Highlights from the House Judiciary Hearings Targeting Arbitration’s Role in Prosecuting Sexual Harassment

By Tamia Sutherland

The House Committee on the Judiciary held a Nov. 16 hearing on arbitration’s effects on victims of sexual violence and harassment. Chairman Jerrold Nadler,  D., N.Y., presided over the hearing, “Silenced: How Forced Arbitration Keeps Victims of Sexual Violence and Sexual Harassment in the Shadows.”

A second hearing followed the next day, marking up a bill introduced to restrict the use of arbitration in sexual harassment employment cases, and sending it to the full House, where it awaits action.

In his opening statement at the first hearing, Nadler said that “arbitration was originally developed as an alternative to the court system, for parties of relatively equal bargaining power to enter into voluntarily.”

But, he continued, “forced arbitration” clauses, seen in “take it or leave it contracts,” have grown in popularity between large corporations and individuals. Nadler asserted that forced arbitration is most problematic in the workplace. He provided data projecting that by 2024, 80% of private-sector employees will be required to sign an arbitration clause when accepting employment. Moreover, he stated that employers prevailed over employees in 98.1% of arbitrations.

Notwithstanding the statistical information, Nadler explained that the purpose of the hearing was to examine the “true human toll of forced arbitration, [based on] stories that cannot be distilled down to a number or a statistic.” He set out the theme of the hearing by declaring arbitration a system that is “fundamentally unjust,” but noting that the decisions in the matters involving the witnesses would not be reversed. He added that the witnesses’ appearances were to provide a voice for other victims of sexual harassment.

Ranking minority committee member Jim Jordan, R., Ohio, also provided an opening statement in which he explained that the committee must ensure that “pathways that Americans have to resolve their disputes function properly and are fair to everyone.” He added, “Arbitration should be as fair as court.”

He noted the declining number of civil cases that concluded in a trial. Jordan said that if the arbitration system is not being used properly, there is an obligation to fix it to benefit the parties to the dispute.

Many of the witnesses who provided hearing testimony are survivors of sexual harassment and/or sexual assault who reported that they were forced into arbitration agreements based on their employment. Chairman Nadler explained that the witnesses faced off in arbitration with their employers, who had the opportunity to select “the judge and the jury, truncate the discovery process, choose the law applied, and prevent all appeals.” The individuals who provided testimony, Nadler reported, were only allowed to do so because a congressional subpoena has compelled their testimony. Here is the witness list:

  • Eliza Dushku, actor/producer and philanthropist;
  • Tatiana Spottiswoode, first-year Columbia University Law School student and former business analytics associate at Afiniti Ltd., a Hamilton, Bermuda-based software developer;
  • Anna St. John, president and general counsel at Washington, D.C., public interest law firm Hamilton Lincoln Law Institute;
  • Andowah A. Newton, vice president for legal affairs and head of litigation for LVMH Moët Hennessy Louis Vuitton Inc.;
  • Sarah Parshall Perry, Legal Fellow, Edwin Meese III Center for Legal and Judicial Studies at the Heritage Foundation, a Washington, D.C. membership think tank focusing on conservative issues;
  • Lora Henry, a sales associate for Wacom Mitsibushi in Canton, Ohio, and
  • Myriam Gilles, the Paul R. Verkuil Chair in Public Law at the Yeshiva University’s Benjamin N. Cardozo School of Law in New York.

Eliza Dushku began the witness testimony, noting that she has worked in the entertainment industry on high-profile films and television for nearly 30 years.  She also identifies as a victim and survivor of sexual harassment in the workplace—she was fired and says she was silenced when she attempted to speak out.

She told the story of being aggressively pursued by CBS to co-lead in a 2017 show, “Bull,” in which she said her character was written with her in mind, and which required a six-year commitment to playing a strong, confident lawyer. But within the first week of her new job, she reported that she became the brunt of crude sexualized, lewd verbal assaults and suffered near-constant sexual harassment from her co-star, Michael Weatherly, who also was the show’s co-producer.

Dushku says she wasn’t physically harmed, but the effects of verbal abuse have been long lasting. Examples of some of the comments endured included being called “legs” and being told she would be taken to a “rape van” where  “long phallic things” would be used, or she would be “take[n] over his knee and spank[ed] like a little girl.” Additionally, she reported Weatherly told her that his sperm were “powerful swimmers,” and he shouted out loud on set that he and his buddy wanted to have a “threesome” with her.

The comments were not scripted lines. They were made in front of the cast and crew members, and sometimes while the cameras were still rolling. She stated that her co-star’s comments emboldened other male crew members.  One said to her, “I’m with Bull, I want to have a threesome with you, too, Eliza,” between scenes.

Dushku reported that she was horrified and became physically nauseous but, she said, her drive to succeed was strong, and she loved the role, so she tried to maintain her professionalism. And as a result, she said, she received positive reviews from the showrunner and other CBS employees and officials.

After speaking with her manager about the work conditions, Dushku said that she asked her co-star to be her ally and “tone down some of the sexualized comments.” His response was that “no one is more respectful of women than me.”

But then he texted the head of CBS Studios that Dushku was “humor deficit,” who she reported replied that Dushku made the show better. Nevertheless, Dushku was fired the next day and told she was only in three more episodes despite the six-year deal.

Despite her longevity in the entertainment industry, Dushku said she never understood the mandatory arbitration clauses in her contracts. In this case, the harassment of Dushku was caught on camera, in tapes CBS provided in a poorly constructed attempt to defend itself. Still, Dushku told the House Judiciary Committee that no one will see the tapes due to her signing a binding arbitration clause.

Dushku concluded her testimony by asserting that there will never be real justice for her and for countless other victims of sexual harassment who unknowingly signed binding arbitration clauses.

* * *

Tatiana Spottiswoode explained that she first met Zia Chishti, the founder of Invisalign and CEO of Afiniti, when she was around 12-13 years old, as a business associate and friend of her father’s. When Spottiswoode was a college senior in 2014, Chishti, then 43, deceived Spottiswoode by insisting that she attend a ski trip to meet a nephew that she later discovered didn’t exist. Spottiswoode believes the trip was an attempt to groom her and introduce her to “an extravagant lifestyle.”

