arbitrator has the same authority as a court to issue confidentiality orders to protect evidence/discovery.
  • CPR’s Employment Rules are specifically designed to avoid ambiguity and disputes over the interpretation of the rules.

The fee structure for the administration under the Employment Rules can be found HERE.

CPR also is updating the Employment-Related Mass Claims Protocol (ERMCP), which it first launched in November of 2019.  The Protocol provides an innovative mechanism for the more efficient and effective resolution of a mass of employment-related cases.  The ERMCP now incorporates CPR’s newly launched Employment Rules as the default rules that will govern arbitrations under the Protocol.

In addition, and in an effort to provide better clarity around the procedures under the Protocol, and with the guidance from a task force of leading counsel from the plaintiff’s bar, in-house employment counsel, corporate defense attorneys, and neutrals, the updated ERMCP also:

  • clarifies the documents that need to be filed to commence the arbitrations;
  • clarifies certain timelines for triggering events, including payment deadlines;
  • specifies the kinds of grounds for challenging an arbitrator’s independence or impartiality (such as provided in the Employment Rules);
  • defines basic terms to avoid ambiguity, such as “Commencement Date,” the “Employment Mass Claims Panel,” the “CPR Panel of Distinguished Neutrals,” and a “Final Written Reasoned Award;”
  • provides greater details for how the Mediation Process will work;
  • expands the role of the Administrative Arbitrator to assist the parties in expediting the proceedings and reaching a resolution;
  • reinforces the option of the parties to resolve their cases at any point in time even apart from the Mediation Process; and
  • clarifies the authority of the arbitrator to order a remote proceeding so long as taking measures to ensure the remote proceedings remain fair.

Please also see the FAQs accompanying this revised version.

To make administration of the Protocol more cost-effective, the fee structure for the Protocol has also been modified based on efficiencies that can be achieved.  CPR still requests that any party contemplating inclusion of the Protocol in its dispute resolution program discuss the Initiation Fee with CPR both to scope out the size of any matter and to ensure there is compliance with CPR’s Due Process Protections and other guidance.

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Conflict, Constructively: Damali Peterman on Managing Conflict

By Amy Foust

Commitment, communication, conflict resolution, and comradery: New York attorney Damali Peterman, founder and CEO of Breakthrough ADR, presented a Thursday, March 25, CPR-hosted discussion, “The 4 Cs to Managing Conflict in the Workplace Remotely.” 

Those “4 Cs,” she explained, establish or maintain comradery in a remote relationship. She discussed virtual coffee meetings, using the phone instead of Zoom, turning on cameras during Zoom calls to increase interactive communication, and introducing short icebreakers before getting to the substance of a meeting.  Damali modeled using “reactions” and the Zoom chat function to solicit audience involvement throughout her presentation.

Among other frameworks for understanding and preventing conflict, Damali reviewed the Thomas-Kilmann Conflict Mode Instrument’s communication styles and how they might appear in common workplace situations.  Understanding those styles, Damali said, can help in understanding behavior even if we do not know people well, as can happen in remote work relationships.  That understanding can also help us be aware of our own responses to conflict, avoiding defensiveness and adapting our response to the situation constructively.

Imagining conflict as an iceberg, Damali said that “only 10% of the iceberg is showing above the waterline.  We want to jump under that water line, and we want to see . . . more of the conflict, understand what happened and gather information.”

To gather information, she encouraged the use of the word “and.”  Rather than acknowledging other perspectives with “yes, but,” which tends to negate what came before, Damali encouraged the use of “yes, and,” which recognizes that there could be many valid perspectives.

In addition to Damali Peterman’s resources on the Breakthrough ADR website, a program of related interest will be “Yes, You Can!  Pathways to a Career in Conflict Prevention & Resolution,” a May 6 event presented by CPR’s Young Leaders in Alternative Dispute Resolution (Y-ADR) and the Metropolitan Black Bar Association’s Dispute Resolution Section.

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Author Amy Foust is an LLM candidate studying dispute resolution at the Straus Institute, Caruso School of Law at Malibu, Calif.’s Pepperdine University, and an intern with the CPR Institute through Spring 2021.

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Mediation Confidentiality: Misconceptions, Pitfalls and Best Practices

By Temitope Akande

CPR’s Mediation Committee presented Los Angeles mediator Jeff Kichaven on the limits of mediation confidentiality at a March 16 online program that provided attendees with cutting-edge and occasionally controversial practice guidance on confidentiality, and avoiding neutrals’ liability disclaimers, as well as ethics continuing legal education credits.

Kichaven began his presentation with a statement he attributed to the late U.S. Supreme Court Justice Antonin Scalia in 2003:

The principle of separation of powers is central to the American system of government. The framers of the American Constitution believe that that principle, as popularized by Montesquieu, was the single most important guarantee of freedom. No political truth, wrote James Madison in the Federalist Papers, is certainly of greater intrinsic value or is stamped with the authority of more enlightened patrons of liberty.

Kichaven continued, “For the separation of powers regime to work, we must have a robust and functioning judiciary, as well as executive and legislative branches to our government, and for that to happen it’s necessary for people to have confidence in the judiciary.”

That’s why we have the “basic rule of evidence everywhere–all relevant evidence is admissible,” Kichaven explained. If parties and advocates want courts to get things right, he said, the courts need to have the relevant evidence before them, and anytime court does not get a case right, it is eroding a key element of the law.

While evidence law recognizes certain privileges, which frustrate courts’ abilities to get relevant evidence, “those privileges serve important societal purposes,” he said, which is critical, for example, for the functioning of lawyers, doctors and clergy in their critical professions.

Kichaven explained that Wigmore’s attorney-client privilege—the prevailing standard in law and practice protecting communications—”construe[s] privileges narrowly, no more broadly than necessary to effectuate their purposes, because every time privileges are asserted, a court is deprived of relevant evidence, [and] it becomes less likely that a court will get a decision right.” So, a key element of the rule of law is eroded every time a court is unable to adjudicate a claim properly.

This led to the discussion of what Kichaven called “the mantra that confidentiality is necessary for effective mediation.” Kichaven emphasized the word “mantra” because he opined that there is no evidence to support the assertion the confidentiality is necessary for effective mediation.

