In a first indication of the Trump Administration’s stance on consumer arbitration, the Centers for Medicare & Medicaid Services (CMS) this week issued a new proposed rule that rolls back the Obama Administration’s regulation, which precluded pre-dispute arbitration agreements in nursing homes. (Too many negatives in that sentence… in other words, the Trump Administration wants to ensure that nursing homes can have arbitration agreements in their admission documents.) For context, CMS just issued the regulation it is now retracting in October of 2016. The 2016 rule applied to any new agreements between residents and long-term care facilities that receive dollars through Medicare or Medicaid, and prohibited the centers from requiring residents to sign arbitration agreements as a condition of admission. Before the 2016 rule could even take effect, though, its legality was challenged and a federal court stayed implementation of the new regulation during the case. Seven months and a new president later, the agency is changing course. Why? The announcement suggests it is for three reasons. First, because a federal court found merit to the challenges to the rule. Second, because President Trump’s January 30, 2017 Executive Order “Reducing Regulation and Controlling Regulatory Costs” encouraged all agencies to repeal two existing regulations for every new regulation. And finally, “[u]pon reconsideration, we believe that arbitration agreements are, in fact, advantageous to both providers and beneficiaries because they allow for the expeditious resolution of claims without the costs and expense of litigation.” Those second and third points could support the roll back of most, if not all, of the Obama Administration’s regulations relating to arbitration. The new proposed CMS rule offers an olive branch to those who lobbied for the 2016 rule. It proposes to require that arbitration agreements be written in plain language, explained clearly to prospective residents of long term care facilities, and that the resident acknowledge his/her understanding. The new rule also prohibits any language that would discourage a resident from contacting governmental authorities, and requires facilities to keep copies of arbitration awards for five years (suggesting CMS may request inspection). The announcement summarizes that the new rule “would . . . strengthen requirements regarding the transparency of arbitration agreements in LTC facilities. This proposal would support the resident’s right to make informed choices about important aspects of his or her health care. In addition, this proposal is consistent with our approach to eliminating unnecessary burden on providers.” If you are curious how other arbitration rules proposed or passed during the Obama Administration have fared so far, Bloomberg BNA has done a great summary of where things stand. (Short answer: most are on hold.) **Many thanks to Mark Kantor for alerting me to this development.
Just as I predicted, SCOTUS reversed the Kentucky Supreme Court’s decision in Kindred this morning. The interesting piece, though, is that the seven member majority went out of its way to cut off some of the “on trend” methods that state courts have been using to avoid arbitration clauses.
The Kentucky decision can be summarized easily. The case involved nursing homes attempting to compel arbitration of wrongful death and personal injury claims by estates of deceased residents. In each case, a relative with power of attorney had signed an admission document that included arbitration when the resident entered the nursing home. However, the Kentucky court refused to infer the agent’s “authority to waive his principal’s constitutional right to access the courts and to trial by jury” unless that power is “unambiguously expressed” in the power-of -attorney document. (You may recall this is the decision that analogized entering into an arbitration agreement to: putting a child up for adoption, aborting a pregnancy, and entering into personal servitude. If that doesn’t cry out “judicial hostility to arbitration,” I don’t know what does.)
Justice Kagan, writing for the seven-member majority, found Kentucky’s “clear statement rule” preempted by the Federal Arbitration Act. “[T]he court did exactly what Concepcion barred: adopt a legal rule hinging on the primary characteristic of an arbitration agreement–namely, a waiver of the right to go to court and receive a jury trial.” In response to Kentucky’s attempt to paint its rule as broader than arbitration, the Court said “No Kentucky court, so far as we know, has ever before demanded that a power of attorney explicitly confer authority to enter into contracts implicating constitutional guarantees.”
That preemption aspect of the decision seems to confirm what I have been saying about the impact of DirecTV: states are in much better position to defend their anti-arbitration “general contract rule” if they can point to at least one non-arbitration circumstance in which it has been applied. (The decision added a footnote to clarify this isn’t an absolute necessity: “We do not suggest that a state court is precluded from announcing a new, generally applicable rule of law in an arbitration case.” But that’s like saying it is conceivable that your mother will appreciate a new vacuum for mothers day, but we don’t recommend it.)