When Chishti explained that he had feelings for her, she rejected him but agreed to date him nine months later. After 10 weeks of dating, Spottiswoode ended the relationship. ‘

Months later, Spottiswoode was offered a job with an annual $60,000 salary, and she was assured Chishti did not expect a sexual relationship. In April 2016, Spottiswoode signed an employment contract that included an arbitration agreement. And over the next 18 months, Spottiswoode was pressured for sex and punished or humiliated when she did not comply.  Chishti, she said, also retaliated by ignoring her for months after her rejection.

Chishti fixated on another young female employee on a Dubai business trip, according to Spottiswoode. After the employee was violated by Chishti after a night of drinking, the other young employee was flown home and paid a secret settlement, according to Spottiswoode’s testimony. Afiniti did not take any steps to prevent other women from this behavior, she reported, noting that in all interactions with Chishti she made clear that she did not want to have a sexual relationship with Chishti. In a January 2017 email, Spottiswoode wrote to Chisti: “three times you have behaved inappropriately and with my explicit non-consent.”

Chishti only became more hostile. He called Spottiswoode petulant and told her to fix her behavior in writing. After expressing concern to Chishti, Spottiswoode received pornographic emails describing Chishti’s rape fantasies. On a business trip to Brazil, where Spottiswoode had business accounts, Chishti forced sex with her, and beat her. Spottiswoode’s was covered with scratches, cuts, and contusions;  gruesome images, including choke marks, were submitted in the hearing (and are available at the committee hearing link below).

According to Spottiswoode’s testimony, Chishti then initiated arbitration against Spottiswoode. He filed suit against her father, who had quit his employment with the company when she returned from Brazil the day before her deposition was scheduled.

In May 2019, an arbitrator ruled that Spottiswoode was sexually harassed. Chishti’s Big Law representation, she told the House Judiciary Committee hearing, have tried to get Spottiswoode to vacate the arbitration award by offering her money and to drop the suit against her father, and pay him $1 million. Spottiswoode’s father’s arbitration was continuing as of the House Judiciary Committee hearing, she said. Spottiswoode  she said she is terrified about the ramifications of her testimony because forced arbitration gave Chishti the power for continuing a “campaign of retaliation.”

Zia Christie Chishti stepped down from his role as Afiniti CEO three days after the hearing, but denied all of the allegations. Rimal Farrukh, “She Wanted to Accuse a Celebrated Techie of Sexual Assault But Couldn’t. Until Now.” Vice.com (Nov. 29, 2021) (available at https://bit.ly/3sBblvu).

* * *

Committee witness Anna St. John of the Hamilton Lincoln Law Institute argued that removing arbitration is not in the best interests of those subjected to sexual harassment and assault. St. John explained that studies show that arbitration provides a faster and less expensive way to resolve claims against employers and to obtain greater relief because (1) arbitration is more flexible, (2) involves less burdensome discovery and traditional rules, and (3) organizations support arbitration proceedings to increase accessibility and fairness for individual claimants, and which can lower the costs of claims.

St. John argued that secondary benefits include corporations having more funds for employee benefits or lowering costs to consumers. Furthermore, St. John stated that the U.S. Supreme Court and Congress have expressly recognized the benefits of arbitration.

St. John said that she believes that taking away arbitration for victims is a “top-down, heavy-handed approach that denies them the advantages of arbitration as a means of adjudicating their claims.” Moreover, she believes that overburdened courts are slow-moving, which in turn benefits attorneys, not victims. And class actions do not benefit sexual assault victims because their experiences are often individualized, according to St. John.

* * *

Other testimony included the Heritage Foundation’s Sarah Parshall Perry, who testified strongly in support of arbitration as support for helping congested court dockets.  She said that “the basic premise of all limiting legislation that arbitration is somehow unfair to or bad for employees and consumers is false. The evidence shows precisely the opposite.” She concluded noting that the elimination of the use of arbitration ultimately could hurt victims of sexual harassment and violence.

During the questioning that followed testimony, Perry repeatedly said that more scrutiny should be made of confidentiality provisions and nondisclosure agreements, the use of which she said could be “a particularly pernicious setup” when teamed with an arbitration agreement. But she warned later during questioning that reforms on confidentiality and NDAs can’t become “a piecemeal slice-and-dice of the [Federal Arbitration Act].”

Prof. Myriam Gilles discussed H.R. 4445, the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021,” which was introduced and debated the day after the hearing. The bill would bar predispute arbitration agreements or predispute joint-action waiver in sexual assault or harassment disputes. Gilles focused on the secrecy aspect of arbitration in her support of the bill. But during questioning late in the hearing, Gilles made clear that the target is arbitration and court-waiver provisions as a condition of employment, noting, “Post-dispute arbitration is fine.”

* * *

The House Judiciary Committee marked up the bill the next day, Nov. 17. The bill prohibits the validity or enforcement of any pre-dispute arbitration agreement or a pre-dispute joint-action waiver with respect to a case “which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.” 

The terms “sexual assault dispute, “sexual harassment dispute,” “sexual assault dispute,” “pre-dispute arbitration agreement” and “pre-dispute joint-action waiver” are defined in detail in the bill. The proposed legislation, however, says nothing about NDAs, but it excepts application to collective bargaining agreements, which often depend on arbitration.

The bill was reported out to the full House at the markup hearing, 27–14, with four Republicans joining the majority Democrats in passing the proposal.

* * *

The Nov. 16 House Judiciary hearing, “Silenced: How Forced Arbitration Keeps Victims of Sexual Violence and Sexual Harassment in the Shadows,” can be viewed in its entirety at https://bit.ly/3wTDLkf. The link includes the biographies, written testimony, and evidence submissions of each of the hearing witnesses. The Nov. 17 House Judiciary markup, with role-call votes on the bill and proposed amendments, as well as more supporting submissions, is available at https://bit.ly/3FFNw9p.

