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Liz Kramer litigates business and construction disputes. She loves a challenge, and represents both plaintiffs and defendants in a variety of complex cases, frequently involving franchise disputes, construction projects, breaches of contract and appeals.

Two different panels of the Second Circuit issued opinions about class arbitration on the same day last week.  One creates a circuit split over how specific parties must be to delegate the availability of class arbitration to arbitrators, and the second addresses when bankruptcy law can preempt the federal arbitration act.

In Wells Fargo Advisors, LLC v. Sappington, 2018 WL 1177230 (2d Cir. March 7, 2018), a putative class of former Wells Fargo employees brought suit for unpaid overtime (FLSA).  Wells Fargo moved to compel “bilateral” (individual) arbitration.  The district court denied the motion, finding that the arbitrator was authorized to decide whether class arbitration was available.   The Second Circuit affirmed.

As you may recall from this blog, at least four federal circuit courts have found that whether class arbitration is available is a gateway issue of arbitrability, meaning that it is presumptively for the courts to determine.  (The 8th, 6th, 4th, and 3d.)  And, while parties can delegate gateway issues to the arbitrator if they do so clearly and unmistakably, at least three of those circuits have held that a higher standard applies to the class arbitration issue.  (For example, the Eighth Circuit found that incorporating AAA rules was not sufficient to delegate class arbitrability, while it is sufficient to delegate other gateway issues.)

In the Wells Fargo matter, the Second Circuit “assume[d] without deciding” that the availability of class arbitration is a gateway question.  (Wimps.  Just decide.)  It then considered whether the delegation of that issue to an arbitrator was clear and unmistakable under Missouri law.  One set of plaintiffs had an agreement stating that “any controversy relating to your duty to arbitrate hereunder, or to the validity or enforceability of this arbitration clause, or to any defense to arbitration, shall also be arbitrated.”    The court found that was clear and unmistakable delegation of the class arbitration issue to an arbitrator.

More surprisingly, the court found that a second set of plaintiffs had also clearly and unmistakable delegated class arbitration to an arbitrator, even though their agreement only agreed to arbitrate “any dispute” and adopted either FINRA rules or alternatively 1993 Securities Arbitration Rules of the AAA.  In its analysis, the court noted that because some types of disputes were excluded from arbitration (unemployment), but class arbitration was not excluded, Missouri law would consider it included.  And the court found that more recent iterations of the AAA rules applied, which allow an arbitrator to determine whether a class can proceed.  This decision creates a circuit split on the issue of whether class arbitration is special enough to deserve its own rules for delegation.

As if creating a circuit split on class arbitrability wasn’t exciting enough, the Second Circuit also allowed another putative class action to go forward, despite an arbitration clause.  In In re Anderson, 2018 WL 1177227 (2d Cir. March 7, 2018), Mr. Anderson went through Chapter 7 bankruptcy and his debts were released.  One of those debts was to his credit card company.  However, Mr. Anderson alleged that the credit card company refused to update his credit reports after the bankruptcy.  So, he filed a putative class action.  The credit card moved to compel arbitration under the cardholder agreement, but the bankruptcy court found it was non-arbitrable because it “was a core bankruptcy proceeding that went to the heart of the ‘fresh start’ guaranteed to debtors.”  On appeal, the Second Circuit agreed.

Sometimes current events provide an occasion perfect storm to educate about arbitration basics. This is one of those occasions.

Here are questions that friends and colleagues  storming mad people have asked me in the past day or so, with my best answers:

  • Does an arbitration agreement have to be signed by both parties to be enforceable (i.e. ride out the storm)?
    • The Federal Arbitration Act provides that an arbitration agreement must be “written,” but it does not also say it must be signed by all parties.  Whether a signature is required, along with all answers about the enforceability of arbitration agreements, depends on state contract law. In general, a contract requires an offer, acceptance, and consideration. And in most states, “acceptance” of an offer can take many forms. (See, for example,  this case (about Macy’s) finding a valid agreement without one party’s signature , but these cases finding no valid agreement where a signature was missing.)
  • Do arbitrators have authority to issue temporary or ex parte injunctions?
    • It depends. Arbitrators derive their authority from the parties’ arbitration agreement. If that arbitration agreement expressly grants the power to issue emergency, temporary, or ex parte injunctions, or if the arbitration agreement incorporates rules of an administrator (like the AAA) and those rules grant the power to issue those types of injunctions, then the arbitrator has power to enjoin the parties on an emergency or temporary basis (but only the parties, otherwise non-parties will kick up a storm and vacate the award).
  • How are injunctions from arbitrators enforced?
    • Within the arbitration proceeding, a party may seek sanctions from the arbitrator if the arbitrator’s temporary injunction is violated. Those sanctions can include anything authorized by the applicable rules. (Remember in this case, when the sanction was over $600 million?  Oh, that created a sh*tstorm.) Outside the arbitration proceeding, the party wanting to enforce the injunction (whether temporary or permanent) must first obtain a final arbitration award, and then have that award confirmed in federal court. (Remember, only “final” awards can be confirmed under the Federal Arbitration Act.) After that final award is confirmed in court, it is a judgment that can be enforced like any other court judgment.
    • However, when the winning party asks a court to confirm an award, the losing party often moves to vacate the arbitration award.  And the absence of a valid arbitration agreement is a solid basis to vacate the award.  For example, the Revised Uniform Arbitration Act authorizes vacatur if: “there was no agreement to arbitrate, unless the person participated in
      the arbitration proceeding without raising the objection.”

**Thanks for all the nudges about writing this post.  You convinced me that my desire to offer context to the news should trump my desire to storm off and pretend it is not happening.

Despite how often I talk about whack-a-mole and the tug-of-war between the state courts and SCOTUS on arbitration, the truth is that the majority of state supreme courts follow SCOTUS’s arbitration precedent (whether holding their noses or not, we don’t know). Recent weeks have given us multiple of those pro-arbitration state court decisions to highlight – from Alabama, Rhode Island, Texas, and West Virginia.  Yes, that West Virginia.

In STV One Nineteen Senior Living, LLC v. Boyd, 2018 WL 914992 (Alabama Feb. 16, 2018), the Supreme Court of Alabama enforced the arbitration agreement in the admission documents of an assisted living facility.  The trial court had denied the facility’s motion to compel arbitration without explanation.  On appeal, the supreme court found the language of the arbitration agreement, which required arbitration of “any controversy or claim arising out of or relating to” the parties’ agreement, was broad enough to cover the tort claims asserted.

In Disano v. Argonaut Ins. Co., 2018 WL 1076522 (R.I. Feb. 28, 2018), the Supreme Court of Rhode Island refused to vacate an arbitration award.  Although the losing party argued that the panel of arbitrators had miscalculated damages, the supreme court applied a very deferential standard of review and noted that even if the arbitrators’ math skills were lacking, that “does not rise to the level necessary to vacate such an award.”

In Henry v. Cash Biz, 2018 WL 1022838 (Tex. Feb. 23, 2018), the Supreme Court of Texas found that a pay day lender did not waive its right to arbitrate by alerting the district attorney’s office to the borrowers’ conduct (issuing checks that were returned for insufficient funds).  The trial court had denied the lender’s motion to compel arbitration, the court of appeals had reversed, and the supreme court affirmed the intermediate appellate court.  It found: 1) that the borrowers’ claims of malicious prosecution were within the scope of the arbitration clause; and 2) that the lender’s status as the complainant in the criminal charge was not sufficient to prove that it “substantially invoked the judicial process.”  [Recall that Mississippi’s high court reached the opposite result in a very similar case just a few months ago.]

In another waiver case, the Supreme Court of Appeals of West Virginia held that a party’s “pre-litigation conduct” did not waive its right to arbitrate. In Chevron U.S.A. v. Bonar, 2018 WL 871567 (W. Va. Feb. 14, 2018), the trial court had denied Chevron’s motion to compel arbitration.  It found that Chevron’s decision to take actions consistent with its interpretation of the parties’ agreement had waived the right to arbitrate, because Chevron had “unilaterally decided” the questions instead of posing them to an arbitrator.  On appeal, the supreme court found “such a result simply is unreasonable” and “absurd.”  Therefore, it reversed with instruction for the trial court to issue an order compelling arbitration.