The Court’s decision to clearly state that courts cannot invalidate arbitration agreements based on their (necessary) waiver of the right to a jury trial also cuts off a trendy argument in state courts. New Jersey courts, for example, have invalidated arbitration agreements in recent years based on their failure to clearly advise consumers they are waiving their rights to jury trials (SCOTUS denied cert in the key NJ case, Atalese.) Those NJ decisions are now shaky precedent, IMHO.
The decision then went beyond the basic preemption analysis. Respondents had argued the FAA had no application to contract formation, that only state law controlled that question. SCOTUS quickly disabused the respondents, and all state courts, of that notion, reasoning that the purpose of the FAA would be completely undercut by the rule: “If the respondents were right, States could just as easily declare everyone incompetent to sign arbitration agreements. (That rule too would address only formation.)” In doing so, the Court cut off another avenue for avoiding the FAA. (In my view, though, the slippery slope argument relied on by SCOTUS also cuts against the formation/validity distinction used to separate which issues are decided in court and which by arbitrators.)
[As usual, Justice Thomas dissented based on his position that the FAA does not apply in state courts.]
If I had drafted this annual summary post on November 7, 2016, it would have looked different. At that point, the year had produced numerous (final or proposed) federal regulations that significantly restricted the use of arbitration with consumers in large industries. In addition, Justice Scalia’s death, along with the prospective election of Secretary Clinton, appeared poised to alter the make-up of the U.S. Supreme Court, which has voted 5-4 in many of the critical arbitration decisions in the last decade.
As I draft this post on January 4, 2017, it is still true that 2016 produced multiple federal regulations and some significant decisions that move away from the rigid arbitration-enforcement world view that Justice Scalia professed, but the election of Donald Trump, and the opening on the U.S. Supreme Court, may undo those pro-consumer changes.
Here were the big arbitration developments I saw in 2016:
- The death of Justice Antonin Scalia in February. He authored arbitration blockbusters like Buckeye Check Cashing v. Cardegna (2006); Rent-A-Center, West v. Jackson (2010); AT&T Mobility v Concepcion (2011); American Express Co. v. Italian Colors Restaurant (2013).
- Courts created uncertainty for the enforcement of delegation clauses. Enforced in Mohamed v. Uber Technologies, Inc., __ F.3d __, 2016 WL 4651409 (9th Cir. Sept. 7, 2016) and Regions Bank v. Rice, 2016 WL 3031357 (Ala. May 27, 2016). Rejected in Morgan v. Sanford Brown Institute, 2016 WL 3248016 (N.J. June 14, 2016) and Smith v. D.R. Horton, Inc., 2016 WL 3660720 (S.C. July 6, 2016).
- Courts also created uncertainty regarding who decides availability of class arbitration. Chesapeake Appalachia, LLC v. Scout Petroleum, LLC, 2016 WL 53806 (3d Cir. Jan. 5, 2015) (parties’ incorporation of AAA rules is insufficient to delegate the availability of classwide arbitration to arbitrators); Sandquist v. Lebo Automotive, Inc., 376 P.3d 506 (Cal. July 28, 2016) (arbitrator decides); Dell Web Communities, Inc. v. Carlson, 2016 WL 1178829 (4th Cir. Mar. 28, 2016) (court decides).
- FAA allows no special treatment for famous athletes. Arbitral awards against Tom Brady and Adrian Peterson, which had been vacated in federal district courts, were un-vacated by federal appellate courts.
- Finn got under my skinn. The high court in New Hampshire got creative in Finn v. Ballentine Partners, LLC, __ A.3d __, 2016 WL 3268852 (NH June 14, 2016). After finding no avenue for vacating an arbitration award in the FAA, it concluded the FAA’s sections regarding confirming and vacating awards do not apply in state courts and vacated the award under its state arbitration act. Threw me into a tizzy.