* * *

The author, a second-year law student at the Howard University School of Law, in Washington, D.C., is a CPR 2021-22 intern.

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US Supreme Court to Review Whether Private Attorney General Action Can Be Waived by an Arbitration Agreement

By Mark Kantor

Continuing its focus on arbitration, the U.S. Supreme Court yesterday granted certiorari in Viking River Cruises v. Moriana, No. 20-1573, where the question presented is whether the Federal Arbitration Act requires enforcement of an arbitration agreement that waives a signatory’s ability to bring a labor law claim on behalf of California labor law agencies in court pursuant to California’s Private Attorneys General Act (PAGA).

The official issue presented:

Whether the Federal Arbitration Act requires enforcement of a bilateral arbitration agreement providing that an employee cannot raise representative claims, including under the California Private Attorneys General Act.

PAGA enables an individual employee to seek a court judgment for breach of California labor laws as a “private attorney general” on behalf of the state of California. 

An employee bringing a PAGA action does so as the “proxy” or “agent” of California’s labor law enforcement agencies, who are the real parties in interest.  A successful employee-plaintiff may obtain civil penalties under PAGA for violations committed against similarly placed employees, Cal. Lab. Code § 2699(g)(1), just as the state could if it brought the enforcement action directly.   Civil penalties recovered in a PAGA representative action must be allocated 75% to the state enforcement agency and 25% to the aggrieved employee. Cal. Lab. Code § 2699(i).

California state courts, and federal courts applying the California law, have held that a PAGA representative claim in court cannot be overcome by an arbitration agreement.  Employers consider that jurisprudence to be contrary to U.S. Supreme Court precedent.

The Supreme Court will now take up that issue for review.

The Court’s docket page for Viking River Cruises with filings is linked above. The Scotusblog page containing the lower court opinion and amicus briefs can be found here.

* * *

It has been a busy week for arbitration at the Supreme Court, and with recent moves, the Court has provided itself a full arbitration docket, with six separate cases pending in five matters, only one of which has been argued, as the others await argument dates.

Last Friday, the Court accepted two cases and consolidated them into one argument, date to be announced, on a long-running issue about the reach of a federal law that provides discovery in foreign matters. Details on the Dec. 10 cert grant on the consolidated cases, which will determine whether the law applies to discovery in international arbitration matters, can be found at John Pinney, “International Arbitration Is Back at the Supreme Court with Today’s Cert Grant on Two Section 1782 Cases,” CPR Speaks (Dec. 10) (available here).

The Court on Friday also accepted a case on  Federal Arbitration Act Sec. 1 that will examine the extent of the exception from the FAA involving workers in interstate commerce. For details on that new case, as well as a roundup of the six arbitration cases now at the U.S. Supreme Court, see Russ Bleemer, “Court Adds a Third Arbitration Case in Friday’s Cert Granted Order List,” CPR Speaks (Dec. 10) (available here).

* * *

Mark Kantor is a member of CPR-DR’s Panel 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.

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Court Adds a Third Arbitration Case in Friday’s Cert Granted Order List

By Russ Bleemer

In addition to the two cert grants this afternoon on the international arbitration discovery issue in 28 U.S.C. § 1782, the U.S. Supreme Court accepted a third arbitration case for oral arguments.

Southwest Airlines Co. v. Saxon, No. 21-309, presents a Federal Arbitration Act Sec. 1 question:

“Whether workers who load or unload goods from vehicles that travel in interstate commerce, but do not physically transport such goods themselves, are interstate ‘transportation workers’ exempt from the Federal Arbitration Act.”

FAA Sec. 1 defines the statute’s application to maritime transactions and commerce. The section ends noting that “nothing [in the statute] shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”

The Court has interpreted the law to mean that the exception from FAA application is only for transportation workers “engaged in” interstate commerce. Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001) (available at https://bit.ly/2HhwYLu).

The original plaintiff in the case, now the respondent, is a “Ramp Agent Supervisor for Southwest who occasionally loads and unloads passenger baggage from airplanes,” according to Southwest’s cert petition, which is available at the docket link above. The original plaintiff works at Chicago’s Midway Airport.

The Seventh U.S. Circuit Court of Appeals in the case (available at https://bit.ly/3rRA8Ln) held that the plaintiff was a transportation worker, and therefore exempt from the FAA.  

Noting a circuit split, Southwest appealed, and this afternoon, the nation’s top Court agreed to decide whether the local worker was FAA-exempt, which is likely to include an examination of the plaintiff’s work in relation to interstate commerce.

The case has not yet been scheduled; schedules for winter and spring 2022 argument dates in the current 2021-2022 term have yet to be released, and the case could be added before the Court’s year ends in June.

* * *

Southwest Airlines Co. v. Saxon, and the two new international arbitration cases on 28 U.S.C. § 1782, ZF Automotive US Inc. v. Luxshare Ltd.No. 21-401, and AlixPartners LLP v. The Fund for Protection of Investor Rights in Foreign States, No. 21-518, contribute to an already busy 2021-2022 Supreme Court arbitration docket.

The Court had scheduled an arbitration case to be argued the first week of the term, but it dismissed the matter shortly before the arguments at the parties’ request after an award was issues and the case concluded.  For details, see Bryanna Rainwater, “Case Dismissed: Supreme Court Lightens Its Arbitration Load as Servotronics Is Removed from 2021-22 Docket,” CPR Speaks (Sept. 8) (available here).

But two more arbitration cases quickly followed last month. The Court heard Nov. 2 arguments in Badgerow v. WaltersNo. 20-1143, an employment discrimination case that dives into the jurisdiction of federal courts under Federal Arbitration Act sections on enforcing and overturning arbitration awards.  See Russ Bleemer, “Supreme Court Hears Badgerow, and Leans to Allowing Federal Courts to Broadly Decide on Arbitration Awards and Challenges,” CPR Speaks (Nov 2) (available here).