He defined confidentiality for the purposes of the session in three ways–

  • Evidentiary confidentiality: “Can courts compel disclosure of what is said or done in mediation as part of discovery or trials?”;
  • Caucus confidentiality: “People say things to mediators in caucuses and mediators agree not to disclose those things to the opposing parties,” and
  • Societal confidentiality: “Are we allowed to talk to reporters, bartenders neighbors and various others about what people say or did in mediation?“

On caucus confidentiality, he said that it assumes people disclose secrets, and mediators keep them confidential. The two parts of the assumption are problematic in commercial cases, he said, because it is rare that parties volunteer weaknesses in their case of which the other side is not aware because “there is always a greater than zero percent chance that the mediator will leak” those secrets.

Kichaven said, “The best way to keep it a secret is not to tell the mediator in the first place.  . . . And also, let’s face it, mediators often leak. We can’t help it.” He discussed subconscious actions and words that result in mediator leaks.

Societal confidentiality is a problem in product liability and sexual harassment cases, among others, said Kichaven, because it is generally a subject to be covered by statutes. Still, legislatures haven’t imposed societal confidentiality as a condition of participating in settlement talks or mediation, he explained, but some mediators put it into their confidentiality agreements.

“In essence,” he said, “the mediators are conditioning their willingness to serve on people forfeiting rights that legislators wanted them to have, or at least allowed them to have. [T]hey are having people waive those rights, a condition of serving as mediator.”

Kichaven discussed at length evidentiary confidentiality, which was his key focus in the CPR seminar.  He stated that there is no evidence to prove that evidentiary confidentiality is necessary for effective mediation. In support of this assertion, he discussed the California Legislature’s request to the state’s Law Revision Commission to evaluate a possible exception to California’s mediation confidentiality law for legal malpractice that is alleged to have occurred at a mediation.

The exception—which is in the Uniform Mediation Act but which California has not adopted–would have allowed the introduction of mediation evidence from the session to back a legal malpractice claim. The mediation establishment, according to Kichaven, failed to produce any evidence to prove that evidentiary confidentiality actually is necessary to conduct effective mediation. If the evidence existed, he said, nobody was in a better position to deliver it.

He further stated that U.S. jurisdictions largely reject the need for evidentiary confidentiality in mediation, and compared the adoptions of the Uniform Mediation Act. The act is “kind of a failure,” he said, noting its adoption in only 11 states and the District of Columbia.

Neither has the act fostered “mediation tourism,” he said. If statutory confidentiality were necessary for effective mediation, there would be more mediation in states that have the statutory confidentiality, Kichaven maintained, adding, therefore, “this concern about confidentiality is just overblown.”

In In re MSTG Inc., 675 F.3d 1337 (Fed. Cir. 2012) (available at https://bit.ly/3tX8rP8), the appellate court was asked to adopt a settlement communication privilege as a matter of federal common law, which Kichaven said would far exceed the protections of Federal Rule of Evidence 408, Compromise Offers and Negotiations.  The circuit court, he reported, held that “while there is clearly an important public interest in favoring the compromise and settlement of disputes, disputes are routinely settled without the benefit of a settlement privilege. It is this thus clear that an across-the-board recognition of a broad settlement negotiation privilege is not necessary to achieve settlement.”

Kichaven repeated that parties do not conduct mediation “tourism” to take advantage of statutory confidentiality like litigators may do when the laws would be to their advantage. That is, litigators do not react to the statutory confidentiality, privilege, or rules in mediation like they might in other areas, like patents.

Kichaven discussed two cases, People v. PriceWaterhouseCoopers, 150 A.D.3d 578 (2017), and GE Company v. APR Energy (see discussion below). He noted that the first case is a complex financial matter, important to the mediation confidentiality issue, because the process and analysis has gotten much more complicated with many mediations conducted with interstate parties–with parties and advocates often living and practicing law in different states.

He focused on the PriceWaterhouseCoopers case in part because of its New York origin, noting that New York is important to commercial litigation and mediation, making it a likely site of problems.  And “New York law is kind of a mess, and it’s not a mess that favors mediation confidentiality,” he said.

In the case, the New York court applied the forum law—which does not include a statutory accountant-client privilege, in contrast to the law where the contract took place, Texas.

This led Kichaven to discuss of the 1934 and 1971 Restatement of Conflict of Laws. The 1934 restatement provides for the territoriality test–courts are to apply the law of the forum where discovery was sought in cases where there are conflicts regarding evidentiary privileges and confidentiality, regardless of where the communications took place.

But the American Law Institute’s second restatement in 1971 replaced the territoriality tests with the “significant relationship test,” where courts are supposed to apply the state privilege law with the most significant relationship to the communications at issue. Generally, said Kichaven, that’s thought to be the state where the communications took place.

Therefore, courts have a motivation to do justice in the case before them, and want to get relevant evidence to do their jobs, Kichaven explained.  That means, he said, they are inclined to pick the law of whatever state gives them the greatest ability to obtain evidence while conducting the mediation, which puts the mediation communications at risk.

The important point from General Electric Co. v. APR Energy PLC, 19-CV-3472 (VM) (KNF) (S.D.N.Y. Dec. 14, 2020) (available at https://bit.ly/2PdF9Nc), is territoriality. New York courts will not automatically apply the privilege or confidentiality law of the place where the mediation took place. That is, a written confidentiality agreement in a prior mediation may not protect a party even if the prior mediation took place in a state with stronger statutory protection for mediation confidentiality.

The result is that a New York court may compel production of materials from a prior mediation upon request in a New York matter, Kichaven said, potentially even using a general evidentiary relevance standard under FRE 26, rather than a heightened mediation “standard of need.” That could occur in New York, he said, even if the state the mediation occurred in had a higher standard of protection and even if there was a confidentiality agreement between the mediation parties.

Kichaven warned that when there is a breach of confidentiality, a mediator could be sued for ordinary negligence, negligent misrepresentation, or perhaps more severe claims on basis that the neutral induced or allowed clients to be more candid than they otherwise would have been.  So, since confidentiality may not protect mediators, it is problematic in terms of whether mediators should promise mediation confidentiality at all because they are not promises mediators have the power to keep, he said.

As an ethical issue, mediators and lawyers are not supposed to make guarantees to clients on the outcome of judicial proceedings. “But,” explained Kichaven, “when you make that airtight [mediation] confidentiality promise, is that not just precisely what you have done? . . . By so doing you’ve misled your clients as well and that’s a potential ethical issue, too.”