Just two days later, the Supreme Court of Appeals of West Virginia enforced the arbitration agreement in a contract of adhesion, again reversing the decision of a trial court. In Hampden Coal, LLC v. Varney, 2018 WL 944159 (W. Va. Feb. 16, 2018), an employee sued his employer and the employer moved to compel arbitration.  In response, the employee argued the arbitration clause was unenforceable.  On appeal, the supreme court clarified that it applies “the same legal standards to our review of all arbitration agreements,” and not a special standard if they involve employees or consumers.  It then found that the mutual agreement to arbitrate was sufficient consideration for the arbitration clause and that the arbitration clause was not unconscionable.

In a fitting ending to a post about high courts,  our nation’s highest court has agreed to decide a new arbitration case.  The case, New Prime Inc. v . Oliveiracomes from the 1st Circuit and raises two questions: whether a court or arbitrator should decide if an exemption to the FAA applies; and whether the FAA’s exemption (in Section 1) includes independent contractors.

A recent decision from the 10th Circuit shows there is a whole new way to invalidate an arbitration agreement.  In Citizen Potawatomi Nation v. Oklahoma, 2018 WL 718606 (10th Cir. Feb. 6, 2018), the court found the arbitration agreement unenforceable because the parties provided for de novo review of any arbitration award in federal court, which is prohibited under the Hall Street decision from SCOTUS in 2008.

The agreement at issue was a Tribal-State gaming compact between the Citizen Potawatomi Nation and the State of Oklahoma.  The Compact had a dispute resolution procedure providing for arbitration under AAA rules.  But it also stated that “notwithstanding any provision of law, either party to the Compact may bring an action against the other in a federal district court for the de novo review of any arbitration award …”

The parties then had a dispute over liquor licensing and taxes, which was heard in arbitration.  The Potawatomi Nation moved to confirm the award in federal court, and argued for narrow review under FAA Section 10.  Oklahoma moved to vacate the award,  seeking de novo review of the dispute under the Compact.  The district court applied the narrow review in Section 10 and confirmed the award.

On appeal, the 10th Circuit upended the entire arbitration agreement.  It noted that the 2008 Hall Street decision makes clear that parties cannot alter the standard of review in Section 10.  It also found that the provision for de novo review could not just be severed, because it was material to the parties’ decision to choose arbitration, as evidenced by a review of the Compact as a whole.  As a result, the court found the arbitration agreement as a whole unenforceable.


If you are an arbitrator, litigator or in-house counsel ready to advance your knowledge and skills in arbitration, join me at the ABA’s 11th Annual Arbitration Training Institute this May!  I will present on Trends in Arbitration Law (plus, it is in Miami….)


The Fourth Circuit issued an opinion yesterday in an under-developed area of arbitration law: when are awards “mutual, final, and definite”?  This is an important issue because under Section 10(a)(4) of the Federal Arbitration Act, arbitration awards can be vacated if they don’t meet the standard of “mutual, final and, definite.”

In Norfolk Southern Railway Co. v. Sprint Communications Co., 2018 WL 1004805 (4th Cir. Feb. 22, 2018), the parties’ lease agreement called for a three-person appraisal panel to establish the price for the renewal period.  Each party selected their own appraiser, and those two appraisers chose a third appraiser.  (Let’s just call him the Chair.)  In December of 2014, the Chair issued a “majority decision,” setting a payment amount and identifying two critical assumptions underlying that payment amount.  The majority decision clarified that  “[i]f either of these extraordinary assumptions are found to not be true, [the Chair] … reserves the right to withdraw his assent.”   A panel of AAA arbitrators then determined the Majority Decision was final and binding.

Norfolk Southern then moved to confirm the Majority Decision and the district court granted the motion.  The Fourth Circuit reversed, finding the Majority Decision was not “final”.  It cited cases for the proposition that “[a]n award is not ‘final’ under the FAA if it fails to resolve an issue presented by the parties to the arbitrators.”  The court focused on the Chair’s reservation of his right to withdraw his assent as the key aspect of the Majority Decision that made it lack finality.  It wrote: the Chair “did not merely base his assent on certain assumptions, but rather reserved the right to withdraw his assent if his assumptions proved to be incorrect. This outcome cannot be squared with any conception of ‘finality.'”