And on Nov. 15, the Court accepted an employment arbitration case, Morgan v. Sundance Inc.No. 21-328, on the extent to which a federal court may defer to an arbitration agreement. The case will return to the scope of a decade-old case,  AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), which permits mandatory arbitration backed with class waivers in consumer contracts. For details, see Mark Kantor, “U.S. Supreme Court Adds an Arbitration Issue: Is Proof of Prejudice Needed to Defeat a Motion to Compel?” CPR Speaks (Nov. 15) (available here).

Like today’s three-case addition to the Court docket, Morgan awaits an argument date.

* * *

The author edits Alternatives to the High Cost of Litigation for CPR.

[END]

International Arbitration Is Back at the Supreme Court with Today’s Cert Grant on Two Section 1782 Cases

By John Pinney

The U.S. Supreme Court this afternoon granted certiorari on two Section 1782 cases, ZF Automotive US Inc. v. Luxshare Ltd., No. 21-401, and AlixPartners LLP v. The Fund for Protection of Investor Rights in Foreign States, No. 21-518.

By accepting these cases, the nation’s top Court has again agreed to decide whether 28 U.S.C. § 1782 can be invoked by parties in international arbitrations to obtain U.S.-style discovery to obtain evidence for use in such proceedings.

It is the second time this year that the Court has taken on the issue. Today’s cert grants follow the voluntary dismissal in September just six days before the scheduled argument for Servotronics, Inc. v. Rolls-Royce, PLC, No. 20-794, a case that the court had agreed to hear on the same issue last March.  For details on the dismissal, see Bryanna Rainwater, “Case Dismissed: Supreme Court Lightens Its Arbitration Load as Servotronics Is Removed from 2021-22 Docket,” CPR Speaks (Sept. 8) (available here).

As it had done in Servotronics, the International Institute for Conflict Prevention and Resolution, which publishes CPR Speaks, filed an amicus brief in support of the AlixPartners certiorari petition. [Editor’s note: John Pinney, author of this CPR Speaks blog post, also is counsel of record on both amicus briefs on CPR’s behalf. See the credit line for links below.]

In its order granting cert on the two cases, the Court formally granted CPR’s leave to file an amicus brief in AlixPartners. The Court consolidated the two cases and allotted an hour for an oral argument. The order is available here.  The case has not yet been scheduled; schedules for winter and spring 2022 argument dates in the current 2021-2022 term have yet to be released, and the case could be added before the Court’s year ends in June.

The specific issue before the Supreme Court is whether the critical phrase in § 1782, “foreign or international tribunal,” includes international arbitral tribunals. As readers who have been following the cases addressing § 1782 over the past two years know—see links to key CPR Speaks blog posts below–there is a circuit split regarding the applicability of § 1782 for private international arbitrations. The Second, Fifth and Seventh U.S. Circuit Courts of Appeals have held that an international arbitral tribunal is not a “tribunal” within the meaning of the statute, while the Fourth and Sixth Circuits have decided it is.

There was widespread disappointment in the international arbitration community when Servotronics was officially dismissed in late September after a party requested the dismissal shortly after an award was issued in the underlying London arbitration that mooted the § 1782 case before the Supreme Court.

The ZF Automotive case is virtually identical to Servotronics in that it involves a private international arbitration. It is noteworthy, however, that the ZF Automotive petition was brought before judgment out of the Sixth Circuit, one the two circuit courts allowing § 1782 discovery for a private international arbitral tribunal.

On the other hand, AlixPartners presents a significantly different issue than the Servotronics matter.

AlixPartners arises not from a private international arbitration but instead from an investment case brought under the Russian-Lithuanian bilateral investment treaty. The respondent Fund now before the Supreme Court is a Russian entity pursuing claims before an ad hoc UNCITRAL-rules arbitral tribunal against Lithuania for investors’ financial losses resulting from the insolvency of the Lithuanian bank.

The Fund brought its § 1782 request for discovery in New York against AlixPartners, a financial consulting firm that had advised the Lithuanian government regarding the bank’s insolvency. The case comes to the Supreme Court after the Second Circuit, applying criteria established in a recent case that denied discovery for a case before a private international arbitration tribunal–see In re Hanwei Guo for an Order to take Discovery for Use in a Foreign Proceeding Pursuant to 28 U.S.C. 1782, 965 F.3d 96 (2d Cir. 2020), as amended (July 9, 2020) (available at https://bit.ly/3IxxzUK)–allowed discovery for the investment case because of the degree of governmental involvement due to the investment treaty. 

For more on ZF Automotive, see Bryanna Rainwater, “The Law on Evidence for Foreign Arbitrations Returns to the Supreme Court,” CPR Speaks (Oct. 22, 202) (available here). For a CPR YouTube discussion of the cases and two other pending U.S. Supreme Court arbitration matters, see “The Latest #SCOTUS #Arbitration: Process ‘Preference’; Int’l #Discovery; Federal Courts’ Arb #Jurisdiction,” CPR Speaks (Nov. 23) (available here).

By taking both ZF Automotive and AlixPartners, the Supreme Court will now decide the scope of § 1782 for both private international and investment arbitrations.

* * *

John Pinney is counsel to Graydon Head & Ritchey in Cincinnati. On CPR’s behalf, he acted as counsel of record in an amicus brief urging the U.S. Supreme Court to accept the AlixPartners case, but not taking a position on behalf of either party. Details on the brief can be found on CPR Speaks here. His AlixPartners brief on CPR’s behalf can be found at on the Supreme Court docket page linked at the top or directly at https://bit.ly/3pzZpHj. Earlier this year, he filed a similar friend-of-the-Court brief asking the Supreme Court to accept the Servotronics case, which was accepted and later dismissed ahead of a scheduled argument. Details on the dismissal can be found in the CPR Speaks Sept. 8 posting cited above, and here. He discusses the Servotronics brief in a CPR YouTube analysis here. His Servotronics brief on CPR’s behalf can be found on the Supreme Court docket page linked at the top of this post or directly at https://bit.ly/3Ez58U4.