Advocates need to inform their party-clients on the potential persistent use of the territoriality test, said Kichaven, and decide on how candid they should be during the mediation. For these reasons, Kichaven disclosed that he does not use written mediation confidentiality agreements in order to avoid the appearance of making promises to mediation parties, or practicing law via the production of a contract that applies to the rights of both sides. “It’s up to the parties to have the kind of confidentiality agreements that suit them best,” said Kichaven.

Finally, Kichaven advised that the best practice is for mediators to ensure that they do not get sued based on a prospective waiver of liability.  He said to avoid the use of such clauses in confidentiality agreements—that is, the waivers are another reason not to provide a confidentiality agreement.

He noted that the typical clause says, “The mediator shall have no liability for any act or omission in connection with this mediation.”  Said Kichaven, “It’s a cowardly act,” something mediators would do to avoid the consequences of their conduct.  

He stated that the liability waiver is really saying that, as a mediator, “We are announcing to the world that we are lowering our ethical standards.  . . . We should be sending the message that we stand behind the quality of our work and that we want you to be compensated and treated fairly in the unlikely event something goes wrong.”

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CPR members can access the full video here after logging in.

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Akande, who received a Master of Laws in Alternative Dispute Resolution last May at the University of Southern California Gould School of Law in Los Angeles, is volunteering with the CPR Institute through Spring 2021.

YouTube Analysis: What Happens Next with the 3/22 Servotronics Cert Grant on Foreign Arbitration Evidence

John Pinney, counsel to Graydon in Cincinnati, joins Russ Bleemer, editor of Alternatives to the High Cost of Litigation, to set the stage on why the U.S. Supreme Court agreed Monday, March 22, to hear Servotronics Inc. v. Rolls-Royce PLC, et al., No. 20-794, and what may happen if the arbitration proceeds in advance of the expected late 2021 Court arguments.

This morning, CPR Speaks examined the cert grant and provided links covering some of the policy considerations that John discusses in this video.  See Amy Foust, The Next Arbitration Matter:  Supreme Court Agrees to Decide Extent of Foreign Tribunal Evidence Powers, CPR Speaks (March 22).

Disclosure: As discussed in the CPR YouTube video, the International Institute for Conflict Prevention and Resolution—CPR, which publishes this blog, submitted an amicus brief asking the Supreme Court to resolve the split in federal circuit court opinions on the topic without taking a position on the merits. See “CPR Files Amicus Brief Asking U.S. Supreme Court to Tackle Foreign Discovery for Arbitration,” CPR Speaks (Jan. 6, 2021) (available at http://bit.ly/2PJvzBO). (CPR has created a web page for the brief at http://bit.ly/3nklaYp).

Our guest John Pinney wrote the amicus brief on CPR’s behalf.   

[END]

The Next Arbitration Matter: Supreme Court Agrees to Decide Extent of Foreign Tribunal Evidence Powers

By Amy Foust

The U.S. Supreme Court today granted review in Servotronics Inc. v. Rolls-Royce PLC, et al., No. 20-794, and will be the next arbitration case on the Court’s docket.  It will likely be heard in the term beginning in October.

The case highlights law that had long appeared settled on whether foreign tribunals seeking discovery in the United States includes private arbitration panels.

In the past two years, cases on the statute in question–28 U.S.C. § 1782, “Assistance to foreign and international tribunals and to litigants before such tribunals”–have packed federal courts. See Joseph Famulari, “Section 1782 Circuit Split Update: 7th Circuit says Law Doesn’t Include Arbitration, as 9th Circuit Hears Arguments,” CPR Speaks (Oct. 22, 2020) (available at http://bit.ly/38kxyCV), an John B. Pinney, “Update: The Section 1782 Conflict Intensifies as the International Arbitration Issue Goes to the Supreme Court,” 38 Alternatives 125 (September 2020) (available at https://bit.ly/3tbgFCX).

Petitioner Servotronics presented the question formally as:

Whether the discretion granted to district courts in 28 U.S.C. § 1782(a) to render assistance in gathering evidence for use in “a foreign or international tribunal” encompasses private commercial arbitral tribunals, as the U.S. Courts of Appeals for the Fourth and Sixth Circuits have held, or excludes such tribunals without expressing an exclusionary intent, as the U.S. Courts of Appeals for the 2nd, 5th and, in the case below, the 7th Circuit, have held.

The question doesn’t reveal the unusual posture of the case, because it literally created its own circuit court split. There are two decisions:  The Seventh U.S. Circuit Court of Appeals decision on appeal that was granted today had prohibited Servotronics’ requested discovery for the foreign arbitration tribunal also had been decided in Servotronics’ favor against the same adversaries, Rolls Royce and Boeing, when the case was heard in the Fourth Circuit.

The International Institute for Conflict Prevention and Resolution—CPR, which publishes this blog–submitted an amicus brief asking the Supreme Court to resolve the split in opinions without taking a position on the merits. See “CPR Files Amicus Brief Asking U.S. Supreme Court to Tackle Foreign Discovery for Arbitration,” CPR Speaks (Jan. 6, 2021) (available at http://bit.ly/2PJvzBO) (CPR has created a web page for the brief at http://bit.ly/3nklaYp).  

The evolution of the circuit split is described in John B. Pinney, “Will the Supreme Court Take Up Allowing Discovery Under Section 1782 for Private International Arbitrations?” 38 Alternatives  103 (July/August 2020) (https://onlinelibrary.wiley.com/doi/abs/10.1002/alt.21848) (Pinney prepared on behalf of CPR the Supreme Court amicus brief in Servotronics).  

Justice Samuel A. Alito Jr. didn’t participate in the consideration of or the decision to accept the petition, according to this morning’s order list, indicating that the case could be decided by eight judges later this year.

In the case the nation’s top Court agree to hear today began in January 2016, during testing at a Boeing facility, when an engine manufactured and installed on an aircraft by Rolls Royce caught fire. Boeing sought reimbursement from Rolls Royce for damage to the aircraft.  Boeing and Rolls Royce settled the matter between them.

