Court Backs Award for Class Arbitration, Refusing to Wait for Supreme Court’s Decision

By Shravanthi Suresh-Silver

A recent Wisconsin federal trial court decision backs confirmation of an arbitration award even though the defendant asked for it to be stayed until the class waivers-arbitration cases currently before the U.S. Supreme Court are decided.

The arbitrator in the case had backed a class arbitration process on behalf of employees, who said that the defendant, Waterstone Mortgage Corp., a Pewaukee, Wis.-based lender, failed to pay its loan officers overtime.

The three consolidated cases on waivers that ban class processes in favor of mandatory individual arbitration were argued together in the Supreme Court on Oct. 2. A decision on the relationship between the Federal Arbitration Act and the National Labor Relations Act is expected soon.

In Herrington v. Waterstone Mortgage Corp., No. 11-cv-779-bbc (U.S.W.D Dec. 4)(available at http://bit.ly/2BgULTT), U.S. District Court Senior Judge Barbara B. Crabb, based in Madison, Wis., concluded that plaintiff’s claims would have to be resolved through arbitration under the parties’ agreement, and that the NLRA gave the plaintiff the right to join other employees in her case.

Herrington also is notable because the court rejected an arbitrator bias argument and addressed claims that the arbitrator, former Second U.S. Circuit Court of Appeals Judge George Pratt, slept through key proceedings.

Plaintiff Herrington commenced arbitration on March 23, 2012, under her employment contract. Arbitrator Pratt issued an order determining that the arbitration could proceed as a collective action. Ultimately, the Wisconsin federal court opinion by Senior Judge Crabb notes, 174 class members opted into the arbitration.

On July 5, 2017, Pratt issued a final decision, holding that Waterstone was liable under the Fair Labor Standards Act for unpaid minimum wages and overtime and attorney fees and costs, but not liable under Wisconsin statutory or contract law. He ordered Waterstone to pay nearly $7.3 million in damages; $3.3 million in attorney fees and costs and an incentive fee of $20,000 to be paid to Herrington.

The plaintiff moved for confirmation of the award under 9 U.S.C. § 9 in the Wisconsin federal court, while the mortgage company moved to vacate or modify the award, asking Senior Judge Bragg to stay any action relating to the award until the U.S. Supreme Court reaches a decision in the consolidated cases of Ernst & Young LLP v. Morris; Epic Systems Corp. v. Lewis, and NLRB v. Murphy Oil USA Inc. (For more information on the cases, see CPR Speaks at http://bit.ly/2yWjWuf.). In the cases, the Court is considering whether class and collective action waivers in arbitration agreements violate the National Labor Relations Act.

The plaintiff countered by asking for sanctions against the defendant lender, arguing that the objections to the award’s confirmation were frivolous.

The court denied the defendant’s motions to stay and to vacate the arbitration award, as well as Herrington’s sanctions motion. The court confirmed the arbitration award, with one modification to correct the mathematical error identified by both parties.

In arguing to stay any action relating to the award until the Supreme Court reaches its decision in the consolidated cases, Waterstone suggested that if the Supreme Court concludes that class and collective action waivers do not violate the National Labor Relations Act, the defendant will be able to rely on that decision to file a motion under Federal Rule of Civil Procedure 60(b)(6) challenging Bragg’s March 2012 decision in the case striking the class waiver in the company’s employment agreement.

In noting that the defendant’s assumption was flawed, the Wisconsin court reemphasized that “a change in law showing that a previous judgment may have been incorrect is not an ‘extraordinary circumstance’ justifying relief under Rule 60(b)(6).” (Quoting Nash v. Hepp, 740 F.3d 1075, 1078 (7th Cir. 2014)(“Rule 60(b) cannot be used to reopen the judgment in a civil case just because later authority shows that the judgment may have been incorrect.” (Internal citation omitted.)), Bragg noted in her opinion that the defendant “made no attempt to explain why a change in the law would justify reconsideration of a decision made in this case five years ago.”

The court also noted that the ultimate decision allowing the case to proceed on a collective basis was made by Arbitrator Pratt, not the court. Bragg noted that Pratt said he was bound by her finding that the class waiver provision was invalid under the National Labor Relations Act.

But the opinion also says that Pratt found the employment agreement’s arbitration clause was ambiguous. Despite the waiver, he noted, the clause also stated that arbitration should proceed “in accordance with the rules of the American Arbitration Association,” which permits class arbitration.

The arbitrator noted that the defendant “at the very least created an ambiguity, which must be construed against [Waterstone,] the party who drafted the Agreement.”

The opinion says that the arbitrator “also noted plaintiff’s argument that the language of the so-called ‘waiver’ clause should actually be read as permitting class or collective arbitration, rather than prohibiting it, though the arbitrator chose not to resolve that dispute.”

Wrote Senior Judge Bragg,

In other words, the arbitrator’s discussion suggests that he believed there were independent bases for permitting collective arbitration, aside from this court’s previous decision. Thus, it is far from clear that the Supreme Court’s decision . . . would cause the arbitrator to change his decision to permit collective arbitration.

The court also stated that the case had been pending since 2011 and that it was not at an early stage. It was noted that a further delay would prejudice the plaintiff, who had been waiting several years through numerous delays to recover unpaid wages.

Additionally, despite the defendant’s assertion that a stay would “greatly simplify the issues and reduce the burden of litigation,” Bragg wrote that she was not persuaded that the Supreme Court’s decision will necessarily simplify the issues in this case, however it rules.

There were other significant issues. The defendant argued that Arbitrator Pratt “demonstrated bias in favor of plaintiff when he sent a survey to potential class members as part of his decision whether to certify a class.” The defendant stated that when the survey was submitted, discovery on class certification was closed and the arbitrator had said that the plaintiff’s evidence supporting class certification was insufficient.

Additionally, Waterstone argued that the phrasing of the survey was biased in favor of plaintiff.

But Bragg dismissed the bias claims.  She held that “there is nothing about the arbitrator’s decision to send out the survey and consider the responses that suggests bias in favor of plaintiff or against defendant.” The inquiries, the opinion noted, were “simply ‘yes’ and ‘no’ questions regarding the experiences of putative class members.”

Furthermore, the arbitrator permitted the parties to argue and brief their views regarding the survey, “and issued a written decision explaining his reasons for considering the results.” Pratt “later issued a well-reasoned 16-page written decision on class certification,” Bragg noted in her opinion, “explaining the survey results and his conclusion that the results supported class certification.”