[END]

CPR Protocol on Disclosure of Documents & Presentation of Witnesses in Commercial Arbitration

By Verlyn Francis

One of the advantages of arbitration over litigation is efficiency. Arbitration does not have to contend with the numerous rules of civil procedure. This saves time and, therefore, cost. However, parties to arbitration still expect and do receive procedural fairness in the adjudication of their disputes.  

The concept of efficiency combined with procedural fairness is sometimes challenging for arbitration counsel from different jurisdictions who argue that, without all the court system’s procedural steps, parties do not receive fairness.

Trained commercial arbitrators would argue they are misconstruing the whole arbitration process.  One of the fundamentals of arbitration is that, at the first pre-hearing conference, the parties have input into the procedural rules that will govern the process before those rules are set out in the first preliminary order.

Unfortunately, document disclosure and witness presentation are two areas that can bedevil the tribunal, arbitration counsel and the parties.

The newly published Protocol on Disclosure of Documents & Presentation of Witnesses in Commercial Arbitration, by CPR, the International Institute for Conflict Prevention and Resolution, will go a long way to providing guidance to tribunals and tribunal counsel on the disclosure of documents and witness presentation in commercial arbitration.  This insightful Protocol, a revision of the first Protocol issued in 2009, is the work product of a CPR Arbitration Committee task force co-chaired by Baker McKenzie of counsel Lawrence W. Newman, in New York, and Viren Mascarenhas, a King & Spalding partner who works in the firm’s New York and London offices.

The Protocol’s stated aims are: (1) to give parties to arbitration agreements the opportunity to adopt certain modes of dealing with the disclosure of documents and the presentation of witnesses; and where they have not done so, (2) to assist CPR or other tribunals in carrying out their responsibilities regarding the conduct of arbitral proceedings. 

The Protocol does not supersede the institutional rules or ad hoc arbitrations.  Instead, it helps tribunals to refer to the Protocol in organizing and managing arbitrations under rules such as those for CPR (for example, CPR’s arbitration rules are available here), other institutions, or ad hoc arbitrations.

In dealing with the disclosure of documents, the Protocol considers the philosophy underlying document disclosure; attorney-client privilege and attorney work-product protection; party-agreed disclosure; disclosure of electronic information, and tribunal orders for the disclosure of documents and information. It provides schedules of the wording that can be adopted by parties in their agreements and tribunals in their orders.

In the section on the presentation of witnesses, the Protocol reminds arbitrators to bring to the attention of the parties at the pre-hearing conference the options for adducing evidence and encourage the exploration of those options with the parties.

The first option is that the parties can agree that the tribunal will decide the arbitration on documents only.  It then sets out guidance on how evidence can be submitted by witness statements, oral testimony, depositions, and presentations by party-appointed experts.  Also included are procedures that may be applied to the conduct of the hearing. 

This does not negate party-agreed procedures for the presentation of witnesses but, of course, the tribunal must be careful not to allow the parties to encumber the arbitration with all the court rules.  The Protocol also includes schedules setting out the modes of presenting witnesses, including experts.

This Protocol contains guidance that most commercial arbitrators know, but it is another important tool that tribunals can use to educate counsel and the parties while bringing efficiency into arbitration procedures. 

I have added it to my toolkit!

* * *

The author, a mediator and arbitrator who heads Toronto-based Isiko, an ADR consulting firm, conducts adjudicative processes in estates, family, civil, and commercial disputes. She is a Professor of ADR at Centennial College, Toronto, Canada, and a member of the CPR Panel of Distinguished Neutrals.

[END]

The Latest #SCOTUS #Arbitration: Process ‘Preference’; Int’l #Discovery; Federal Courts’ Arb #Jurisdiction

CPR presents on YouTube linked and embedded above a new discussion on the current U.S. Supreme Court hot arbitration topics.  

The discussion is moderated by Russ Bleemer, editor of Alternatives to the High Cost of Litigation (http://altnewsletter.com, and for CPR members at www.cpradr.org/news-publications/alternatives) (@altnewsletter)), who is joined by Angela Downes, Assistant Director of Experiential Education and Professor of Practice Law at the University of North Texas-Dallas College of Law; independent Dallas attorney-arbitrator Richard Faulkner, and arbitration advocate Philip J. Loree Jr., who heads the Loree Law Firm in New York (@PhilLoreeJr). 

Here are the matters discussed, and links on this CPR Speaks blog to details on the cases and potential cases along with resources including links to lower court opinions and briefs.

  1. Morgan v. Sundance Inc., No. 21-328, an employment case on the extent to which a federal court may defer to an arbitration agreement, which the nation’s top Court agreed to hear last week. For details, see Mark Kantor, “U.S. Supreme Court Adds an Arbitration Issue: Is Proof of Prejudice Needed to Defeat a Motion to Compel?” CPR Speaks (Nov. 15) (available here).
  2. The Court has scheduled two cases involving the reach of 28 U.S.C § 1782 for a Dec. 3 conference that will determine whether it should hear the matters or let lower court opinions stand.  The cases examine whether the statute, which authorizes “any interested person” in a proceeding before a “foreign or international tribunal” to ask for and receive discovery from a person in the United States, covers international arbitration tribunals. The cases, AlixPartners LLP v. The Fund for Protection of Investors’ Rights in Foreign States, No. 21-518, and ZF Automotive US Inc. v. Luxshare Ltd., No. 21-401, are discussed at Bryanna Rainwater, “The Law on Evidence for Foreign Arbitrations Returns to the Supreme Court,” CPR Speaks (Oct. 22, 202) (available here).  CPR has filed an amicus brief asking the Supreme Court to accept and decide the AlixPartners case; the NYC-based nonprofit which publishes this blog did not take a position in the case.  The details on the filing can be found at “CPR Asks Supreme Court to Consider Another Foreign Tribunal Evidence Case,” CPR Speaks (Nov. 12) (available here) (containing information and links to CPR’s previous amicus brief in Servotronics v. Rolls Royce PLC, No. 20-794, another Section 1782 case that the Supreme Court dismissed in September and removed from the Court’s October argument calendar).
  3. Badgerow v. Walters, No. 20-1143, an employment discrimination case that dives into the jurisdiction of federal courts under Federal Arbitration Act sections on enforcing and overturning arbitration awards.  The case was most recently discussed on CPR Speaks at Russ Bleemer, “Supreme Court Hears Badgerow, and Leans to Allowing Federal Courts to Broadly Decide on Arbitration Awards and Challenges,” CPR Speaks (Nov 2) (available here).