Rolls Royce then sought reimbursement from Servotronics, which manufactured a fuel valve for the engine.  When negotiations over the reimbursement failed, Rolls Royce demanded arbitration under the rules of the Chartered Institute of Arbitrators in the United Kingdom, as permitted by an agreement between Rolls Royce and Servotronics.

During the arbitration, Rolls Royce and Boeing declined an invitation to produce evidence that Servotronics insists is critical to its defense, including information about what Rolls Royce and Boeing did after observing certain test results.  Servotronics contended those test results presaged the fire and showed a missed opportunity to intervene before the fire.

Rolls Royce countered that the discovery requested by Servotronics was reviewed and denied by the arbitral panel, in part because the request was overly broad.  Servotronics applied for leave under 28 U.S.C. §1782 to subpoena records from Boeing’s Illinois headquarters and, in a separate application, to take the depositions of three South Carolina-based Boeing employees,  where the test flight went awry.

The South Carolina application was denied, but the denial was overturned by the Fourth Circuit. Servotronics Inc. v. Boeing Co., 954 F.3d 209, 216 (4th Cir. March 30, 2020) (available at https://bit.ly/3h7s0P8). The Fourth Circuit rejected the notion that §1782 is limited to public or state-sponsored tribunals. 

Further, the court reasoned, arbitration in the United Kingdom is government-sanctioned and regulated, at least by the U.K. Arbitration Act of 1996.  Therefore, a U.K. arbitrator is acting under the authority of the state and would meet Boeing’s proposed restrictions on the scope of §1782.

The appeals court dismissed Boeing and Rolls Royce’s predictions of expanded discovery and increased international arbitration costs if a tribunal is broadly defined in §1782, reasoning that courts have discretion to consider applications for documents or testimony in view of the Congressional purpose of extending aid to a foreign tribunal.

But the case also was being litigated in the Midwest. An Illinois application was initially granted ex parte but was quashed upon intervention by Rolls Royce and Boeing. The denial of discovery in Illinois was upheld by the Seventh Circuit—the case before the Court in Friday’s conference and accepted for argument today. Servotronics Inc. v. Rolls Royce PLC, 975 F.3d 689 (7th Cir. Sept. 22, 2020) (available at https://bit.ly/3ccK7RU).

The Seventh Circuit had followed the Second and Fifth Circuits in finding that a “foreign or international tribunal,” as used in 28 U.S.C. §1782, refers to a state-sponsored tribunal, and private arbitration is not state-sponsored. 

The Seventh Circuit opinion noted that a limited definition of “foreign or international tribunal” also avoids an apparent conflict with the Federal Arbitration Act, which permits a district court to order discovery only on request of the arbitrator.  The panel observed that including private international arbitral tribunals in the scope of §1782 would result in a prohibition on a party to a domestic arbitration seeking court assistance with discovery under the FAA, while permitting a party to an international arbitration to obtain the same assistance (under §1782).

The case therefore presented the circuit split in stark relief—with discovery granted in the Fourth Circuit, and denied in the Seventh, in the same matter between the same parties before the same foreign arbitral tribunal. 

Rolls Royce argued that certiorari should be denied to allow the Circuit Courts continue to consider the issue and because this case would likely be moot before the Supreme Court could complete its review, with the final arbitral hearing scheduled for May.

Today’s order provides further review and clarification by the Supreme Court in an area that had been considered settled law until the flurry of cases hit the circuit courts in recent years.  CPR Speaks will provide more analysis later today  on the background and the future of Servotronics.

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Author Amy Foust is an LLM candidate studying dispute resolution at the Straus Institute, Caruso School of Law at Malibu, Calif.’s Pepperdine University, and an intern with the CPR Institute through Spring 2021.

[END]

Part I: How Workplace ADR Will Evolve Under the Biden Administration

By Antranik Chekemian

Anna Hershenberg, Vice President of Programs and Public Policy & Corporate Counsel, welcomed an online audience of nearly 200 attendees for the CPR Institute’s webinar “What Labor and Employment ADR Will Look Like Under a Biden Administration?” The Feb. 24 webinar was presented jointly by CPR’s Employment Disputes Committee and its Government & ADR Task Force.

This is the first of two CPR Speaks installments with highlights from the discussion.

Hershenberg shared background information for attendees who were new to CPR, and reviewed CPR activities. [Check out www.cpradr.org for future public and members-only events, including the March 25 program on Managing Conflict in the Workplace Remotely. For information on access and joining CPR, please visit CPR’s Membership webpage here.]

Hershenberg then turned the program over to Aaron Warshaw, a shareholder in the New York office of Ogletree, Deakins, Nash, Smoak & Stewart, who is chair of CPR’s Employment Disputes Committee. Warshaw described the Employment Disputes Committee as “made up of in-house employment counsel, management-side attorneys, employee-side attorneys, and neutrals. Throughout its long history, the committee … [has provided] a platform for all of the stakeholders to come together and explore ways to resolve disputes in employment matters,”.

Last year, the committee presented a panel discussion about COVID-19-related employment claims. (Video available here.) There was also a panel discussion on mass individual arbitration claims during last year’s CPR Annual Meeting in Florida.

Warshaw also noted that the committee is currently working on soon-to-be-released administered employment arbitration rules, and a workplace disputes programs. “There is also an active committee currently revising CPR’s Employment-Related Mass Claims Protocol,” he said.  The release of these projects will be announced at www.cpradr.org and on social media.

Warshaw then introduced the panel moderator, Arthur Pearlstein, who is Director of Arbitration for the Federal Mediation & Conciliation Service, a Washington, D.C.-based independent agency whose mission is to preserve and promote labor-management peace and cooperation. He also directs FMCS’s Office of Shared Neutrals and has previously served as the agency’s general counsel.

Pearlstein opened the conversation stating that “Joe Biden and Kamala Harris ran a campaign that reflected a closer alignment with organized labor than I think we’ve seen in a very long time.”

Pearlstein pointed out the remarks made by President Biden a week ahead of the CPR program, where the president called himself a “labor guy,” and referred to labor people as “the folks that brung me to the dance.” Pearlstein, however, noted that Biden “did hasten to add, ‘There’s no reason why it’s inconsistent with business-growing either.’”

Pearlstein further said that even though it had been just a month since the inauguration at the time of the panel discussion, already dramatic steps had been taken.  He cited the firing of the National Labor Relations Board’s general counsel.

