New California Law Prohibits Pre-Dispute Employment Arbitration Agreements

By Andrew Garcia

California last week enacted a new law that prohibits employers from requiring job applicants, or any existing employee, to enter into pre-dispute arbitration agreements as a condition of employment.

California Gov. Gavin Newsom signed the bill into law Oct. 10. It also criminalizes any retaliation against an employee who refuses to enter into a pre-dispute arbitration agreement.

Assembly Bill 5, introduced by Assemblywoman Lorena Gonzalez, D., San Diego, says that a violation of the amended California Labor Code is a misdemeanor. Despite the law’s harsh prescriptions for violators, the bill clarifies that it does not purport to invalidate any existing arbitration agreement that is consistent with the Federal Arbitration Act.

The California Chamber of Commerce identified AB 51 as a “job killer.” (See the chamber’s press release ahead of the first major hearing on the bill in March at http://bit.ly/2pmYYEu.)  The chamber said that the new law conflicts with the U.S. Supreme Court’s decision in Kindred Nursing Centers Ltd. Partnership v. Clark, 137 S.Ct. 1421 (2017), among many cited cases that it notes are part of the Supreme Court’s jurisprudence favoring arbitration agreements. The chamber predicts that the law will be challenged and overturned, preempted by federal law. (You can read the chamber’s statement in opposition to the California Legislature, joined by 41 local chamber and specialized industry groups, at http://bit.ly/33zTLIz.)

As other jurisdictions wrestle with local restrictions, courts are beginning to see challenges.  A New York federal court last spring stuck down a New York state pre-dispute mandatory arbitration bar in a decision that was mirrored by the California Chamber’s view. See Latif v. Morgan Stanley & Co. LLC, No. 18-cv-11528, 2019 WL 2610985 (S.D.N.Y. June 26, 2019), where the U.S. District Court held that a newly enacted New York state law that invalidated pre-dispute employment arbitration agreements was preempted by the Federal Arbitration Act. See also, Andrew Garcia, “Update: Legislatures on Invalidating Pre-Dispute Arbitration Agreements,” CPR Speaks blog (Aug. 1) (available at http://bit.ly/2IPg6dd).

AB 51 is one of three bills signed by Gov. Newsom, a Democrat who took office in January, that expanded California’s workplace protection laws.  “Work is about more than earning an income,” he stated, adding, “For many, a job can provide a sense of purpose and belonging–the satisfaction of knowing your labor provides value to the world. Everyone should have the ability to feel that pride in what they do, but for too many workers, they aren’t provided the dignity, respect or safety they deserve. These laws will help change that.”

That move is a big change from Newsom’s predecessor. The new law is a reintroduction of an identical 2018 bill that was vetoed by then-Gov. Jerry Brown, also a Democrat–the second time Brown vetoed legislation restricting arbitration.  The California Chamber of Commerce opposition letter quotes Brown’s 2018 veto extensively, including the Kindred Nursing decision, which noted, “A rule selectively finding arbitration contracts invalid because improperly formed fares no better under the [Federal Arbitration Act] than a rule selectively refusing to enforce those agreements once properly made. Precedent confirms that point.”

An August California court decision, however, shares the new law’s skeptical arbitration view. In OTO LLC v. Kho, 447 P.3d 680 (Cal. 2019) (available at https://stanford.io/2ON8f3x), the California Supreme Court rejected the validity of an arbitration agreement because, among other reasons, the defendant required plaintiff Kho to sign the agreement as a condition of his employment.

The court found that the porter who delivered the agreement remained at Kho’s place of work until he signed the agreement, which created an impression that he had to sign it immediately. Therefore, the court ruled that since Kho had no choice but to sign the arbitration agreement or lose his job without an opportunity to review the agreement in his native language, it could not be enforced.

To view the bill in its entirety, click here.

The author, a Summer and Fall 2019 CPR Institute intern, is a law student at Brooklyn Law School.

 

 

Committee Q&A: A Conversation with Mediation Committee Co-Chair, Marjorie Berman 

marjorieberman

As part of our continuing “Committee Q&A” series, we sat down recently with Mediation Committee Co-Chair, Marjorie Berman of Krantz & Berman (pictured), to learn more about what this committee has been up to and has planned for the future.

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The Mediation Committee consists of CPR members throughout the world and aims to enhance the quality and effectiveness of corporate mediation practice, both domestically and internationally.  The Mediation Committee recently released Mediation Best Practices Guide for In-House Counsel: Make Mediation Work for You, a CPR members-only guide with insider tips from in-house counsel on how to navigate every step of the mediation process (digital copies available to CPR members at no cost).  The Mediation Committee meets quarterly to collaborate and share best practices and put on programs of interest.   In addition, the Committee works to identify qualified neutrals to serve on CPR’s Panels of Distinguished Neutrals. You may find online, CPR’s Mediation ProcedureFast Track Rules for Mediation, and International Mediation Procedure (2017), as well as other industry-specific protocols.

Q. What are some of the specific issues that the Mediation Committee has focused on recently, and how?

A. I am a relatively new add to the committee but, looking back at just the past two meetings we’ve held, the first was on the Singapore Convention. We worked to fashion a program that would be meaningful – and useful – to people at all levels, including some who may not be as familiar with international law.  And at our most recent meeting, we focused on the very timely topic of confidentiality in mediation.

There has been a recent vintage of challenges to the confidentiality of mediation in the courts. Eugene Farber and Professor Nancy Rogers of the Ohio State University Moritz College of Law spoke, and the meeting was super lively and chock full of information. The event also inspired a very strong dialogue among the participants with respect to both knowledge and practice tips on anticipating that such issues could arise.

Q. Can you give us a preview of some of the important issues the Mediation Committee will be focusing on in the coming year?  

A. One long-term focus of the committee is an even closer look at this issue of confidentiality in mediation. Because candor between a mediator and parties is essential, mediation depends upon the privileges and confidentiality that protect those communications. The law protecting mediation communications is a patchwork of federal and individual case statutes, case law and rules of conduct that vary across jurisdictions.

This project will inform practitioners of the law and rules governing mediation confidentiality by jurisdiction so they can prepare themselves in the event they need to mediate in an unfamiliar locale. In fact, as people are reading this, and they have personal experiences with challenges to confidentiality and being put in the spotlight in a litigation – not where mediators wish to be! – I encourage them to share those stories with the committee.  

Q. What have you personally gotten out of participating in CPR’s committee structure, and what would you say to busy CPR members about why they should become more involved?

A. Even in the short term in which I’ve been intensely involved, participation in the committee has given me exposure to a wide variety of mediators working in many different contexts, and to a breadth of mediation practices. We can all so easily develop a narrow focus in our work, so it is especially valuable to get perspective from all angles – including from inside and outside litigators using mediation, mediators doing mediation, mediators working both in the US and around the world and academics studying mediation.

Q. Why would you encourage people to join CPR’s Mediation Committee in particular?

A. To some degree mediators tend to be in a bit of a closed world. They mediate cases and its often just them, in a room as a mediator. Being a part of such a dynamic and interactive group expands your view and allows you to process and grow both your perspective and your practice. This is valuable whether you’re a mediator trying to develop your own practice, or a litigator from a corporation or a law firm who is involved as a participant, trying to get a perspective of where mediators are coming from – because you can’t have that kind of conversation with your own mediator.

Committee participation also provides the broader opportunity to act as a thought leader, helping to improve the effectiveness of mediation and to shape best practices. Mediation is a very dynamic area where small changes can produce big results in terms of outcomes, and this committee offers an opportunity to become a meaningful part of that.

Marjorie Berman of Krantz & Berman LLP represents civil litigants in business disputes, employers and employees in employment conflicts, and individuals in white-collar criminal matters.

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CPR committees are always looking to increase membership and participation, and there are no extra fees or costs associated with joining. Learn more about CPR’s other industry and subject matter committees here. To become a committee member, log in and join the committee(s) of your choice or email a note of interest to Richard Murphy at rmurphy@cpradr.org.

Take your seat at the table, along with
other thought leaders in your industry.

JOIN A CPR COMMITTEE TODAY

 

 

A Report on the 2019 CPR European Congress on Business Dispute Management (Part II)

EU flagBy Vanessa Alarcón Duvanel and Kathleen Fadden

On 15 May 2019, CPR held its third annual European Congress on Business Dispute Management, in London. Organized by CPR’s European Advisory Board (the “EAB”) and kindly hosted once more by SwissRe in the magnificent Gherkin building, the Congress inspired thought provoking considerations on topics of dispute prevention and resolution. As with last year’s summary, we have split this reporting in two parts; Part I sharing the morning panel sessions can be found HERE

The afternoon’s session began with a keynote address by Teresa Giovannini of LALIVE in Geneva, Switzerland.  Teresa Giovannini has a wealth of experience in international arbitration having served as an arbitrator in over 200 arbitrations and held leadership positions in various institutions.  In a captivating speech entitled “what happens behind the curtains”, she gave the audience a glimpse of how arbitral tribunals operate.  The integrity of the arbitral process has often been criticized and bias, in particular, be it unconscious or conscious, can impact throughout the process.  Complete elimination of bias may be difficult and Teresa Giovannini outlined some simple steps that can minimize bias: adopting the screen selection process in the CPR Rules whereby the arbitrators do not know which party has appointed them; ensuring that the issues to be determined are identified at the outset of the proceeding and put to the parties; and strictly adhering to the principle that a case must be put aside if a party does not adduce sufficient evidence to support its case.

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“Master Mediators Answer the Most Intriguing Mediation Questions”

The first panel of the afternoon proved to be a lively discussion about mediation challenges.  The panel was moderated by Isabelle Robinet-Muguet (Orange) and Alexander Oddy (Herbert Smith Freehills).  The panelists were: Eileen Carroll (Mediator and CPR Neutral), Renate Dendorfer-Ditges (Ditges and CPR Neutral), Diego Faleck (Mediator and CPR Neutral) and Birgit Sambeth Glasner (Altenburger and CPR Neutral)

The panel addressed three intriguing mediation questions:

What are the challenges when dealing with cross border mediation and what advice would you offer?