The video embedded above can be found on YouTube at https://www.youtube.com/watch?v=Sw8ps4vtTfs.

[END]

House Subcommittee Introduces Bill that Would Restrict Arbitration

By Tamia Sutherland

The House Committee on Education and Labor’s Subcommittee on Health, Employment, Labor, and Pensions held a Nov. 4 hearing on employment arbitration to introduce the “Restoring Justice for Workers Act.” The meeting and bill was presented by House Education and Labor Committee Chairman Bobby Scott, D., Va., and House Judiciary Committee Chairman Jerrold Nadler, D., N.Y.

The text of the Restoring Justice for Workers Act is available here. The act would

  • prohibit pre-dispute arbitration agreements that require arbitration of work disputes;
  • prohibit retaliation against workers for refusing to arbitrate work disputes;
  • provide protections to ensure that post-dispute arbitration agreements are truly voluntary and with the informed consent of workers;
  • amend the National Labor Relations Act to prohibit agreements and practices that interfere with employees’ right to engage in concerted activity regarding work disputes, and
  • reverse the U.S. Supreme Court’s 5-4 decision in Epic Systems Corp. v Lewis, available here. (Earlier this week, the Court agreed to hear a case that could clarify the extent of the seminal case’s application. For more, see Mark Kantor, “U.S. Supreme Court Adds an Arbitration Issue: Is Proof of Prejudice Needed to Defeat a Motion to Compel?” CPR Speaks (Nov. 15) (available at https://bit.ly/3FnfyGd).

The subcommittee meeting, “Closing the Courthouse Doors: The Injustice of Forced Arbitration Agreements,” began with an opening statement from committee Chairman Mark DeSaulnier, D., Calif. Senior Georgia Republican committee  Rick W. Allan gave an opening statement, and then four witnesses provided testimony:

  1. Alexander Colvin, Dean of the School of Industrial and Labor Relations at Cornell University;
  2. Glenda Perez, Former Implementation Set-Up Representative at Cigna;
  3. G. Roger King, Senior Labor and Employment Counsel at the Arlington, Va.-based HR Policy Association, a nonprofit membership group of “over 390 large” corporations’ chief human resource officers; and
  4. Kalpana Kotagal, a Partner in Cohen Milstein Sellers & Toll’s Washington, D.C., office.

First, Chairman DeSaulnier began by introducing the topic of “forced arbitration” agreements and collective action waivers, explaining that for many employees, employment documents “include an arbitration clause, hidden in the fine print,” which requires workers to sign the document or forgo employment.

Next, he provided data to support the assertion that the use of these agreements is widespread. He explained that “in 1990, 2.1% of non-union employees had an arbitration clause in their employment contracts . . . [and in] 2018, nearly 60% of all nonunionized private-sector employees were covered by forced arbitration agreements.”

Chairman DeSaulnier provided other examples of what he described as unfair practices and, finally, introduced the Restoring Justice for Workers Act as a solution.

Rep. Allan countered in his opening statement that the act is another instance of heavy-handed government reach that will be burdensome to employers and unfairly target job creators. Moreover, he asserted that the act would delay justice and continue to clog an already overrun court system.

Prof. Colvin, a longtime critic of mandatory arbitration processes, was the first witness to provide testimony. He provided statistics from his studies, cited at his link above, to show the increase use of arbitration, and how employees do worse in arbitration as opposed to the court. He also discussed how employees who use the arbitration process for the first time are at a structural disadvantage to companies who repeatedly use the process.

Next, Glenda Perez provided a personal account of her struggles with the arbitration process without a lawyer. Perez reported that she and her husband worked for Bloomfield, Conn.-based insurer Cigna from October 2013 to  July 2017. In April 2017, Cigna put her on a performance correction plan for work “errors” after meeting with her team on pharmacy benefits.

Her husband, a Cigna analyst, found evidence of errors by white women but none by his wife, according to Perez’s witness statement. She filed a discrimination complaint with Cigna’ human resources department. Typically, a full investigation takes 60 days, she reported, but in her statement, Perez said her investigation took one day, with human resources backing her manager’s claim. Two months later, she was fired.

Perez wanted to file a claim for discrimination and retaliation, but could not find an attorney to represent her in mandatory arbitration. She said she was forced to drive to a law library to do research while also taking care of her three children and looking for a new job. She claimed it took several months to choose an arbitrator.

Moreover, Perez reported, the arbitrator selected may have had a conflict of interest that was not disclosed. Perez’s testimony focused on arbitrator’s lack of impartiality. She reported that there are photos online of the arbitrator, and Cigna’s attorney, at the arbitrator’s 50th birthday party, which she filed with her committee testimony. Additionally, she testified, the arbitrator formerly worked for the firm representing Cigna and had Cigna’s counsel as a reference on his CV.

The arbitrator denied Perez’s request for materials to prove her case as Cigna claimed it would cost more than $1 million to retrieve “even though,” she said, “I was only requesting my employee personal profile.” Cigna moved for summary judgment, and then the arbitrator ruled in favor of Cigna, and canceled a hearing that had been scheduled. When Perez filed a motion to vacate the decision in court, she said Cigna fired her husband.

HR Policy Association attorney Roger King said that two of the legislation’s primary objectives are big mistakes and are a substantial overreach of congressional action. He explained that completely eliminating pre-dispute arbitration was a mistake, and a total prohibition on class-action waivers would be burdensome. Also, in response to Glenda Perez’s testimony, he asserted that generally, arbitrators are ethical.

