2015 has been a dry spell in arbitration decisions from the U.S. Supreme Court, but 2016 promises to be much more interesting.  In addition to the California case being heard next week, SCOTUS just granted certiorari in another California-based arbitration decision.  This one, MHN Government Services, Inc. v. Zaborowski, will review an unpublished 2-1 decision of the Ninth Circuit that affirmed a district court’s refusal to compel arbitration.  The beautifully succinct question presented is “whether California’s arbitration-only severability rule is preempted by the FAA.”

In Zaborowski, counselors who provide services to members of the military alleged that MHN improperly classified them as independent contractors instead of employees, thereby violating federal and state labor laws.  (The district court opinion is at 936 F. Supp. 2d 1145.)  The relevant agreement had an arbitration clause which the counselors argued was unconscionable under California law.  The court summarized the provisions that the plaintiffs objected to as including: “MHN shall choose three arbitrators, and the [counselor] shall choose one amongst them; each party may depose one individual and any opposing expert witness; arbitration must be initiated within six months of the claim’s occurrence; the arbitrator may not modify or refuse to enforce any agreements; the parties may not be awarded punitive damages; and the prevailing party or substantially prevailing party’s costs are borne by the other party.”  963 F. Supp. 2d at 1150.  The district court found procedural unconscionability and determined that many of the provisions raised by plaintiffs were substantively unconscionable.

Critically, the district court refused to sever those provisions it found substantively unconscionable.  It concluded, citing primarily to a California Supreme Court decision from 2000, that the arbitration agreement was “so permeated with unconscionability that it is not severable.”  A majority of the appellate panel affirmed that conclusion, noting that while they may have made a different decision in the first instance, the district court did not abuse its discretion.  Judge Gould dissented only with respect to the severability question, opining “Concepcion and its progeny should create a presumption in favor of severance when an arbitration agreement contains a relatively small number of unconscionable provisions that can be meaningfully severed and after severing the unconscionable provisions, the arbitration agreement can still be enforced.”  601 Fed. Appx. 461.

The petition for certiorari was bold and attention-grabbing.  It states: “California courts routinely display the flagrant hostility to arbitration that the FAA was designed to end. The Ninth Circuit routinely allows this to occur. And the severability issue presented here arises literally every time a court finds one or more provisions of an arbitration agreement to be invalid under California law.”  In response, the plaintiffs argue that “California’s severance doctrine derives from statutes that apply to all contracts and from cases dealing with contracts of various sorts—not just arbitration agreements.”  (They also note that a dozen judges have refused to enforce MHN’s arbitration agreement and lean on the discretion of district courts.)

Will this case be Concepcion part II, focused on when state contract rules of interpretation should be deemed obstacles to arbitration?  Or will it be narrowly focused on appropriate rules of severability?

Also, could there be more arbitration cases this term?  My fingers are crossed.

 

 

 

Nursing home arbitration agreements are among the most unpopular arbitration agreements around.  Last week, Kentucky’s Supreme Court issued a lengthy, but fractured, opinion, finding three arbitration agreements were never validly formed because the signing parties did not have authority to give up the decedent’s constitutional right to a jury trial.  Extendicare Homes, Inc. v. Whisman, ___ S.W.3d___, 2015 WL 5634309 (Ky. Sept. 24, 2015).

The Extendicare case consolidated three separate matters, all of which 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 when the resident entered the nursing home.  In a 2012 case, the Kentucky Supreme Court held that decedents cannot affect the rights of their beneficiaries with respect to wrongful death claims.  Therefore, the wrongful death claims were already not subject to arbitration.  The Extendicare case confronted the open issue of whether other personal injury claims had to be arbitrated.

