Decline of Dialogue? Galton, Love & Weiss on Joint Sessions, Caucuses, and the State of Mediation

If the point of mediation is to get parties together to discuss and thereby resolve their problems, why is the distinct trend to keep the parties apart?

The cover story in the new June issue of Alternatives to the High Cost of Litigation presents a survey that shows how caucuses predominate and joint sessions are declining in mediation practice. 

The authors–veteran leaders in the profession—are Eric Galton of Lakeside Mediation Center in Austin, Texas; Lela P. Love, a law professor and director of the Kukin Program for Conflict Resolution at New York’s Benjamin N. Cardozo School of Law, and Jerry Weiss, founder of MediationInc, based in Shaker Heights, Ohio.

The authors join us in the YouTube video above to discuss their research.  Please like and share it at the YouTube link or below on Twitter, Facebook, and LinkedIn.

In their Alternatives article, “The Decline of Dialogue: The Rise of Caucus-Only Mediation And the Disappearance of the Joint Session,” 39 Alternatives 89 (June 2021), the authors chart the regional differences in the use of joint sessions and so-called phenomenon of “mediation without dialogue,” and use an example of how joint sessions can be deployed to reduce the conflict that caused the dispute.

Alternatives is available here to CPR members who are logged into the CPR website.  Subscription information is available at altnewsletter.com.

[END]

Roundup: Four New Arbitration Petitions Under Consideration at the U.S. Supreme Court

By Mylene Chan

Four recent petitions for writs of certiorari pending before the U.S. Supreme Court raise a number of interesting arbitration issues. While the Court may decline to hear these cases, they are worth following because they could help to define the scope of arbitration in both consumer and commercial contexts.

The cases are being briefed and will be scheduled for conferences.  If accepted, they likely would be argued in the 2021-2022 Court term beginning Oct. 4.

The Court already has two cases that will be argued in the new fall term, and which are awaiting hearing dates:

* * *

Here are the cases the Court will soon be considering:

Shivkov v. Artex Risk Solutions Inc., No. 20-1313

Shivkov centers on the availability of class arbitrations. In the case, the plaintiffs contracted with Artex and TSA Holdings LLC to set up and manage business entities—captive insurance vehicles the small business owner-plaintiffs entered into with the defendants–that the U.S. Internal Revenue Service later determined were illegal tax shelters.  The plaintiffs alleged the captive insurance schemes were “mass-marketed fraud” that caused the plaintiffs to be liable for back taxes, penalties, interest and “significant fees.”

The plaintiffs filed a class action against the defendants, alleging a variety of Arizona state and federal claims for breach of fiduciary duty, negligence, conspiracy and related claims.  Relying on an arbitration clause in the agreements, the defendants moved to compel arbitration.

The Ninth U.S. Court of Appeals ordered individual arbitrations of the plaintiffs’ claims. The appeals court first rejected the plaintiffs’ arguments that the defendants had a fiduciary duty to explain the arbitration clause to the plaintiffs, that the arbitration clause did not survive termination of the contracts, and that the arbitration clause did not cover all of the plaintiffs’ claims.

The appeals court also found that class arbitration was unavailable.  In so ruling, the appellate panel held that the availability of class arbitration is a gateway issue for courts–not arbitrators–to decide that the arbitration agreements did not provide for class arbitration. The Ninth Circuit also rejected the plaintiffs’ argument that the inclusion of the American Arbitration Association as the default arbitration method in the agreements was the equivalent of incorporating AAA rules about class arbitrability by reference into the agreements.

On March 17, the plaintiffs filed a petition for a writ of certiorari and presented two questions: (1) Whether an agreement that specifies arbitration before the AAA as the default dispute resolution method also must specifically mention the AAA rules to avoid being considered ambiguous about whether the parties intended to apply the AAA rules; and (2) Whether the availability of class arbitration is a matter for an arbitrator to decide, or for a court to decide.

* * *

Eni USA Gas Marketing LLC v. Gulf LNG Energy LLC, No. 20-1462

The next case involves an attempt to use arbitration proceedings as a means of collateral attack on a previous arbitration award. In the case, Gulf entered into a Terminal Use Agreement (TUA) with Eni whereby Gulf would construct a natural gas terminal and Eni would use the terminal to deliver natural gas. The TUA contained a broad arbitration clause.

Eni initiated arbitration, alleging breach of contract, and arguing that the TUA was void because of unforeseen changes in the market. The arbitration tribunal found that the TUA had terminated and ordered Eni to pay Gulf for the value of Gulf’s partial performance under the TUA.

Eni then filed a second arbitration alleging a breach of contract claim left undecided from the first arbitration and misrepresentation. Gulf moved to enjoin Eni from pursuing the second arbitration. Eni argued that an arbitrator–rather than a court–should decide whether the first arbitration award precludes the second arbitration.

The Delaware Supreme Court enjoined Eni from pursuing the second arbitration. The Court reasoned that when a party files a second proceeding attacking a prior arbitration award, it circumvents the contractual  Federal Arbitration Act review procedure. The Court held that courts may intervene in a party’s attempt to seek arbitration when the objective is to rectify a prior unfavorable arbitration award by arbitrating claims in new separate arbitration proceedings. 

On April 15, Eni filed a petition for a writ of certiorari in the U.S. Supreme Court presenting the issue of whether the FAA permits a court to refuse to enforce an arbitration agreement delegating all questions, including a question of arbitrability, to an arbitrator where a party contends that the claim sought to be arbitrated represents a “collateral attack” on a prior arbitration award.