The Fourth Circuit remanded to the district court with instructions to vacate the award, and told the parties to go back to arbitration for “an arbitration award that is “final” and otherwise complies with the FAA and this opinion.”

This is an important case for arbitrators to read in order to be sure they issue awards that are final and can be confirmed.


In today’s post, we pick up where the 4th Circuit left off a few weeks ago — with federal circuit courts finding ways to avoid enforcing arbitration agreements that are obtained years after litigation has commenced.

In Dasher v. RBC Bank (USA), __ F3d. ___, 2018 WL 832855 (11th Cir. Feb. 13, 2018), the plaintiffs alleged the bank had processed debit card transactions in such a way that it would increase overdraft charges.  Although the date is not listed, the case appears to have begun in 2009.  During the course of the litigation, the first bank was acquired by another bank (“new bank”) and issued new customer account agreements in 2012 which lacked arbitration agreements.  A motion to compel based on the arbitration clause in the earlier agreement was denied, and the new bank appealed.  At about the same time, the new bank sent customers an amended agreement that included an arbitration provision.  The amended agreement was effective in February 2013.

The new bank lost its appeal.  After the case was remanded to district court, the new bank again moved to compel arbitration, this time based on the February 2013 amendment.  The motion was made in December of 2014.  The district court denied the motion, finding the new bank had waived its right to arbitrate under the 2013 amendment.

On appeal, the 11th Circuit agreed that the new bank could not compel arbitration, but for a different reason.  It held that the new bank failed to prove that the parties had agreed to the 2013 amendment.  The opinion found that under North Carolina law, it could consider the parties’ words and actions to determine whether the parties intended to amend the 2012 customer agreement.  And here, it concluded that the named plaintiff gave mixed responses to the proposed 2013 amendment.  Through counsel, the named plaintiff was fighting the motion to arbitrate in the courts.  But his “uncounseled response” was silence.  The court was clearly bothered by the fact that the new bank sent its proposed amendment directly to all of its customers, without advising either the plaintiffs’ attorney or the court.  Therefore, while it did not want to write “an ethics opinion,” it still refused to find the 2013 amendment was enforceable.

This is an important decision for many reasons.  First, it offers future courts an alternative argument to  “waiver” in situations like this one.  (As the 4th Circuit decision showed, waiver didn’t seem to sit well.)  Second, it offers an important reminder to defendants that courts do not take kindly to repeated motions to compel arbitration based on evolving arbitration agreements.  While they may be willing to overlook it if the “redo” motion is due to a change in the legal landscape, that’s probably the only good reason.  That means the left hand (the litigators and the in-house counsel overseeing them) always need to know what the right hand (whomever is deciding what goes in the customer contracts) is doing.

The Supreme Court of Nebraska gave an unpleasant surprise to its trial court judges last week: they cannot enforce arbitration agreements sua sponteBoyd v. Cook, 298 Neb. 819 (Feb. 2, 2018).

The case involved a messy shareholder dispute.  A key contract to the dispute contained an arbitration provision covering “any dispute or controversy arising out of” the agreement.  The suit began in April of 2014, and eventually included many parties and at least a dozen claims.  In 2016, the trial court granted partial summary judgment.  But then it had apparently had enough.  In January of 2017, the trial court “dismissed sua sponte all of the claims in the case” other than one, based on the arbitration provision in the contract.  It found it lacked jurisdiction.

After confirming its appellate jurisdiction, and noting that arbitration clauses can never defeat a court’s subject matter jurisdiction (Dude! Don’t get your hackles up), the Nebraska Supreme Court got around to the good stuff.  It found that because arbitration is a contractual right “it necessarily follows that this right may be enforced only by a party to the contract.”  Therefore, “it is improper for a court to try to enforce such a contractual right on behalf of the parties.”  Trial courts will have to resort to other tactics in getting irritating cases off their dockets.