The court explained that the arbitration agreements would be validly formed only if the attorney-in-fact had authority to bind the residents to arbitrate claims by the power-of-attorney instrument.  The court found the following statements of authority insufficient to allow the attorney-in-fact to bind the resident to arbitration:

  • power to “institute or defend suits concerning [the principal’s] property rights.”  [The court found “suits” are actions in courts of law, and that signing an arbitration agreement is not incidental to instituting or defending a suit];
  • power “to draw, make and sign any and all checks, contracts…agreements.”  [The court found that statement was limited to managing the principal’s financial and banking affairs.]
  • power “to demand, sue for, collect, recover, and receive all debts, monies” ever due or owing.  [The court found that statement limited to court actions and said arbitration is not reasonably necessary or incidental to the specified powers.]
  • power to “make…contracts of every nature in relation to both real and personal property.”  [The court found that while personal injury claims are personal property, a “pre-dispute arbitration agreement was not a contract made ‘in relation’ to a property claim.”]

The only language that the Kentucky court found did encompass entering into an arbitration agreement was the power to “transact, handle, and dispose of all matters affecting me and/or my estate” and “generally to do and perform for me in my name all that I might if present.”  However, the 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.

In dramatic fashion, the court analogized entering into an arbitration agreement to: putting a child up for adoption, aborting a pregnancy, and entering into personal servitude.  The majority reasoned that if an agent’s general authority cannot be extended to those serious waivers of constitutional rights, then it is equally “absurd” to infer that a general grant of authority carries with it the power to waive the right to a jury trial in a court of law.  How specific would the power of attorney need to be?  The decision suggests it has to expressly provide for “authority to waive the fundamental right to an adjudication by judge or jury.”

In response to the three dissenters, the Extendicare majority reasons that its holding does not conflict with Marmet Health Care Center or Concepcion because it is not a “blanket prohibition” against arbitration agreements and is instead “a long-standing and well-established policy disfavoring the unknowing and involuntary relinquishment of fundamental constitutional rights regardless of the context in which they arise.”

The three dissenters write that the majority’s rule does, in fact, conflict with SCOTUS’s interpretations of the FAA.  “[T]his Court is not at liberty to conclude that in Kentucky a power of attorney that gives the agent express authority to contract does not include the authority to contract for arbitration… Any such holding would fly in the face of federal law and be preempted by the Supremacy Clause because it … singles out arbitration agreements for disfavored treatment….”  Furthermore, the dissenters note that agreeing to arbitrate is fundamentally different from giving up parental rights or personal liberty because “arbitration agreements…involve no substantive waiver.  The principal’s substantive rights remain intact, only the forum for addressing those rights is affected.”

Kentucky’s Supreme Court is not the only governmental entity working against nursing home arbitration agreements.  Just last week, Senator Al Franken joined 33 other senators to urge the Center for Medicare and Medicaid Services (CMS) to “outlaw the use of unfair pre-dispute arbitration clauses in contracts with long-term care facilities like nursing homes.”  CMS is already considering restrictions on pre-dispute arbitration agreements in Long-Term Care facilities, but consumer advocates feel they are not protective enough.

 

The issue in analyzing whether a party waived its right to arbitrate is usually whether the defendant waited too long to assert the arbitration obligation.  But, this week the Second Circuit had the opportunity to address whether a plaintiff waives its right to arbitrate by the simple fact of bringing a case in court.

In LG Electronics, Inc. v. Wi-LAN USA, Inc., 2015 WL 5254894 (2d Cir. Sept. 10, 2015), the appellate court affirmed the district court’s decision that defendant Wi-LAN had not waived its right to arbitrate.  The court found that Wi-LAN’s four month delay in asserting arbitration was not sufficient to show waiver, when LG could not prove prejudice other than litigation expenses.  Furthermore, the court noted that Wi-LAN had not waived its right to arbitration merely by bringing suit in federal court in the first place.

The Supreme Court of Alabama made that same point earlier this year in IBI Group, Michigan, LLC v. Outokumpu Stainless USA, 2015 WL 2161150 (Ala. May 9, 2015).  In that case, clients had sued the designer of their facilities in federal court.  After the parties had engaged in Rule 26 disclosures and served discovery (and even debated whether there was complete diversity of citizenship to support federal jurisdiction), the clients/plaintiffs demanded arbitration and asked the federal court to stay litigation.  In response, the designer brought its counterclaims in state court and the clients moved to compel arbitration of the state court claims.