Finally, Kalpana Kotagal testified that the justification for forced arbitration is predicated on myths because (1) there is no equal bargaining power in most forced arbitrations, (2) it burdens those who are already marginalized, (3) it is not speedy, and (4) it deters workers from bringing claims.

The meeting concluded with a Q&A from other committee members.

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A video of the hearing, and witness statements, is available here. The Congressional repository page for the event can be found here.

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The author, a second-year law student at the Howard University School of Law in Washington, D.C., is a CPR 2021 Fall Intern.

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U.S. Supreme Court Adds an Arbitration Issue: Is Proof of Prejudice Needed to Defeat a Motion to Compel?

By Mark Kantor

This morning, the U.S. Supreme Court granted certiorari and agreed to hear the petition in Morgan v. Sundance, Inc., No. 21-328, in which the Question Presented is:

Does the arbitration-specific requirement that the proponent of a contractual waiver defense prove prejudice violate this Court’s instruction [in AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011)] that lower courts must “place arbitration agreements on an equal footing with other contracts?”

In this case, Robyn Morgan, an employee at an Osceola, Iowa, Taco Bell, brought a proposed Fair Labor Standards Act class action in court against employer Sundance Inc., a company that owns more than 150 Taco Bell franchises, according to Morgan’s cert petition.  

Morgan alleged in the class action that Sundance did not pay Taco Bell franchise employees for all the hours they worked. Sundance eventually moved to require Morgan to arbitrate her claims.  

In substance, this dispute involves the question of whether one party arguing that a second party has waived its right to arbitration must show prejudice resulting from the second party’s delay in asserting the right to arbitrate the dispute. 

An Iowa federal district court determined that Sundance had waived its right to require arbitration because the company waited too long, and that Morgan was harmed by costs and efforts in defending the court litigation, instead of getting ready for arbitration.

The requirements to be met to show waiver of a right to arbitrate, said the Eighth U.S. Circuit Court of Appeals, are:

A party waives its right to arbitration if it: “(1) knew of an existing right to arbitration; (2) acted inconsistently with that right; and (3) prejudiced the other party by these inconsistent acts.”

The Court of Appeals rejected Morgan’s argument that Sundance waited too long and engaged in too much judicial conduct to effectively waive Sundance’s right to arbitrate the dispute.  In doing so, the Court of Appeals held that Morgan had failed to show prejudice sufficient to succeed on the waiver argument. Morgan v. Sundance Inc., 992 F.3d 711 (8th Cir. 2021) (available at https://bit.ly/3nqL7sJ).

The appellate panel–in a 2-1 decision–disagreed with the lower U.S. District Court finding of prejudice, concluding that part of the delay was attributable to the time the district court spent deciding Sundance’s motion to dismiss on quasi-jurisdictional grounds, no discovery was conducted, and the efforts on the motion to dismiss did not duplicate efforts Morgan would have to spend in the arbitration. The majority opinion stated:

The district court found Morgan was prejudiced by having to respond to Sundance’s motion to dismiss over the eight-month span of litigation.  We disagree.  Four months of the delay entailed the parties waiting for disposition of Sundance’s motion to dismiss.  No discovery was conducted.  And, the record lacks any evidence that Morgan would have to duplicate her efforts during arbitration.  Instead, most of Morgan’s work focused on the quasi-jurisdictional issue [addressed by Sundance’s motion to dismiss], not the merits of the case.  For these reasons, we hold Morgan was not prejudiced by Sundance’s litigation strategy.

Morgan then petitioned the Supreme Court in August to determine whether she was required to show prejudice to prove that Sundance waived its right to arbitrate, arguing that she would not be required to make such a showing for other types of contracts under applicable law. 

Morgan has now persuaded the Court to take up the case for a hearing on the extent of AT&T Mobility’s reach sometime in 2022. The Court’s order this morning accepting the case—the sole cert granted in today’s order list—can be found here.

An argument date is expected to be scheduled soon. If argued this term, it will be the second arbitration case to be heard in the 2021-2022 Court year. Earlier this month, the Court heard arguments in Badgerow v. Walters, No. 20-1143, a case involving the federal courts’ jurisdiction under the Federal Arbitration Act. For more, see Russ Bleemer, “Supreme Court Hears Badgerow, and Leans to Allowing Federal Courts to Broadly Decide on Arbitration Awards and Challenges,” CPR Speaks (Nov. 2, 2021) (available at https://bit.ly/30tIRI5).

Here is the Court’s official Morgan v. Sundance docket page, with case materials. More materials and analysis can be found on Scotusblog, here.

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Mark Kantor is a member of CPR-DR’s Panel 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.

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CPR Asks Supreme Court to Consider Another Foreign Tribunal Evidence Case

The International Institute for Conflict Prevention and Resolution has asked the U.S. Supreme Court to hear a case on the extent of a law allowing U.S. federal courts to grant requests from foreign tribunals for discovery on U.S. persons as defined under the statute.  

The question in AlixPartners LLP, et al. v. The Fund for Protection of Investors’ Rights in Foreign States, No. 21-518, is whether the law on international tribunals applies to arbitration panel requests.

It’s the second Supreme Court amicus request by CPR in 2021.

CPR didn’t take a position in its Monday amicus filing, but instead asked the Court to hear the matter and clear up a federal circuit split over whether overseas arbitration tribunals may obtain requests for discovery under the law as, say, a foreign court can do.

The reach of 28 U.S.C § 1728 has become a hot topic in federal appellate courts over the past two years.  It was thought to be nearing a conclusion when the nation’s top Court granted cert on the issue in Servotronics Inc. v. Rolls-Royce PLC, et al., No. 20-794.