Obviously good preparation is table stakes.  It is essential to take time to talk to the clients in order to understand what might be driving the dynamics, including whether the parties are being guided by lawyers and – in either joint or evaluative sessions – what the expectations are including how active they expect the mediator to be.  The mediator must establish the process and set a substantive agenda for the clients.  In this respect, another challenge that often arises in cross border mediations is that cross border frequently means cross-cultural.  Mediators must therefore be sensitive to, and familiar with, cultural differences as such awareness can guide the mediator in selecting negotiation strategies/tactics that are more likely to be successful.

A second challenge is one of timing of the mediation hearing.  Increasingly, mediations are being forced into short time frames, typically a day and no more.  Master mediators however criticized the efficiency of this template – check the box – practice.  It has proven helpful to require the parties to resume the following day because the interim night often provides valuable time for reflection.  Where does this 24-hour model come from?  The audience contributed suggestions pointing the finger to mediators who in most cases are lawyers and have other cases to attend to or at the insurers who tend to drive the 24-hour template.

Is the concept of a mediated settlement changing?

The concept itself may not have changed but its implementation suffers difficulties.  In line with its remarks to the first question, the panel noted that the purpose of mediation is unfortunately too often gravitating towards setting the stage for arbitration rather than settling the dispute.  It may be a function of the compressed time frames in which mediations increasingly take place (see above).

How do you deal with a conflict within a conflict?

There was no question that conflicts within conflicts impact the mediation process and therefore it is critical they be addressed effectively.  It is not an easy situation to navigate.  Good mediation process management and managing expectations are key as each case is different.  Master mediators on the panel shared illustrative examples of what can generate a conflict within a dispute such as the imbalance in the parties’ levels of sophistication and/or resourcing.  One often finds the weaker party being aggressive and/or irrational.  From a process perspective, a mediator should be equipped to handle such situation proactively by taking the time to understand the concerns (the party may be missing information or believing that its interests are unmet) and by warning the stronger side to be patient.

Mediation is an art – it requires skills, training and practice!

“The Resolution of Complex, Multi-Stakeholder, Multi-Jurisdictional Disputes”

The final panel of the day examining the use of ADR tools in large complex disputes was moderated by Cliff Hendel (Hendel IDR) and the panelists were: Gavin Chesney (Debevoise & Plimpton), James Cowan (Shell International), Ania Farren (Vannin Capital), Albert Hilber (Swiss Reinsurance) and Richard Little (Eversheds Sutherland).

Setting the stage for the discussion, Cliff Hendel offered a couple of interesting preliminary remarks.   Firstly, he reminded everyone that in large and complex disputes culture eats process for breakfast.  In other words, culture counts!  Failures often stem from the inability to understand one another.  Engaging in active listening is therefore key.  Secondly, there are of course trade-offs inherent to the co-existence of different legal systems.  Notwithstanding some European laws in the ADR field, national laws are not particularly harmonized, leading to the risk of forum shopping (among others).

This panel addressed two main issues:

What are your views on the use of co-mediation in complex disputes?

The overall view was that generally mediation, per se, remains difficult in many jurisdictions and that is for cultural reasons. For many Europeans resorting to non-binding ADR is still perceived as a sign of weakness and many parties adopt a mindset whereby if they are to spend money on a dispute resolution process, they want a binding result.  It is important to work to help parties overcome this hurdle.  There is really no substitute for having all the parties in one room and giving all stakeholders visibility as to the whole picture.  In the panel’s experience, this tends to produce more creative solutions.  On co-mediation specifically, experience shows that it works well when all involved mediators are well prepared and even better if they have worked together in the past.

Does litigation/arbitration funding have an impact on mediation?

There is an often referred to “traditional” view that third party funder involvement will make settlement less likely.  The panel did not entirely agree with that.  Ania Farren, offering a funder’s perspective, explained that having a funder on board signaled a strong case.  Funders typically do not influence the dispute resolution process and do not normally attend settlement discussions.  Funders in fact do favor early settlement often preferring less money early than more money later. That said, and unsurprisingly, different third-party funders have different risk appetites. This diversity while beneficial to parties seeking funding for their case brings uncertainty and raises concerns as to the funders’ impact on the parties’ ability to settle or mediate the dispute.  In international arbitration there is no formal regulation of the use of third-party funding and the panel agreed on the need for more transparency concerning funder involvement particularly given the potential for conflicts of interest.

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The Conference concluded with closing remarks from Noah Hanft, CPR’s outgoing President and CEO and James South, Managing Director of CEDR.  This was an opportunity to outline the fruitful collaboration between CEDR and CPR.

Noah was thanked profusely for his phenomenal contribution to CPR.

 

 

Vanessa Alarcon Duvanel is an attorney admitted to practice in New York and Switzerland and specializing in international arbitration. She is based in Geneva and serves as the Secretary to the European Advisory Board.

Kathleen Fadden is a legal consultant and member of the CPR’s European Advisory Board.

 

A Report on the 2019 CPR European Congress on Business Dispute Management (Part I)

EU flagBy Vanessa Alarcón Duvanel and Kathleen Fadden

On 15 May 2019, CPR held its third annual European Congress on Business Dispute Management, in London. Organized by CPR’s European Advisory Board (the “EAB”) and kindly hosted once more by SwissRe in the magnificent Gherkin building, the Congress inspired thought provoking considerations on topics of dispute prevention and resolution. As with last year’s summary, we have split this reporting in two parts: a Part I sharing the morning panel sessions, and a Part II covering the afternoon panels.

“The Future of ADR”

The first panel examined how the ADR community was responding to recent attacks on traditional arbitration and mediation and how ADR can remain relevant.  It was moderated by Mark McNeill (EAB member, Quinn Emmanuel Urquhart & Sullivan (then Sherman & Sterling).  The panelists sharing their perspectives were: Stefano Catelani (DuPont), Ferdinando Emanuele (Cleary Gottlieb Steen & Hamilton), Jennifer Glasser (White & Case) and Noah Hanft (CPR).

Considering the recent developments in dispute resolution, the panel’s remit was to consider whether ADR was approaching crisis point or, whether in fact, there were new opportunities to be seized.  The panel tackled a variety of topics:

Driving mediation into the arbitration process and whether arbitrators should encourage mediation.

Some jurisdictions still have limited acceptance of mediation for multifarious reasons: it can be difficult to find qualified mediators, arbitrators are reluctant to promote mediation and model escalation clauses often force a “check the box” type approach where mediation is not given adequate consideration and viewed solely as a mandatory step.  CPR has been actively encouraging mediation over the world and made a particular push in Brazil.  It has been considering a more flexible model escalation clause that whilst mandating mediation, is not prescriptive about when it shall occur – provided it is before the case is heard.  The use of mediation is referenced in the new 2019 CPR Rules for Administered Arbitration of International Disputes and mediation is now a topic for discussion within the preliminary conference (Rule 9.3e).

How will this change the ADR landscape in the coming years?

Noah Hanft offered his perspective on the evolution of ADR: In his view there is no dispute that mediation is effective so it really is in companies’ interests to adopt mediation.  He anticipates a growth in mediation even though he noted that user complaints have succeeded in driving down the average time it takes to conclude an arbitration.  But there will also be more use of hybrid approaches and the desire for efficiency and cost containment will drive innovation in the area.  These thoughtful comments led the panel to add that mediation was in fact being used nowadays in various stages of a commercial relationship.  For example, mediation is resorted to in transactions to facilitate deals and in the joint venture space consideration was being given to the early identification of those issues that may lead to a dispute with the engagement of a standing neutral and/or the introduction of turnkey provisions requiring stakeholders to focus on the health of the joint venture.

Is ADR at all relevant in investor state disputes?

When it comes to mediation or settlement negotiation, it is often politically very difficult for states to settle disputes with investors.  Andy Rogers of CEDR reported on an interesting development whereby CEDR, in collaboration with other organisations, is currently organizing training for mediators, ISDS practitioners and government officials to equip them with the knowledge and skills necessary to mediate investment disputes.

Will Brexit change the ADR landscape?

Since the Congress was hosted in the United Kingdom (UK) it would have been remiss not to consider the impact of Brexit on ADR!  English governing law and jurisdiction clauses have historically been popular choices for commercial parties and panelists were asked for their views on whether businesses should rethink this choice in light of Brexit.  The overall reaction was that there is no clear answer to the question and the area of greatest uncertainty likely concerns the enforcement of judgments.  Currently, under the Recast Brussels Regulation (Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast) also known as the “Brussels regime”), a judgment rendered in an EU member state and enforceable in that member state is enforceable in all other member states.  If the UK exits the EU without an agreement on the continued operation of the Brussels regime, the latter will cease to apply and the reciprocity will be lost.  This could be remedied – to some extent – as the UK is seeking to become a member, in its own right, of the Hague Choice of Court Convention. As the panel noted, if the UK accedes to this international instrument, then as contracting state its courts must give effect to exclusive jurisdiction clauses and enforce any judgments resulting from such clauses. This blog cautions that the Hague Convention is narrower in scope than the Recast Brussels Regulation and questions still remain about the application of the Convention in circumstances where an exclusive jurisdiction clause has been entered into prior to the U.K.’s exit from the EU.   Post Congress, a new “Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters” was adopted on 2 July 2019.  The UK adherence to this new treaty would resolve many of the enforcement issues triggered by Brexit.  Although the 2018 Queen Mary & White & Case International Arbitration Survey reported that London remained the most preferred seat of arbitration and over half of the respondents thought that Brexit will have no impact on the use of London as a seat, it is clear, Brexit has created doubts and given rise to many questions that only time will answer.