The Alabama courts enforced the arbitration clause, despite the clients’ initial filing of the federal action.  The Alabama Supreme Court noted it had previously held that plaintiffs are not barred from exercising contractual arbitration rights just because they initiated litigation.  But the complicating factor in this case was that the arbitration agreement gave the clients the “sole discretion” to choose whether a dispute would be arbitrated or litigated, and the designer argued that once the clients made that decision, it was “irrevocable.”  The Alabama courts disagreed, interpreting the arbitration agreement to allow the clients to change their mind about the dispute resolution forum.

Finally, in a more run-of-the-mill waiver case, the Sixth Circuit recently concluded that the defendant had waived its contractual right to arbitrate by participating in federal litigation for 15 months, including filing dispositive and non-dispositive motions.  Gunn v. NPC Int’l, Inc., 2015 WL 5061545 (6th Cir. Aug. 28, 2015).

Again this year, a famous athlete put the spotlight on the process of arbitration.  Earlier this month, Tom Brady succeeded in convincing a federal judge to vacate the arbitration award against Brady.  (The four-game “deflategate” suspension — a pdf of the decision is available through the link.)

The decision vacating the award is 40 pages (and a good read), but here’s the summary:

 The Court is fully aware of the deference afforded to arbitral decisions, but, nevertheless, concludes that the Award should be vacated. The Award is premised upon several significant legal deficiencies, including (A) inadequate notice to Brady of both his potential discipline (four-game suspension) and his alleged misconduct; (B) denial of the opportunity for Brady to examine one of two lead investigators, namely NFL Executive Vice President and General Counsel Jeff Pash; and (C) denial of equal access to investigative files, including witness interview notes.

In its analysis, the court relied on labor law arbitration doctrines, including that the arbitrator has to adhere to the “law of the shop” and the award must “draw its essence” from the collective bargaining agreement, as well as Section 10(a)(3) of the Federal Arbitration Act (refusal to hear evidence).  However, the court curiously “did not reach” one of Brady’s key arguments: that the arbitrator, NFL Commissioner Goodell, displayed evident partiality within the meaning of Section 10(a)(2) of the Federal Arbitration Act.

Yet the court’s decision reads like an 40-page indictment of Goodell’s ability to serve as an impartial decision-maker.  The judge found: Brady had no notice that his conduct (general awareness of others’ misconduct) could be subject to that type of punishment; Goodell’s choice to equate Brady’s behavior to using steroids was basically irrational; and “Commissioner Goodell’s denial of Brady’s motion to compel the testimony of Mr. Pash [the co-lead investigator] was fundamentally unfair” as was Goodell’s refusal to force the NFL to turn over notes from the investigation.  The decision also notes that before Goodell served as arbitrator, he had publicly praised the investigative report at issue.

So – why not just say NFL Commissioner Goodell was evidently partial in his handling of Brady’s arbitration?  (This is the same question I had about the Adrian Peterson ruling in February, which refused to call the arbitrator biased.)  Could it be that judges are overly concerned with setting a precedent that would essentially forbid the NFL from ever using its own Commissioner as an arbitrator again?  Could it be that judges view the NFL Commissioner as a demi-god who cannot be criticized?  Are the judges worried about being banned from games?  Are we all so polite that we just cannot stomach calling another human being biased?  (Though, the Missouri courts had the guts to do so this year in a similar situation.)  Or is there not enough good case law on the issue of partiality to provide judges the cover they need to issue such a ruling?

I’d love to hear your thoughts.  Email me or send them to @Kramerliz.

 

The Eleventh Circuit has a lesson for future litigants: the presence of a repeat player is not enough to show the evident partiality needed to vacate an arbitration award under the Federal Arbitration Act.