- 7th Circuit supported NRLB on arbitration. The NLRB has ruled that arbitration agreements which prohibit class actions violate the federal labor laws. But, five federal circuit courts have disagreed with the Board. This year, the 7th Circuit stood up for the Board in Lewis v. Epic Systems Corp., 2016 WL 3029464 (7th Cir. May 26, 2016). Watch for SCOTUS to weigh in on this issue in the near future.
- Agencies engaged in rule-making aimed at eliminating pre-dispute arbitration clauses in many types of contracts.
- May 2016: CFPB proposed 2 arbitration rules for financial services industry and received almost 13,000 comments in 90 days. The rules would allow financial consumers to participate in class actions in court, even if the governing agreements call for arbitration generally, and would require providers of arbitration services to submit redacted copies of arbitration pleadings to the CFPB for its continuing monitoring. (The rule is rumored to be finalized just before president-elect Trump is inaugurated.)
- September 2016: the Center for Medicare and Medicaid Services issued a rule that will prohibit the use of pre-dispute arbitration agreements in most long term care facilities.
- October 2016: the Federal Communications Commission indicated that it was developing a proposed rule to address “mandatory arbitration agreements” in contracts between communication service providers and consumers.
- October 2016: the U.S. Department of Education banned pre-dispute arbitration agreements for all “Direct Loan borrowers.”
Where does that leave us, after this year of significant change? And why do I say the election could undo much of what you just read?
I am no administrative law scholar (this blog is not called RegulationNation, thank goodness), but I do know that these agency rules can be rescinded more easily than an act of Congress or even a precedential holding from SCOTUS. (See http://www.wsj.com/articles/reversing-rule-by-regulation-1479342822.) I predict the Trump Administration will act to roll back some or all of these regulations. (I have not seen any pronouncements from the President-elect, but base my prediction on my general Spidey sense, as well as Mr. Trump’s motions to compel arbitration in litigation against his companies, and his pro-business positions.) I also predict that SCOTUS will again become a 5-4 majority in favor of strict enforcement of arbitration clauses.
And what will our feisty state courts do in reaction to more rigid enforcement of arbitration clauses by SCOTUS and federal agencies? I think they will again get creative with their interpretations of state contract laws and even their application of the Federal Arbitration Act in state courts (a la Finn), just like was happening before SCOTUS issued the Concepcion decision. There was less of a reason for the state courts to do that over the past year, as they saw the federal government regulation stepping in. Watch this blog to see if my predictions are accurate… And feel free to send me your thoughts if you disagree!
Editors of the ABA Journal have selected ArbitrationNation as one of the top 100 best “blawgs” for a legal audience. This marks the fifth consecutive year that this blog has made the cut. (See the full list here.) It remains the only arbitration blog on the list.
Thank you to everyone who nominated Arbitration Nation and also to everyone who shares my passion for arbitration law. Your feedback and nudges and comments often give me the energy I need to keep writing.
In a complete embarrassment of riches, I also received this award this week.
p.s. If this is your first time visiting ArbitrationNation – Welcome! If you want to know what it’s all about, these “listicles” are a good place to start: Five biggest surprises in arbitration law; Five states most hostile to arbitration; Five arbitration cases you should know; Five biggest surprises in the arbitration process; Five things that should really be in your arbitration agreement.
While state courts have been busy articulating novel interpretations of arbitration law this summer, federal courts seem intent on getting back to basics. In recent weeks, federal appellate courts have reminded parties who has the burden of proving an agreement to arbitrate, what should happen to the case when arbitration gets compelled, how parties waive their right to arbitration, and what is a “reasoned award.”