* * *

HRB Tax Group v. Snarr, No. 20-1570

This case looks at the scope of the Federal Arbitration Act preemption of state law in cases where plaintiffs seek a remedy of a public injunction. In HRB Tax Group v. Snarr, the plaintiffs sought to stop their tax service provider from continuing business practices they alleged are fraudulent.

HRB and the plaintiffs entered into agreements in which HRB offered the plaintiffs services in filing tax returns. The service agreements required all disputes arising from these agreements to be resolved through individual arbitration.

The plaintiffs, customers of H&R Block’s accounting services, alleged that the marketing of HRB’s tax filing services violated California’s Consumers Legal Remedies Act, False Advertising Law, Cal. Bus. & Prof. Code, and Unfair Competition Law. They filed a class action suit against HRB and sought a public injunction enjoining HRB’s alleged misleading web services and advertising.

HRB moved to compel arbitration, arguing that the Federal Arbitration Act, which provides that arbitration agreements are presumptively valid, preempts McGill v. Citibank, N.A. 393 P.3d 85 (2017) (which held that a contract is unenforceable when it entirely waives the right to seek public injunctive relief under consumer protection statutes). 

The Ninth Circuit denied HRB’s motion to compel arbitration. The court reasoned that HRB’s argument had been foreclosed by Blair v. Rent-A-Center Inc., 928 F.3d 819 (2019) (holding that the FAA does not preempt McGill.)

HRB’s May 10 U.S. Supreme Court cert petition asks whether California’s public policy rule declining to enforce agreements for individualized arbitration whenever a plaintiff seeks a public injunction is preempted by the Federal Arbitration Act.

* * *

Viking River Cruises v. Moriana, No. 20-1573

The fourth case raises questions about the applicability of agreements for bilateral arbitration to claims brought under California’s Private Attorneys General Act of 2004 (PAGA). In Viking River Cruises, aggrieved employees sought relief from an international cruise line.

Original plaintiff Angie Moriana agreed upon joining Viking as a sales representative to an arbitration agreement providing that any employment-related disputes would be arbitrated. The agreement also required Moriana to waive all rights to bring a class, collective, representative, or private attorney general action in the employment contract.

Moriana filed suit against Viking on behalf of the state and all other similarly situated employees alleging various California Labor Code violations under PAGA.

Viking moved to compel individualized arbitration of Moriana’s PAGA claims, arguing that Epic Systems Corp. v. Lewis 138 S.Ct. 1612 (2018), validates private predispute waivers of such claims. Viking claimed that Epic Systems overruled Iskanian v. CLS Transportation Los Angeles, LLC  59 Cal. 4th 348 (2014), a California Supreme Court decision holding that arbitration agreements that waived the right to bring PAGA actions are unenforceable.

The California Court of Appeal denied Viking’s motion to compel arbitration, reasoning that the real party in a PAGA claim is the state and Moriana was not acting as an agent of the state when she bound herself to arbitrate. The court  explained that Iskanian remains good law because Epic Systems differs fundamentally from a PAGA claim. Epic Systems addressed the enforceability of an individualized arbitration requirement against challenges that such enforcement violated the National Labor Relations Act.

Viking filed a petition for writ of certiorari on May 10. The issue the Court will decide to consider is whether the Federal Arbitration Act requires enforcement of a bilateral arbitration agreement providing that an employee cannot raise representative claims, including under PAGA.

* * *

The author, an LLM candidate at Yeshiva University’s Benjamin N. Cardozo School of Law in New York, is a 2021 CPR Summer Intern.

CPR Y-ADR Corporate Counsel Interview #2: GM’s Klingensmith on Career Tips, ADR in the Pandemic, and More

Following up on last week’s debut, CPR’s Y-ADR group’s new Corporate Counsel Interview Series returns this week with another discussion on in-house work and law practice development.

Click above and share the YouTube interview by Y-ADR member Elizabeth Chan, an associate in the London office of Three Crowns, who discusses career advice and conflict resolution with Jason Klingensmith, Assistant General Counsel, at General Motors Co. in Detroit.  Jason co-chairs Y-ADR’s Steering Committee.

Jason follows his GM colleague Brittany Mouzourakis, Counsel-Litigation, who discussed her career path with Elizabeth in the series kickoff last week, available on CPR Speaks here. In the Corporate Counsel Interview Series, in-house attorneys are asked to share their perspectives on dispute resolution mechanisms and their advice for young practitioners.

Jason also discusses ADR. He notes in the interview that GM relies heavily on arbitration in its vendor contracts, which he says is standard U.S. practice, and preferred for international contracts. He says the company has particularly focused on mediation in the pandemic, and “the remote mediation setting very amenable to resolving disputes.”

Watch above, and share the interview on YouTube here.

CPR’s Young Leaders in Alternative Dispute Resolution educates the next generation of leaders on the full spectrum of dispute prevention and resolution mechanisms, and offers unique networking and professional development benefits to participants. Through periodic seminars and other initiatives, participants are introduced to CPR and gain an insider’s view into how CPR’s community of corporate counsel, law firm counsel, and other experts in the field are using dispute prevention and resolution techniques to manage conflict.

Y-ADR is open to the conflict prevention and resolution community–attorneys, professionals, academics and students–45 years old and younger, or those with less than eight years of professional experience in international or domestic ADR practice or other areas of conflict prevention and resolution.