In  Johnson v. Directory Assistants, Inc., __ F.3d __, 2015 WL 4939578 (11th Cir. Aug. 20, 2015), an advertising company demanded arbitration against its client for breach of contract.  The arbitrator disclosed that he had arbitrated a dispute involving the advertising company five years earlier.  The client challenged the arbitrator and the arbitral forum (the Alternative Dispute Resolution Center, “ADRC”) denied the challenge.  Days before the hearing, the client requested and received a continuance.  A week before the rescheduled hearing, the client declared that because of “the current state of affairs” in its industry, it was “not able to continue with the arbitration.”  Therefore, the arbitrator proceeded with the hearing and allowed the advertising company to put on its case, despite the absence of the client.  The arbitrator awarded the advertising company roughly $100,000 in liquidated damages, late fees, and arbitration costs.

The client sought to vacate the award.  The federal district court granted the motion to vacate, finding that the arbitrator was biased.  The appellate court disagreed.  With respect to the client’s primary argument, that there was “evident partiality” because the arbitral forum refused to disclose how often the advertising company had used ADRC, the court noted that there was no record the client even asked how many times the advertising company had used the arbitral forum.  Furthermore, the court was “unconvinced that the failure to disclose that information would justify vacatur” because that fact alone would not “lead a reasonable person to suspect partiality.”

With respect to the client’s argument that vacatur was appropriate under Section 10(a)(3) because the arbitrator did not postpone the hearing a second time, the court had little sympathy.  “Under these circumstances, where a party participated in an arbitration proceeding only to withdraw a week before the hearing with little explanation and no request for extension, vacatur is inappropriate.”

While the client’s arguments for vacatur in this case were not strong, the Eleventh Circuit did more than it needed to dispose of them.  Its comment that evidence of repeat arbitrations before a single arbitrator or forum is not enough to show vacatur is important because many opponents of consumer arbitration point to the existence of repeat players as a critical flaw in the system.

Let’s say your client gets sued in court, the parties have an arbitration agreement, and you want to compel arbitration right away and not mess around with any other court proceedings. You already know you can make a motion to compel instead of an Answer, but you are stuck on this: what do you call the motion?

Let’s face it, neither the federal or state rules of civil procedure line up perfectly with the FAA (for example, Rule 12 does not list “motion to compel arbitration” as a potential responsive pleading). Today’s post is designed to help you figure out what subsection of Rule 12 to identify when you make your motion to compel arbitration straight out of the box. In short, not all federal appellate courts have spoken on this issue, and the ones that have are divided on whether a motion to compel arbitration should be made under Federal Rule 12(b)(1), 12(b)(3), or 12(b)(6).

Federal courts in six circuits have treated motions to compel arbitration as motions to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1). A district court in the Eleventh Circuit is the only court to expressly state that motions to compel arbitration should be brought under Rule 12(b)(1). MRI Scan Ctr., L.L.C. v. Nat’l Imaging Assocs., Inc., No. 13–60051–CIV, 2013 WL 1899689, at *2 (S.D. Fla. May 7, 2013). However, in the Second, Sixth, Eighth, Ninth, and Federal Circuits litigants have been permitted to bring motions to compel under the 12(b)(1) standard. See, e.g., Geographic Expeditions, Inc. v. Estate of Lhotka, 599 F.3d. 1102, 1106–07 (9th Cir. 2010); U.S. ex rel. Lighting & Power Servs., Inc. v. Inferface Constr. Corp., 553 F.3d 1150, 1152 (8th Cir. 2009); Harris v. United States, 841 F.2d 1097, 1099 (Fed. Cir. 1988); Multiband Corp. v. Block, No. 11–15006, 2012 WL 1843261, at *5 (E.D. Mich. May 21, 2012); Orange Cnty. Choppers, Inc. v. Goen Techs. Corp., 374 F. Supp. 2d 372, 373 (S.D.N.Y. 2005).