Finally, the arbitrator was clear that he understood the evidentiary limitations of the survey results. Therefore, the court dismissed the defendant’s allegations of arbitrator bias.

The defendant also argued that the award should be vacated because Arbitrator Pratt “slept through portions of the evidentiary hearing,” the opinion says.

Waterstone argued that the arbitrator’s “alleged sleeping amounts to abdication of his duties and qualifies as misconduct sufficient to justify vacating the arbitration award,” the opinion says.

Senior Judge Bragg said she agreed with Plaintiff Herrington that if the defense believed Pratt slept during the hearing, it should have asked for a break. The court noted that there appeared to be a factual dispute regarding whether Pratt dozed. “To raise this issue now seems far too late,” the opinion says.

Bragg emphasized that even if the arbitrator dozed off, the defendant “had pointed to nothing suggesting that the arbitrator was prejudiced by the alleged napping.” While Waterstone claimed that Pratt slept during important testimony, it failed to identify any specific testimony that he missed.

In dismissing the defendant’s motion that the arbitration award should be vacated, the court noted that the defendant’s arguments about prejudice are based entirely on speculation.

* * *

The author is a CPR intern.

The Reaction: Here’s What They’re Saying in the Wake of the Senate’s Vote to Overturn the CFPB Arbitration Rule

By Elena Gurevich and Russ Bleemer

Last night in a narrow 51-50 vote, Senate Republicans overturned the Consumer Financial Protection Bureau rule that would have allowed the consumers to file class action suits against financial institutions and prohibited waivers of such processes accompanied by mandatory predispute arbitration.

Vice President Mike Pence cast the deciding vote.  See our blog post from earlier today here.

According to the New York Times, “By defeating the rule, Republicans are dismantling a major effort of the Consumer Financial Protection Bureau, the watchdog created by Congress in the aftermath of the mortgage mess.” See Jessica Silver-Greenberg, “Consumer Bureau Loses Fight to Allow More Class-Action Suits,” N.Y. Times (Oct. 24)(available at http://nyti.ms/2yL9eHn)

Reuters, noting that the House already passed the resolution repealing the rule soon after it was released in July, observed that the resolution under the Congressional Review Act “also bars regulators from instituting a similar ban in the future.” Lisa Lambert, “Republicans, Wall Street score victory in dismantling class-action rule,” Reuters (Oct. 24)(available at http://cnb.cx/2yQd8B2).

Moments after the vote, the White House issued a statement applauding Congress for passing the resolution and stating that a recent Treasury Department report was clear evidence that “the CFPB’s rule would neither protect consumers nor serve the public interest.” The White House statement is available at http://bit.ly/2yLFOew.

President Trump is expected to sign the resolution the moment it hits his desk. This, according to Reuters, will “abruptly end a years-long fight that has included multiple federal regulators, consumer advocacy groups, and financial lobbyists.”

In its blog that closely monitors the CFPB, consumerfinancemonitor.com, Ballard Spahr, a Philadelphia-based law firm, congratulated the Senate for “its courageous action and for recognizing . . . that arbitration benefits consumers, while class action litigation benefits only the plaintiffs’ bar.”

Keith A. Noreika, the acting Comptroller of the Currency, issued a statement praising the vote and calling it “a victory for consumers and small banks across the country.” Noreika stressed the crucial role of the OCC that “identified the rule’s likely significant effect on consumers.” The OCC statement is available at http://bit.ly/2gJ1rFC.

Late Tuesday night, Sen. Elizabeth Warren, D. Mass., who was among those who defended the rule this week wrote on Twitter, “Tonight @VP Pence & the @SenateGOP gave a giant wet kiss to Wall Street. No wonder Americans think the system is rigged against them. It is.”

CNN reported that “Consumer advocates said the vote was a tremendous setback for Americans, and that it offered companies like Wells Fargo and Equifax ‘a get-out-of-jail-free card.’” Donna Borak & Ted Barrett, “Senate kills rule that made it easier to sue banks,” CNN (Oct. 25)(available at http://cnn.it/2zCxJFN).

CNN also quoted Karl Frisch, executive director of Washington’s Allied Progress, a consumer watchdog group, who said that “This repeal will hurt millions of consumers across the country by denying them their rightful day in court when they get screwed over by financial predators.”

Public Citizen, a Washington, D.C., nonprofit consumer advocacy group echoed this sentiment, tweeting that the “#RipoffClause enables bad actor banks like @WellsFargo to steal billions from the very consumers they defraud and get off scot free.”

***

Gurevich is a CPR Institute 2017 Fall Intern. Bleemer edits Alternatives for the CPR Institute.

The CFPB’s Arbitration Rule is Overturned by the Senate

By Elena Gurevich and Russ Bleemer

Just a day after the U.S. Treasury Department issued a report criticizing a controversial Consumer Financial Protection Bureau rule that prohibited class waivers requiring consumers use mandatory predispute arbitration for disputes, the U.S. Senate voted on October 24 to overturn the rule.

The House in July had voted to overturn the rule under the Congressional Review Act, which gives Congress 60 legislative-session days to reverse administrative rulings it disagrees with.

The bill will go to President Trump, who is expected to sign it.

The legislative moves will overturn five years’ worth of efforts to roll back the use of class waivers accompanied by arbitration by the CFPB, which was designated by the 2010 Dodd-Frank Act to examine the utility of the ADR process in consumer disputes.

A 728-page 2015 study by the independent Washington agency said that arbitration was ineffective in vindicating consumers’ rights in financial services contracts, which are under the CFPB’s jurisdiction. The agency vowed to regulate arbitration.

After the report, Republicans, who long said the agency was too powerful, used the CFPB’s moves to increase calls to eliminate the agency in last year’s presidential campaign.

Late last night, Jeb Hensarling, R., Texas,  who as House Judiciary Committee chair led the fight against the rule, congratulated the Senate, noting in a statement on his social networks that the vote “is a victory for consumers, a defeat for the wealthy trial lawyers lobby and a rejection of the unchecked, unconstitutional and unaccountable CFPB.”

The CFPB had finalized its rule and published it July 19. It would have fully taken effect next year after a 180-day waiting period.

The rule, however, didn’t outlaw arbitration, though it increased the CFPB’s scrutiny by requiring reporting. The rule instead required that class processes, in either litigation or arbitration, be made available to consumers signing financing contracts or purchasing financial services.