The Y-ADR Steering Committee is the leadership group for Y-ADR. Jason’s co-chair is Ulyana Bardyn, counsel in the New York office of Eversheds Sutherland. The Committee is seeking applications for new members, here, but note that the application period is closing this week.

CPR has posted the Y-ADR Corporate Interview Series on its website audio/video page, here. Follow CPR’s social media at the link (scroll to the bottom) for developments, and connect with Y-ADR’s LinkedIn page here.

[END]

Y-ADR Launches a New Corporate Counsel Interview Series, Providing an Insider’s View

CPR’s long-running Y-ADR group this week has kicked off a new Corporate Counsel Interview Series.

Click above and share the YouTube interview by Y-ADR member Elizabeth Chan, an associate in the London office of Three Crowns, who discusses in-house practice with Brittany Mouzourakis, Counsel-Litigation at General Motors Co. in Detroit.

CPR’s Young Leaders in Alternative Dispute Resolution (see www.cpradr.org/programs/y-adr) educates the next generation of leaders on the full spectrum of dispute prevention and resolution mechanisms, and offers unique networking and professional development benefits to participants. Through periodic seminars and other initiatives, participants are introduced to CPR and gain an insider’s view into how CPR’s community of corporate counsel, law firm counsel, and other experts in the field are using dispute prevention and resolution techniques to manage conflict.

Y-ADR is open to the conflict prevention and resolution community–attorneys, professionals, academics and students–45 years old and younger, or those with less than 8 years of professional experience in international or domestic ADR practice or other areas of conflict prevention and resolution.

The Y-ADR Steering Committee is the leadership group for Y-ADR. The Committee is chaired by Ulyana Bardyn, counsel in the New York office of Eversheds Sutherland, and Jason Klingensmith, assistant general counsel at General Motors. The Committee is currently seeking applications for new members, here.

Interviewee Brittany Mouzourakis also serves on the Y-ADR Steering Committee.

In the Corporate Counsel Interview Series, in-house attorneys are asked to share their perspectives on dispute resolution mechanisms and their advice for young practitioners.

CPR has posted the Y-ADR Corporate Interview Series on its website audio/video page, here. Follow CPR’s social media at the link (scroll to the bottom) for developments, and connect with Y-ADR’s LinkedIn page here.

[END]

Supreme Court Adds an Arbitration Case for the 2021-2022 Term

By Mark Kantor

Today is an important day in the US Supreme Court, as the Court agreed for the first time in many years to hear a case on abortion rights.  Court watchers will rightly focus extensively on that development.

In far-less significant news, but perhaps of interest to the arbitration community, this morning the U.S. Supreme Court also denied certiorari in Selden v. Estate of Silverman, 20-895, a Federal Arbitration Act case involving (1) whether vacatur on public policy grounds is permitted and (2) the proper standard for “evident partiality” vacatur.  The March 2020 Nebraska Supreme Court decision in the matter stands, upholding the confirmation of an arbitration as well as sanctions and attorneys fees.

The Court, however did grant certioraritoday in another FAA case, Badgerow v. Walters, No. 20-1143 (documents available at https://www.scotusblog.com/case-files/cases/badgerow-v-walters/).

The Question Presented in Badgerow is:

Whether federal courts have subject-matter jurisdiction to confirm or vacate an arbitration award under Sections 9 and 10 of the Federal Arbitration Act when the only basis for jurisdiction is that the underlying dispute involved a federal question.

Badgerow is thus a dispute regarding when, if at all, the U.S. federal courts have “federal question” jurisdiction over an FAA confirmation/vacatur dispute.  It will accordingly be of primary interest for U.S. litigators seeking a court ruling on whether a local state court or a federal court is the proper forum to decide whether an arbitration award can be confirmed or vacated under the FAA when the underlying arbitration award resolves a question of federal law.

Federal courts are forums of limited jurisdiction.  Longstanding jurisprudence holds that the FAA itself does not create federal court jurisdiction.  Rather, a party seeking to have a U.S. federal court forum for an FAA-related dispute must find an independent ground for jurisdiction. 

The implementing statutes for the New York and Panama Conventions do, however, expressly create federal subject matter jurisdiction for their covered international awards.  Consequently, the issue does not arise for those awards.

Badgerow poses the question of whether a federal court may “look through” to see if the underlying subject matter of the arbitration award resolves a “Federal question” and, if the answer is “yes,” take jurisdiction of the case.

The petitioner’s cert petition summarizes the legal issue and circuit split succinctly:

As this Court has repeatedly confirmed, the FAA does not itself confer federal-question jurisdiction; federal courts must have an independent jurisdictional basis to entertain matters under the Act.  In Vaden  v.  Discover Bank, 556 U.S. 49 (2009), this Court held that a federal court, in reviewing a petition to compel arbitration under Section 4 of the Act [failure to arbitrate under agreement; petition to United States court having jurisdiction for order to compel arbitration], may “look through” the petition to decide whether the parties’ underlying dispute gives rise to federal-question jurisdiction.  In so holding, the Court focused on the particular language of Section 4, which is not repeated elsewhere in the Act.