This led panelists to move naturally to another new development in ADR, namely the introduction in various jurisdictions of “international” courts.  The Netherlands, Germany and Singapore to name just a few have created or contemplated the opportunity of creating “international” commercial courts.  Typically, these courts – which are established under national law rather than by international treaty – operate in English and adopt arbitration type rules.  Do these represent a threat or a challenge to arbitration?  In general, the panel did not see a significant threat.  There are, of course, pros and cons with national courts and arbitration tribunals.  A key benefit of arbitral proceedings is confidentiality, which is not necessarily guaranteed in court proceedings.  With respect to enforcement, currently, there is no global convention for the enforcement of court judgments in the same way that the New York Convention facilitates enforcement of arbitral awards.  On the other hand, summary disposition of issues is available in some court systems but historically arbitrators have been cautious about their use – even though recent revisions to most leading arbitral rules (including the CPR Rules) permit such procedures.  In summary, there is space for both fora and the panel noted that certainly from a user perspective, competition and choice could only be positive.

The last aspect concerning the future of ADR which the panel considered was: the Prague Rules and whether they will lead to increased efficiencies in arbitration.

The Rules are intended to be an alternative to the well-known IBA Rules on the Taking of Evidence in International Arbitration (IBA Rules) and to bridge the gap between common and civil law approaches.  The panel’s position was not too optimistic.  Neither document production nor the taking of witness evidence are likely to be more efficient under the Prague Rules and the costs of arbitration proceedings are unlikely to reduce.  This is so because the Prague Rules provide a framework and do not exist in a vacuum; in many respects the level of efficiency and the nature of document production is driven more by the arbitrator.  In the panel’s view, rather than a new set of rules, it would be more useful to increase the pool of arbitrators  and even better, arbitrators that are more active!  The panel shared four examples as to why in its view the Prague Rules would not deliver efficiencies.  I) there is a conflict between article 2.1 which requires that the arbitral tribunal “shall” convene a case management conference “without any unjustified delay,” and the requirement in article 2.2 that the arbitral tribunal “shall” clarify at that same case management conference, undisputed / disputed facts and the legal grounds of the parties’ respective cases (among others). Indeed, experience shows that it would be inefficient (perhaps impossible) to clarify disputed and undisputed facts or legal positions on the basis of a Request for Arbitration and Answer to the Request since these typically do not contain sufficient detail.  II) article 4.2 on documentary evidence discourages document production but the rest of the provisions in the same section retreat from this position.  III) with respect to fact witnesses, articles 5.2 and 5.3 empower arbitrators to make determinations about calling witnesses but article 5.7 then rather diminishes that power by providing that if a party insists on calling a witness whose statement has been submitted by the other party, the arbitral tribunal should call the witness to testify at the hearing.  Finally, iv) in respect of experts, article 6.1 appears to make tribunal-appointed experts the default rule.  However article 6.5 states that a party may nonetheless submit a report from an expert appointed by that party.  Given that in practice many tribunals hear only party-appointed experts, the Prague Rules’ regime is likely to lead to arbitrations with both tribunal-appointed and party-appointed experts which will increase the volume of the parties’ submission, hearing time, and inevitably costs.

The future of ADR is in some respects uncertain (Brexit being an example) but at the same time full of interesting challenges and novelties.

“Preparing for the Robo-Revolution”

The second panel of the morning was similarly looking to the future but this time with a legal-tech focus.  The panel was moderated by Javier Fernández-Samaniego (Samaniego Law) and the panelists were: Ulyana Bardyn (Dentons US LLP), Diana Bowman (VINCI Energies), Sarah Ellington (DLA Piper) and Ralph Lindbäck (Wärtsila Corporation).

Should ADR practitioners be concerned about robots? Or do we consider that robots and computer arbitrators are still in the realm of science fiction?

To answer this question, the panel started by looking at the state and use of legal-tech today.  Certain types of dispute and several aspects of dispute management can be automated and in fact there are already automated tools deployed to handle routine and administrative tasks.  EBay was cited as an example, as it uses algorithms to generate decisions in e-commerce disputes.  Currently, automation is however mostly applied in low value disputes rather than complex cases. Whilst appropriate deployment of automated tools can bring benefits in terms of speed and accuracy, the panel noted that it also carries disadvantages and has its limitations.  For instance, it is not necessarily clear how due process will be respected if a computer arbitrator presides in an arbitration, or how algorithms could be created and comply with the confidentiality of arbitral proceedings, or how the parties would know how to pick the right algorithms for their dispute.  One significant limitation highlighted by the panel was the inescapable fact that disputes involve human beings and one cannot automate the relationship management aspect of dispute resolution!  Even if artificial intelligence were able to accurately predict the verdict in a dispute, some litigants simply want their day in court or their day in arbitration, an experience that no robot can satisfy.

Notwithstanding the challenges, law firms are preparing for the robot revolution and some have already achieved significant milestones in this respect. Law firm practitioners on the panel provided real insights into the approaches taken by their respective organizations.  Ulyana Bardyn shared with the audience some of Dentons’ leading efforts in this space including its collaborative innovation platform “Nextlaw Labs”; various programmes focused on case management enabling clients to see spending in real time, or assisting clients with finding the best pro bono help available; and the “Libryo platform” which aims to simplify legal complexity by providing a curated collection of all laws relevant to specific business sectors enabling lawyers to understand their organisation’s legal obligations in any given situation.

Sarah Ellington reported on DLA Piper’s own investments in technology and elaborated on three of the DLA tools, all of which are aimed at dispute avoidance.  A first tool is a guided pathway app geared to IT outsourcing projects and intended for commercial managers, it contains questions about project progress and status and produces a report with red flags if problems are detected.  The second is a virtual secondment tool which enables businesses to submit questions and have a response within 24 hours.  Finally, the firm has an immersive business simulation, essentially a training tool, geared toward infrastructure projects where users can engage in a facilitated session where they take on a particular role within a simulated project.

These tools are impressive from the lawyers’ perspective.  How is the business community reacting to this technology assisting their counsel?  Corporate counsels on the panel all agreed that dispute resolution should be looked upon as a value stream with a significant focus on dispute avoidance.  To reach this goal and develop successful tools, collaboration between law firms and their clients is key.  That is all the more relevant as the business community is making its own progresses in the digital arena.  Many businesses are entering into collaborations, partnerships and campus initiatives – e.g., sandbox environments where universities, startups and investors can come together to innovate– are growing.  Dispute resolution though is not always part of the picture. Would it ever be possible to predict that a dispute was coming?  In certain sectors, that Holy Grail may not be too far off.  As Diana Bowman described, VINCI Energies already attempts to obtain information about events that occur on site and shares it with the back office in real time.  With good record keeping and quality information there may be opportunities to both predict and resolve issues early before a dispute escalates.

Shifting gears slightly, the panel touched on another technology hot topic: cyber security. Cyber attacks are a significant and rapidly evolving peril for today’s businesses but the levels of security deployed, particularly in the arbitration field, varies significantly between, for example, sole practitioners and top tier international law firms.  Regardless of size, all can fall victim to an attack.  Speaking from experience, Sarah Ellington shared some of the lessons learned after DLA Piper suffered from the NotPetya malware attack in June 2017 resulting in all the firm’s IT systems globally being taken offline. The risks are real and the consequences of an attack can be devastating.  To cope with a potential problem, it is fundamental to have: an up-to-date business continuity plan including practical solutions for work continuation, a clear communication protocol, emergency contact groups, back up email, calendar and document management systems.

The digital revolution has arrived although not necessarily in all legal departments! In some of the most sophisticated companies the legal department does not even have a suite of templates.  Readers of this blog, as the audience at the Congress, are encouraged to think about the digital revolution as a wave: do you want to be bowled over by it or do you choose to ride it on a surf board?

Stay tuned for part II…

 

Vanessa Alarcon Duvanel is an attorney admitted to practice in New York and Switzerland and specializing in international arbitration. She is based in Geneva and serves as the Secretary to the European Advisory Board.

Kathleen Fadden is a legal consultant and member of the CPR’s European Advisory Board.

 

New Clear and Unmistakable Outcome Exception to the Old Clear and Unmistakable Rule? (Part II)

loreejrII

By Philip J. Loree Jr.

Part I of this post discussed how the Second and Fifth Circuits, in  Metropolitan Life Ins. Co. v. Bucsek, ___ F.3d ___, No. 17-881, slip op. (2d Cir. Mar. 22, 2019), and 20/20 Comms. Inc. v. Lennox Crawford, ___ F.3d ___, No. 18-10260 (5th Cir. July 22, 2019), suggest a trend toward what might (tongue-in-cheek) be called a “Clear and Unmistakable Outcome Exception” to the First Options Reverse Presumption of Arbitrability (a/k/a the “Clear and Unmistakable Rule”).

Under this Clear and Unmistakable Outcome Exception to the Clear and Unmistakable Rule, courts consider the merits of an underlying arbitrability issue as part of their analysis of whether the parties clearly and unmistakably agreed to arbitrate arbitrability issues.

But the Clear and Unmistakable Outcome Exception runs directly counter to the U.S. Supreme Court’s decision in Schein v. Archer & White Sales, Inc., 586 U.S. ___, 139 S. Ct. 524 (January 8, 2019), and thus contravenes the Federal Arbitration Act as interpreted by Schein. 139 S. Ct. at 527-28, 529-31.

This Part II analyzes and discusses how Met Life and 20/20 Comm. effectively made an end run around Schein and considers what might have motivated those Courts to rule as they did.

Making an End Run Around Schein?

When, prior to 20/20 Comm. we wrote about Met Life, we said it “an important decision because it means in future cases where parties have not expressly agreed to arbitrate arbitrability questions, but have agreed to a very broad arbitration agreement, the question whether the parties’ have nevertheless clearly and unmistakably agreed to arbitrate arbitrability questions may turn, at least in part, on an analysis of the merits of the arbitrability question presented.” (See here. )

But after the Fifth Circuit decided 20/20 Comm. this July, in comments we made to Russ Bleemer, Editor of Alternatives, the Newsletter of the International Institute for Conflict Prevention & Resolution (“CPR”)—which were reproduced with our consent in Mr. Zhan Tze’s CPR Speaks blog article about 20/20 Comm. (here)—we expressed the belief that the Fifth Circuit was (whether intentionally or unintentionally) making an end run around Schein, effectively creating an exception to the Clear and Unmistakable Rule.