If the Boyd case can be described as parties ignoring their rights to arbitrate, then a Vermont case can be described as a party ignoring its potential right to litigate.  In Adams v. Barr Law Group, 2018 WL 671444 (Feb. 2, 2018), a law firm tried to recover unpaid fees from its client in arbitration.  The client participated in arbitration (without counsel) for seven months.  Then, one week before the hearing, it alleged for the first time that the arbitration agreement was unenforceable, because the law firm did not fully explain to the client the ramifications of agreeing to arbitration.  The arbitrator denied the motion to dismiss and issued an award in favor of the law firm.  The client then moved to vacate the award and lost.  On appeal, the Vermont Supreme Court explained that the client had waived its right to object to arbitration by participating fully for seven months without raising the issue.  It noted that the requirement is “designed to avoid unnecessary investments in time and resources of exactly these types.”


Finally, another post script to the SCOTUS preview : a new cert petition raises the circuit split over the “wholly groundless” doctrine.  Maybe the Court will finally bite on one of my favorite issues!

In a recent opinion, the Fourth Circuit cited waiver as its basis to refuse to compel arbitration, but the result seems animated by a sense that the arbitration agreements were unenforceable.  Degidio v. Crazy Horse Saloon & Restaurant, Inc., __ F.3d __, 2018 WL 456905 (4th Cir. Jan. 18, 2018).

The case involved a putative collective and class action case by “exotic dancers” at a club in South Carolina, alleging they were wrongly classified as independent contractors and thereby denied minimum wages and other statutory protections.  The complaint was filed against the club in August of 2013.  [I can’t call it a saloon.  We aren’t in the wild west.]  At that point, it is undisputed that none of the potential plaintiffs had arbitration agreements with the club.

The club participated in discovery for a year.  In November and December 2014, the club obtained arbitration agreements with some of its dancers “as a condition of performing.”  In December of 2014, the club moved for summary judgment on the merits, arguing the dancers were properly classified as independent contractors.  Then in January of 2015, the club brought a motion to compel arbitration against plaintiffs who had signed arbitration agreements.  The district court denied the motion, raising concerns about the enforceability of the arbitration agreements.  The club brought a new summary judgment motion on the merits in October of 2015.  When that was denied, the club sought additional discovery on the merits, attempted to certify questions to the South Carolina Supreme Court, and then moved to compel arbitration against nine plaintiffs who had opted into the litigation after its last motion.  That motion was also denied.

The Fourth Circuit set the stage for its discussion by noting that litigants may waive their rights to arbitration by “substantially utilizing the litigation machinery.”  Without citing any further case law about waiver, the opinion proceeded to review the significant extent of the club’s use of “litigation machinery” (summarized above).  The court was particularly upset at the apparent gamesmanship:

The only possible purpose of the arbitration agreements, then, was to give [the club] an option to revisit the case in the event that the district court issued an unfavorable opinion [on summary judgment].  In other words, Crazy Horse did not seek to use arbitration as an efficient alternative to litigation; it instead used arbitration as an insurance policy in an attempt to give itself a second opportunity to evade liability.

In response to the club’s argument that it could not have moved to compel arbitration until the entertainers who had actually signed the agreements opted into the case, the court suggested that it should have informed the district court of its intentions so that the court did not waste judicial resources.  In addition, the court did not want to “give defendants a perverse incentive to wait as long as possible to compel arbitration.”

At the close of this waiver discussion, the court veers into what seems to be the heart of the matter: its conclusion that the arbitration agreements were “misleading” and “sham agreements.”  The arbitration agreements told the dancers that they only reason they could keep tips and set their own schedules was because they were independent contractors, and that would change if they joined the Degidio lawsuit.  The court noted that information was false.  Furthermore, the court was upset that the agreements were presented to plaintiffs “in a furtive manner,” evading the district court’s ability to supervise contact between the potential plaintiffs and counsel.  “The setting here was ripe for duress.”  However, the court does not undertake any analysis of unconscionability or other bases to find the agreements unenforceable under South Carolina law.  It just affirms the decision to deny the motion to compel arbitration.

I find this a puzzling case.  Normally, parties are allowed to agree to arbitrate a dispute that has already begun.  And litigation conduct before that agreement can’t count as a waiver.  Furthermore, parties don’t usually tell the judge about motions that they don’t yet have a basis to bring.  So, unless FLSA cases are really so different, this seems like a case that should have been analyzed on the validity of the arbitration agreements.  It is decidedly underhanded to convince people to sign arbitration agreements by misrepresenting the law.  Maybe South Carolina unconscionability doctrines are very difficult?