The president has also issued a number of executive orders and halted some regulations. “He definitely wants to be seen as a champion of worker rights,” said Pearlstein.

Pearlstein added that Biden backs “the most significant piece of labor legislation since perhaps Taft-Hartley Act in 1947, . . . the PRO Act, that would dramatically change the landscape in the labor relations world in a way that’s very favorable to unions.” See Mark Kantor, “House Passes ‘PRO’ Act, Which Includes Arbitration Restrictions,” CPR Speaks (March 10) (available at https://bit.ly/38u5w87).

Biden also supports the FAIR Act which, if passed, could end mandatory employment arbitration, said Pearlstein, adding that Covid-19 in the workplace and the rights of gig workers are also important administration considerations. See Mark Kantor, “House Reintroduces a Proposal to Restrict Arbitration at a ‘Justice Restored’ Hearing,” CPR Speaks (Feb. 12) (available at http://bit.ly/3rze7y1).

Pearlstein introduced the panelists.

  • Mark Gaston Pearce is a Visiting Professor and Executive Director of the Georgetown University Law Center Workers’ Rights Institute. Formerly a two-term board member and chairman of the National Labor Relations Board, Pearce previously taught at Cornell University’s School of Industrial and Labor Relations.
  • Kathryn Siegel is a shareholder in Littler Mendelsohn’s Chicago office, representing employers in matters of both employment law and labor relations before federal and state courts and federal agencies like the NLRB and the Equal Employment Opportunity Commission, as well as state agencies.

Mark Kantor started off the conversation by focusing on two general areas:

a) the prospects for legislative change in the Congress for arbitration of employment and labor issues; and

b) the prospects for regulatory measures by independent or executive agencies in the absence of new legislation.

Kantor pointed out that the Forced Arbitration Injustice Repeal (FAIR) Act was reintroduced in the House and the Senate. The House Committee on the Judiciary held a hearing on the matter on Feb. 11.

He noted that, in the previous Congress, the legislation passed the House of Representatives by a 225-186 vote–all Democrats plus two Republicans. When it reached the Senate, however, “it went nowhere,” he said. “Not surprising,” he said, under Republican control, “There were no hearings, there were no committee markups, no committee activity, and the FAIR Act certainly never reached the floor of the Senate.”

In the current Congress, however, he noted, “We can expect the FAIR Act to pass the House of Representatives again, and then go to the Senate. Matters in the Senate might be a little different than they were in the last Congress. We can . . . expect committee activity, hearings, possibly a markup, maybe getting the legislation to the floor of the Senate.”

He said that Senate floor challenges exist for the legislation, because substantive measures are subject to a filibuster. Overcoming a filibuster requires 60 votes.

He added that Republicans are united in their opposition to the FAIR Act as it currently stands. Moreover, trying to avoid the filibuster by altering Senate rules to eliminate the filibuster runs into the problem that there are at least two Democratic Senators who will oppose that: Sen. Joe Manchin, from West Virginia, and Sen. Kyrsten Sinema from Arizona. Therefore, he said, “overriding a filibuster seems highly unlikely.”

A way to avoid the filibuster is budget reconciliation, said Kantor, which is the route that was  taken for the Covid-19 stimulus legislation. He noted, however, that the FAIR Act’s anti-arbitration provisions are unlikely to fall within the scope of budget reconciliation. He further explained:

That means there are very few formal ways to avoid the filibuster. Some people have suggested that Vice President Harris might simply override a parliamentary ruling that the legislation is outside the scope of budget reconciliation. That is also not likely to go anywhere, because Senators Manchin and Sinema will not support that. Consequently, you don’t have 50 votes out of the Democrats and you’re certainly not going to get any Republican votes to reach the threshold to allow Vice President Harris to make that decision.

Kantor then noted that there could still be other prospects for passage:

  1. Appending the FAIR Act or other legislation to a “must pass” piece of legislation:  “That’s exactly how restrictions on arbitration for consumer finance and securities arbitration, and whistleblower protections, was passed as part of the Dodd-Frank Act [in 2010], which did get 60 votes in support, because it was ‘must pass’ legislation,” he said.

  2. Narrow legislation: Kantor noted that during the Feb. 11 hearing, “the ranking minority member of the House Judiciary Committee, Rep. [Ken Buck, a Republican] from Colorado, did signal an interest in supporting two narrow areas of restriction. One was for sexual harassment and racial discrimination, and the other was to override non-disclosure agreements for those two types of disputes.” Kantor added that Buck’s support sends a signal that Republicans on the Senate side also may be “open to focus targeted legislation, aiming at those two narrow areas.”

Kantor also pointed out that a provision in the National Defense Appropriations Act, which is renewed annually, “prohibits mandatory pre-dispute arbitration for sexual harassment and Title VII claims under procurement contracts in the national defense area and subcontracts for those procurements. That is not controversial in the national defense contracting community.”

But the bottom line here, he said, is that the filibuster will determine whether the FAIR Act or any of the other pieces of legislation like the PRO Act, which contain restrictions on pre-dispute arbitration for employment and labor, have a chance of Senate passage.

On regulatory measures, Kantor pointed out that the 2018 U.S. Supreme Court Epic Systems Corp. v. Lewis decision “set a very high barrier to utilizing preexisting general statutory authority for administrative agencies, independent, or executive agencies. It said that in order to prevail, the claim must show ‘clear and manifest’ intention to displace the Federal Arbitration Act.”

He continued: “Congress would be expected to have specifically addressed preexisting law, such as the Federal Arbitration Act. That meant ‘no’ for the [Fair Labor Standards Act], ‘no’ for the [National Labor Relations Act], and in subsequent court decisions, also ‘no’ for Title VII, [the Americans with Disabilities Act], [and the Age Discrimination in Employment] arguments.”

As a result, he added, one “can’t generally rely on pre-existing labor relations legislation to override mandatory pre-dispute arbitration agreements.” But Kantor provided two possible avenues agencies could explore in order to not run into an Epic Systems problem. He explained:

One is that you could avoid Epic Systems by focusing on the prohibition of class procedures, and prohibiting a prohibition of class procedures in any forum–that would be litigation and arbitration, and therefore would be nondiscriminatory. Indeed, the Epic Systems decision says, in essence, the Federal Arbitration Act sets up a nondiscrimination approach to whether or not other acts can be utilized to prevent arbitration. If it’s focused only on a fundamental attribute of arbitration, then there might be conflict preemption by the FAA. On the other hand, if it spreads more generally, there might not be.