After analyzing 20/20 Comm. and comparing it to the Second Circuit’s Met Life decision, we concluded that the Second Circuit’s decision also ran counter to Schein.

Schein’s Abrogation of the “Wholly Groundless Exception” to the Clear and Unmistakable Rule

In Schein the U.S. Supreme Court abrogated the so-called “wholly groundless exception” to the Clear and Unmistakable Rule. Prior to Schein certain courts, including the Fifth Circuit, held that even when parties clearly and unmistakably agreed to arbitrate arbitrability questions, courts could effectively circumvent the parties’ agreement and decide for itself arbitrability challenges that it determined were “wholly groundless.”

The rationale Schein used to jettison the “wholly groundless exception” to the Clear and Unmistakable Rule is incompatible with the rationales the Second and Fifth Circuit used to support their decisions in Met Life and 20/20 Comm.

Under FAA Section 2, the Schein Court explained, “arbitration is a matter of contract, and courts must enforce arbitration contracts according to their terms.” Schein, 139 S. Ct. at 529 (citation omitted). When those contracts delegate arbitrability questions to an arbitrator, “a court may not override the contract[,]” and has “no power to decide the arbitrability issue.” 139 S. Ct. at 529. That is so even where a Court “thinks that the argument that the arbitration agreement applies to a particular dispute is wholly groundless.” 139 S. Ct. at 529.

Schein explained that its conclusion was supported not only by the FAA’s text, but also by U.S. Supreme Court precedent. Citing and quoting cases decided under Section 301 of the Labor Management and Relations Act, the Court explained that courts may not “‘rule on the potential merits of the underlying’ claim that is assigned by contract to an arbitrator, ‘even if it appears to the court to be frivolous[,]’” and that “[a] court has “‘no business weighing the merits of the grievance’” because the “‘agreement is to submit all grievances to arbitration, not merely those which the court will deem meritorious.’” 139 S. Ct. at 529 (quoting AT&T Technologies, Inc. v. Communications Workers, 475 U.S. 643, 649–650 (1986) and Steelworkers v. American Mfg. Co., 363 U.S. 564, 568 (1960)).

This “principle,” said the Schein Court, “applies with equal force to the threshold issue of arbitrability[]”—for “[j]ust as a court may not decide a merits question that the parties have delegated to an arbitrator, a court may not decide an arbitrability question that the parties have delegated to an arbitrator.” 139 S. Ct. at 530.

Exception to Clear and Unmistakable Rule? Why the Second and Fifth Circuit Decisions Conflict with Schein

Both the Second Circuit and Fifth Circuit decided that the parties before them did not clearly and unmistakably agree to arbitrate arbitrability because each Court believed that there was not even a barely colorable basis for a court or an arbitrator to find that the underlying dispute should be submitted to arbitration. In other words, both courts focused on contractual provisions governing the merits of the arbitrability dispute rather than confining their analysis to the terms of the contract dealing directly with whether the parties clearly and unmistakably agreed to arbitrate arbitrability.

In Met Life the Court decided the merits of the underlying arbitrability issue before analyzing whether the provisions of the contract directly pertinent to the arbitration of arbitrability did or did not clearly and unmistakably delegate arbitrability to the arbitrators. The Court quite correctly found it implausible that the parties agreed to arbitrate a dispute that arose years after one of the parties had left the NASD and was not a member of FINRA.

But that was a conclusion about the merits of the arbitrability dispute, not about whether the parties clearly and unmistakably agreed to arbitrate arbitrability disputes. The Clear and Unmistakable Rule turns solely on whether the parties clearly and unmistakably delegated arbitrability questions to the arbitrator, irrespective of what the merits of those arbitrability questions may be.

In 20/20 Comm. the Court’s focus was on the parties’ broad class arbitration waiver. Class arbitration waivers are ordinarily dispositive of the merits of whether the parties consented to class arbitration, but the class arbitration waiver in 20/20 Comm., like most or all others we’ve seen, says nothing about who decides whether or not the parties consented to class arbitration.

Had the Fifth Circuit not focused on the class arbitration waiver, and instead on the three provisions directly relating to arbitrability, then it could have easily found that the parties clearly and unmistakably delegated class arbitration consent issues to the arbitrator.

The so-called “exception language” in those provisions (see Part I, here) was quite beside the point. There is nothing “inconsistent” with an arbitrator, rather than a court, deciding the effect of the class arbitration waiver, no matter how clear it may be that the outcome will, or at least should, be an arbitral determination that the parties did not consent to class arbitration.

Exception to Clear and Unmistakable Rule?Second Circuit Attempted to Distinguish Schein, but Fifth Circuit did not

The Second Circuit articulated the reasons it believed that Schein did not foreclose its examination of the merits of the arbitrability issue before it, but the Fifth Circuit did not address Schein.

The Second Circuit said “[t]he point of the [Schein] opinion was that, where the parties have agreed to submit arbitrability to arbitration, courts may not nullify that agreement on the basis that the claim of arbitrability is groundless.” Met Life, slip op. at 24 (emphasis in original). The Court said it “reject[s] [A’s] claim for arbitration of arbitrability not because” it considers the “claim of arbitrability” to be “groundless[,]” but “because, upon consideration of all evidence of the intentions of the arbitration agreement, including the groundlessness of [A’s] claim of arbitrability, the agreement does not clearly and unambiguously provide for arbitration of the question of arbitrability.” Met Life, slip op. at 25. That “reasoning is based on the parties’ contract, and not based on any exception to what the parties have contracted for.” Met Life, slip op. at 25.

The Fifth Circuit might have made the same or a similar argument, but said nothing about whether it thought its decision was consistent with Schein.

While the Second Circuit’s reasoning was theoretically sound, it doesn’t hold up in practice. Apart from questions concerning the existence of the contract, the merits of most, if not all, arbitrability questions turn in large part on the language of the parties’ contract. That was certainly the case in both Met Life and 20/20 Comm.

Under the reasoning of those cases, however, the language directly relating to the question whether the parties clearly and unmistakably agreed to arbitrate arbitrability must be viewed in conjunction with the language of the contract bearing on the merits of the arbitrability dispute. If the language pertinent to the merits of the arbitrability issue suggests that the parties did not agree to arbitrate the dispute (or did not consent to class arbitration), then under the Second and Fifth Circuits’ reasoning, that conclusion weakens (or eliminates) the inference that the parties clearly and unmistakably agreed to arbitrate arbitrability.

Met Life and 20/20 Comm. Contravene the U.S. Supreme Court’s Decision in Schein

The Met Life/20-20 Comm. analytical regime effectively revives—and potentially might even expand the scope of—the “wholly groundless exception” that the U.S. Supreme Court laid to rest in Schein. Remember that disputes about arbitrability of arbitrability can be analytically broken down into at least four separate questions: (a) what the dispute on the merits is; (b) does that dispute raise a question of arbitrability, which is ordinarily decided by the court; (c) if so, did the parties clearly and unmistakably agree to arbitrate arbitrability disputes (i.e, does the Clear and Unmistakable Rule apply); and (d) what is the outcome of the dispute on the merits that the proper decisionmaker should reach once he or she decides it?

The Clear and Unmistakable Rule is concerned only with question (c), above, that is, did the parties clearly and unmistakably agree to arbitrate arbitrability disputes? The “wholly groundless exception” to the Clear and Unmistakable Rule—and the analytical regime imposed by the Second and Fifth Circuits—focuses not only on  question (c), above, but simultaneously considers question (d), that is, what is the outcome on the dispute on the merits that the proper decisionmaker should reach?

Assuming the dispute on the merits is a question of arbitrability (as was the case in Schein, Met Life, and 20/20 Comm.), if the provisions of the parties’ agreement suggest that there is only one proper outcome that a decisionmaker should reach on the merits of the arbitrability dispute—the subject of question (d), above— then a Court following Met Life and 20/20 Comm. would be more chary about concluding the parties clearly and unmistakably agreed to arbitrate arbitrability—the subject of question (c), above.

Schein forecloses any consideration of the merits of the arbitrability issue (question (d), above), limiting the scope of the Court’s analysis to whether the parties’ clearly and unmistakably agreed to arbitrate arbitrability (question (c), above).

Schein explains that, if the parties clearly and unmistakably agree to arbitrate arbitrability disputes, then courts should direct the parties to arbitrate the arbitrability issue. Just as it is with any other arbitrable issue, judicial review is postponed until the final award stage, and is limited to the grounds enumerated by Section 10 of the FAA, including manifest disregard of the agreement under Section 10(a)(4), and, in Circuits which recognize it (such as the Second—but not the Fifth—Circuit) manifest disregard of the law.

In Schein the proponent of the “wholly groundless exception” argued that the “back-end judicial review” available if an arbitrator “exceeds his or her powers” impliedly authorizes courts to determine that an arbitrability question is “wholly groundless” and obviates the need to submit the arbitrability question to arbitration. Schein, 139 S. Ct. at 530. But the Supreme Court said “[t]he dispositive answer to [the “wholly groundless exception” proponent’s] §10 argument is that Congress designed the Act in a specific way, and it is not our proper role to redesign the statute.”  Schein, 139 S. Ct. at 530.

The Schein Court further explained that acceptance of the “wholly groundless exception” proponent’s “argument would mean. . . that courts presumably also should decide frivolous merits questions that have been delegated to an arbitrator.” But, said the Supreme Court, “[we] have already rejected that argument: When the parties’ contract assigns a matter to arbitration, a court may not resolve the merits of the dispute even if the court thinks that a party’s claim on the merits is frivolous. So, too, with arbitrability.” 139 S. Ct. at 530 (citation omitted).

Under Schein the proper course for the Second and Fifth Circuits was to determine whether the parties clearly and unmistakably delegated arbitrability issues to the arbitrators without determining or analyzing the merits of those underlying arbitrability issues. If the answer was “yes,” then the Courts should have directed the arbitrators to decide those arbitrability questions.