Other circuits take a different position asserting that motions to compel arbitration should be brought under Rule 12(b)(3) for improper venue. The Fourth and Seventh Circuits adopt this approach. These circuits reason that because arbitration clauses are a type of forum selection clause and therefore concern venue, motions to compel arbitration should be brought under Rule 12(b)(3). Gratsy v. Colo. Technical Univ., 599 Fed. App’x 596, 597 (7th Cir. 2015); Hayes v. Delbert Servs. Corp., No. 3:14:–cv–258, 2015 WL 269483, at *4 n.1 (E.D. Va. Jan. 21, 2015).

Only one circuit adopts Rule 12(b)(6) — failure to state a claim upon which relief can be granted — as the proper subpart for a motion to compel arbitration. The Third Circuit explicitly rejects the practice of bringing motions to compel arbitration under 12(b)(3) and requires that motions to compel arbitration should be made under Rule 12(b)(6). Palko v. Airborne Express, Inc., 372 F.3d 588, 597–98 (3rd Cir. 2004); Lomax v. Meracord L.L.C., No. 13–1945 (SRC), 2013 WL 5674249, at *6 n.3 (D.N.J. Oct. 16, 2013).

The First, Fifth, Tenth, and D.C. Circuits have yet to address the issue.

The following chart summarizes the federal appellate courts’ treatment of motions to compel arbitration:

  12(b)(1)   Subject Matter Jurisdiction 12(b)(3) Improper Venue 12(b)(6)   Failure to State a Claim Unanswered
1st Circuit Unanswered
2nd Circuit Permitted
3rd Circuit Express
4th Circuit Express
5th Circuit Unanswered
6th Circuit Permitted
7th Circuit Express
8th Circuit Permitted
9th Circuit Permitted
10th Circuit Unanswered
11th Circuit Express
Fed. Circuit Permitted
D.C. Circuit Unanswered

ArbitrationNation thanks Mary-Kaitlin Rigney, a student at American University Washington College of Law, for researching and drafting this post.

The primary purpose of this blog is to educate lawyers and clients about arbitration law. So, what better way to celebrate my fourth blogiversary than with an awesome new infographic about compelling arbitration! Making a motion to compel arbitration is trickier than it seems. When people call me for advice, I often have to tell them they missed a key analytical step. So, I worked with my firm’s marketing team and a graphic designer and came up with a one page pictorial summary of the analysis lawyers and judges should follow when they consider compelling arbitration – it starts with what court you should be in, and what law you should apply, identifies which issues are appropriate for courts to decide, and leads you through other key issues on a path either to arbitration or court. Now, some caveats. Of course I cannot put every nuance of 90 years of federal case law interpreting the Federal Arbitration Act on a single page (at least not while keeping it attractive). So, this infographic should be considered a big picture checklist to ensure you considered each of the major issues and are on the right track, and not a comprehensive list of everything you might possibly need to know. For the same reason, this picture cannot take the place of a real live lawyer, who knows something of the facts of your case and can give you case and jurisdiction-specific advice. Finally, if you end up in an English roundabout while following the arrows, going in circles instead of toward any destination, I advise you to try again without the cocktail or just give me a call. (Note: You’ll want to click on the infographic for a high resolution PDF version. It’s a bit small to read otherwise.) ** Have I succeeded in educating you or someone you know about arbitration? If so, please nominate my blog for the ABA Journal’s Blawg 100 list here. I would be honored to have ArbitrationNation recognized for a fourth consecutive year.

Decision Flowchart for Compelling Arbitration
Decision Flowchart for Compelling Arbitration (Select image to open a high resolution PDF.)
 

California is changing its tune.  Although previously known for decisions that flouted federal arbitration law, its decision yesterday in Sanchez shows the current California Supreme Court will abide by SCOTUS’s interpretation of the FAA.  After a trial court and intermediate appellate court had ruled that the arbitration clause in a consumer contract was unconscionable, the California Supreme Court reversed, finding the clause was enforceable.  Sanchez v. Valencia Holding Co., LLC, __ P.3d __, 2015 WL 4605381 (Aug. 3, 2015).