Burden of Proof
The Eleventh Circuit took the opportunity to clarify that when the plaintiff denies the existence of an arbitration agreement, state contract law determines who has the burden of proving the existence of the agreement. (Distancing itself from its own 1993 precedent.) In this case, Georgia law applied, and it provided that the defendant seeking to enforce the alleged arbitration agreement bears the burden of proving a valid arbitration agreement exists. Because the defendant credit card issuer had no proof that the plaintiff agreed to any terms at all when she completed her on-line application, and could not prove that it sent a Welcome Kit containing the arbitration agreement at issue, or even establish which cardholder agreement it sent to plaintiff, the appellate court affirmed the district court’s denial of the motion to compel arbitration. Furthermore, having presented “woefully inadequate” proof with its motion, defendant was not entitled to try and prove the existence of an arbitration agreement at a later trial. Bazemore v. Jefferson Capital Systems, LLC, 2016 WL 3608961 (11th Cir. July 5, 2016).
In the course of a “summary order” affirming the district court’s grant of a motion to compel arbitration, the Second Circuit took time to issue a reminder to lower courts. In that Circuit, the language of Section 3 is read quite literally. Section 3 says when there is an applicable arbitration agreement the court “shall on application of one of the parties stay the trial…”. Even if all claims are referred to arbitration, courts are not to dismiss an action if any party seeks a stay instead. To dismiss in that instance is an abuse of discretion. Virk v. Maple-Gate Anesthesiologists, PC, 2016 WL 3583248 (2d Cir. July 1, 2016).
Don’t Waffle, Or You’ll Waive
Everyone knows you can waive your right to arbitrate, right? But sometimes you need a good example of someone doing that, so that you can see exactly what to avoid. Martin v. Yasuda, 2016 WL 3924381 (9th Cir. July 21, 2016) can provide that example. Here the putative class of students at a private cosmetology school had all signed an enrollment agreement calling for arbitration. Yet in response to the students’ Fair Labor Standards Act (FLSA) case, the school moved to dismiss for a substantive failure to state a claim. When they were not completely successful, they filed an answer in which arbitration was one of 43 affirmative defenses. Finally, after engaging in some discovery, the defendant moved to compel arbitration, 17 months after the start of the case. Both the district court and the appellate court found the defendant had waived its right to arbitrate. (Key factors: defendant had told court it was not likely to enforce arbitration agreement and had forced court to decide motion on merits.) The court also confirmed that whether a party has waived its right to arbitrate by its litigation conduct is an issue for determination by the courts, not arbitrators.
In arbitration, parties can usually choose among three levels of award: simple award, reasoned award, or findings of fact and conclusions of law. But, the lines delineating those three levels are awfully fuzzy and undefined. Why does that matter? Because a party who contracted for “findings of fact” might be able to vacate its award if the arbitrator issued only a “reasoned award.” In the spirit of helpfulness, the Second Circuit defined a “reasoned award” in Leeward Construction Co. v. American Univ. of Antigua-College of Medicine, 2016 WL 3457266 (2d Cir. June 24, 2016). They held “that a reasoned award is something more than a line or two of unexplained conclusions, but something less than full findings of fact and conclusions of law on each issue raised before the panel. A reasoned award sets forth the basic reasoning of the arbitral panel on the central issue or issues raised before it. It need not delve into every argument made by the parties.”
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The American Arbitration Association (AAA) has not released statistics for years (other than to the CFPB). But recently, arbitration geeks got a summer solstice gift of (limited) new information. The piece is only three pages, short enough to read during a commercial break, but here are some key numbers to know:
- In 2015, 8,360 new business-to-business (B2B) arbitrations were filed. That figure includes commercial cases, construction, and executive employment disputes;
- The claims and counterclaims made in those B2B arbitrations in 2015 totaled over $16 billion;
- As a point of comparison, there were 25,024 private contract disputes filed in all the federal courts in the U.S. in the year ending March 2015;
- The industries with the fastest increasing arbitration caseloads are transportation, commercial insurance, entertainment/media, and pharma/biotech; and
- 56% of the B2B cases in 2015 were resolved prior to award.
What I take away from this is that there is still a significant percentage of business disputes being resolved in arbitration, and more of them get all the way to an award than is true in court litigation.
Today the Consumer Financial Protection Bureau proposed the rules that it previewed last fall, following up on its Arbitration Study. Those rules would essentially ban class action waivers from consumer financial agreements, as well as requiring arbitral institutions to provide data on consumer financial disputes to the CFPB. (As an aside, the proposal is 377 pages long. Are all proposed notices of rulemaking so long?? If so, I am very happy not to practice in administrative law.)