Remember when Maria sang “Let’s start at the very beginning, it’s a very good place to start”?  Well, that seems to be what federal circuit courts are doing with their arbitration decisions recently.  This post will run through some Do Re Mis of arbitration law, as articulated by those decisions (and will close with some arbitration cases on SCOTUS’s docket).

  • In most circuits, arbitrators cannot subpoena documents in advance of an in-person hearing.  The 9th Circuit affirmed that applies within its jurisdiction as well.  CVS Health Corp. v. Vividus, __ F.3d __, 2017 WL 6519942 (9th Cir. Dec. 21, 2017).
  • When an arbitration agreement calls for application of arbitral rules, and those rules give the arbitrator power to rule on her own jurisdiction, then the district court should send any dispute over arbitrability to the arbitrator.  The 4th Circuit confirmed that holding applies to JAMS rules, just as it does to AAA rules.  Simply Wireless, Inc. v. T-Mobile US, Inc., __ F.3d __, 2017 WL 6374105 (4th Cir. Dec. 13, 2017).
  • Claims under the Fair Labor Standards Act are subject to arbitrationRodriguez-Depena v. Parts Authority, Inc., __ F.3d __, 2017 WL 6327827 (2d Cir. Dec. 12, 2017).  (The Second Circuit is at least the third federal circuit to reach that conclusion.)
  • An arbitration agreement that carves out injunctive relief means what it saysArcher & White Sales v. Henry Schein, Inc., __ F.3d __, 2017 WL 6523680 (Dec. 21, 2017).  The arbitration agreement called for arbitration of any dispute under the agreement “except for actions seeking injunctive relief and disputes related to [intellectual property].”  Plaintiff brought an antitrust action seeking damages and injunctive relief. Applying the exception, the district court denied the motion to compel arbitration and the appellate court affirmed.
  • Independent contractors are not “agents” that can be bound as a non-signatory to arbitration clauseOudani v. TF Final Mile, LLC, __ F.3d __, 2017 WL 5587648 (1st Cir. Nov. 21, 2017) (refusing to compel arbitration of class action brought by independent contractors for wage-and-hour claims).
  • Ambiguous awards can be sent back to the arbitrator.  Herll v. Auto-Owners Ins. Co., __ F.3d __, 2018 WL 296870 (8th Cir. Jan. 5, 2018)  (sending ambiguous “appraisal award” back to arbitrator under Minnesota’s Revised Uniform Arbitration Act.)
  • If the losing party failed to raise an argument in arbitration, it can’t use that argument to vacate the arbitration awardLaborers’ Pension Fund v. W.R. Weis Co., __ F.3d __, 2018 WL 316555 (7th Cir. Jan. 8, 2018) (finding in an ERISA dispute that one party “waived its statutory-interpretation argument by failing to raise it in the arbitration.”)
  • First Amendment arguments will not get a putative class out of arbitration with a private party.  Okay, this is not an arbitration law “basic” point, but instead one that confirms the ingenuity of plaintiffs’ class action lawyers. These plaintiffs opposed arbitration “on First Amendment grounds” and asserted there was state action because the FAA and judicial interpretations of it encourage arbitration to the point that AT&T’s actions are attributable to the state.  Roberts v. AT&T Mobility, __ F.3d __, 2017 WL 6275537 (9th Cir. Dec. 11, 2017).  The 9th Circuit found no state action, and noted that plaintiffs’ arguments that the FAA violates consumers’ constitutional rights are incompatible with the Supreme Court’s decisions on arbitration.


Now that we’ve run through those reminders on issues that arise frequently in arbitration law, let’s talk about some unsettled issues.  SCOTUS today is considering two cases involving delegation clauses and how lower courts should put its Rent-a-Center, West decision into practice:

  • New Prime, Inc. v. Oliveira — this case comes from the First Circuit and raises the question whether the court should determine that the FAA applies before enforcing a delegation clause.  Why does that matter?   In this case a worker successfully argued the FAA did not govern, because he was an exempt transportation worker, and therefore the court refused to compel arbitration.  [Jan. 22 update: SCOTUS’s order list today does not include this as a grant or deny, so it will likely be considered again in February.]
  • Applied Underwriters Captive Risk Assurance Co. v. Minnieland Private Day School — this case comes from the Fourth Circuit and raises this question: Can a defense to arbitration that applies to the arbitration agreement as a whole ever be specific to the delegation clause?   [Disclosure: I was involved with this petition.] [ Jan. 22 update: SCOTUS denied cert.]