Business lawyers, lobbyists and trade groups said the rule would wipe out financial services arbitration, because companies would rather face class action in courts, under familiar federal rules, than class arbitration with few outlets for appeal.

The Senate didn’t follow the House’s quick lead because it didn’t have the votes to overturn the rule, with some Republicans fearing a backlash for voting to support a banking industry-approved bill in the wake of scandals that invoked arbitration.

In fact, the Senate was split evenly, with two Republicans, Lindsay Graham, of South Carolina, and John Kennedy, of Louisiana, joining the Democrats. Vice President Mike Pence joined fellow Republicans to cast the deciding vote.

Treasury might have brought a senator or two to the side of overturning the law. On Monday, in a highly unusual move, the Treasury Department issued a 17-page report blasting the rule. See “Limiting Consumer Choice, Expanding Costly Litigation: An Analysis of the CFPB Arbitration Rule,” U.S. Dept. of the Treasury (Oct. 23)(available at http://bit.ly/2h0N7VB).

According to the Washington Post, Jaret Seiberg, an analyst with Cowen and Co.’s Washington Research Group, said that the Treasury Department report “[p]rovides some needed political cover for the few Senate Republicans who have been reluctant to vote in favor of the banks.” See Renae Merle, “Treasury Department sides with Wall Street, against federal consumer watchdog agency on arbitration rule,” Washington Post (Oct. 23)(available at http://wapo.st/2zxMABI).

It wasn’t the first Washington institution to fire back at one of its own on arbitration.  Earlier this month, the CFPB report and rule had been the subject of a heated argument between Keith A. Noreika, the acting U.S. Comptroller of the Currency, and Richard Cordray, the CFPB’s director.

Noreika slammed the CFPB’s action in an article on the Beltway website The Hill.  See “Senate should vacate the harmful consumer banking arbitration rule,” The Hill (Oct. 13)(available at http://bit.ly/2izENzT).

According to Noreika, the CFPB failed to support its case and “failed to disclose the costs to consumers that will likely result from the rule’s implementation.”

Soon after Noreika’s post, Cordray responded, stating that Noreika’s claims were “bogus” and “out of the blue.” See “The truth about the arbitration rule is it protects American consumers,” The Hill (Oct. 16)(available at http://bit.ly/2gIHbk2).

Added Cordray, “Why should Wells Fargo be able to block groups of customers from suing over fake accounts? Why should Equifax be able to force people to surrender their legal rights when the company put their personal information at risk?”

For more on yesterday’s vote, see Jessica Silver-Greenberg, “Consumer Bureau Loses Fight to Allow More Class-Action Suits,” N.Y. Times (Oct. 24)(available at http://nyti.ms/2yL9eHn).

* * *

Gurevich is a CPR Institute 2017 Fall Intern. Bleemer edits Alternatives for the CPR Institute.

The Class Waiver-Arbitration Argument: The Supreme Court Transcript

By Russ Bleemer

There’s no indication, yet, that the newest U.S. Supreme Court Justice, Neil M. Gorsuch, will be the swing vote in the employment arbitration cases that kicked off the Court’s 2017-2018 term yesterday morning.

The justice—who had been active in oral arguments after he was seated in April to fill the Court vacancy created by the death of Justice Antonin Scalia in February 2016—didn’t say a word.

But the liberal and conservative wings of the Court had their say. The former posed tough questions to the employers’ representative and the government, who are fighting against employees joining together under the National Labor Relations Act to file class action suits for workplace disputes, despite the presence in their employment agreements of class waivers and a requirement of individual arbitration.

The Court conservatives who spoke at the hearing seemed skeptical that the NLRA could override the Court’s strong historical backing of the Federal Arbitration Act, and defeat the employers’ requirement that matters proceed one at a time, in arbitration.

Though Justice Clarence Thomas also maintained his customary silence during the arguments, observers saw a 5-4 split yesterday assuming he and Gorsuch joined the conservative block, with Justice Anthony Kennedy leaning toward the business side.

Washington, D.C. neutral and Georgetown University Law Center adjunct Mark Kantor gathered reports and added analysis on CPR Speaks yesterday, here. See also Adam Liptak, “Supreme Court Divided on Arbitration for Workplace Cases,” N.Y. Times (Oct. 2)(available at http://nyti.ms/2fHZ8ya).

The dispute has been running since the National Labor Relations Board ruled that class waivers accompanied by mandatory arbitration provisions were illegal under the NLRA in 2012, and eliminated by the FAA’s Sec. 2 savings clause, which enforces arbitration agreements “save upon such grounds as exist at law or in equity for the revocation of any contract.”

Last winter, the Court accepted three cases on the issue, including one in which the NLRB is a party.  It consolidated them, then announced the argument would be held until the term that began yesterday—presumably to await the new justice for the vacancy eventually taken by Gorsuch, rather than risking a 4-4 split on the issue, which has divided the federal circuit courts that have tackled the issue.

The unusual hour-long argument was notable for other reasons: The federal government was facing off against one of its own agencies. In a June amicus filing, the Justice Department’s acting solicitor general, Jeffrey Wall, told the Court the Trump administration had “reconsidered the issue and has reached the opposite conclusion” from the stance the department had taken under President Obama on the NLRB’s behalf.  [For more information on Justice’s position, see the October issue of Alternatives, which will be posted later soon at https://www.cpradr.org/news-publications/alternatives and http://bit.ly/2kh91YT.]

Wall presented an amicus argument yesterday, facing off against the NLRB’s general counsel, two of four advocates in the argument.

The discussion highlights below come from the Court’s transcript, posted late yesterday, available at http://bit.ly/2yFDsKA.

* * *

First, frequent Supreme Court argument participant and former U.S. Solicitor General Paul D. Clement, a Washington, D.C. partner at Kirkland & Ellis, faced tough questions and skepticism from the Court in his argument on behalf of the petitioner-employers in Epic Systems Corp. v. Lewis, No. 16-285 and Ernst & Young LLP v. Morris, No. 16-300, as well as the respondent employer in NLRB v. Murphy Oil USA Inc., No. 16-307.

Clement opened by noting the employees’ claims that arbitration agreements providing for individual arbitration that are enforceable under the Federal Arbitration Agreement are invalidated by another federal statute, the National Labor Relations Act.

But, he said, ‘this Court’s cases provide a well-trod path for resolving such claims.” Clement explained that “[b]ecause of the clarity with which the FAA speaks to enforcing arbitration agreements as written, the FAA will only yield in the face of a contrary congressional command[,] and the tie goes to arbitration.”