There will be lots of analysis of the rules and their potential impact in the coming days, but for now here are the deets on the proposal, with direct quotes from it where appropriate:
What Do the Proposed Rules Say? Two things.
- First, financial consumers will be entitled to participate in class actions in court, even if the governing agreements call for arbitration generally:
“A provider shall not seek to rely in any way on a pre-dispute arbitration agreement . . . with respect to any aspect of a class action that is related to any of the consumer financial products or services covered by § 1040.3 including to seek a stay or dismissal of particular claims or the entire action, unless and until the presiding court has ruled that the case may not proceed as a class action and, if that ruling may be subject to appellate review on an interlocutory basis, the time to seek such review has elapsed or the review has been resolved.”
The arbitration agreement must clarify:
“We agree that neither we nor anyone else will use this agreement to stop you from being part of a class action case in court. You may file a class action in court or you may be a member of a class action even if you do not file it.”
- Second, providers of arbitration services must submit redacted copies of the following documents to the CFPB for its continuing monitoring:
“In connection with any claim filed in arbitration by or against the provider concerning any of the consumer financial products or services covered by § 1040.3;
(A) The initial claim and any counterclaim;
(B) The pre-dispute arbitration agreement filed with the arbitrator or arbitration administrator;
(C) The judgment or award, if any, issued by the arbitrator or arbitration administrator”
CFPB’s Authority: “In the Dodd-Frank Act, Congress also authorized the Bureau, after completing the [Arbitration] Study (hereinafter Study), to issue regulations restricting or prohibiting the use of arbitration agreements if the Bureau found that such rules would be in the public interest and for the protection of consumers.” In particular, the Bureau relies on sections 1022(b) and (c), and 1028(b) of the Dodd-Frank Act.
Why CFPB is Proposing the Rule (in its own words):
“The Bureau preliminarily concludes, consistent with the Study and based on its experience and expertise, that: (1) the evidence is inconclusive on whether individual arbitration conducted during the Study period is superior or inferior to individual litigation in terms of remediating consumer harm; (2) individual dispute resolution is insufficient as the sole mechanism available to consumers to enforce contracts and the laws applicable to consumer financial products and services; (3) class actions provide a more effective means of securing relief for large numbers of consumers affected by common legally questionable practices and for changing companies’ potentially harmful behaviors; (4) arbitration agreements block many class action claims that are filed and discourage the filing of others; and (5) public enforcement does not obviate the need for a private class action mechanism.”
Which entities are affected: “[P]roviders of certain consumer financial products and services in the core consumer financial markets of lending money, storing money, and moving or exchanging money.” This includes entities that provide credit to consumers (banks, credit card issuers), extend auto leases, provide debt relief services, collect debts, provide check cashing services, and provide credit reports.
When would the rule take effect? “Compliance with this part is required for any pre-dispute arbitration agreement entered into after” 211 days after the final rule is published in the federal register. (So, affected entities likely have about a year to prepare.)
What Other Agencies are Doing on Arbitration: CFPB spends three pages of its proposal explaining what other agencies have done, or are doing, to protect consumers in the context of arbitration. The most recent examples are from the Centers for Medicare and Medicaid Services (in the context of long-term health care facilities) and the Department of Education (in the context of college enrollment agreements).
Deadline for comments: The public has 90 days to comment on this proposed rule.
These proposed rules are a continuation of the battle between the executive and judicial branches of the federal government over arbitration. If passed, they will undoubtedly lead to a significant increase in consumer financial class actions. It will be interesting to see if they also affect the willingness of companies to include arbitration agreements at all.
Showing it will soldier on without Justice Scalia, the Supreme Court granted cert, vacated, and remanded an arbitration decision from West Virginia yesterday. Because this is the exact same treatment the Court gave a case from Hawaii’s highest court in January (and the same treatment I predicted, ahem), it suggests SCOTUS is trying to go on with business as usual.