The second avenue would be to look at nondisclosure agreements as Rep. Buck mentioned during the Feb. 11 hearing. Kantor added that the FAIR Act covers employment, civil rights, class action, antitrust legislation, and consumer disputes. If passed, it would also prohibit pre-dispute joint-action waivers of those disputes in any forum.

* * *

Mark Gaston Pearce’s highlights focused on what is to be expected from the National Labor Relations Board with the Biden Administration.

Pearce started off with a focus on the composition of the five-member NLRB. by pointing out that even though Biden is in office, the majority of the NLRB is still Republican appointees, and that this will not change until August 2021.

He then discussed some of the NLRB cases. “There is a lot to be undone by the Trump board since the Trump board did a whole lot of undoing itself,” he said. He explained: “Among those things that the Trump board did was weakening the election reforms that were made in 2015,” said Pearce.

He explained that the Trump board changed union election rules by providing employers an increased ability to challenge and litigate certain issues prior to the election, and increased the length of time between the filing of a petition and the election date. “They were mandating that there should be a certain minimum time period to pass before an election,” he said.

Moreover, the Trump Board “lengthened the time period for an employer to serve a voter list and lengthened the time period for which an election is to be held if there was going to be a challenge to the [NLRB] Regional Director’s decision,” he said. [Among other things, Regional Directors are empowered to administer union elections.  See the NLRB’s Organization and Functions, Sec. 203.1 (available at https://bit.ly/3ls48Ij.]

Pearce explained, “All of those provisions and a few more were struck by a [federal] district court judge once [they] went into effect. The basis for . . . striking . . . those provisions was that the board had determined that these actions were strictly procedural, and therefore under the . . . Administrative Procedure Act, they were not obliged to go through the full notice and comment requirements.” The district court decision, however, has been appealed and it is currently pending before the D.C. Circuit Court of Appeals, he said.

Pearce added that it is unlikely a decision will be issued before a new majority is in place. He noted that “it’s very likely that a new majority will withdraw that appeal and those provisions of the new rule will never see the light of the day.”

Pearce said MV Transportation standards–from a 2019 NLRB decision on whether an employer’s unilateral action is permitted by a collective-bargaining agreement—will affect  arbitrators. In the case, he explained, the NLRB abandoned a standard requiring the employer to bargain over any material changes to a mandatory subject of bargaining unless the union gave a “clear and unmistakable waiver” of its right to bargain on the changes. The new standard is based on the “contract coverage.”

The “clear and unmistakable waiver” standard, Pearce explained, generally hindered an employer’s ability to make changes, so instead the board adopted the broader contract coverage standard for determining whether unionized employers’ unilateral change in terms and conditions of employment violated the National Labor Relations Act.

Pearce predicted that “MV Transportation will be revisited because the outgrowth . . . has been that unions, fearing that their position would be waived, are negotiating contracts with so many provisos or are likely to negotiate contracts with so many provisos in it that contract negotiations have become fairly untenable.”

He noted, however, that “with respect to arbitrators, there was always going to be an issue of whether or not, in fact, there is truly a contract coverage for the change that is being proposed,  and I don’t think parties are going to want to constantly go to arbitration over every little thing that they plan on doing.”

Pearce then discussed recent developments in the area of higher education. He noted that there was a proposed rule that graduate students not be considered as employees under the National Labor Relations Act. He added, however, that it was unlikely for that rule to be adopted as the majority will likely object to such status. He said he predicts that there is going to be an “increase in petitions filed for graduate student bargaining units in the universities.”

“On the other hand,” Pearce explained, “[Last year’s NLRB decision] Bethany College, which reversed [a 2013 board decision,] Pacific Lutheran, . . . has resulted in a policy that has emanated from the courts that religious universities do not have to show much to consider themselves to have a religious bent and direction and therefore exclude faculty from being able to unionize.”

He directed attendees to the recent NLRB General Motors decision. “General Motors changed the standards with respect to offensive speech . . . during the course of protected concerted activity,” he said. Pearce added that cases involving sexist and racist remarks set on the picket line is an area that should not have received protections under the NLRA, though he said he backed the board’s decision in the case.

* * *

In a soon-to-be-posted Part II on the Feb. 24 CPR Employment Disputes Committee event, CPR Speaks will focus on the remarks of panelist Kathryn Siegel, and include a discussion among Moderator Pearlstein and Panelists Kantor, Pearce, and Siegel.

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The author, a second-year student at New York’s Benjamin N. Cardozo School of Law, is a CPR 2021 intern.

[END]

Video Simulation Highlights the Need for a New Deal Point: The Prevention Neutral

By Amy Foust

A March 4 New York Law School Alternative Dispute Resolution Program presentation focused on the work of CPR’s Dispute Prevention Committee, centering on recognizing the inevitability of disagreements in complex business relationships, and the value of working to prevent problems from festering into conflict and formal disputes.

The program, “No Need to Resolve if You Can Prevent,” opened with moderator Noah Hanft, of New York consulting firm AcumenADR, noting that mediation was rare just a few decades ago, but is now common or even required in many jurisdictions.  He expressed confidence that dispute prevention, although unusual today, will be a part of ADR’s future.

Hanft, who was CPR’s president and CEO from 2014-2019, co-chairs the CPR Dispute Prevention Committee with Gregory S. Gallopoulos of General Dynamics Corp., in Falls Church, Va. The committee has worked with CPR to develop a dispute prevention panel of professionals to assist companies in developing techniques and processes to head off conflicts, and Model Dispute Prevention and Resolution Provisions. 

The model provisions assist with the appointment of a standing neutral for significant transactions, such as joint ventures where the parties envision a long-term relationship; a standby neutral, who is ready to step in but is not necessarily involved in regular meetings; or an agreement, without the appointment of a neutral, to work to recognize and resolve friction before it evolves into conflict.

CPR also offers a new Dispute Prevention Pledge for Business Relationships (it can be viewed and signed here) to recognize the importance of addressing conflict. The Pledge allows for contracting parties to incorporate dispute prevention mechanisms into business arrangements, such as the prompt identification of escalating conflicts or the appointment of a third-party neutral who will be engaged before disputes emerge.