After Vaden, the circuit courts have squarely divided over whether the same “look-through” approach also applies to motions to confirm or vacate an arbitration award under Sections 9 and 10. In Quezada v. Bechtel OG & C Constr. Servs. Inc., 946 F.3d 837 (5th Cir. 2020), the Fifth Circuit acknowledged the 3-2 “circuit split,” and a divided panel held that the “look-through” approach applies under Sections 9 and 10. In the proceedings below, the Fifth Circuit declared itself “bound” by that earlier decision, and applied the “look-through” approach to establish jurisdiction.  That holding was outcome-determinative, and this case is a perfect vehicle for resolving the widespread disagreement over this important threshold question.

The question presented is:

Whether federal courts have subject-matter jurisdiction to confirm or vacate an arbitration award under Sections 9 and 10 of the FAA where the only basis for jurisdiction is that the underlying dispute involved a federal question.

[Emphasis is in the brief, which can be found here.]

The dispute will likely come up for oral argument before the U.S. Supreme Court sometime in its October Term.

Badgerow is the second arbitration case slated for the new fall term.  On March 22, the Court agreed to hear Servotronics Inc. v. Rolls-Royce PLC, et al., No. 20-794, which will examine “[w]hether 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 Fourth and Sixth Circuits have held, or excludes such tribunals without expressing an exclusionary intent, as the Second, Fifth, and, in the case below, the Seventh Circuit, have held.”

Argument dates for both cases are expected this summer.

* * *

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.

[END]

Modeling for the World: Five UN Agencies Pledge to Accept Mediation Requests

By Russ Bleemer

The United Nations this week took a big step in modeling conflict resolution for resolving workplace disputes.  A new report says that, upon request, mediation will be the go-to method of resolving employment disputes for several high-profile UN agencies.

This effort not only serves the UN’s internal purposes but also provides an example for the governments world-wide that support UN efforts.

The Annual Report issued this morning by the Office of the Ombudsman for United Nations Funds and Programmes reveals that in 2021, its five associated UN agencies have elevated mediation’s role in their operations via a new Mediation Pledge in which the organizations each pledge to use third-party neutrals to address internal conflict.

The Ombudsman for United Nations Funds and Programmes works to resolve employment disputes within the United Nations Development Programme; the United Nations Population Fund; the United Nations International Children’s Emergency Fund, better known as UNICEF; the UN Office for Project Services, and the United Nations Entity for Gender Equality and the Empowerment of Women, known as UN-Women. 

Management and staff at the organizations have long been able to opt into the Ombudsman system, which, according to the Ombudsman’s website at  fpombudsman.org, provides informal grievance procedures with which the Ombudsman “may consider conflicts of any nature arising from employment“ within the organizations “and related funds and programmes.”

UN employees at the organizations can contact the Ombudsman “at any stage, for help on any work-related problem where a perspective outside of formal channels would be helpful.”

The new pledge, adopted this year by the five agencies, seeks to increase mediation use as part of the Ombudsman’s system of conflict resolution, with the signing agencies acknowledging that a mediated settlement addresses all parties’ interests and can lead to a more harmonious and less stressful workplace.   The texts of the pledges commit to increase mediation use backed by “statements of principles.” Other than the references to the adopting agencies, the pledges include the following:

  • In the event of a workplace conflict between [the signing agency] and a member of its personnel, the organization is prepared to discuss the possibility of resolving the conflict through Mediation.
  • At the request of the member of personnel or of [the signing agency], an initial discussion on the suitability of Mediation will be hosted by the Mediation Unit of the Office of the Ombudsman for United Nations Funds and Programmes.
  • At any time during the mediation process after the initial discussion, if one or both parties believe that Mediation is not viable in their case, either party may withdraw and proceed with formal options to resolve the matter.

The report further notes that the Ombudsman Office has been beefing up its mediation resources over the past year, in time for the pledge rollouts.  It has developed a new web page offering its materials at https://fpombudsman.org/what-we-do/mediation/. These include, among other items, a mediation guide (available in Arabic, English, French, and Spanish); a mediation training flyer; a guide for lawyers and parties in mediation; and a copy of the Ombudsman Office’s agreement to mediate.

The Ombudsman Office has also increased its outreach and training to promote the use and understanding of mediation services, including 14 specialized training sessions for human resources professionals worldwide that involved more than 450 UNICEF human resources staffers.

According to the new Annual Report, even in the face of the pandemic, this increase in mediation services led to record numbers of mediation cases in 2020, with a 97% settlement rate. Mediation now accounts for a greater proportion—almost double that of previous years—of cases brought to the Ombudsman office’s attention. Full details on the case breakdowns and the Ombudsman Office’s activities can be found in the report, just posted at the website link above.

* * *

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

[END]

A Two-Time Supreme Court Arbitration Matter Is Ready to Settle

By Russ Bleemer

The long-running price-fixing matter between dental equipment suppliers that turned into an epic arbitration procedure fight, with two separate visits to the U.S. Supreme Court, appears to be over.

Documents have been filed in a Texas federal court indicating that the parties have reached an agreement in Archer and White Sales Inc. v. Henry Schein Inc, et al., Civil Action No. 2:12-CV-00572-JRG. Texas Eastern U.S. District Court Chief Judge Rodney Gilstrap, of Marshall, Texas, yesterday signed an order issuing a 30-day stay “of all deadlines” in the case because the parties “have agreed in principle on a settlement agreement and are in the process of finalizing the agreement.” Attorneys from both sides signed and submitted the stay request last week.