If the arbitrators, after having decided those underlying arbitration issues, decided that the issues were arbitrable, then the arbitration opponents could challenge them as being in manifest disregard of the contract (and, in the Second Circuit, perhaps also in manifest disregard of the law).

But rather than let the arbitration and post-award review process run its course, the Second and Fifth Circuit took it upon themselves to decide arbitrability issues that the parties clearly and unmistakably agreed to submit to arbitration. Met Life and 20/20 Comm. cannot be meaningfully squared with Schein.

What Might have Motivated Met Life and 20/20 Comm. Courts to Rule the way they did?

While we respectfully believe that Met Life and 20/20 Comm. are inconsistent with Schein, it would be unfair not to acknowledge that the very able and experienced judges who decided those cases were faced with unusual circumstances that would presumably be of concern to many or most other fair-minded jurists. In Met Life a FINRA arbitration claim was made against an entity that had never been a member of FINRA, and had not been a member of the NASD, FINRA’s predecessor, for several years. The claim itself arose out of conduct that took place after the entity had left the NASD.

The Second Circuit concluded the dispute was not arbitrable because FINRA had no regulatory interest in the dispute, but apparently there were no FINRA rules, or terms in the parties’ agreement, which addressed directly the unusual arbitrability question the case presented. And prior Second Circuit precedent suggested that, under the Clear and Unmistakable Rule, the breadth of the parties’ arbitration agreement, together with a provision of the applicable arbitration rules, constituted clear and unmistakable evidence of an intent to arbitrate arbitrability.

The Second Circuit might have been legitimately concerned about whether a FINRA arbitrator would necessarily reach the same conclusion as the Court did, and if so, whether the award could be vacated if the arbitrator got it wrong. That would mean that the arbitration opponent might have been forced to arbitrate not only the underlying arbitrability issue, but also the entire dispute on the merits, before there was any opportunity for FAA Section 10 review.

If the award was ultimately vacated, the parties would be forced to incur a great deal of time and expense vindicating their rights. But if the award was not, and could not be, vacated, and the arbitration opponent lost on the merits, then the arbitration opponent would effectively have been forced to arbitrate a dispute that the Second Circuit strongly believed the parties never agreed to arbitrate.

“Hard cases,” the adage goes, “make bad law.”

The Fifth Circuit might have had similar reservations about the case before it, although the stakes were probably not as high as they were in Met Life. The contract’s incorporation of AAA employment arbitration rules, which brought into play the AAA Supplementary Rules for Class Arbitration, meant that the arbitrator would have been empowered to make a “Clause Construction Award,” which the parties are deemed to agree is a final award subject to judicial review under Section 10.

There was no reason to think that the briefing, argument, and decision of the Clause Construction issue, and the rendering of the Clause Construction Award, would take a great deal of time, given how narrow the issue was, and given the clear class arbitration waiver. And FAA Section 10 review would have been available once the Clause Construction Award was made.

Thus, had the Fifth Circuit compelled arbitration of the class arbitration consent issue, and had the arbitrator made a ruling in favor of class arbitration consent by ignoring the class arbitration waiver (or at least by not even arguably interpreting it), FAA Section 10 review would be available in relative short order, and certainly long before the parties were forced to engage in a class arbitration that could drag on for several years before Section 10 review could take place.

But the Fifth Circuit might nevertheless have been very concerned that a class arbitration opponent who had taken the time to include a broad class arbitration waiver in its contract, the enforceability of which is not really open to legitimate question in light of the many U.S. Supreme Court decisions that have closed state- and federal-law enforcement loopholes, should be forced to engage in the several months of arbitration and litigation necessary to vindicate its legitimate, bargained-for right to arbitrate on a bilateral basis only. Even apart from the extra costs imposed on the class arbitration opponent, compelling arbitration would have virtually guaranteed that within a relatively short period, the district court and, possibly also the Fifth Circuit, would again have to devote substantial time and effort into matters that were the subject of the consolidated appeal in 20/20 Comm.

Those concerns about economic inefficiency and judicial economy are unquestionably legitimate. But Schein, as we’ve seen, has already said that the courts do not, in the name of public policy or judicial economy, have the power to amend or alter the post-award-review-only procedures mandated by the FAA.

And the class arbitration opponent, a sophisticated business entity, could have drafted its contract more precisely, providing that notwithstanding anything to the contrary, disputes about class arbitration consent, including the application and interpretation of the class arbitration waiver, must be decided by courts, not arbitrators. In fact, other class arbitration opponents would be well advised to consider carefully whether they might find themselves in a situation where they are forced to arbitrate and litigate in the district court (and perhaps in an appellate court) for several months or more court, and if so, to take appropriate steps to mitigate this risk by more precisely drafting their contracts’ class arbitration waivers.

***

 

Philip J. Loree Jr. is a co-founder and partner at law firm, Loree and Loree. This post was originally published on the firm’s blog, Loree Reinsurance and Arbitration Forum, and has been republished with permission here.

New Clear and Unmistakable Outcome Exception to the Old Clear and Unmistakable Rule? (Part I)

loreejrIIBy Philip J. Loree Jr.

Arbitration law is replete with presumptions and other rules that favor one outcome or another depending on whether one thing or another is or is not clear and unmistakable. Put differently, outcomes often turn on the presence or absence of contractual ambiguity.

There are three presumptions that relate specifically to questions arbitrability, that is, whether or not an arbitrator or a court gets to decide a particular issue or dispute:

  1. The Moses Cone Presumption of Arbitrability: Ambiguities in the scope of the arbitration agreement itself must be resolved in favor of arbitration. Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983). Rebutting this presumption requires clear and unmistakable evidence of an intent to exclude from arbitration disputes that are otherwise arguably within the scope of the agreement.
  2. The First Options Reverse Presumption of Arbitrability:  Parties are presumed not to have agreed to arbitrate questions of arbitrability unless the parties clearly and unmistakably agree to submit arbitrability questions to arbitration. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 942-46 (1995)
  3. The Howsam/John Wiley Presumption of Arbitrability of Procedural Matters: “‘[P]rocedural’ questions which grow out of the dispute and bear on its final disposition are presumptively not for the judge, but for an arbitrator, to decide.” Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002) (quoting John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 557 (1964)) (internal quotation marks omitted). To rebut this presumption, the parties must clearly and unmistakably exclude the procedural issue in question from arbitration.

These presumptions usually turn solely on what the contract has to say about the arbitrability of a dispute, not on what the outcome an arbitrator or court would—or at least should—reach on the merits of the dispute.

Some U.S. Circuit Courts of Appeal, including the Fifth Circuit, recognized an exception to the First Options Reverse Presumption of Arbitrability called the “wholly groundless exception.” Under that “wholly groundless exception,” courts could decide “wholly groundless” challenges to arbitrability even though the parties have clearly and unmistakably delegated arbitrability issues to the arbitrators. The apparent point of that exception was to avoid the additional time and expense associated with parties being required to arbitrate even wholly groundless arbitrability disputes, but the cost of the exception was a judicial override of the clear and unmistakable terms of the parties’ agreement to arbitrate.

Earlier this year the U.S. Supreme Court in Schein v. Archer & White Sales, Inc., 586 U.S. ___, slip op. at *1 (January 8, 2019) abrogated the “wholly groundless” exception. Schein, slip op. at *2, 5, & 8. “When,” explained the Court, “the parties’ contract delegates the arbitrability question to an arbitrator, the courts must respect the parties’ decision as embodied in the contract.” Schein, slip op. at 2, 8. The “wholly groundless” exception, said the Court, “is inconsistent with the statutory text and with precedent[,]” and “confuses the question of who decides arbitrability with the separate question of who prevails on arbitrability.” Schein,slip op. at 8.

But since Schein both the Second and Fifth Circuits have decided First Options Reverse Presumption of Arbitrability cases by effectively conflating the question of who gets to decide an arbitrability issue with the separate question of who should prevail on the merits of that arbitrability issue. The Courts in both cases determined whether the parties clearly and unmistakably agreed to arbitrate arbitrability questions by considering, as part of the clear and unmistakable calculus, the merits of the arbitrability question.

These two cases suggest a trend toward what might (tongue-in-cheek) be called a “Clear and Unmistakable Outcome Exception” to the First OptionsReverse Presumption of Arbitrability. But the problem with that trend is that it runs directly counter to the Supreme Court’s decision in Schein, and thus contravenes the Federal Arbitration Act as interpreted by Schein.

In Part I of this post we discuss the Second Circuit and Fifth Circuit decisions. In Part II we analyze and discuss how— and perhaps why — those courts effectively made an end run around Schein.

Clear and Unmistakable Rule: The Second Circuit’s Met Life Decision

We first wrote about the Second Circuit decision, Metropolitan Life Ins. Co. v. Bucsek, ___ F.3d ___, No. 17-881, slip op. (2d Cir. Mar. 22, 2019), in an April 3, 2019 post. In Met Life the Second Circuit was faced with an unusual situation where party A sought to arbitrate against party B, a former member of the Financial Industry Regulatory Authority (“FINRA”)’s predecessor, the National Association of Securities Dealers (“NASD”), a dispute arising out of events that occurred years after party B severed its ties with the NASD.

The district court rejected A’s arguments, ruling that: (a) this particular arbitrability question was for the Court to decide; and (b) the dispute was not arbitrable because it arose years after B left the NASD, and was based on events that occurred subsequent to B’s departure. The Second Circuit affirmed the district court’s judgment.

After the district court decision, but prior to the Second Circuit’s decision, the U.S. Supreme Court decided Schein, which—as we explained earlier—held that even so-called “wholly-groundless” arbitrability questions must be submitted to arbitration if the parties clearly and unmistakably delegate arbitrability questions to arbitration. Schein, slip op. at *2, 5, & 8.

The Second Circuit was faced a situation where a party sought to arbitrate a dispute which clearly was not arbitrable, but in circumstances under which prior precedent suggested that the parties clearly and unmistakably agreed to arbitrate arbitrability.