Noting that the failure rate for joint ventures might be as high as 60%, the panel used portions of  a video from a January dispute prevention simulation at the CPR Annual Meeting to discuss how dispute prevention might work in a complex business scenario, with several of the #CPRAM21 presenters returning for analysis at the NYLS program. 

The video follows a hypothetical joint venture of two auto companies seeking to build a network of electric car charging stations. The scenario envisions perfunctory quarterly meetings, with increasing departures from projected results.  In one version of the scenario, there is no early intervention.  The failures lead to finger pointing and blaming.  Mediation fails, and the case goes to arbitration.

In a second scenario, a neutral attends meetings, and calls attention to the pattern of falling revenues before the parties have expressly addressed them.  Recognizing this as a likely source of future conflict, the neutral facilitates a conversation about the significance and causes of the departure from plan—a “constructive framework” for review. The parties work on a joint plan to revise the course of the deal or terminate the joint venture before a dispute emerges. 

The video segments also addressed overcoming objections to adding a dispute prevention clause to an agreement, distinguishing dispute prevention from a routine dispute resolution clause.  One mock negotiator dismissively described the appointment of a standing neutral as “like marriage counseling.” 

But panelist Deborah Hylton, a neutral who heads her own Durham, N.C., firm and who also played the role of the standing neutral in the CPR video, described the neutral’s role as more “guiding and facilitative,” akin to “an honest broker.”  She said the neutral can call out “the 500-pound. gorilla” neither side felt that it could address “for fear of signaling a weakness.” She described the value of the neutral’s ability to raise difficult issues.

Panelist Kimberly Maney, assistant general counsel at pharmaceutical manufacturer GlaxoSmithKline, based in Durham, N.C., spoke to the familiarity of the hypothetical scenario.  These relationships start in a great place, she said, but then “something goes not quite right,” and the relationship “moves to a scorched-earth posture.” 

Her business partners, Maney offered, would be happy to have a better option for managing conflict than burning the relationship to the ground.  Dispute prevention is helpful in allowing the parties to have a disagreement but still maintain a relationship, she noted.

Panelist Steven Bierman, a New York-based partner in Sidley Austin, noted that outside counsel and litigators are ultimately problem-solvers.  One way to help clients, he said, is to litigate or arbitrate a case, but another is to help clients anticipate problems and avoid litigation.  There will always be disputes to be litigated, Bierman said–if not this one, the next one.

In responding to audience questions, the panel encouraged counsel to engage the business executives involved in a large transaction in crafting a dispute resolution clause appropriate to the relationship the parties seek to establish. 

This is too important, Moderator Noah Hanft said, to be left to the lawyers.  Using ADR provisions as boilerplate copied from one agreement to the next is likely inadequate.  ADR clauses typically address how to resolve disputes, not how to manage the relationship to prevent disputes.

Furthermore, because the dispute prevention and resolution clauses govern the relationship, what worked in a prior relationship might not be in the best interests of a new relationship.  The best time to address these issues is at the outset, when everyone is on good terms. 

The program, hosted by NYLS ADR Skills Program Director F. Peter Phillips, is available at the program’s link above.  The CPR Institute has a web page devoted to the program, too, and it includes the video, here. Panelist Deborah Hylton also posted an article that expands on the Annual Meeting and NYLS programs that can be found here.

* * *

Author Amy Foust is an LLM candidate studying dispute resolution at the Straus Institute, Caruso School of Law at Malibu, Calif.’s Pepperdine University, and an intern with the CPR Institute through Spring 2021.

[END]

House Passes ‘PRO’ Act, Which Includes Arbitration Restrictions

By Mark Kantor

Yesterday, the proposed Protecting the Right to Organize Act (PRO Act) passed the U.S. House of Representatives by a 225-206 vote, with five Republicans voting Yay and one Democrat voting Nay.  The bill was sent to the U.S. Senate for consideration. 

While much arbitration-related attention in the new Congress has focused on the arbitration-only FAIR Act (for details and links, see Mark Kantor, “House Reintroduces a Proposal to Restrict Arbitration at a ‘Justice Restored’ Hearing,” CPR Speaks (Feb. 12) (available at http://bit.ly/3rze7y1)), the PRO Act contains significant provisions that, if finally enacted, would limit employment arbitration.

Most important, the PRO Act would make it an unfair labor practice for an employer to prevent employees requiring arbitration agreements that obligate an employee “not to pursue, bring, join, litigate, or support any kind of joint, class, or collective claim arising from or relating to the employment of such employee in any forum that, but for such agreement, is of competent jurisdiction.” 

Note that the coverage of the proposed PRO Act encompasses both employment contracts of adhesion and individually negotiated employment contracts, as well as covering individual independent contractors.  See Section 101(b) of the legislation at the act’s link above.

Section 104 of the PRO Act would override Epic Systems v. Lewis,138 S. Ct. 1612 (May 21)(available at https://bit.ly/2rWzAE8), with respect to employment arbitration and class proceedings. 

According to the accompanying section-by-section analysis released by the House, “ . . .  on May 21, 2018, the Supreme Court held in Epic Systems Corp. v. Lewis that … employers may force workers into signing arbitration agreements that waive the right to pursue work-related litigation jointly, collectively or in a class action. This section overturns that decision by explicitly stating that employers may not require employees to waive their right to collective and class action litigation, without regard to union status.”  (The analysis is available at https://bit.ly/2OGrKNj).

The ultimate Senate fate of the PRO Act is linked to the fate of the filibuster.  As Politico states:

But the Protecting the Right to Organize Act, which advanced mostly along party lines, is unlikely to win the 60 votes needed for passage in the narrowly controlled Senate. And already, some union leaders — who hold outsize sway in the Biden administration — are amping up pressure on Democrats to eliminate the filibuster so they can see one of their top priorities enacted.

Eleanor Mueller and Sarah Ferris, “House passes labor overhaul, pitting unions against the filibuster,” Politico (March 9) (available at http://politi.co/3vbgFEu). For the latest on the limited prospects for overturning the filibuster in the Senate, see Burgess Everett, “Anti-filibuster liberals face a Senate math problem,” Politico (March 9) (available at http://politi.co/2ObVou0). 