Just a few months ago, the case was argued before the U.S. Supreme Court a second time on the issue of who decides whether a case is arbitrated, a court or an arbitrator. The hour-long December arguments resulted in a nine-word per curiam decision on Jan. 25, when the nation’s top Court announced that the writ of certiorari was improvidently granted, and it dismissed the case.

The problem for the Court appeared to be that another issue, on the effectiveness of the incorporation of American Arbitration Association rules that speak to the decision-maker question, was needed to decide the case. 

But the Court last June had turned down a cross-petition on the incorporation-of-rules issue, which still figured heavily in the December oral arguments. The sole issue that the Court had expected to decide the abandoned case was on “Whether a provision in an arbitration agreement that exempts certain claims from arbitration negates an otherwise clear and unmistakable delegation of questions of arbitrability to an arbitrator.”

The result was that the Texas Eastern District federal court was readying the case for trial, because the Supreme Court ruling meant that the Fifth U.S. Circuit Court of Appeals case declining to send the case to arbitration stood as the law of the case.

The appeals court decision was unusual, too, in that it found that a clause effectively delegated the arbitration decision to the arbitrator via the incorporation of the AAA rules to that effect. Nevertheless, the panel didn’t compel arbitration.  It found that because of the way the clause was drafted, a  carve-out from arbitration for injunctions still applied to the contract. Archer & White Sales, Inc. v. Henry Schein Inc., 935 F.3d 274 (5th Cir. 2019) (available at https://bit.ly/2NC7EmL).

That’s the state of the case that was put on pause by Gilstrap’s order yesterday.

But it’s also only half of the arbitration history. The Supreme Court already had decided an arbitration point in the case less than two years before the December oral arguments. In Henry Schein Inc. v. Archer and White Sales Inc., 139 S. Ct. 524 (Jan. 19, 2019) (available at https://bit.ly/338gdLT), the Court held that the “wholly groundless” exception to arbitrability is inconsistent with the Federal Arbitration Act and the Court’s precedent.

Archer and White had argued that the dispute was not subject to arbitration because its complaint sought injunctive relief, at least in part. Henry Schein contended that because the rules governing the contract provide that arbitrators have the power to resolve arbitrability questions, an arbitrator—not the court—should decide whether the arbitration agreement applied. Archer and White countered that Schein’s argument for arbitration was wholly groundless–at the time, an exception to arbitration.

The Texas trial court and the Fifth Circuit agreed, but the Supreme Court, in January 2019, reversed, unanimously, and sent the case back to the Fifth Circuit.  Still, Justice Brett Kavanaugh, in his first Supreme Court opinion, wrote that the Court declined to determine “whether the parties agreed to arbitrate arbitrability” as indicated by “clear and unmistakable evidence.”

That began a road that had the case back in front of the Court again last December, and the Fifth Circuit’s reassessment that found that there still was not clear and unmistakable evidence that the parties wanted the injunctive relief arbitrated.  

Lost in the public arbitration morass was the dispute itself—a complicated antitrust matter. In 2012, Archer and White Sales Inc., a distributor, seller, and servicer for dental equipment manufacturers based in Plano, Texas, filed suit against Henry Schein Inc., a Melville, N.Y.‐based distributor and manufacturer of dental equipment, and subsidiaries of Washington, D.C.’s Danaher Corp., in U.S. federal court alleging that the defendants violated U.S. federal and state antitrust laws by conspiring to fix prices and refusing to compete with each other.

Specifically, Archer and White maintained that its competitor Henry Schein conspired with Danaher to terminate or reduce Archer and White’s distribution territory because the plaintiff was selling dental equipment at discounted prices. Archer and White sought millions of dollars in damages and injunctive relief.

The defendants had moved to compel arbitration based on the arbitration clause in the distributor contract between Archer and White and Danaher, which provided:

Disputes. This Agreement shall be governed by the laws of the State of North Carolina. Any dispute arising under or related to this Agreement (except for actions seeking injunctive relief and disputes related to trademarks, trade secrets, or other intellectual property of Pelton & Crane [Henry Schein succeeded Pelton in the contract with Archer]), shall be resolved by binding arbitration in accordance with the arbitration rules of the American Arbitration Association. The place of arbitration shall be in Charlotte, North Carolina.

There were no settlement details in last week’s request or Judge Gilstrap’s stay order, which was first reported yesterday for Bloomberg subscribers here.

* * *

CPR Speaks has watched the arbitration developments in the matter closely.  For information, see:

Analysis of the first U.S. Supreme Court case in the matter is available using the search features at CPR Speaks and altnewsletter.com.  A good starting point on this blog is Philip J. Loree Jr., Schein Returns: Scotus’s Arbitration Remand Is Now Back at the Court (Feb. 19, 2020).

* * *

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

[END]

Part III: Deference Change–Analysis of a Shift on a Labor Arbitration Review Standard

By Antranik Chekemian

CPR Spring Intern Antranik Chekemian has provided extensive highlights on CPR Speaks of a Feb. 24 CPR online panel discussion, hosted by CPR’s Employment Disputes Committee and its Government & ADR Task Force, covering the current state of employment conflict resolution in the executive and legislative branches.  In “Part I: How Workplace ADR Will Evolve Under the Biden Administration,” Antranik covered presentations by panelist Mark Kantor, a Washington, D.C., arbitrator, who focused on prospects for legislative changes for employment and labor ADR issues, and possible regulation, and panelist Mark Gaston Pearce, Visiting Professor and Executive Director of the Georgetown University Law Center Workers’ Rights Institute, who discussed developments in decisions of the National Labor Relations Board, where he served as chairman from 2011 to 2017. In “Part II: More on Workplace ADR Under the Biden Administration,” 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, whose presentation was highlighted, and then led a general discussion.  Here, Antranik returns to the program to highlight a piece of the discussion on the recent evolution of a key NLRB arbitration standard as discussed by panelist Pearce.