To give effect to the parties’ probable intent not to arbitrate before the NASD (or its successor, FINRA) arbitrability questions that arose after B left the NASD, the Second Circuit apparently believed it had no choice but to distinguish and qualify its prior precedent, and to attempt to do so without falling afoul of the Supreme Court’s recent pronouncement in Schein.

That required the Second Circuit to modify, to at least some extent, the contractual interpretation analysis in which courts within the Second Circuit are supposed to engage to ascertain whether parties “clearly and unmistakably” agreed to arbitrate arbitrability in circumstance where they have not specifically agreed to arbitrate such issues.

Met Life modified that analysis to mean that in cases where parties have not expressly agreed to arbitrate arbitrability questions, but have agreed to a very broad arbitration agreement, the question whether the parties’ have nevertheless clearly and unmistakably agreed to arbitrate arbitrability questions may turn, at least in part, on an analysis of the merits of the arbitrability question presented.

Effectively articulating a new interpretative rule necessitated by the unusual case before it, the Court said “what the arbitration agreement says about whether a category of dispute is arbitrable can have an important bearing on whether it was the intention of the agreement to confer authority over arbitrability on the arbitrators.” Slip op. at 13-14.

To that end, said the Court, “broad language expressing an intention to arbitrate all aspects of all disputes supports the inference of an intention to arbitrate arbitrability, and the clearer it is from the agreement that the parties intended to arbitrate the particular dispute presented, the more logical and likely the inference that they intended to arbitrate” arbitrability questions.  Slip op. at 12-13 (citations and quotations omitted).

The contrapositive, the court explained, was also true (at least conditionally): “the clearer it is that the terms of an arbitration agreement reject arbitration of the dispute, the less likely it is that the parties intended to be bound to arbitrate the question of arbitrability, unless they included clear language so providing . . . .” Slip op. at 13. But, added the Court, “vague provisions as to whether the dispute is arbitrable are unlikely to provide the needed clear and unmistakable inference of intent to arbitrate arbitrability.” Slip op. at 13.

What the Court appears to be saying is that where the parties have not expressly, clearly and unmistakably expressed their intent to arbitrate arbitrability questions, the strength of the inference of clear and unmistakable intent to arbitrate arbitrability is inversely proportional to how clear it is that the terms of the agreement reject arbitration of the dispute.

In other words, if the terms of the agreement strongly suggest that a court, rather than an arbitrator, should resolve the dispute on its merits, then the strength of the inference of clear and unmistakable intent to arbitrate the arbitrability of the dispute will be weaker. But, all else equal, if the terms of the agreement suggest that an arbitrator rather than a court should resolve the dispute on its merits, then the inference of clear and unmistakable intent to arbitrate arbitrability of the dispute will be stronger.

The Fifth Circuit’s 20/20 Comm. Decision

A few months after Met Life was decided, on July 22, 2019, the United States Court of Appeals for the Fifth Circuit decided 20/20 Comms. Inc. v. Lennox Crawford, ___ F.3d ___, No. 18-10260 (5th Cir. July 22, 2019). Although 20/20 Comms did not cite Met Life, it engaged in what might be roughly described as a simplified version of the Second Circuit’s reasoning in that case.

Hew Zhan Tze, an International Institute for Conflict Resolution and Prevention (“CPR”) summer intern has published— under the very able tutelage of our friend Russ Bleemer, a New York attorney who is the editor of CPR’s Alternatives, an international ADR newsletter published by John Wiley & Sons, Inc.—a well-written and insightful article about 20/20 Comm.in the CPR Speaks blog. (A shout-out also to CPR’s Tania Zamorsky, who is the blog master of CPR Speaks.)

Mr. Zhan Tze’s excellent article discusses the case and quotes some commentary I provided by email to Russ about the case, as both Russ and I were quite intrigued by the decision. You can read that article in the CPR Speaks Blog here.

Zhan Tze’s article thoroughly discusses the background of the case, its reasoning, and holding. (See here.) The case involved consent to class arbitration.

There were two questions before the Court: (a) whether class arbitration consent was a question of arbitrability for the Court; and (b) if so, whether the parties, under the First Options Reverse Presumption of Arbitrability, had clearly and unmistakably agreed to submit class arbitration consent questions to the arbitrator.

As to the first issue, the Court determined that consent to class arbitration was a question of arbitrability, thereby joining the Fourth, Sixth, Seventh, Eighth, Ninth, and Eleventh circuits, which have likewise concluded that class arbitration consent presents a question of arbitrability. See Del Webb Cmtys., Inc. v. Carlson, 817 F.3d 867, 877 (4th Cir. 2016); Reed Elsevier, Inc. ex rel. LexisNexis Div. v. Crockett, 734 F.3d 594, 599 (6th Cir. 2013); Herrington v. Waterstone Mortg. Corp., 907 F.3d 502, 506-07 (7th Cir. 2018); Catamaran Corp. v. Towncrest Pharmacy, 864 F.3d 966, 972 (8th Cir. 2017); Eshagh v. Terminix Int’l Co., L.P., 588 F. App’x 703, 704 (9th Cir. 2014) (unpublished); JPay, Inc. v. Kobel, 904 F.3d 923, 935-36 (11th Cir. 2018).

As respects the second issue—whether the parties clearly and unmistakably agreed to arbitrate class-arbitration consent issues— the Court held that the parties did not clearly and unmistakably so agree.

The parties’ contract contained three provisions pertinent to arbitrability questions:

1.      “If Employer and Employee disagree over issues concerning the formation or meaning of this Agreement, the arbitrator will hear and resolve these arbitrability issues.”

2.      “The arbitrator selected by the parties will administer the arbitration according to the National Rules for the Resolution of Employment Disputes (or successor rules) of the American Arbitration Association (‘AAA’) except where such rules are inconsistent with this Agreement, in which case the terms of this Agreement will govern.” (emphasis added)

3.      “Except as provided below, Employee and Employer, on behalf of their affiliates, successors, heirs, and assigns, both agree that all disputes and claims between them . . . shall be determined exclusively by final and binding arbitration.” (emphasis added)

But the parties’ contract also contained a broad class arbitration waiver, which provided:

[T]he parties agree that this Agreement prohibits the arbitrator from consolidating the claims of others into one proceeding, to the maximum extent permitted by law. This means that an arbitrator will hear only individual claims and does not have the authority to fashion a proceeding as a class or collective action or to award relief to a group of employees in one proceeding, to the maximum extent permitted by law.

(Emphasis added.)

The Court said that the first three provisions, “[d]ivorced from other provisions of the arbitration (most notably, the class arbitration bar). . . could arguably be construed to authorize arbitrators to decide gateway issues of arbitrability, such as class arbitration.” Slip op. at 8. As respects the second of the three, the incorporation by reference of the National Rules for the Resolution of Employment Disputes (or successor rules) of the AAA, the Court noted that “Rule 3 of the AAA Supplementary Rules for Class Arbitration provides that the arbitrator is empowered to determine class arbitrability.” Slip op. at 8. And, according to the Court, “the third provision states in broad terms that ‘all disputes and claims between them’ shall be determined by the arbitrator, language arguably capacious enough under this court’s previous rulings to include disputes over class arbitrability.” Slip op. at 8.

But the Court did not decide whether those “provisions, standing alone, clearly and unmistakably” required arbitration of the class arbitration consent issue, because the Court held that the class arbitration waiver foreclosed such a finding. Slip op. at 8, 6-7.

The court said “that this class arbitration bar operates not only to bar class arbitrations to the maximum extent permitted by law, but also to foreclose any suggestion that the parties meant to disrupt the presumption that questions of class arbitration are decided by courts rather than arbitrators.” Slip op. at 6-7. “[I]t is[,]” observed the Court, “difficult for us to imagine why parties would categorically prohibit class arbitrations to the maximum extent permitted by law, only to then take the time and effort to vest the arbitrator with the authority to decide whether class arbitrations shall be available.” Slip op. at 7.  “Having closed the door to class arbitrations to the fullest extent possible,” queried the Court rhetorically, “why would the parties then re-open the door to the possibility of class arbitrations, by announcing specific procedures to govern how such determinations shall be made?” Slip op. at 7.

Comparing the first three provisions “with the class arbitration bar at issue in this case, we conclude that none of them state with the requisite clear and unmistakable language that arbitrators, rather than courts, shall decide questions of class arbitrability.” Slip op. at 8.

Two of the provisions, said the Court, “include express exception clauses. . . , which “expressly negate any effect these provisions might have in the event they conflict with any other provision of the arbitration agreement—as they plainly do here in light of the class arbitration bar.” Slip op. at 9.

Even apart from “the exception clauses,” none of the three provisions “speak with any specificity to the particular matter of class arbitration.” Slip op. at 9. “[B]]y contrast[,]” said the Court, [t]he class arbitration bar. . . specifically prohibits arbitrators from arbitrating disputes as a class action, and permits the arbitration of individual claims only.” Slip op. at 9 (citations and quotations omitted).

Those three provisions “[a]ccordingly[]. . . do not clearly and unmistakably overcome the legal presumption—reinforced as it is here by the class arbitration bar—that courts, not arbitrators, must decide the issue of class arbitration.” Slip op. at 9.

In our next post we’ll analyze and discuss how Met Life and 20/20 Comm. effectively make an end run around Schein and what might have motivated those courts to rule as they did.

***

 

Philip J. Loree Jr. is a co-founder and partner at law firm, Loree and Loree. This post was originally published on the firm’s blog, Loree Reinsurance and Arbitration Forum, and has been republished with permission here.

Ready to Sign: The Singapore Convention, An International Mediation Treaty, Opens for Ratification

By Hew Zhan Tze

After years of negotiations, the Singapore Convention on Mediation last week reached the signature phase.

That means that countries around the globe can sign on, and ratify, a treaty designed to boost the use and support for mediation in cross-border transactions.

The convention is officially known as the United Nations Convention on International Settlement Agreements Resulting from Mediation, and is available at https://bit.ly/2YWbHKN.

On Aug. 7, more than 1,500 international delegates from 70 countries attended a Singapore signing ceremony.