So, what was the West Virginia case? It is the Schumacher Homes case I wrote about last July, in which that state’s highest court refused to enforce the parties’ delegation clause, even after acknowledging the rule in Rent-A-Center, because it found the word “arbitrability” was ambiguous.
This GVR (grant, vacate, and remand), although not a summary reversal because it ostensibly leaves it up to the West Virginia courts to decide what to do next, falls in line with recent arbitration summary reversals from SCOTUS. Prof. Drahozal, in an interesting article called “Error Correction and the Supreme Court’s Arbitration Docket,” helps put it in context (Ohio State Journal on Dispute Resolution, Vol. 29, No. 1, 2014).
Indeed, since O.T. 2000, the proportion of summary reversals that addressed arbitration issues (4 of 83, or 4.8%) is more than double the proportion of argued cases (18 of 948, or 1.9%) that addressed arbitration issues.
What are the common characteristics of cases that receive a summary reversal? First, they misapply the FAA. But also, Prof. Drahozal points out:
The summary reversals were all in cases that originated in state rather than federal courts, and often included some suggestion that the state court disagreed with Supreme Court decisions interpreting the FAA.
Bingo! That last factor is definitely present in Schumacher Homes. In addition to calling the rule in Rent-A-Center “absurd” and an “ivory-tower interpretation of the FAA,” the opinion criticized all federal arbitration jurisprudence, explaining that the SCOTUS decisions construing the FAA “create an eye-glazing conceptual framework” that is “a tad oversubtle for sensible application” and that “the rules derived from these decisions are difficult for lawyers and judges—and nearly impossible for people of ordinary knowledge—to comprehend.”
So, here’s a tip for all state courts that want to buck the FAA, but not risk summary reversal or GVR: don’t insult SCOTUS.
Justice Scalia wrote some blockbuster decisions about arbitration, enforcing arbitration agreements regardless of their real-world impact, and making a potentially dry topic exciting and contentious. Readers of his opinions knew from the first few paragraphs of the analysis how the case was coming out. If he was bench-slapping a lower court for its interpretation of the FAA, Scalia liked to begin the analysis with this context: “The FAA was enacted in 1925 in response to widespread judicial hostility to arbitration agreements…” (E.g., Italian Colors, Concepcion, Compucredit, Buckeye Check Cashing). His arbitration opinions are the ones that the New York Times highlighted when it described what is wrong with arbitration jurisprudence. And they are the decisions that state courts most often balk at applying.
All of which means his decisions made their mark. Here are key arbitration decisions he authored for the majority, with quotes from those majority decisions.
- American Express Co. v. Italian Colors Restaurant (2013) (refusing to apply an “effective vindication” exception to enforcement of individual arbitration of low-dollar claims):
- The class-action waiver merely limits arbitration to the two contracting parties. It no more eliminates those parties’ right to pursue their statutory remedy than did federal law before its adoption of the class action for legal relief in 1938, see Fed. Rule Civ. Proc. 23, 28 U.S.C., p. 864 (1938 ed., Supp V); 7A C. Wright, A. Miller, & M. Kane, Federal Practice and Procedure § 1752, p. 18 (3d ed. 2005). Or, to put it differently, the individual suit that was considered adequate to assure “effective vindication” of a federal right before adoption of class-action procedures did not suddenly become “ineffective vindication” upon their adoption.
- Compucredit Corp. v. Greenwood (2012) (finding a federal statute — CROA — did not trump the FAA):
- It is the dissent’s interpretation that effectively reduces a portion of the CROA to a nullity. Interpreting the “right to sue” language in § 1679c(a) to “create” a right to sue in court not only renders it strikingly out of place in a section that is otherwise devoted to giving the consumer notice of rights created elsewhere; it also renders the creation of the “right to sue” elsewhere superfluous.
- AT&T Mobility v Concepcion (2011) (finding California’s case law declaring it unconscionable to waive class arbitration in the consumer context was preempted by the FAA):
- Arbitration is poorly suited to the higher stakes of class litigation. . . . We find it hard to believe that defendants would bet the company with no effective means of review, and even harder to believe that Congress would have intended to allow state courts to force such a decision.