* * *

At CPR’s February webinar, “What Will Labor and Employment ADR Will Look Like Under a Biden Administration?” former NLRB board chair Mark Gaston Pearce discussed the effects of a 2019 United Parcel Service Inc. Board decision overruling its 2014 Babcock & Wilcox decision.

Babcock & Wilcox had changed the standard of post-arbitration deferral on resolution of a grievance concerning an employee’s discipline or discharge that has been alleged to violate the National Labor Relations Act.  

United Parcel Service reverted to the previous, long-running arbitration-deference standard.  NLRB Chairman John F. Ring (currently a board member), and members Marvin E. Kaplan and William J. Emanuel, all Trump appointees, unanimously decided the case.

Babcock & Wilcox Construction Co. Inc., Board Case No. 28-CA-022625 (reported at 362 NLRB No. 36) (Board summary here) (9th Cir. review Oct. 17, 2017, under the name Beneli v. NLRB), provided that the Board will “defer to an arbitral decision if the party urging deferral shows that: (1) the arbitrator was explicitly authorized to decide the unfair labor practice issue; (2) the arbitrator was presented with and considered the statutory issue, or was prevented from doing so by the party opposing deferral; and (3) Board law reasonably permits the award.”

The Babcock & Wilcox standard shifted the burden of proof to the party urging deferral. In addition, deferral was appropriate only when the party urging deferral was able to demonstrate that the specific statutory right at issue was incorporated in the collective-bargaining agreement.

In employers’ views, this made deferral to an arbitral decision less likely, with the need to prosecute cases at the grievance stage and the unfair labor practice stage. The NLRB decided to apply the standard prospectively.

During the webinar, Mark Gaston Pearce noted that it was still difficult to say whether Babcock & Wilcox had an impact on businesses, because any contract negotiated prior to the decision was not affected by the new change in standards. 

The Board in United Parcel Service Inc., 369 NLRB 1 (Dec. 23, 2019), reversed the Babcock & Wilcox decision, returning to the arbitral deferral standards established in Spielberg Mfg. Co., 112 NLRB 1080 (1955) and Olin Corp., 268 NLRB 573 (1984).

The United Parcel Service decision states that the Board will defer to an arbitration award in cases alleging discharge and discipline in violation of Section 8(a)(3) and (1), “if (1) the arbitration proceedings were fair and regular, (2) the parties agreed to be bound, (3) the contractual issue was factually parallel to the unfair labor practice issue, (4) the arbitrator was presented generally with the facts relevant to resolving the unfair labor practice, and (5) the decision was not clearly repugnant to the purposes and policies of the [NLRA].”

The NLRB stated in United Parcel Service that Babcock & Wilcox “disrupted the labor relations stability” and that the 2014 decision disfavored “the peaceful resolution of employment disputes about discharge and discipline issues through collectively bargained grievance arbitration proceedings.”

In a press release announcing the decision of United Parcel Service, the NLRB stated it “will continue to safeguard the exercise of Section 7 rights—particularly by ensuring that arbitral awards are not clearly repugnant to the Act—while better promoting the strong federal policy in favor of arbitration as the parties’ agreed-upon mechanism for resolving employment disputes.”

Mark Gaston Pearce told the CPR seminar attendees that the burden was once again placed on the party resisting deferral to the arbitration decision. He stated that the explicit authorization under the collective bargaining agreement sending the matter to the arbitrator to decide on a specific issue was not required anymore, and that there is no longer a requirement that the statutory issue be precisely articulated by the arbitrator.

Pearce concluded that it is still a “big question mark” whether a new Board under President Biden will reinstate the Babcock & Wilcox standard eliminated at the end of 2019, as it was to be effective prospectively. It was only recently that newly negotiated contracts would be subject to that standard.

* * *

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

[END]

In Its ‘Setty’ Decision, the Ninth Circuit Revisits Whether a Non-Party Can Compel Arbitration Under the FAA and the New York Convention

By Temitope Akande

Litigation over a non-party compelling arbitration via the contract theory of equitable estoppel lives on in the wake of a U.S. Supreme Court decision last year, and looks as though it will continue for some time, courtesy of a still-in-progress federal appeals court case–which itself already has visited the Supreme Court.

In Setty v. Shrinivas Sugandhalaya LLP, 986 F.3d 1139 (9th Cir. Jan. 20, 2021) (available at https://bit.ly/3gCLXzk),  the Ninth U.S. Circuit Court of Appeals revisits the enforceability of an arbitration clause by a non-party. The parties in the case are two companies set up by former partners, with the petitioner seeking to arbitrate under their partnership agreement.  The respondent—the original appellee—maintains that the arbitration is between the individual parties, not their companies, and the case should not be arbitrated.

The Ninth Circuit, in a January opinion on remand from the U.S. Supreme Court, agreed, and declined to compel arbitration.  The petitioner asked for a panel rehearing, or, alternatively, a rehearing en banc by the full Ninth Circuit.  A decision is pending.  The case may eventually re-trace its steps to the nation’s top Court.