A total of 46 countries–including the United States and China–signed the convention on the first day. (The full list is available from the United Nations at http://bit.ly/2ZPFGFl.)

The convention is a product of the efforts of the United Nations Commission on International Trade Law Working Group II to alleviate the difficulties of enforcing a cross-border settlement agreement reached from mediation. It can only come into effect after six months, and after three signatory countries ratify the treaty. See Article 14(1) of the Singapore Convention at the first link above.

Ratification is a signatory country’s domestic procedure where treaty approval is sought, and necessary legislation is enacted to give effect to the convention.

Generally, in the United States, a treaty can only be ratified by the president after receiving the advice and consent of the U.S. Senate. The Senate must pass a ratification resolution, requiring a two-thirds approval.  See U. S. Const. Art. II, § 2 (available at https://bit.ly/2zBgoge).

The Singapore Convention’s goals have been likened to a mediation version of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, best known as the New York Convention. (Available at http://bit.ly/2KHaa5W.)

The large number of initial signatories to the Singapore Convention appears to show a positive reception toward easing enforcement of a settlement agreement obtained from other similarly bound jurisdictions. This is in comparison to the 10 signatures received at the launch of the New York Convention six decades ago. The increase in numbers likely reflects an increased recognition of the effectiveness of ADR methods.

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More analysis on the Singapore Convention on Mediation will appear in the September Alternatives to the High Cost of Litigation, available soon at altnewsletter.com.

The author was a CPR Institute Summer 2019 intern.

 

Gov Cuomo Signs New Legislation Barring Use of Mandatory Arbitration to Resolve Workplace Discrimination and Harassment in New York State

By Anna Hershenberg

As expected, on Monday, August 12, 2019, Governor Cuomo signed new legislation that, among other things, purports to bar the use of mandatory arbitration to resolve discrimination and harassment cases in the workplace in New York state.

The prior version of this law, New York CPLR § 7515, which went into effect last year, aimed to prohibit mandatory arbitration of workplace sexual harassment claims only; this version expands the prohibition to claims of other types of discrimination.

In June, Judge Denise Cote (SDNY) found the prior version of  § 7515 to be preempted by the Federal Arbitration Act and therefore invalid. (Latif v. Morgan Stanley & Co. LLC et al. (S.D.N.Y. 2019) (available at http://bit.ly/2y9w6AL)) Her ruling should apply with equal force to the amended version of § 7515, at least with respect to interstate matters.

CPR covered this issue earlier this month on CPRSpeaks:

https://blog.cpradr.org/2019/08/01/update-legislatures-on-invalidating-pre-dispute-arbitration-agreements/

The full text of the newly enacted § 7515 is pasted below (revisions in blue).

Section 7515: Mandatory arbitration clauses; prohibited

(a) Definitions. As used in this section:

1. The term “employer” shall have the same meaning as provided in subdivision five of section two hundred ninety-two of the executive law.

2. The term “prohibited clause” shall mean any clause or provision in any contract which requires as a condition of the enforcement of the contract or obtaining remedies under the contract that the parties submit to mandatory arbitration to resolve any allegation or claim of an unlawful discriminatory practice of sexual harassment. discrimination, in violation of laws prohibiting discrimination, including but not limited to, article fifteen of the executive law.

3. The term “mandatory arbitration clause” shall mean a term or provision contained in a written contract which requires the parties to such contract to submit any matter thereafter arising under such contract to arbitration prior to the commencement of any legal action to enforce the provisions of such contract and which also further provides language to the effect that the facts found or determination made by the arbitrator or panel of arbitrators in its application to a party alleging an unlawful discriminatory practice based on sexual harassment in violation of laws prohibiting discrimination, including but not limited to, article fifteen of the executive law shall be final and not subject to independent court review.

4. The term “arbitration” shall mean the use of a decision making forum conducted by an arbitrator or panel of arbitrators within the meaning and subject to the provisions of article seventy-five of the civil practice law and rules.

(b) (i) Prohibition. Except where inconsistent with federal law, no written contract, entered into on or after the effective date of this section shall contain a prohibited clause as defined in paragraph two of subdivision (a) of this section.

(ii) Exceptions. Nothing contained in this section shall be construed to impair or prohibit an employer from incorporating a non-prohibited clause or other mandatory arbitration provision within such contract, that the parties agree upon.

(iii) Mandatory arbitration clause null and void. Except where inconsistent with federal law, the provisions of such prohibited clause as defined in paragraph two of subdivision (a) of this section shall be null and void. The inclusion of such clause in a written contract shall not serve to impair the enforceability of any other provision of such contract.

(c) Where there is a conflict between any collective bargaining agreement and this section, such agreement shall be controlling.

Anna Hershenberg is CPR’s Vice President of Programs and Public Policy

More Class: Fifth Circuit Sends Arbitrability to the Court, Not the Tribunal

By Hew Zhan Tze

The Fifth U.S. Circuit Court of Appeals recently held that class arbitrability is to be determined by the Court instead of the arbitrators in a class arbitration case.  20/20 Comms. Inc. v. Lennox Crawford, No. 18-10260 (5th Cir. July 22, 2019). The case appears to add a level of inquiry in the subject matter that may run counter to a U.S. Supreme Case earlier this year.

Several employees of 20/20 Communications, a marketing firm based in Fort Worth, Texas, filed individual arbitration claims against the employer. The arbitrator commenced a class arbitration despite an arbitration agreement contract clause prohibiting the consolidation of individual claims, “on the theory that the parties’ class arbitration bar is prohibited by federal law.”

Following the views of the Fourth, Sixth, Seventh, Eighth, Ninth and Eleventh Circuits, the Fifth Circuit held that where class arbitration is an issue, a legal presumption arises that the Court will determine the availability of class arbitration unless the arbitration agreement contained clear and unmistakable language to the contrary.

The Fifth Circuit, in a unanimous opinion written by Circuit Judge James C. Ho, reversed the decisions of two district courts. In one case, the district court held that the arbitration agreement authorized the arbitrator to determine class arbitrability instead of the court. See 20/20 Comms. Inc. v. Randall Blevins, No. 4:16-cv-00810-Y (N.D. Tex.) (Means, J.). In the other case, the district court held that the class arbitration bar was unenforceable under the National Labor Relations Act. See 20/20 Comms. Inc. v. Lennox Crawford, No. 4:17-cv-929-A (N.D. Tex.) (McBryde, J.).

The Fifth Circuit determined that class arbitrability is a gateway issue for the court. It rejected the employee’s arguments that the delegation provisions in the arbitration agreement clearly and unmistakably delegated the determination of class arbitrability to the arbitrator.

The circuit court said class arbitrability falls under the category of a gateway issue which would presumptively be determined by the courts because (i) the increased size and complexity of the dispute, (ii) the due process concerns that are raised and (iii) the privacy and confidentiality of the parties may be compromised.

While these factors point toward class arbitrability being a gateway issue, the appeals court stops short of elaborating on why arbitrators are not well-equipped to handle these concerns. An arbitrator could undertake these considerations and determine not to consolidate the individual claims.

Regardless, it means that the court could be involved despite the parties’ attempt to resolve the dispute via arbitration. Additionally, to the extent the employee can bargain, the individual may not reach an agreement with the employer to use the “clear and unmistakable” language sought by the courts to override the legal presumption that the court is to decide class arbitrability.

Having raised the legal presumption that class arbitrability is to be determined by the court, not the arbitrator, the court’s next task, according to the Fifth Circuit, would be to assess whether the arbitration agreement contained delegation provisions in clear and unmistakable language that would override the legal presumption. The circuits courts are currently split on whether traditional delegation provisions are sufficient to override this legal presumption.

The Arbitration Nation blog points out that in the Second, Tenth and Eleventh Circuits, traditional delegation provisions which submits any dispute to the arbitrator were held to be sufficient to overcome the presumption, citing Wells Fargo Advisors LLC v. Sappington, 884 F. 3d 392 (2nd Cir. 2018) and Spirit Airlines, Inc. v. Maizes, 899 F. 3d 1230 (11th Cir. 2018). See Henry Allen Blair, “The Fifth Circuit Weighs in About Who Decides Class Arbitrability,” Arbitration Nation (July 28) (available at http://bit.ly/2KqcIFu). It is noted that the Tenth Circuit held similarly in Dish Network L.L.C. v. Matthew Ray, 900 F.3d 1240 (10th Cir. 2018).

On the other hand, Blair’s Arbitration Nation post notes that the Third, Fourth, Sixth and Eighth Circuits concluded that notwithstanding traditional delegation provisions or provisions incorporating institutional rules which delegates the decision of class arbitrability to the arbitrator, the decision of class arbitrability still lies with the Court. See Opalinski v. Robert Half Intern Inc., 761 F. 3d 326 (3rd Cir. 2014); Dell Web Communities Inc. v. Carlson, 817 F.3d 867 (4th Cir. 2016); Reed Elsevier Inc. v. Crockett, 734 F. 3d 594 (6th Cir. 2013), and Catamaran Corp. v. Towncrest Pharmacy, 864 F. 3d 966 (8th Cir. 2017), among others.

In the Fifth Circuit Crawford opinion, typical delegation provisions were included in the arbitration provision. Interestingly, after a brief discussion of the delegation provisions at issue, the court stated that it ultimately need not make a conclusion on “[w]hether these provisions, standing alone, clearly and unmistakably empower the arbitrator to decide questions of class arbitrability.” Instead, the Court considered it sufficient to compare the class arbitration bar at issue with the delegation provisions to reach the conclusion that none of the provisions “state with the requisite clear and unmistakable language that arbitrators, rather than courts, shall decide questions of class arbitrability.”

The Fifth Circuit’s conclusion raises an important question: What language used in the arbitration agreement would be clear and unmistakable enough to overcome the legal presumption that it is the courts that will decide class arbitrability instead of the arbitrators when there is a contractual clause barring class arbitration?