Justice Stephen G. Breyer soon said that he didn’t accept the argument, or the premise. “You started out saying this is an arbitration case,” said Breyer.  “I don’t know that it is. I thought these contracts would forbid . . . joint action, which could be just two people joining a case in judicial, as well as arbitration forums.”

Breyer continued: “Regardless, I’m worried about what you are saying is overturning labor law that goes back to, for FDR at least, the entire heart of the New Deal.”

The justice explained that the NLRA “protects the worker when two workers join together to go into a judicial or administrative forum for the purpose of improving working conditions, and the employers here all said, we will employ you only if you promise not to do that.”

Breyer concluded, “I haven’t seen a way that you can . . . win the case, . . . without undermining and changing radically what has gone back to the New Deal.”

“For 77 years,” countered Paul Clement, “the NLRB did not find anything incompatible about Section 7 and bilateral arbitration agreements, and that includes in 2010 when the NLRB general counsel looked at this precise issue.”

NLRA Sec. 7 permits concerted action by employees “for the purposes of collective bargaining or other mutual aid or protection.”

Clement also explained, at length, that “from the very beginning, the most that has been protected is the resort to the forum, and then, when you get there, you are subject to the rules of the forum.”

He later added, “[T]he NLRA in no other context extends beyond the workplace to dictate the rules of the forum.”

Said Clement, “I think the way to think about the Section 7 right is it gets you to the courthouse, it gets you to the Board, it gets you to the arbitrator. But once you are there.  . . .”

* * *

Deputy Solicitor General Jeffrey B. Wall, who led the Justice Department’s reversal of position in the case, followed Clement with an amicus argument supporting the employers. “[I]f you understand Section 7 to protect you from retaliation when you seek class treatment but not to give you an entitlement to proceed as a class in the forum, then . . . everything fits together perfectly fine, and these arbitration agreements are enforced.”

Wall concluded, “[O]ur simple point is this case is at the heartland of the FAA. It is, at best, at the periphery of the NLRA, on the margins of its ambiguity, and you simply can’t get there under the court’s cases.”

* * *

Under questioning from Chief Justice John G. Roberts Jr. at the beginning of his argument, NLRB General Counsel Richard F. Griffin Jr., arguing in support of the employees, said that the employers needed to keep open access in the forum so that the employees can proceed jointly—in arbitration or litigation.

But Roberts pressed, and Griffin agreed, that judicial options can be waived because the Court has recognized the equivalence of arbitration.  “I don’t understand how that is consistent with your position that these rights can’t be waived,” said the Chief Justice.

Griffin countered that the NLRB’s position that the right to a class process can’t be waived “takes into account this Court’s view with respect to the ability to effectively vindicate these rights in an arbitral forum.”

Justice Anthony Kennedy said that Griffin’s argument meant that employers “are now constrained in the kind of arbitration agreements they can have.” Griffin responded that they are “constrained with respect to limiting employees’ ability to act concertedly in the same way that, from the beginning of the National Labor Relations Act, individual agreements could not be used to require employees to proceed individually in dealing with their employers.”

Under tough questioning by Roberts and Kennedy, Richard Griffin stuck to his positon that the rules of the forum—arbitral or court—must be followed, but an arbitration agreement that violates the NLRA by limiting the employees’ right to proceed must fall. He suggested that ADR provider rules could limit the procedures, but the employers couldn’t because if they did, it would be limiting employees’ access to justice.

* * *

The employees’ attorney, Daniel R. Ortiz, director of the Supreme Court Litigation Clinic at the University of Virginia School of Law in Charlottesville, Va., began his argument by addressing an earlier question posed by Justice Sonia Sotomayor to Richard Griffin.  Ortiz said that about 55% of nonunion private employees have contracts with mandatory arbitration agreements, covering 60 million workers, with about 25 million people covered by the equivalent of class wavers.

The key part of Ortiz’s argument, which emerged in discussions with a skeptical Chief Justice Roberts, was that the employers’ conduct was clearly illegal under NLRA Sec. 7, and thereby removed the enforcement of the arbitration agreement under FAA Sec. 2’s savings clause, because the section makes illegality of a contract provision a basis for striking an obligation to arbitrate.

* * *

In his rebuttal, Paul Clement picked up on comments by Justice Kennedy earlier that, even if they have waived class litigation and arbitration, employees still have the right to concerted activity by choosing the same lawyer to represent them in an arbitral forum, even if they proceeded individually.  He also said that they can take their pay claims to the Labor Department, which would allow employees to proceed without arbitration.

In response to a question by Justice Ruth Bader Ginsburg, Clement said that confidentiality agreements wouldn’t affect a lawyer’s ability to take multiple arbitration matters.

 

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

CFPB Announces Final Rule Barring Mandatory Arbitration In Consumer Financial Contracts

By Russ Bleemer

The broadest move by a government agency so far to restrict arbitration has been unveiled by the Consumer Financial Protection Bureau—a long-expected ban on the use of class-action waivers that require mandatory arbitration in consumer financial contracts.

While arbitration itself wasn’t the direct target, the practice has taken a public relations hit, becoming a proxy in a war over class-action processes.

Under the CFPB’s final rule—it proposed the ban last year under the Obama Administration after researching the subject since 2012—financial services firms, including those providing bank accounts and credit agreements, would be prohibited from using contracts that prevent consumers from joining together in class-action suits in court and require, instead, individualized arbitration processes.

Arbitration, the CFPB emphasized, would not be banned.

But it will be subject to unprecedented regulation.  Companies would have to note in their consumer credit agreements that the arbitration process being offered does not prevent the individual from initiating or joining a class-action suit.

And the companies using arbitration would have to provide the results of those processes to the CFPB, which on Monday announced it would post those cases, after redacting identifying information, on its website beginning in July 2019.

The rule, according to CFPB Director Richard Cordray, “prevents financial companies from using mandatory arbitration clauses to deny groups of consumers their day in court.”

Still, it may never get to the marketplace.  The rule, the CFPB said Monday, will be sent to the Federal Register for publishing, expected in the next week or two.  There is a total of 241 days needed for compliance before the rule is fully effective—the CFPB said it would announce an exact date upon publication.

In the interim, the Republican Congress may move to revoke it.  The 2017 Congress has embraced the Congressional Review Act, a formerly little-used 1996 law that allows it to review new federal regulations issued by government agencies and overrule them under a joint resolution.