The action arises from a dispute between two brothers who formerly ran a partnership in India under the trademarked name Shrivinas Sugandhalaya. The brothers’ Deed of Partnership provides an agreement to arbitrate “All disputes of any type whatsoever in respect of the partnership arising between the partners.” The brothers separated and later established their separate incense businesses at different locations.

Ninth Circuit respondents (and original plaintiffs) Balkrishna Setty and his Indian company, referred to in the Ninth Circuit case as SS Bangalore, filed suit against brother Nagraj Setty’s company, referred to in the opinion as SS Mumbai–both references to their operating locations.

Original plaintiff SS Bangalore claimed that original respondent SS Mumbai used the partnership’s intellectual property without permission. But the suit did not name SS Mumbai owner Nagraj Setty, who signed the Deed of Partnership containing the arbitration clause. Yet SS Mumbai, despite its nonsignatory status, in the current case petitioned in federal court to stay the litigation and compel arbitration pursuant to the Federal Arbitration Act and the New York Convention.

A Washington state U.S. District Court denied SS Mumbai’s motion, holding  that since SS Mumbai was not a signatory to the Deed of Partnership, it had no right to enforce the agreement’s arbitration provisions or stay the litigation. SS Mumbai appealed, and the Ninth Circuit affirmed the District court’s decision.

The U.S. Supreme Court granted certiorari, vacated the judgment, and remanded for further consideration last year in light of GE Energy Power Conversion France SAS v. Outokumpu Stainless USA, LLC, 140 S. Ct. 1637 (2020). The district court once again denied the defendant’s motions to compel arbitration and to grant a stay pending arbitration in a civil case. 

The Ninth Circuit again affirmed in January in the case cited above, but a detailed dissent, more than twice as long as the panel decision, appears to have sparked the rehearing motions now pending before the Ninth Circuit, and could eventually be the impetus to return the case to the U.S. Supreme Court in the form of a new cert petition. 

In the most recent case decided by the Ninth Circuit on remand from the Supreme Court, SS Mumbai raised two issues. The first was whether the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, best known as the New York Convention, permits a nonsignatory to an arbitration agreement to compel arbitration based on the doctrine of equitable estoppel or similar principles of applicable law.

On that point, the petitioner argued that FAA Chapter 1 makes written arbitration agreements “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Therefore, it also permits enforcement of an arbitration clause “against (or for the benefit of) a third party”—i.e., a nonsignatory—if enforcement would be permitted “under state contract law.” Arthur Andersen v. Carlisle, 556 U.S. 624, 631 (2009).

Consequently, state law doctrines and concepts such as equitable estoppel prevent a party from “cherry-picking” the beneficial provisions of the contract while trying to avoid provisions it deems detrimental, such as a requirement to arbitrate disputes. 21 Richard A. Lord, Williston on Contracts, § 57:19, at 200, 202 (4th ed. 2017) (cited in Arthur Andersen, above).

The petitioner’s second issue was whether the court could issue a stay of the litigation pending the arbitration.

The Ninth Circuit denied both motions.  It declined to compel arbitration since the partnership deed provided for arbitration exclusively for disputes “arising between parties,”—here, it would have between the brothers, not the brothers’ partnership–and not by a third party.

Regarding petitioner SS Mumbai’s request for a stay of the litigation under FAA Section 3, the Ninth Circuit further held that SS Mumbai’s ability to stay the litigation depended on its right to compel and, with SS Mumbai’s request to compel rejected, the district court did not abuse its discretion in denying a stay of proceedings pending arbitration.

SS Mumbai had argued that the district court and previous Ninth Circuit decisions misconstrued the New York Convention and the FAA, leaving international arbitration agreements with less protection than domestic agreements.

The decision, written by Senior Ninth Circuit Judge Dorothy W. Nelson, joined by Circuit Judge Johnnie B. Rawlinson, is a straightforward, seven-page affirmation of a denial to compel, relying on the use of federal law to determine the ability to apply equitable estoppel to allow non-party SS Mumbai to compel arbitration under the Deed of Partnership. 

But a detailed 18-page dissent by Senior Circuit Judge Carlos T. Bea, focusing on the choice of law that is needed to make the decision as to whether equitable estoppel can be applied by the court to compel arbitration in favor of the petitioners, ensures more attention for this case before it is litigated or arbitrated.

The GE Energy Supreme Court decision was pivotal–the reason for the nation’s top Court granting cert in Setty, then vacating and remanding.  In GE Energy last spring, the Court held that nothing in the New York Convention conflicted with “the application of domestic equitable estoppel doctrines permitted under Chapter 1 of the FAA.”

As a result, the Court allowed nonsignatories to agreements governed by the New York Convention—codified in FAA Chapter 2–to request compelling arbitration as permitted under FAA Chapter 1, using state law contract grounds.  For details and analysis on GE Energy, including a link to the case, see  “Holding There Is No Treaty-FAA Conflict, Supreme Court Permits Equitable Estoppel for International Arbitration Parties,” CPR Speaks (June 1, 2020) (available at https://bit.ly/2U1QrDs).

But even post-GE Energy, the Ninth Circuit panel early this year said that the Setty question involved “federal substantive law.” Under its case of Letizia v. Prudential Bache Securities Inc., 802 F.2d 1185, 1187 (9th Cir. 1986), that means that the court looks to “ordinary contract and agency principles” in determining the arbitrability of federal claims by or against nonsignatories to an arbitration agreement.

