As we close out 2018, it is a good time to reflect on the year in arbitration law. Overall, I would characterize the year as another in which everyone was mildly obsessed with class actions, the U.S. Supreme Court again showed its willingness to enforce arbitration agreements of all kinds, and lower courts and groups of citizens attempted to resist the high court’s blind faith in arbitration with some success. Here are my thoughts on the biggest stories of the year:
- Decision With Biggest Impact: SCOTUS’s ruling in Epic Systems. Groups of employees argued that the National Labor Relations Act gave them the right to join class actions and no arbitration agreement could overcome that statutory right. But the Court emphatically rejected that argument, holding that employees are bound to the agreements they sign and nothing in the NLRA contradicts that result. The outcome of this case was not unexpected, but the fallout was dramatic. Many class actions dried up almost immediately, while others took a few months. Yet other employees decided to give mass individual arbitration a go, filing hundreds of arbitration demands against the same employer simultaneously.
- Circuit Split Most Likely To Go To SCOTUS: The split over who — judges or arbitrators — should decide whether the parties’ arbitration agreement allows class arbitration. Seven federal circuits have looked at this issue. Four have concluded that the issue of class arbitration is a big enough deal that it is presumptively for courts to decide, even when the parties have incorporated arbitration rules that authorize an arbitrator to decide jurisdictional questions. Three circuits disagree. Given the Supreme Court’s attraction to everything class arbitration, this seems likely to pique the Justices’ interest. (Indeed, a cert petition has been filed in the 11th Circuit case, which is on the minority side of this circuit split, and the Justices have asked the winning party to respond.)
- Best Evidence That Arbitration Law Is Still In Its Infancy: The conflicting cases over whether Uber’s arbitration agreement is enforceable. Nothing says “This is a developing area of law” like having the First Circuit refuse to enforce the same arbitration agreement that the Second Circuit had just agreed to enforce. Even better — the difference turned on the color of the hyperlink. [Runner up in this category are the conflicting cases over whether the arbitration agreements printed on the outside of roofing shingle packages are enforceable.]
- Most Successful Political Attack on Arbitration: The #MeToo movement successfully brought public attention to concerns that having arbitration agreements in employment contracts may exacerbate a discriminatory workplace. As a result, legislation declaring arbitration agreements invalid in cases of sexual assault or harassment was introduced at the federal level and many states. To date, I am aware of it passing in only New York and Washington. But, those state statutes are likely preempted by the Federal Arbitration Act. More effective may be the public pronouncements by many major corporations that they will not enforce arbitration agreements in cases of sexual assault or harassment.
- New Face of the Resistance: Kentucky. First place had to go to Kentucky, after this decision, in which it just ignored the fact that the U.S. Supreme Court had schooled it on arbitration law last year. But there are many runners-up in this category, frequently consisting of courts who are using the flexibility inherent in state contract law to find ways around arbitration. For example, the courts who have recently decided that if the parties either did not choose an entity to administer the arbitration, or chose one that is no longer available, that voids the entire arbitration agreement. (See postscript on this entry.) Or the courts who found that, despite the federal presumption in favor of arbitrability, the parties’ disagreement was outside the scope of their arbitration agreement.
- Most Outrageous Motion To Compel: There are moments you just want to say “What were you thinking??” to counsel for the defense. This year, this case stood out to me for outrageous conduct, as the plaintiffs did not originally have an arbitration agreement but apparently were duped into signing one a year into the class action litigation. But, this case was a close second (where the defense argued that blind plaintiffs should be bound by the arbitration agreement, despite no evidence they were made aware of its existence).
Turning our sights forward, what can we expect in 2019? Well, SCOTUS owes us three arbitration decisions (Henry Schein, Lamps Plus, and New Prime). None of those are likely to have broad impact on arbitration law, as they each deal with fairly narrow issues. So, big stories will likely come from elsewhere. Maybe the new Democratic majority in the House will have more interest (and success) in passing federal arbitration legislation? Maybe mass individual arbitration filings will change the cost-benefit-analysis of class action waivers for corporations? I look forward to watching it unfold with all of you! Happy New Year.