This year, the CRA has been invoked 14 times to overturn regulations. The CFPB’s arbitration efforts have been squarely in the sights of banking and finance lobbyists, among others.

There are other options, including President Trump firing Cordray and replacing him with a director who would strike the CFPB proposal.  See Alan S. Kaplinsky, “Proposed CFPB Arbitration Rule Faces Multiple Obstacles,” 35 Alternatives 3 (January 2017)(available at http://bit.ly/2hRb943).

And H.R. 10, the Financial CHOICE Act of 2017, an April proposal by Rep. Jeb Hensarling, R., Texas, would repeal the CFPB’s authority to restrict arbitration.  The bill passed the House and has been referred to the Senate Committee on Banking, Housing, and Urban Affairs.

Late last month, the Trump Administration reversed course on mandatory employment arbitration contracts, switching sides in three consolidated U.S. Supreme Court cases to be argued this fall in which the National Labor Relations Board similarly had banned the use of arbitration clauses because they prevent class cases against employers.  See Nicholas Denny, “DOJ to NLRB: You’re On Your Own in the Supreme Court,” CPR Speaks (June 21)(available at http://bit.ly/2uJNDwC).

Said Cordray, “I am aware, of course, of those parties who have indicated they will seek to have the Congress nullify the new rule.” He said that such steps will be “determined on the merits.” He continued: “My obligation as the [CFPB director] is to act for the protection of consumers and in the public interest, [and] that is what I believe have done” with the release of the final class waiver-arbitration rule.

The CFPB’s press announcement, along with links to the rule’s text and a new video explaining the moves, can be found HERE.

Russ Bleemer is the editor of CPR’s award-winning magazine, Alternatives.

Making the Mandatory Argument: Arbitration, Class Waivers and the Practitioners’ Role

By Russ Bleemer

Legislative and court arguments over whether ADR processes can be used to defray class litigation are moving toward a decisive 2017 conclusion.

New regulations barring the use of class waivers associated with mandatory arbitration clauses in consumer financial contracts, like credit card agreements or wireless telephone service agreements, are due for release soon by the Washington, D.C.-based Consumer Financial Protection Bureau.  The CFPB had issued a proposal in May and accepted public comments until August.

In the December Alternatives, Sanford Jaffe and Linda Stamato, longtime conflict resolution process theorists, designers, and practitioners at the Center for Negotiation and Conflict Resolution at Rutgers University in New Brunswick, N.J., backed the move.  They argue that the mandatory arbitration processes that prohibit class litigation that the CFPB targets indeed should go.

But with the intervention of last month’s election, the prospects for the vitality and longevity of the coming regulation has dimmed.

So the authors also argue that the responsibility for preserving the integrity of alternative dispute resolution processes by breaking the link between mandatory processes and class waivers lies with practitioners themselves.

“Rarely seen are misgivings about mandatory arbitration expressed by dispute resolution professionals,” the authors write. “But we ought to be heard in the hearings and rule-making processes, and in social and print media, to support the proper use of the processes we have worked to design, develop, apply and evaluate.  We need . . . to defend the principles upon which this field is grounded, not the least of which is choice. We need to return to the attitudes and beliefs with which the field started decades ago, to fulfill the promises of the architects of the field.”

In addition to discussing mandatory arbitration in contracts over which the CFPB regulates, Jaffe and Stamato discuss mandatory arbitration in the employment context, noting the line of cases involving the clash between the Federal Arbitration Act and the National Labor Relations Act.

Three federal circuit courts have held that the FAA permits employers to use class waivers in requiring arbitration to resolve workplace disputes, while two circuits have gone the other way, saying that the NLRA preserves a right to class processes, including litigation, under the law which says that employees may “engage in . . . concerted activities.” See CPR Blog post from Aug. 23 HERE.

Since the December issue of Alternatives was released (HERE free on CPR’s website for members logged in; HERE with archives on publisher John Wiley’s site) , the U.S. Supreme Court has scheduled five FAA-NLRA cases for discussion at its Jan. 6 case conference.

Experts believe the Court will accept one or more of the cases—perhaps one favoring the defense view upholding mandatory arbitration with a class waiver, and one backing the National Labor Relation Board’s ruling that class processes must be preserved—to finally decide the matter, which has been brewing since the NLRB struck the mandatory arbitration/class waiver provision it found in D.R. Horton Inc., 357 NLRB No. 184, 2012 WL 36274 (Jan. 3, 2012)(PDF download link at http://1.usa.gov/1IMkHn8), enforcement denied in relevant part, 737 F.3d 344 (5th Cir. 2013)(Graves, J., dissenting)(PDF download link at http://bit.ly/1XRvjrM), reh’g denied, No. 12-60031 (Apr. 16, 2014).

Meantime, the viability of the CFPB’s yet-to-be-released regulations is in doubt in light of President-elect Trump’s anti-regulation views, including his loathing of the Dodd–Frank Wall Street Reform and Consumer Protection Act, which authorized the CFPB.  While the agency is committed to a forthcoming final regulation, it’s unlikely it will stand without attack.

In the forthcoming January issue of Alternatives, available at the links above on or around Jan. 4, Philadelphia-based Ballard Spahr partner Alan Kaplinsky will counter the December Alternatives commentary discussed above with an outline of the options to challenge to the CFPB’s regulation, which some analysts say may emerge before Trump’s Jan. 20 inauguration.

As Kaplinsky points out, a Congressional repeal may not even be necessary.  A new Trump appointee replacing current CFPB Director Richard Cordray could roll back the roll-out, restore (or reassert) mandatory arbitration and class waivers, and delay or change the regulations via the Administrative Procedure Act.

The December Alternatives commentary, “Private Justice: Losing Our Day in Court,” by Sanford M. Jaffe and Linda Stamato, is available now for all readers HERE.

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

Ninth Circuit Backs NLRB’s View Barring Mandatory Pre-dispute Class Waivers, Deepening a Circuit Split

By Ksenia Koriukalova

The Ninth U.S. Court of Appeals Monday joined the Seventh Circuit in supporting the position of the National Labor Relations Board against “concerted action waivers” in employment agreements

Morris v. Ernst & Young LLP, No. 13-16599 (9th Cir. August 22, 2016) (available at http://bit.ly/2bqiU0k) contributes to deepening the circuit split regarding the enforceability of class waivers that compel employees to take their employment disputes to individual arbitration.

