Supreme Court Rejects NFL’s Rams Bid to Arbitrate

By Russ Bleemer

The U.S. Supreme Court this morning declined to hear Rams Football Co., et al. v. St. Louis Regional Convention & Sports Complex Auth., No. 19-672, a case involving a prominent question in the arbitration field.

Rams Football is a Missouri state appeals court case on arbitrability and the so-called delegation clause—the arcane lawyers’ law on who gets to decide whether a case is decided by arbitrators or the courts.

The case had been listed for Friday Court conferences, according to Scotusblog, at least eight times this before the Court turned it down at Friday’s conference, and noted the denial in this morning’s order list.

The CPR Speaks blog discussed Rams Football at length in David Chung, “Under Consideration: The Supreme Court May Be Ready to Tackle Arbitrability–Again” (March 23) (available at https://bit.ly/2wx0Nmf).

The Supreme Court set out the law on delegation clauses in First Options v. Kaplan, 514 U.S. 938 (1995) (available at http://bit.ly/2WEXGnF)—a case argued and won by Chief Justice John G. Roberts Jr. when he was a Washington, D.C., partner in Hogan & Hartson—which held that courts should review arbitrability and should not assume that the parties agreed to arbitrate arbitrability unless there is clear and unmistakable evidence that they did so.

And the standard has been elusive ever since.

Problems with arbitrability may be growing.  In addition to the Rams Football case, last year’s Supreme Court decision on the subject,  Henry Schein, Inc., et al. v. Archer and White Sales, Inc., 139 S.Ct. 524 (2019) (available at http://bit.ly/2YLDkWQ), was remanded, reheard, decided, and is back before the Court on basically the same issue.

In last year’s decision, the Court held unanimously that parties to a contract have the ultimate say in whether to have an arbitrator or a court resolve disputes on questions of arbitrability.  Schein’s main holding was that a court couldn’t refuse to enforce arbitration because it believed the claims for arbitration were “wholly groundless”; it sent the case back on remand to the Fifth U.S. Circuit Court of Appeals, and the remand decision about the delegation clause is back before the Court for cert consideration.

So far as it is known, the new Schein has not yet made it to the Court’s conference table.  For more on Schein, see Philip J. Loree Jr., “Schein Returns: Scotus’s Arbitration Remand Is Now Back at the Court,” CPR Speaks (Feb. 19) (available at http://bit.ly/3bQXQgl).

See also, Philip J. Loree Jr., “Schein’s Remand Decision Goes Back to the Supreme Court. What’s Next?” 38 Alternatives 54 (April 2020) (available https://bit.ly/3aYy7Sg), and  Richard D. Faulkner & Philip J. Loree Jr., “Schein’s Remand Decision: Should Scotus Review the Provider Rule Incorporation-by-Reference Issue?” 38 Alternatives 70 (May 2020) (available at http://altnewsletter.com/ on May 1).

Late last month, an appellate court in Florida in a split decision trashed the concept of incorporating by a reference to American Arbitration Association rules as “clear and convincing evidence” of parties agreeing to an Internet app clickthrough contract as sending the arbitrability decision to an arbitrator. Doe and Doe v. Natt and Airbnb Inc., Case No. 2D19-1383 (Fla. 2d DCA March 25) (available at https://bit.ly/3byW6r6).

The Rams issue, according to the team’s cert request petition was

Whether the Federal Arbitration Act permits a court to refuse to enforce the terms of an arbitration agreement assigning questions of arbitrability to the arbitrator if those terms would be enforceable under ordinary state-law contract principles in a non-arbitration context.

For now, the Missouri Court of Appeals decision affirming a trial court’s decision denying arbitration and sending the case to trial stands, and the case is remanded to trial.

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Scotusblog’s case page, available at https://bit.ly/2QANwjk, contains the Rams’ cert petition, the respondent’s brief in opposition, and the Rams’ reply.

Russ Bleemer is the editor of Alternatives

Under Consideration: The Supreme Court May Be Ready to Tackle Arbitrability–Again

By David Chung

A Fifth Circuit case on whether a matter was correctly sent to arbitration was distributed for conference at the U.S. Supreme Court for the fifth time over the past two months on Friday, March 20, so the Court could consider hearing it.

The case didn’t appear on this morning’s order list, but that fact alone may be indicative of a lot more arbitration at the nation’s top court.

Any arbitration case before the Court would gain notice on its own in the ADR world.  But the new petition for certiorari is even more noteworthy because the Court had appeared to have decided the issue just a little more than a year ago in its previous term.  Henry Schein, Inc., et al. v. Archer and White Sales, Inc., 139 S.Ct. 524 (2019) (available at http://bit.ly/2YLDkWQ), the Court held unanimously that parties to a contract have the ultimate say in whether to have an arbitrator or a court resolve disputes on questions of arbitrability.

But Schein’s main holding was that a court couldn’t refuse to enforce arbitration because it believed the claims for arbitration were “wholly groundless,” and the nation’s top court sent the case back on remand to the Fifth U.S. Circuit Court of Appeals.

The remand order was a step before actual arbitration, however.  The Court asked the Fifth Circuit to decide whether the contract’s delegation clause really pointed to an arbitrator deciding arbitrability.

The appeals panel looked at the contract again and said it didn’t, and found the decision was for the courts, again.