The arbitration clause at issue was part of a contract to buy a used Mercedes-Benz.  The buyer alleged that the seller made false representations about the car’s condition and violated California laws about various fees and charges.  The buyer wanted to pursue a class action with other affected car buyers.  The seller moved to compel arbitration.  The trial court denied the motion and the Court of Appeals affirmed, but on different grounds.  The California Supreme Court then granted review.

At issue were the following aspects of the arbitration clause:

  • It was offered on a take-it-or-leave-it basis.
  • The arbitration clause was on the back of the contract, but the buyer only signed the front.
  • The arbitration clause allowed an appeal to a panel of three arbitrators only if the award was $0 or greater than $100,000, or included injunctive relief, and the appealing party would be responsible for the fees and costs of the arbitral appeal.  [In contrast, the seller would advance the first $2500 of fees and costs in the initial arbitration.]
  • The seller retained its ability to repossess the car; both parties retained the ability to go to small claims court.
  • The arbitration clause precluded the buyer from arbitrating on a class or consolidated basis (and stated that if that waiver was invalid, the arbitration clause was invalid, the “poison pill”).

The California Supreme Court began its decision by reminding readers that California’s unconscionability doctrines live on, despite the FAA, as long as those standards are facially “the same for arbitration and nonarbitration agreements” and as long as they do not disfavor arbitration as applied.  It also clarified that “a simple old-fashioned bad bargain” is not unconscionable, instead it must be overly harsh, or unduly oppressive, or unreasonably favorable, or shock the conscience.  (All of those phrases mean the same thing, the court notes, so don’t get hung up on which is worse.)

After providing that context, the court found that because the buyer could not negotiate the provisions of the sales contract, he had established “some degree of procedural unconscionability.”  (The buyer did not have to prove he tried to negotiate the arbitration clause.)  The court could then address the buyer’s claims of substantive unconscionability.

The court found that none of the challenged aspects of the arbitration clause made it substantively unconscionable.  With respect to “appeals” being limited to injunctions, or awards at $0 or over $100,000, the court found those thresholds do not “obviously favor the drafting party.”  Instead, the clause allowed appeals from “extreme” awards for either party (as the car cost about $50K, both $0 and $100K would be “outliers”).  It also found that requiring the appealing party to be responsible for the costs of that arbitral appeal was not unconscionable.  Although California statutes have provisions intended to keep arbitration affordable, the court found the buyer here had not proven the appellate fees and costs would be unaffordable or even a deterrent.  In light of the buyer purchasing a “high-end luxury item,” he could hardly claim the arbitration costs were unaffordable.

Furthermore, the court concluded that allowing the seller to retain its rights to repossess the car was not unconscionable.  While that provision favored the seller, the provision allowing claims to proceed in small claims court favored the buyer and evened the score.

With respect to the class action waiver and poison pill, the court noted that Concepcion prevents any finding that the waiver is unconscionable.  Therefore, the provision of California’s Consumer Legal Remedies Act that precludes a waiver of class action rights was preempted by the FAA, and the class action waiver was enforceable (so the poison pill was unnecessary).

This decision puts California squarely in the mainstream on the unconscionability of arbitration agreements.  It also offers very useful guidance for California courts (or those applying California contract law) facing future arguments about the unconscionability of arbitration clauses.

** To celebrate four years of blogging, I am planning some August posts that will be so useful you will want to print them out and pass them around your office, or keep them in a binder at your desk, or just dance around your office to the Pointer Sisters (think “Love Actually”).  (Surely you already have a binder of ArbitrationNation classics?  If not, start with this and this.)  If I succeed, or if I have succeeded in the past, please nominate my blog for the ABA Journal’s Blawg 100 list here.  I would be honored to have ArbitrationNation recognized for a fourth consecutive year.