Morris v. Ernst & Young was the first case in which the NLRB intervened as amicus curiae to urge the court to support its view on the issue, which has been rejected by the Fifth and Eighth Circuits, but backed by the Seventh Circuit in Lewis v. Epic Systems Corp., No. 15-2997 (7th Cir. May 26, 2016) (available at http://bit.ly/1U8lhTW).

Lewis, the first in which the NLRB argued, caused the split.  The Lewis parties requested and received an extension to decide upon and prepare a petition for certiorari to the U.S. Supreme Court.  Arbitration experts and analysts expect that employer Epic Systems will file for an appeal sometime next month.

On Monday, in the 2-1 Morris opinion written by Chief Circuit Judge Sidney R. Thomas, the Ninth Circuit vacated a federal district court order compelling individual arbitration in a class and collective action brought by Ernst & Young employees.

The action was originally brought in New York for the alleged misclassification of employees and violation of the Fair Labor Standards Act. After the case was transferred to California’s Northern District, Ernst & Young filed a motion to compel arbitration in accordance with the agreements executed by the plaintiffs as a condition of their employment.

The agreements contained provisions requiring the employees to pursue their legal claims against the accounting and consulting giant exclusively through arbitration, and to arbitrate only in their individual capacity and in “separate proceedings.”

The plaintiffs argued that the “separate proceedings” clause of their agreements violated federal law, in particular the National Labor Relations Act, or NLRA. The district court granted the employer’s motion to compel individual arbitration. The appellate court disagreed with that decision.

For full details on the November 2015 Morris argument in the Ninth Circuit, as well as information on the background of the case and resources on the class waivers-NLRA issue, see “Cutting Arbitration Classes: Facing Court Defeats on Workplace Waivers, the NLRB Refuses To Back Down,” 34 Alternatives 1 (January 2016)(available at http://bit.ly/2c3hewf).

This week, the Ninth Circuit overturned the district court decision and joined the Seventh Circuit view that class waivers mandating arbitration violate federal labor law.

Specifically, the Ninth Circuit panel held that by requiring employees to sign agreements containing “concerted action waivers,” the employer interfered with the employees’ “essential, substantive right” to “engage in concerted activity” granted by the NLRA § 7.

The panel relied on the NLRB’s decision D.R. Horton, Inc., 357 NLRB No. 184, 2012 WL 36274 (Jan. 3, 2012)(PDF download link at http://1.usa.gov/1IMkHn8), enforcement denied in relevant part, 737 F.3d 344 (5th Cir. 2013) (Graves, J., dissenting)(PDF download link at http://bit.ly/1XRvjrM), reh’g denied, No. 12-60031 (Apr. 16, 2014).

In its original D.R. Horton decision, the NLRB concluded that an employer’s requirement that an employee sign a waiver as a condition of employment violated the NLRA. The Ninth Circuit analyzed NLRA § 7, which establishes an employees’ rights to engage in concerted activities, and NLRA § 8, which enforces collective action rights.  The circuit appeals court agreed with the NLRB’s D.R. Horton interpretation of these statutory provisions.

“This case turns on a well-established principle,” wrote Chief Circuit Judge Thomas, “employees have the right to pursue work-related legal claims together.  . . . Concerted activity—the right of employees to act together—is the essential, substantive right established by the NLRA. 29 U.S.C. § 157. Ernst & Young interfered with that right by requiring its employees to resolve all of their legal claims in ‘separate proceedings.’” [Citations omitted.]

Moreover, the Ninth Circuit also held that the application of the Federal Arbitration Act did not change its conclusion. The panel found that the requirement to pursue legal claims against an employer in “separate proceedings” violated the NLRA, irrespective of whether employees were required to bring their complaints in arbitration or in court.

Circuit Judge Sandra Ikuta dissented, concluding that that the arbitration agreements signed by Ernst & Young employees were enforceable, because the NLRA did not contain a “contrary congressional command” overriding the FAA.

Morris v. Ernst & Young deepens the circuit split on enforceability of class action waivers in employment agreements. In addition to D.R. Horton, the Fifth Circuit also has reversed the NLRB’s decision repeatedly, most notably in Murphy Oil USA Inc., Case 10–CA–038804, 361 NLRB No. 72, 2014 WL 5465454 (Oct. 28, 2014) (PDF download link at http://bit.ly/1LVnR8d), enforcement denied in relevant part, 2015 WL 6457613 (5th Cir. Oct. 26, 2015)(PDF download link at http://bit.ly/1TMfDFO).

The Eighth Circuit followed the Fifth Circuit’s view in Cellular Sales of Missouri LLC v. NLRB, 824 F.3d 772 (8th Cir. 2016).  Earlier the Second Circuit also found class action waiver provisions in employment-related arbitration agreements to be enforceable. (see Sutherland v. Ernst & Young LLP, 726 F.3d 290 (2d Cir. 2013)) But the viability of Sutherland decision is in question following the oral argument in Patterson v. Raymours Furniture Co. heard by the Second Circuit this past Friday.

The Seventh Circuit supported the NRLB’s interpretation in Lewis v. Epic Systems Corp., where the appeals court reaffirmed the NLRB’s position that class action waivers contained in arbitration agreements employees were required to sign as a condition of their employment violated the NLRA.

Monday’s Ninth Circuit Morris decision is powerful support for Lewis. As a result, while the concerted action waivers in employment-related agreements are considered incompatible with the federal labor law in the Seventh and the Ninth Circuit, the Fifth, the Eighth and the Second Circuits render them enforceable–that is, until the Supreme Court of the United States addresses the issue of the compatibility of the NLRA and the FAA nationwide.

The author is a Fall 2016 CPR Legal Intern. And please stay tuned: there will be more on the Patterson case posted here before the weekend! 

Class Act: Looking at How the CFPB Wants to Restrict Arbitration Agreements

By Russ Bleemer

If you want to make your voice heard on federal arbitration regulation, now’s the time.
The Consumer Financial Protection Bureau in May released its proposal to ban arbitration agreement provisions that bar class processes and require individual ADR for disputes in consumer financial services contracts under the agency’s jurisdiction.

The formal public announcement early last month was followed by the publication May 24 of the official proposal. “If finalized in its current form,” said CFPB Director Richard Cordray last month, “the proposal would ban consumer financial companies from using mandatory pre-dispute arbitration clauses to deny their customers the right to band together to seek justice and meaningful relief from wrongdoing. This practice has evolved to the point where it effectively functions as a kind of legal lockout.”