SCOTUS is also being asked to review a decision of the California Court of Appeal that refused to compel arbitration based on a state statute.  That California statute gives courts the discretion to deny enforcement of an arbitration provision when there is a possibility of conflicting rulings in pending litigation with third parties.  The cert petition asks whether the FAA preempts that California statute and will be considered in February.

Last month, SCOTUS  denied cert in another California arbitration case.  That petition, Betancourt v. Prudential Overall Supply, challenged California’s rule that private attorney general disputes cannot be arbitrated.  (SCOTUS passed on the same issue in 2015.)

Here’s hoping that in 2018 SCOTUS sticks with its recent practice of deciding at least one arbitration case per year!  And, here’s hoping the Vikings get in the Super Bowl!

Two cases recently fit in one of my favorite categories: those awards that get “un-vacated.”  These cases went through arbitration, had that arbitration award vacated by a district court, only to have the award later resurrected by an appellate court.  In today’s edition, the whiplash happens in both state and federal court.

In Caffey v. Lees, 2018 WL 327260 (R.I. Jan. 9, 2018), Lees was the winner after bringing a personal injury case in arbitration. He was awarded nearly $200,000.  Caffey moved to vacate the award, arguing every possible basis under the Rhode Island arbitration statute.  The trial court granted the motion to vacate, based on the initial failure of Lees’ counsel to disclose a document from its expert.  Not just any document, of course, but an early assessment that contradicted the expert’s eventual opinion about causation.  The trial court found that omission meant the award was procured by “undue means.”

On appeal, the Supreme Court of Rhode Island noted it had not addressed “undue means” since 1858.  It looked to more recent definitions from federal circuit courts of the phrase — noting that proving undue means involves proving “nefarious intent or bad faith” or “immoral” conduct.   It found that standard was not met in this case, since the losing party had the critical document well before it submitted its final brief to the arbitrator.  Indeed, the issue of the untimely disclosure was placed before the arbitrator, and the expert explained the discrepancy.  Because the expert had a plausible explanation, the court could not agree that Lees’ counsel obtained the award through underhanded or conniving means.  The Supreme Court reinstated the award.

A case in the Ninth Circuit followed the same path.  In Sanchez v. Elizondo, 2018 WL 297352 (9th Cir. Jan. 5, 2018), an investor won a $75,000 award in a FINRA arbitration.  The district court granted the broker’s motion to vacate based on an argument that the arbitrator exceeded his powers.  In particular, the arbitrator allowed the arbitration to proceed with a single arbitrator, even after the claimant had submitted a pre-hearing brief increasing its damage request to just over the FINRA line that requires a three-arbitrator panel.  (The FINRA rules provide that claims over $100,000 must be heard by three arbitrators.  The claimant had initially requested exactly $100,000, so was assigned the single arbitrator, but then sought $125,000 in the pre-hearing brief, without amending the claim.)

The Ninth Circuit reinstated the award.  After first establishing that it had appellate jurisdiction, it considered the arbitrator’s powers.  Importantly, the court affirmed that arbitrators have discretion on matters of substance as well as matters of procedure.  In this case, FINRA rules explicitly gave the arbitrator power to interpret the FINRA Code and rules. Furthermore, the arbitrator asked the parties to address the issue of the increased damage amount, considered their arguments, and interpreted the rule to reference the amount initially claimed in the demand, instead of any amount later sought in the arbitration.  Because the arbitrator had power to interpret the rule and did so, the court found he did not exceed his powers.

These don’t seem like hard cases to me.  Given the standard for vacating awards, these arbitration awards should have been straightforward to confirm.  The fact that they weren’t suggests either that the speed of development under the FAA is difficult for advocates and judges to keep up with, or that there may be some judicial hostility toward arbitration coloring the application of the standard for vacatur.