In January of 2016, SCOTUS granted review of an arbitration case from Hawaii, but summarily vacated and remanded it without analysis. (Unless you consider “Please read DIRECTV” substantive analysis.) Here’s the risk of that course of action: Hawaii can refuse to change its mind.
Last month, in Narayan v. The Ritz-Carlton Development Co., 2017 WL 3013022 (Haw. July 14, 2017), Hawaii affirmed its decision after considering DIRECTV. The case related to whether purchasers of new condominiums could sue the developers over their abandonment of the project. The developers moved to compel arbitration based on an arbitration clause within the Declaration for the condo project, because the Declaration was incorporated into the plaintiffs’ purchase agreement. In 2015, Hawaii’s highest court found the parties had not clearly agreed to arbitrate and portions of the arbitration clause were unconscionable.
Two years later, after a forced reconsideration, the court dropped its analysis of whether the arbitration agreement was validly formed (smart decision, given that it was on the shakiest ground, and given Kindred’s statement that FAA preempts formation decisions that disfavor arbitration). Instead, it focused exclusively on unconscionability. It found the arbitration clause both procedurally and substantively unconscionable (noting “severe” discovery limitations), and added more state case law to support those findings. Amusingly, it also cited to two other state supreme courts which have affirmed their arbitration decisions on unconscionability after receiving a “GVR” from SCOTUS GVR: West Virginia and Missouri. (As if to say: You let those other kids off the hook!)
Speaking of SCOTUS and arbitration, two updates of note:
- Mark your calendars; SCOTUS will hear argument in the cases regarding whether the NLRB can preclude class waivers on October 2. Even so, the federal appellate courts keep issuing decisions on both sides of this issue. E.g. NLRB v. Alternative Entertainment, 2017 WL 2297620 (6th Cir. May 26, 2017) (enforcing NLRB order); Convergys Corp. v. NLRB, 2017 WL 3381432 (5th Cir. Aug. 7, 2017) (rejecting NLRB position); Logisticare Solutions Inc. v. NLRB, 2017 WL 3404648 (5th Cir. Aug. 9, 2017) (rejecting NLRB position).
- Physicians from Florida are asking SCOTUS to grant certiorari in a case about the regulation of doctor-patient arbitration clauses. If you know of other arbitration cases in the pipeline, let me know.
- An employer from California is asking SCOTUS to grant certiorari in this case regarding when courts should review interim arbitration awards. [Ed note: this final bullet was not in the original post, but was added after a thoughtful reader alerted me to it.]