And the defense petitioned the Supreme Court to hear Schein, an appeal that was filed at the end of January and has not yet made it to a Court conference.  See Philip J. Loree Jr., “Schein Returns: Scotus’s Arbitration Remand Is Now Back at the Court,” (Feb. 19) (available at https://bit.ly/2U8ZumI); see also, Philip J. Loree Jr., “Schein’s Remand Decision Goes Back to the Supreme Court. What’s Next?” 38 Alternatives 54 (April 2020) (available next week at altnewsletter.com and on Lexis & Westlaw; CPR Institute membership access after logging in at www.cpradr.org/news-publications/alternatives).

But while Schein was being relitigated, at the same time and on the same issue about the extent of the reach of the clause that delegates arbitration decision making, The Rams Football Co. LLC v. St. Louis Regional Convention & Sports Complex Auth., No. 19-672, already was in front of the Court for consideration on whether it should be heard.

Closely mirroring Schein, the Rams issue, according to the team’s cert request petition is

Whether the Federal Arbitration Act permits a court to refuse to enforce the terms of an arbitration agreement assigning questions of arbitrability to the arbitrator if those terms would be enforceable under ordinary state-law contract principles in a non-arbitration context.

The case has made it to conference stage, repeatedly, without a denial or a “cert granted” or, indeed, any procedure other than rescheduling. The cert petition is dated Nov. 21, 2019, and the counsel of record is Paul Clement, a Washington, D.C., partner in Kirkland & Ellis who is a frequent participant in Supreme Court cases who, according to the Above the Law blog, argued his 101st case at the Court early this month.  See “Neil Gorsuch’s Frustration With Kirkland & Ellis Partner Paul Clement On Full Display,” Above the Law (March 4) (available at https://bit.ly/39dZS7A).

The Court had denied a stay in the case in October without comment.

Despite a government shutdown, including much of the judicial branch, the Court, after canceling oral arguments indefinitely, has continued its normal business of opinion writing and conferences, out of which come its orders, including cases it agrees to hear, and cases it denies. The Court’s Friday conference resulted in an order list earlier today, but Rams was not mentioned and should be back for consideration in the next conference, scheduled for Friday, March 27, with the latest version of Schein waiting to be listed.

The case is about a dispute between the NFL’s Rams, and three Missouri government entities, the St. Louis Regional Convention and Sports Complex Authority, the City of St. Louis, and the County of St. Louis.

The dispute is over an agreement on the Rams’ use of the former Edward Jones Dome stadium in St. Louis.  The team departed for Anaheim, Calif., after the 2015 season amidst a storm of controversy over owner E. Stanley Kroenke’s remarks about St. Louis’s viability as an NFL-hosting city. The Rams sought arbitration over whether it should pay damages in the wake of the team’s move to become the Los Angeles Rams for the second time in the team’s existence.

The agreement included an arbitration clause that incorporated terms by reference, stating that all disputes would be conducted “in accordance with the most applicable then existing rules of the American Arbitration Association.”  Those rules send the question of who decides whether a case should be arbitrated to an arbitrator, not a court.

The petitioner, the Rams, asserts that the key Missouri appellate court decision in a series of cases that include rulings by the state supreme court, should have simply “‘respect[ed] the parties’ decision as embodied in the contract’ by recognizing that it has ‘no power to decide the arbitrability issue.’” Petition for Writ of Certiorari citing Henry Schein, 139 S. Ct. at 528 (brief available at https://bit.ly/2U85jAG).

The Rams’ petition claims the “clear and unmistakable” test of whether the parties intended for an arbitrator, rather than a court, to decide whether an arbitration agreement should be arbitrated was too strict.  It contends the standard applied by the appellate court violated “an application of equal-footing principles,” which the Supreme Court requires under the Federal Arbitration Act—that is, that arbitration contracts are treated the same as other contracts.

While the Rams contend the parties clearly and unmistakably agreed to arbitrate under the then-existing AAA rule, the petition argues that the incorporation of the rule sending the arbitrability question to the arbitrator should have been recognized by state court to keep the arbitration contract on an equal footing with other contract principles.

The state respondents strongly dispute that the Missouri appellate court ignored the Court’s equal-footing principle.  It also asserted the parties could have never unequivocally agreed to arbitrate the issue because the AAA rule did not have the arbitrability provision when they signed the contract.

While conceding the applicable version of AAA rule confers power to the arbitrators to decide arbitrability, the respondents claim the incorporation principle is irrelevant to the case.  Instead, they argue that “[p]ursuant to fundamental Missouri contract law, the parties must agree to all essential terms of an agreement at the time of contracting.”  (Respondent’s Brief in Opposition to Petition for Writ of Certiorari (available at https://bit.ly/2U8ZumI).

Thus, “there must be an actual agreement to delegate at the time of contracting.” Id.

Despite the respondents’ denial of a division among federal and state courts on the applicable standard, the Rams’ petition claims that some state courts, including Missouri, are requiring an extraordinary degree of clarity for the “clear and unmistakable” test, which the petition says is contrary to how every federal court addresses the issue.

The petitioner urges that the Court provide guidance regarding the clear and unmistakable test, which it says is critical since the respondents’ position not only defies the FAA’s equal footing principle but also has been the subject of repeated requests for Court clarification, citing four cases the Court declined to hear between 2014 and 2018. The petition also notes that the situation has seen “every federal court resisting special rules disfavoring arbitration and only state courts on the anti-arbitration side of the dispute.”

Scotusblog’s case page, available at https://bit.ly/2QANwjk, contains the Rams’ cert petition, the respondent’s brief in opposition, and the Rams’ reply

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The author is a CPR Institute Spring 2020 intern.  Alternatives’ editor Russ Bleemer assisted with the research.