In her opinion, Senior Circuit Judge Nelson concluded that the petitioner’s claims were not clearly intertwined with the partnership deed providing for arbitration. Accordingly, she concluded, the district court properly exercised its discretion in rejecting the argument that the original plaintiffs should be equitably estopped from avoiding arbitration and denying SS Mumbai’s motion to stay the proceedings pending arbitration.

But Senior Circuit Judge Bea’s dissent viewed the majority’s choice of federal law differently. He would have sent the case back for further consideration under different law—which perhaps would have reached a different FAA result that would have allowed equitable estoppel to be applied and sent the case to arbitration.

“The Supreme Court and Ninth Circuit,” wrote Bea, “have time and again held that whichever background body of state contract law that governs the arbitration agreement also governs equitable estoppel claims to compel arbitration pursued under [FAA Chapter 1 at] 9 U.S.C. §§ 1 et seq. We should not hold differently here.”

The problem with the majority opinion, explained Bea, was the choice of federal substantive law.  He opened his dissent noting, “On remand from the Supreme Court, we are faced with the question of which equitable estoppel law governs an Indian company’s motion to compel another Indian company and its Indian owner to arbitration based on an agreement entered into in India, signed by two Indian brothers (who own the Indian companies), and governing conduct in India. The majority holds that, not Indian, but U.S. federal common law governs the issue.”

Circuit Judge Bea points out that the first Ninth Circuit refusal to compel arbitration didn’t rule on the merits of SS Mumbai using equitable estoppel, but rather held that the doctrine wasn’t available under the New York Convention.  That was the point in focus under the Supreme Court’s cert grant and accompanying order to vacate and reconsider in light of GE Energy Power.

The dissent emphasizes that the Supreme Court now backs the use of equitable estoppel under FAA Sec. 1, because GE Energy allows nonparties under the New York Convention to use Sec. 1 to compel arbitration.  He maintains that GE Energy overrules previous Ninth Circuit caselaw that barred Sec. 1 use under the New York Convention.

The current difference in the Setty matter, notes the dissent, is that the state law doctrine to be applied in the New York Convention cases should be the foreign law that applies in the case.  In Setty, the law of India on equitable estoppel would be applied to determine whether SS Mumbai can rely on its principal’s Deed of Partnership contract, according to Senior Circuit Judge Bea’s view.

“I see no reason to hold that settled FAA Chapter 1 law should somehow apply differently to nonsignatories of agreements otherwise governed by the New York Convention” codified in FAA Chapter 2, he wrote.  Circuit Judge Bea added that “neither the Supreme Court nor the Ninth Circuit has ever relied on the subject matter jurisdiction or the nature of the claims in holding that state law governs equitable estoppel under FAA Chapter 1.”

In addition, in his choice-of-law analysis, Bea noted, “It would appear to me that India is the forum with the most significant relationship to the Partnership Deed and that the traditional principles of Indian contract law may very well govern whether a signatory may be compelled to arbitrate with a nonsignatory over an issue arising from that contract.”

That analysis, however, wasn’t developed in the parties’ briefing, so Bea concluded that he would “remand the case back to the district court to resolve in the first instance which choice-of-law principles should be used to determine which contract law should govern the equitable estoppel issue, apply the principles, and resolve the equitable estoppel issue.”

* * *

SS Mumbai has asked the panel to re-hear the case or, alternatively, for an en banc rehearing before the full Ninth Circuit, following from points in the Bea dissent. 

The petition notes that:

  1. “The majority’s decision conflicts with other decisions of the Ninth Circuit recognizing that federal common law also incorporates choice of law principles; determining whether those principles continue to apply to agreements subject to the New York Convention is a question of exceptional importance”;
  2. “The majority’s decision conflicts with other Ninth Circuit decisions allowing non-signatories to enforce arbitration agreements using equitable estoppel” and conflicts with Supreme Court decisions, “creates unnecessary confusion, and involves questions of exceptional importance regarding maintaining the uniformity of the law to be applied to arbitration agreements.”

In opposition to the SS Mumbai motion, original plaintiff-appellee SS Bangalore responded that the arbitration agreement at issue is subject to the FAA’s implementation of the New York Convention and if the federal statute in question demands national uniformity, federal common law provides the determinative rules of decision.

The court need not analyze the choice of law, the response says, but instead determine the issue based on federal common law. The reply brief notes, “By concluding that federal common law governs whether a nonsignatory may invoke equitable estoppel to force a party into arbitration, the Majority’s decision furthers the New York Convention’s goal of achieving uniformity in how courts implement international arbitration agreements. [Citation omitted.] With the Majority’s ruling, signatories to international arbitration agreements can rest assured that a nonsignatory will not be able to require arbitration unless they meet the federal standard for equitable estoppel, regardless of the forum state, when invoking federal question jurisdiction.”

The parties now await the decision of the Ninth Circuit on the pending motion to rehear the appeal en banc, with the prospect of an eventual return to the nation’s top Court looming.

* * *

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.

[END]

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.

* * *

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.”

* * *

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.”

* * *

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

* * *

You can read the final installment of Antranik Chekemian’s report on the CPR workplace and employment seminar at Part III: Deference Change–Analysis of a Shift on a Labor Arbitration Review Standard (April 26).

[END]