Public comments, due by Aug. 22, are piling up. There are 599 at this writing. (You can view them HERE, along with the full proposal and the link to provide a comment.) A day after the comment period opened, the deluge was kicked off with a letter signed by more than 200 law professors strongly supporting the agency’s proposals.

But Republicans on the House Financial Services Committee, continuing a long-running push to eliminate the CFPB and overturn the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 that created the agency, introduced on June 8 a new proposal that specifically bars the CFPB from regulating arbitration.

The June Alternatives, available now HERE, covers in detail Cordray’s remarks and those of a pro-and-con panel at the May 5 CFPB Albuquerque, N.M., field hearing that introduced the proposed regulation. (An enhanced, annotated version of the article can be accessed directly by subscribers and individuals at CPR Institute members who are logged into CPR’s website at this link.)

The June Alternatives article discusses how the agency’s research into arbitration’s effects on consumers—a voluminous 728-page report conducted over a three-year period that was released in March 2015–led to last month’s proposal.

Agency representatives, including Cordray, emphasized that the CFPB is not proposing to ban pre-dispute arbitration agreements. The key agency goal is to allow consumer class actions that the waivers have cut off.

The Albuquerque panel discussion of arbitration practice experts included three consumer advocates who congratulated the agency, and three business representatives who criticized it and suggested alternative paths–assuming what has become, for some of the panel, traditional public roles in a short period of regulatory time.

The debate continues in Alternatives in the special combined summer July/August issue, which will be available by July 14 HERE. In “Between the Lines: How the CFPB Will Police Financial Services Arbitration,” we examine the specifics of the proposal, including the mandatory language that the CFPB wants included in consumer financial services arbitration agreements.

Following the June report linked above, the new article wades through the 377-page proposal and accompanying report to highlight how the class action moves will affect arbitration parties, providers, contract drafters, neutrals and tribunals.

It will focus on the details in the CFPB’s proposal and report absent from generalized coverage of the CFPB’s move—minutiae to most, but parts of the proposal that are essential to arbitration practitioners and providers’ businesses, and which are drawing comments this summer.

Russ Bleemer edits the CPR Institute-published Alternatives to the High Cost of Litigation.

2nd Update*: Class Waivers and Arbitration: The Battleground Focus Moves to Labor and Employment Law

*The area of class action waivers and employment law saw an absolutely whirlwind close to 2015, with the NLRB releasing yet another decision midday, on 12/31, following two weeks that saw 16 decisions restricting arbitration practices. Please see below for an up-to-date summary of these rapidly breaking developments.

By Russ Bleemer

The emphasis on the law and politics of consumer arbitrations, and their relationship to class waivers, has overshadowed developments in another closely related area of conflict resolution law.

But the time has come for finality on the legality of employment law class-action waivers.  Developments in 2015’s final quarter indicate that decisive events are coming in the area, which involves the intersection of U.S. labor law and the Federal Arbitration Act.

On the first day of December, the National Labor Relations Board issued two decisions finding labor law violations against companies for using mandatory pre-dispute class action waivers with their arbitration agreements requiring individual processes.  The waivers, the NLRB said, violate Sections 7 and 8 of the National Labor Relations Act, which allows employees, among other things, “to engage in . . . concerted activities for the purpose of collective bargaining or other mutual aid or protection.”

That was only the beginning:  By Christmas, the NLRB had issued at least 16 more decisions striking down mandatory pre-dispute arbitration clauses that coupled class waivers as a condition of employment.

The decisions are crucial because the rights of collective action under the NLRA address far more than union workplaces. The law applies to most employees, and key cases that have arisen in this area focus on white-collar employees.

It’s a major statement by the Board. The NLRB decisions’ reasoning—that the NLRA and the FAA co-exist compatibly but the latter isn’t preferred over workers’ rights to act in concert—had already been rejected by the Fifth U.S. Circuit Court of Appeals.  Twice, in fact, including in a decision just five weeks before the December Board decisions, in Murphy Oil Inc. v. NLRB, No. 14-60800, 2015 WL 6457613 (5th Cir. Oct. 26, 2015).

The Fifth Circuit relied on the U.S. Supreme Court’s high-profile consumer-contract arbitration decision–AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), along with the business-to-business class waiver in American Express Co., et al. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013)—to justify rulings that mandatory individualized arbitrations are authorized by the FAA.

Consumer arbitration controversy has rolled over into politics in 2015, when the Consumer Financial Protection Bureau moved to regulate the process by barring waivers of all class processes. Congressional Republicans introduced legislation to hamper the regulation efforts directly, as well as defund the federal agency.

In November, the NLRB said it would request a rehearing in Murphy Oil, but it did not appeal the Fifth Circuit reversal of its first case on the subject, D.R. Horton Inc., 357 NLRB No. 184, 2012 WL 36274 (Jan. 3, 2012), enforcement denied in relevant part, 737 F.3d 344 (5th Cir. 2013) (Graves, J., dissenting), reh’g denied, No. 12-60031 (Apr. 16, 2014).

December’s stream of cases from Board decisions backing its Murphy Oil and D.R. Horton decisions mostly occurred mid-month, leading up to Christmas.  But for good measure, just hours before the close of business on Dec. 31, the Board added its final 2015 decision, again affirming its view in the cases already rejected by the Fifth Circuit.  The decision, GameStop Corp., 363 NLRB No. 89, 20-CA-080497 (Dec. 15, 2015), went even further, affirming a line in those cases barring class waivers in employment arbitration agreements that provide an “opt out” allowing employees to waive participation in the ADR scheme.

“Regardless of the procedures required, the fact that employees must take any steps to preserve their Section 7 rights burdens the exercise of those rights,” the decision states.

It’s clear that the NLRB, an independent federal agency that oversees workplace conduct by enforcing the National Labor Relations Act, is picking and choosing its battles, which experts on both sides of the argument agree will be finalized by a U.S. Supreme Court decision.  The NLRB appears to be seeking a suitable case to ask the Supreme Court to hear, unloading years of litigation in December sourced from a variety of forums that reject the FAA’s predominance over the NLRA.

And while it awaited Murphy Oil’s Fifth Circuit fate, and while preparing the Board decisions it released in December maintaining its insistence on the NLRA’s vitality in the face of required arbitration clauses, the NLRB for the first time filed an amicus brief in a court case on the subject in the Ninth U.S. Circuit Court of Appeals, in Morris v. Ernst & Young LLP, No. 13-16599.