But while the parties waited for the October Court argument date, they also proceeded in arbitration.  After a July award by a London tribunal, the Court granted the parties’ request to dismiss the case in September, and it was removed from the docket. For more on Servotronics’ details and history, see Bryanna Rainwater, “Case Dismissed: Supreme Court Lightens Its Arbitration Load as Servotronics Is Removed from 2021-22 Docket,” CPR Speaks (Sept. 8) (available here).

CPR last January also had filed an amicus brief, linked at the CPR Speaks post, urging the Court to accept Servotronics. That brief also can be found at the Court’s docket page here.

CPR’s motion for leave to file the AlixPartners amicus brief, as well as the brief itself, is posted on the Supreme Court’s docket page for the case, linked above, and can be accessed directly here. The matter is expected to be considered by the Court at a conference before year end.

Attorneys at Cincinnati’s Graydon Head & Ritchey LLP prepared and filed the brief on CPR’s behalf.  The counsel of record on the filing is John B. Pinney, and the attorneys on the brief are Roula Allouch and John C. Greiner.

For coverage of CPR’s Alixpartners amicus filing argument, see Victoria McKenzie, “Arbitration Group Urges High Court To Define ‘Tribunal,’” Law360 (Nov. 9, 2021) (available here).

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CPR International Conference Highlights: ‘Effects on Cross-Border Disputes After the Singapore Convention’

By Bryanna Rainwater

According to the Singapore Convention on Mediation’s website, the Convention is a “multilateral treaty which offers a uniform and efficient framework for the enforcement and invocation of international agreements resulting from mediation.”

The speakers at the Oct. 6 CPR International Conference kickoff panel, “Effects on Cross-Border Disputes After the Singapore Convention” gave more context to the current legal landscape after the Convention has come into force.

The Convention was passed by resolution by the U.N.’s General Assembly in 2018, and signed into effect in August 2019. It has been hailed as a huge boost for mediation because it provides support for the effectiveness of the agreements the process produces.

The panel’s moderator was Javier Fernández-Samaniego, managing director of Samaniego Law with offices in Madrid and Miami. The speakers included: Sara Koleilat-Aranjo, a partner at Al Tamimi & Co., in Dubai; Michael Mcilwrath, founder and CEO of MDisputes, an ADR consulting firm in Florence, Italy, and a former vice president of litigation at Baker Hughes Co.; and Jan O’Neill, a professional support lawyer at Herbert Smith Freehills in London.

Koleilat-Aranjo said that mediation has “established itself as a viable, typically cost-effective, non-contentious, means to resolve disputes.” She noted that “up until the advent of the Singapore Convention, there wasn’t really . . . a legal instrument, at an international scale which sort of provided a passport . . . of enforcement of mediated settlement agreements.”

Koleilat-Aranjo discussed differences between the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958), best known as the New York Convention, and the Singapore Convention. She noted that the Singapore Convention dispenses with reciprocity—the New York Convention only provides enforcement of an arbitration award that has been made in a jurisdiction that also has adopted the treaty–and that “the Singapore Convention adopts a transcendental approach, meaning . . . unlike the New York Convention, there isn’t really typically a place of mediation that is defined” like how the earlier treaty addresses the seat of arbitration.

Koleilat-Aranjo referred to what she calls “a certificate of origin,” which is when the parties must prove that settlement resulting from mediation occurred in order to enforce the award. She noted that this presents the novel issue of how to prove that a mediation award was given, particular outside of an “institutional framework,” so that it can be enforced via the Convention.

There are currently 54 Convention signatories, and eight states that have ratified it–seven at the date of the discussion, and one added since the CPR International Conference.  

Koleilat-Aranjo noted that two of the nations that have already ratified the treaty, Qatar and Saudi Arabia, are in the Middle East.  She said that this reaffirmed the popularity of mediation in those countries, and that this is not surprising considering the cultural and religious influences and attitudes toward the process. She said that in Arabic, the mediator is called the “agent of peace,” and that mediation has been used in Arab nations for many types of different dispute settlements.

The panel discussed the reservations carve-out in Article 8 of the Convention, which provides that, when adopted by a ratifying state, “the Convention would not be applicable to settlement agreements to which its government or other public entities are a party.”

Saudi Arabia, Koleilat-Aranjo noted, has carved out a reservation per its Royal Decree 96 (April 9, 2020), which mirrors the convention carve out:  It does not allow mediation to apply to the government, government officials, governmental agencies, or any person acting on behalf of those agencies.  She explained that the Saudi economy is tied in with the government, so this is broad reservation, with many international transactions tying private overseas parties to government actors.

Mike Mcilwrath gave his perspective on why the Convention has not yet been ratified by European Union nations. He said that the EU was “hostile to the convention during the drafting stage. They did not support it.” He added that this is likely because of the “coordinating effort” of the EU as a unified front, making it more difficult for individual states to sign on separately.

Mcilwrath noted that the EU chose to go to court over concerns about the AstraZeneca Covid-19  vaccine, rather than mandating mediation, which is a sign of the EU’s trend of choosing not to mediate.

HSF’s Jan O’Neill had a differing view, and–echoing Mcilwrath’s description of Italy likely supporting the Convention on its own but for the current EU hesitancy–noted that the U.K. also “has been left to its own devices” since Brexit. She added that “the U.K. is of course a very mediation friendly jurisdiction, [with a] very long-standing sophisticated mediation infrastructure.”

As a result, she said that she believes that the U.K. will sign the Convention eventually, noting that “there is a sense on the ground . . . it feels like it will happen. They’re certainly not sensing any hostility.”

She said she that the U.K. is familiar with mediation and ADR, but that priorities are stuck on the most pressing issues–the pandemic and the Brexit economy.

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CPR has posted a video of the full panel discussion.  You can find it here after logging into the CPR website. Videos from the other September CPR International Conference panels can be found here.

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Panel moderator Javier Fernández-Samaniego has prepared an article analyzing the Singapore Convention developments and expanding on the panel discussion for CPR’s monthly newsletter, Alternatives to the High Cost of Litigation. His article is scheduled to appear in the December issue.

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The author, a second-year student at Brooklyn Law School, is a 2021 CPR Fall Intern.

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