Parties who ask a court to compel arbitration of all the plaintiff’s claims have a decision to make: should they ask the court to stay the claims or dismiss them (if it finds them arbitrable)?   After noting that the federal courts of appeal are “about evenly divided” on that question, the Second Circuit held that in its circuit, a stay of the proceedings is required “after all claims have been referred to arbitration and a stay requested.”  Katz v. Cellco Partnership, __ F.3d__, 2015 WL 4528658 (2d Cir. July 28, 2015).

The Second Circuit reasoned that the text and policy of the FAA “command this result.”  It found that efficient docket management (an incentive to dismiss the claims) “cannot trump a statutory mandate.”  In requiring that arbitrable claims be stayed, the Second Circuit notes that it joins the 7th, 3d, 10th and 11th circuits.  However, cases from the 80s and 90s in the 1st, 5th and 9th circuits appear to allow dismissal of the action.

Given that there are now more courts of appeal in the “stay” column than the “dismiss” column, and their decisions are more recent, this decision may be the one that turns the tide and resolves the circuit split on this issue.

One way to challenge the very existence of an agreement to arbitrate is to say that the parties’ contract said nothing about arbitration and did not validly incorporate any other document calling for arbitration.  Oklahoma and Alabama have recently come out at opposite ends of the spectrum in terms of what kind of notice must be given a consumer to incorporate an arbitration agreement from a secondary document.

In Walker v. Builddirect.com Technologies, Inc., 2015 WL 3429364 (10th Cir. 2015), the federal appellate court refused to compel arbitration of a dispute, because under state law the arbitration provision was not incorporated by reference into the contract signed by the parties.   That contract  said it was subject to the seller’s “terms of sale,” but did not list those terms or direct the customer to the website where those terms could be found. The Tenth Circuit had certified the question of whether the website terms were incorporated by reference to the Oklahoma Supreme Court, which found they were not.  For future drafters, the Oklahoma decision notes:

If BuildDirect intended to make the online “Terms of Sale” part of the parties’ agreement, BuildDirect could easily have accomplished that purpose by drafting the Contract employing words of express incorporation or clearly referencing, identifying and directing the Walkers to the document to be incorporated.

Reaching the opposite result, the Supreme Court of Alabama enforced arbitration agreements that were contained in insurance forms that the plaintiffs may never have received. American Bankers Ins. Co. of Fl. v. Tellis, __ So.3d __, 2015 WL 3935260 (Ala. 2015).  The insurance policyholders had received their policies, which allegedly included two supplemental forms containing the arbitration agreement.  The policyholders swore they never received those forms, and, although one form has a signature line, the insurer could not produce any signed versions of the form.  However, because those forms were listed on the declarations page (by numerical code, not a descriptive title), the court found the policyholders had a duty to investigate the content of the forms.  In support of compelling arbitration it held:

In sum, although the policyholders did not execute stand-alone arbitration agreements or necessarily even read or receive the insurance policies containing the arbitration provisions, they have nevertheless manifested their assent to those policies, and, necessarily, the arbitration provisions in them, by accepting and acting upon the policies, inasmuch as they all affirmatively renewed their policies and paid their premiums…

In an easier case, the high court in Maryland allowed an arbitration agreement in one document to require the parties to arbitrate disputes over a second document.  Ford v. Antwerpen Motorcars, Ltd., __ A.3d__, 2015 WL 3937607 (Md. 2015).  In that case, all the documents were signed “on the same day during the course of the purchase and financing of an automobile.”  Although only the “Buyer’s Order” contained an arbitration agreement (the financing agreement did not), the court found the buyers’ claims over the financing must be decided in arbitration because the two documents must be construed together as the entire agreement between the parties.

What do these divergent results mean for drafters of arbitration agreements?  As usual, err on the side of caution.  If you comply with Oklahoma’s requirements of notice, which are not that onerous, you will most certainly be well-positioned in other states.

p.s.  This is my 200th blog post at Arbitration Nation!  Hold off on the streamers and balloons, because my fourth blog-iversary is next month anyhow.