“[T]here is tension in this decision,” notes Philip J. Loree Jr., of New York’s Loree & Loree, who closely watches class arbitration cases, “and I think the culprit is the Court’s ruling that the clarity of the class arbitration waiver should be considered as evidence that the parties did not clearly and unmistakably  intend arbitrators to decide arbitrability.”

Loree notes in an email, “Whether or not the class arbitration waiver is clear and unmistakable says nothing about who is supposed to interpret and apply the waiver. This, he notes, gives the impression that the Fifth Circuit is —perhaps unintentionally— making an end around this year’s U.S. Supreme Court rejection of the “wholly groundless” exception to the clear and unmistakable rule set out in Henry Schein, Inc. v. Archer And White Sales, Inc., 139 S.Ct. 524 (2019) (available at http://bit.ly/2YLDkWQ) (see Mark Kantor, “Implications of Henry Schein and New Prime US Supreme Court Decisions,” CPR Speaks (Jan. 22) (available at http://bit.ly/33d5nSo).

Loree notes that where an arbitrator ignores the parties’ clear and unmistakable class arbitration waiver, the award would presumably be vacated under Federal Arbitration Act Section 10(a)(4), following the Supreme Court’s decisions in Stolt-Nielsen S.A v. AnimalFeeds Int’l Corp., 130 S.Ct. 1758 (2010) and Oxford Health Plans LLC v. John Ivan Sutter, 133 S.Ct. 2064 (2013).

“But rather than allow that scenario to play itself out,” he continues, “the Fifth Circuit has effectively conflated the clarity of the contract on the merits issue (class arbitration consent) with the clarity of the contract on the issue of who gets to decide class arbitration consent.”

This, according to Loree, runs counter to the Supreme Court’s Schein decision.

* * *

The author is a CPR Institute summer intern.

 

Update: Legislatures on Invalidating Pre-Dispute Arbitration Agreements

By Andrew Garcia

A federal court has slowed the momentum by legislatures—in this case, New York state’s—to bar arbitration in employment cases. A New York U.S. District Court judge has struck down the application of a recent state law which allowed employees to avoid mandatory pre-dispute employment agreements to arbitrate sexual harassment claims.

The statute at issue, NYCPLR § 7515, originally passed and signed into law a year ago, aimed to void arbitration clauses in employment contracts that require the use of arbitration proceedings to resolve workplace sexual harassment claims in New York state. In June, the New York Senate and Assembly passed amendments to § 7515 that expanded this prohibition to agreements that sought to arbitrate all workplace discrimination claims.

This year’s bill, awaiting Gov. Andrew Cuomo’s expected signature (see http://bit.ly/2SKnH0c), was a victory for lawmakers like the sponsor, State Democratic Senator Alessandra Biaggi. (She wrote on Twitter on June 19: “6 months & 2 public hearings later, we passed #BiaggiBill S6577 to expand protections for survivors, & hold New York employers, agencies, & organizations liable for all forms of workplace sexual harassment and discrimination.” See @SenatorBiaggi.)

But any victories may be short-lived. A federal court found that the currently enacted version of § 7515 was preempted by the Federal Arbitration Act and therefore invalid about a week after the amendments passed both New York houses.

On June 26, U.S. District Court Judge Denise Cote issued an opinion that deemed a recently modified New York State law preempted by the Federal Arbitration Act.  Latif v. Morgan Stanley & Co. LLC et al., No. 18cv11528 – Document 52 (S.D.N.Y. 2019) (available at http://bit.ly/2y9w6AL). In Latif, the plaintiff filed a suit against his employer, alleging discrimination and sexual assault claims. At the beginning of his employment, Latif signed an offer letter that incorporated by reference Morgan Stanley’s CARE Arbitration Program Arbitration Agreement.

Judge Cote found that the application of § 7515 to invalidate the parties’ agreement to arbitrate Latif’s claims would be inconsistent with the FAA. The opinion states that § 7515 does not displace the FAA’s presumption that arbitration agreements are enforceable. Judge Cote did not address the viability of § 7515 in purely an intrastate matter where the FAA would not be implicated.

The recently passed amendments to § 7515 are part of a growing trend in state and federal legislatures to pass laws that ban pre-dispute arbitration agreements for sexual harassment claims and more. In 2018, the Maryland legislature passed the Disclosing Sexual Harassment in the Workplace Act, which prohibited employers from enforcing arbitration agreements for sexual harassment or retaliation claims. In Vermont, the legislature passed “An Act Relating to the Prevention of Sexual Harassment,”  which prohibited agreements that prevent an employee from filing a sexual harassment claim in court.

The states have moved faster than Congress, but there is no shortage of proposals at the federal level. In the current session, there have been at least 11 new bills introduced to amend the FAA, the Fair Labor Standards Act, or the National Labor Relations Act to prohibit most employment and consumer pre-dispute arbitration agreements.

Table 1: 116th Legislative Session Bills Pertaining to Arbitration (Senate = S; House = HR)

Bill Name Bill Number Sponsors Current Status
Forced Arbitration Injustice Repeal (FAIR) Act S. 610 Sen. Richard Blumenthal, D., Conn. 2/28/19: Introduced
H.R. 1423 Rep. Hank Johnson, D., Ga. 4/8/19: Referred to the Subcommittee on Antitrust, Commercial, and Administrative Law
Bringing an End to Harassment by Enhancing Accountability and Rejecting Discrimination (BE HEARD) in the Workplace Act S. 1082 Sen. Patty Murray, D. Wash. 4/9/19: Introduced
H.R. 2148 Rep. Katherine Clark, D. Mass. 5/3/19: Referred to the Subcommittee on the Constitution Civil Rights, and Civil Liberties
Restoring Justice for Workers Act S. 1491 Sen. Patty Murray D., Wash. 5/15/19: Introduced and referred to the Committee on Health, Education, Labor, and Pensions.
H.R. 2749 Rep. Jerrold Nadler, D., N.Y. 6/26/19: Referred to the Subcommittee on Antitrust, Commercial, and Administrative Law
Ending Forced Arbitration of Sexual Harassment Act H.R. 1443 Rep. Cheri Bustos, D. Ill. 4/8/19: Referred to the Subcommittee on Antitrust, Commercial, and Administrative Law
Restoring Statutory Rights and Interests of the States Act S. 635 Sen. Patrick Leahy, D., Vt. 2/28/19: Introduced
Preventing Risky Operations from Threatening the Education and Career Trajectories of (PROTECT) Students Act S. 867 Sen. Margaret Wood Hassan, D. N.H. 3/26/19: Referred to the Committee on Health, Education, Labor, and Pensions
Court Legal Access and Student Support (CLASS) Act S. 608 Sen. Richard Durbin, D., Ill. 2/28/19: Referred to the Committee on Health, Education, Labor, and Pensions
H.R. 1430 Rep. Maxine Waters, D. Calif. 4/8/19: Referred to the Subcommittee on Antitrust, Commercial, and Administrative Law
Safety Over Arbitration Act S. 620 Sen. Sheldon Whitehouse, D., R.I. 2/28/19: Referred to the Committee on the Judiciary
Arbitration Fairness for Consumers Act S. 630 Sen. Sherrod Brown, D., Ohio 2/28/19: Referred to the Committee on Banking, Housing, and Urban Affairs
Justice for Servicemembers Act H.R. 2750 Rep. David Cicilline, D. R.I. 6/26/2019: Referred to the Subcommittee on Antitrust, Commercial, and Administrative Law

 

Ending Forced Arbitration for Victims of Data Breaches Act H.R. 327 Rep. Ted Lieu, D. Calif. 1/25/19: Referred to the Subcommittee on Consumer Protection and Commerce

The bill with the most co-sponsors (215 House members and 34 Senators) and the most prominent media coverage is the Forced Arbitration Injustice Repeal (FAIR) Act, which would ban pre-dispute arbitration in employment, consumer, antitrust, and civil rights disputes. Introduced in both the House and the Senate, the FAIR Act was recently referred to the House Subcommittee on Antitrust, Commercial, and Administrative Law.

Another bill with growing support (96 House members and 18 Senators co-sponsoring) is the Bringing an End to Harassment by Enhancing Accountability and Rejecting Discrimination (BE HEARD) in the Workplace Act. The BE HEARD in the Workplace Act bans all pre-dispute arbitration agreements that require arbitration of a work dispute, and all post-dispute arbitration agreements where an employee’s consent was coerced, or if the agreement was not in sufficiently plain language likely to be understood by the average worker.

The BE HEARD in the Workplace Act would also amend the NLRA to expand “Unfair Labor Practices” to situations where an employer enters into or attempts to enforce any agreement that prevents litigation, or support of joint, class, or collective claims arising from or relating to the employment of a worker, coerces the worker to enter into such an agreement, and retaliates against a worker for refusing to enter into such an agreement. The House bill, sponsored by Rep. Katherine Clark, D., Mass., is currently in the Subcommittee on the Constitution, Civil Rights, and Civil Liberties.

Another key bill, with 48 members of the House and 18 Senators co-sponsoring, is the Restoring Justice for Workers Act. This bill would amend the NLRA to prohibit pre-dispute arbitration agreements that require arbitration of work disputes, retaliation against workers for refusing to enter into arbitration agreements and ensure that post-dispute arbitration agreements are “truly voluntary.” The House bill, sponsored by Rep. Jerrold Nadler, D., is currently in the Subcommittee on Antitrust, Commercial, and Administrative Law.

The Latif holding that the FAA preempts § 7515 might push federal and state lawmakers to accelerate the momentum of the pending federal legislation. Judge Cote in Latif notes that the law already had been cited by the U.S. Supreme Court, in dissent, as an example of state action that seeks to protect workers’ ability to bring sexual harassment suits in court in the wake of other top court decisions backing employment arbitration. See Lamps Plus v. Varela, 139 S. Ct. 1407, 1422 (2019) (Ginsburg, J., dissenting) (available at http://bit.ly/2GxwFbC).

Although legislation that has sought to ban fully pre-dispute arbitration agreements has not been successful, this could change given the political landscape and outcome of the 2020 election.

The author, a Summer 2019 CPR Institute intern, is a law student at Brooklyn Law School.