The filibuster affects large swaths of proposed legislation coming out of the House of Representatives and the Biden Administration agenda. We can anticipate daily media attention to every word any member of Congress or the administration speaks about the topic for some time to come.

The operative PRO Act text in Sec. 104 overriding Epic Systems reads as follows:

(e) Notwithstanding chapter 1 of title 9, United States Code (commonly known as the ‘Federal Arbitration Act’), or any other provision of law, it shall be an unfair labor practice under subsection (a)(1) for any employer—

“(1) to enter into or attempt to enforce any agreement, express or implied, whereby prior to a dispute to which the agreement applies, an employee undertakes or promises not to pursue, bring, join, litigate, or support any kind of joint, class, or collective claim arising from or relating to the employment of such employee in any forum that, but for such agreement, is of competent jurisdiction;

“(2) to coerce an employee into undertaking or promising not to pursue, bring, join, litigate, or support any kind of joint, class, or collective claim arising from or relating to the employment of such employee; or

“(3) to retaliate or threaten to retaliate against an employee for refusing to undertake or promise not to pursue, bring, join, litigate, or support any kind of joint, class, or collective claim arising from or relating to the employment of such employee: Provided, That any agreement that violates this subsection or results from a violation of this subsection shall be to such extent unenforceable and void: Provided further, That this subsection shall not apply to any agreement embodied in or expressly permitted by a contract between an employer and a labor organization.”;

Also, according to the proposal’s section-by-section analysis, PRO Act Section 109(c) would create a private right of action in U.S. federal court if the NLRB fails to pursue a retaliation claim.

(c) Private right to civil action.  If the NLRB does not seek an injunction to protect an employee within 60 days of filing a charge for retaliation against the employee’s right to join a union or engage in protected activity, that employee may bring a  civil  action  in  federal  district  court. The  district  court  may  award  relief  available  to employees who file a charge before the NLRB.

Yesterday’s hearings have gone viral via fiery words backing the act’s passage by Tim Ryan, D., Ohio, who chided Republicans for failing to support workers.  “Heaven forbid we pass something that’s going to help the damn workers in the United States of America!” shouted Ryan in the House chambers, adding, “Heaven forbid we tilt the balance that has been going in the wrong direction for 50 years!”

Republican opponents immediately fired back, saying that the bill would hurt workers by hurting business and the economy. For details, see Katie Shepherd, “Tim Ryan berates GOP over labor bill: ‘Stop talking about Dr. Seuss and start working with us,’” Washington Post (March 10) (available at http://wapo.st/3bz2YaF).

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Mark Kantor is a member of CPR-DR’s Panels of Distinguished Neutrals. Until he retired from Milbank, Tweed, Hadley & McCloy, he was a partner in the firm’s Corporate and Project Finance Groups. He currently serves as an arbitrator and mediator. He teaches as an Adjunct Professor at the Georgetown University Law Center (Recipient, Fahy Award for Outstanding Adjunct Professor). He also is Editor-in-Chief of the online journal Transnational Dispute Management. He is a frequent contributor to CPR Speaks, and this post originally was circulated to a private list serv and adapted with the author’s permission. Alternatives editor Russ Bleemer contributed to the research.

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Supreme Court Denies Review on the Interplay Between the U.S. Bankruptcy Code and the Federal Arbitration Act

By Amy Foust

The Supreme Court today denied certiorari in GE Capital Retail Bank v. Belton, No. 20-481, an arbitration case in a bankruptcy matter.  The question presented by petitioner GE Capital, and rejected in this morning’s order list by the Court, was “whether provisions of the Bankruptcy Code providing for a statutorily enforceable discharge of a debtor’s debts impliedly repeal the Federal Arbitration Act, 9 U.S.C. § 1 et seq.”

The U.S. Bankruptcy Code section in question, 11 U.S.C. § 524(a)(2), provides in part:

A discharge in a case under this title— …

(2) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived[.]

The case, on cert petition from the Second U.S. Circuit Court of Appeals in New York, suggests a tension between this section of the bankruptcy code and the Federal Arbitration Act, which provides that written agreements to arbitrate are “valid, irrevocable, and enforceable” (9 U.S.C. §2), and that if there is no issue with the making of the agreement, a court “shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement.” 9 U.S.C. §4. 

The underlying dispute was a putative class action related to GE Capital’s efforts to collect debts discharged in bankruptcy.  The plaintiffs–the discharged debtors–brought contempt proceedings under § 524 arguing a violation of the injunction against continued recovery.  GE Capital moved to have the dispute referred to arbitration. 

The case of Respondent Belton and two others similarly situated were addressed in a consolidated decision by the federal bankruptcy court in New York’s Southern District, finding that referring these cases to arbitration would defeat the purpose of seeking bankruptcy protections.  The U.S. District Court for the Southern District reversed the bankruptcy court and sent Belton’s case to arbitration. 

But around the same time, the Second Circuit decided Anderson v. Credit One Bank, N.A., 884 F.3d 382 (2d Cir. 2018), a case involving similar facts to GE Capital. In Anderson, an appeals panel found an inherent conflict between § 524 and the FAA because the discharge injunction is critical to the bankruptcy code’s purpose; the contempt claim requires the bankruptcy court’s continuing supervision, and denying the court the power to enforce its own injunctions would undermine bankruptcy code enforcement. 

In response to a request for reconsideration in view of Anderson, the U.S. District Court reversed itself and denied the motion to compel arbitration.  GE Capital appealed to the Second Circuit, which affirmed the district court. 

GE Capital then appealed to the Supreme Court, framing the issue as an implied repeal of the FAA, citing the Court’s support from Epic Systems v. Lewis, 138 S. Ct. 1612, 1627 (2018), where the Court rejected a request to have the National Labor Relations Act override the Federal Arbitration Act. 

In a response to GE Capital’s request asking the nation’s top court to decline to hear the case, Respondent Belton had argued that the Second Circuit was correct in its analysis of this narrow issue, which is not the subject of any circuit split and did not merit the Court’s attention.

So the Second Circuit decision stands, allowing the respondents to proceed with contempt sanctions against major banks for continuing attempts to recover debts that had been subject of a bankruptcy discharge.

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The author is an LLM candidate studying dispute resolution at the Straus Institute, Caruso School of Law at Malibu, Calif.’s Pepperdine University, and an intern with the CPR Institute through Spring 2021.

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