- Rent-A-Center, West v. Jackson (2010) (finding that when parties delegate issues of substantive arbitrability to arbitrators, those delegations must be enforced unless the plaintiff specifically alleges the delegation text itself is unenforceable):
- To be sure this case differs from Prima Paint, Buckeye, and Preston, in that the arbitration provisions sought to be enforced in those cases were contained in contracts unrelated to arbitration—contracts for consulting services, check-cashing services, and “personal management” or “talent agent” services. In this case, the underlying contract is itself an arbitration agreement. But that makes no difference.FN3 Application of the severability rule does not depend on the substance of the remainder of the contract. Section 2 operates on the specific “written provision” to “settle by arbitration a controversy” that the party seeks to enforce. [internal citations omitted]
- Buckeye Check Cashing v. Cardegna (2006) (holding that arbitration clause in illegal contract must be enforced, because plaintiff did not allege the arbitration clause itself was invalid):
- It is true, as respondents assert, that the Prima Paint rule permits a court to enforce an arbitration agreement in a contract that the arbitrator later finds to be void. But it is equally true that respondents’ approach permits a court to deny effect to an arbitration provision in a contract that the court later finds to be perfectly enforceable. Prima Paint resolved this conundrum—and resolved it in favor of the separate enforceability of arbitration provisions.
[While most of his decisions were staunchly pro-enforcement of arbitration, on at least one occasion, Scalia’s majority opinion decided against arbitration. In Wright v . Universal Maritime Service Corp., 525 U.S. 70 (1998), the Court found that a longshoreman could sue his employer for ADA violations, despite an arbitration agreement in his union’s collective bargaining agreement, because that agreement did not clearly and unmistakably waive the federal rights.]
Even those of us who disagree with the result of some of these decisions have to acknowledge they are highly logical, clear, and surprisingly passionate. There is no doubt that Justice Scalia was critical to the development of the Court’s current arbitration jurisprudence.
The actual and potential arbitration docket at the Supreme Court contracted in the last week due to three events.
First, SCOTUS made quick work of an appeal from the Hawaii Supreme Court. Remember when I predicted that the DIRECTV case was going to make it even harder for state courts to find arbitration agreements unenforceable under state law? Well, that must have been exactly the point. Because less than a month later, on Jan. 11, SCOTUS granted cert, vacated, and then remanded this series of decisions from the Hawaii Supreme Court. What helpful instructions did SCOTUS offer to Hawaii’s highest court? Just this: “further consideration in light of DIRECTV, Inc. v. Imburgia, 577 U.S. __ (2015).” If history is any guide (see West Virginia, and Missouri), Hawaii will find a safer basis to uphold its initial decision. That is especially likely in this case, since Hawaii hedged its bets from the get-go, by identifying two bases for not enforcing the arbitration agreement: there was no arbitration agreement; and, if there was, it was unconscionable.
Second, a pending arbitration matter, scheduled to be argued at SCOTUS just next month, settled. It was the California case about whether invalid aspects of an arbitration agreement should be severed. But, the parties resolved the matter after DIRECTV.
Finally, SCOTUS denied cert in a Texas arbitration decision this week.
What’s still left? Well, I know of at least one petition in an arbitration case that will be conferenced in coming weeks. It is this case from West Virginia, a state with a history of bucking the federal arbitration system. Surely you remember this memorable decision, where the West Virginia Supreme Court called SCOTUS’s arbitration precedent “absurd” and an “ivory-tower interpretation of the FAA”??! West Virginia basically invited the same GVR treatment as Hawaii.
Post Script (added 1/15/16): A reader informed me of an interesting second petition for cert in an arbitration case. In the franchise context, the case presents the question of whether a state can require franchisors to include an addendum to their franchise agreement that negates the arbitration clause in that franchise agreement without running afoul of the FAA.
**Thanks to Mark Kantor and Karl Bayer for being the first to alert me to some of these events.