The November filing, just a week after the Fifth Circuit decided Murphy Oil, noted that the Board would seek en banc review of that decision, and strongly defended its own D.R. Horton/Murphy Oil lineage.

At the oral argument on Nov. 18, Ninth Circuit Judge Andrew D. Hurwitz prodded the attorneys on both sides to come up with a formula for NLRA and FAA co-existence.  He suggested severing the waiver clause, but keeping arbitration decisions for a tribunal, rather than blowing up the entire ADR process in favor of litigation.

The Ninth Circuit argument also dissected the class rights being waived by the pre-dispute mandatory arbitration agreement in the context of Federal Rule of Civil Procedure 23, which establishes the ground rules for court class actions.

The details on the December NLRB decisions; the Fifth Circuit’s Murphy Oil reversal; the NLRB Morris amicus filing, and highlights of the Morris oral argument are the subject of the January 2016 cover article in Alternatives, out this week.

Alternatives is available HERE for CPR Institute members after logging into the CPR website.  The newsletter, marking its 33rd year of publication with the January issue, is available to nonmembers at altnewsletter.com.

 

* * *

Bleemer edits Alternatives to the High Cost of Litigation for the CPR Institute.

U.S. Supreme Court’s 2015-2016 Term Has Early Arbitration Focus

U.S. Supreme Court’s 2015-2016 Term Has an Early Arbitration Focus

By Russ Bleemer

The U.S. Supreme Court began its new term with an early arbitration argument—the fourth case argued on the term’s second day, Oct. 6.

The argument followed a week after the nation’s top court agreed to hear a second arbitration case sometime this term.

Both of the cases involve California arbitration practice.  The new case on the docket–which started out focused on unconscionability but will be argued on whether a problematic arbitration clause is salvageable–is a federal case appeal from the Ninth U.S. Circuit Court of Appeals, which covers the state.

The state-court matter that was the subject of the early-term argument, DirecTV Inc. v. Imburgia, No. 14-462, returned to an issue that already had been covered and decided by the Court: federal preemption of conflicting state law that affected arbitrability.

Or so it seemed.

The official issue in the case was “[w]hether the California Court of Appeal erred by holding, in direct conflict with the Ninth Circuit, that a reference to state law in an arbitration agreement governed by the Federal Arbitration Act requires the application of state law preempted by the Federal Arbitration Act.”

The parties—a satellite television provider and an individual subscriber who filed a class action suit over early cancellation fees—had an agreement that provided for individual arbitrations. The form contract waived class arbitration, and was part of a purchase agreement before another California-derived case, AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), backed class waivers.

In AT&T Mobility, the U.S. Supreme Court invalidated a rule from a California Supreme Court case, Discover Bank v. Superior Court, 113 P.3d 1100 (2005), which forbid class processes. The split AT&T Mobility Supreme Court overturned California’s Discover Bank rule because it interfered with the Federal Arbitration Act.

The DirecTV customer agreement the Court reviewed had hedged its terms about class waivers and arbitration in the wake of the then-pending litigation.  Under the purchase agreement, the parties were bound by the FAA.

But the contract stated that if “the law of your state would find this agreement to dispense with class arbitration procedures unenforceable,” then the entire arbitration provision would be stricken from the purchase agreement.

Seemingly flying in the face of the since-decided AT&T Mobility, the California state Court of Appeal in DirecTV had concluded that the contract provision on “the law of your state,” in the words of the DirecTV petition to the Supreme Court, was a non-severable clause that “nullif[ied] the parties’ arbitration provision, even though [the Discover Bank] rule is concededly inconsistent with, and thus preempted by, the FAA under [AT&T Mobility], and even though the arbitration agreement here is concededly governed by the FAA.”

The petition said that the state appellate court had meant the phrase “the law of your state” to mean “state law immune from the preemptive force of federal law.”

It appeared that the U.S. Supreme Court took the case to reverse it and put it in line with its AT&T Mobility precedent.

At the argument, both conservative and liberal justices found the state appeals court’s reading of the contract, in refusing to enforce arbitration, puzzling.  Associate Justice Antonin Scalia said the state appeals court holding “flouts well-accepted universal contract-law principles.”  Associate Justice Elena Kagan lamented “the extent you can find reasoning in this opinion—which you have to search to find.”  The opinion under review is Imburgia v. DirecTV Inc., No. B239361 (Cal. 2nd App. Dist. April 7, 2014)(available at http://ow.ly/Tg4Mi).

The defense of the California state court opinion was that it must be maintained to prevent federal law from usurping state courts’ ability to interpret contract terms.

But the satellite television provider’s slam-dunk argument ran aground when the Court insisted DirecTV’s lawyer set a standard as to how the Court should evaluate state court contract interpretations.

Still, that argument was far simpler than the plaintiff’s argument, which faced a Court mostly unsympathetic to collective actions and which was looking at odd reasoning in the California appellate opinion.

The argument transcript is available at http://ow.ly/TfFui; the November Alternatives, available here on or before Nov. 9, has a full analysis.

* * *

The November Alternatives also will discuss the case that the Court accepted on Oct. 1, MHN Government Servs. Inc. v. Zaborowski, 14-1458, another matter with allegations of California hostility to arbitration.

The case focused originally on unconscionability.  MHN, a San Rafael, Calif., military contractor that provides life consulting services to military members and their families, sought to compel arbitration against the respondents, who were consultants in MHN’s network.

MHN’s motion to compel arbitration lost in both a California federal district court and in the Ninth U.S. Circuit Court of Appeals.

The Ninth Circuit, in an unpublished opinion, agreed with the lower court that MHN’s consulting contract was both procedurally and substantively unconscionable.

MHN avoided the unconscionability arguments in its successful U.S. Supreme Court cert petition, and instead counters with a focus on severability.  It tells the nation’s top Court that California has a rule on severability for contracts that operates differently when the contract is for arbitration, and the state is biased against arbitration.

The original plaintiffs counter that the federal court opinions exercised appropriate discretion in declining to sever clauses in an arbitration agreement that has been refused to be enforced “by over a dozen judges,” including in a 9-0 Washington state Supreme Court opinion that similarly refused to sever.

Full details, cites, links and analysis will be available in the November Alternatives at the link above.

Russ Bleemer is a CPR Consultant and the Editor of CPR’s award-winning publication, Alternatives