On March 9 and 10, 2020, the ABA Section of Dispute Resolution is bringing 20 or more of the leading arbitrators and arbitration advocates in the country to Phoenix, AZ to teach at its 13th Annual Arbitration Institute.

There are at least five good reasons to think about attending, if you can:

(1) It’s being taught by some of the top arbitration practitioners in the country.

(2) It will teach new arbitrators the skills needed to become good arbitrators and experienced arbitrators will learn how to become great arbitrators.

(3) It will teach new arbitration advocates how to become good advocates and experienced advocates how to become great ones.

(4) It’s being held in Phoenix in March!! At least for those of us in the frigid midwest, that warm weather is a tremendous lure.  Plus, spring training!

(5) It includes small group sessions with successful arbitrators on how to market and increase your arbitration business.

If you’re interested, you can find details here: http://ambar.org/arb2020.

I’m adding something new to our Blog experience, the ArbitrationNation Bookworm.  Basically, once or twice a month, I’ll provide a brief overview of an article or book that readers of the Blog might find interesting.  I’m also going to add a sidebar that includes other stuff that we’re reading related to arbitration.

For the inaugural post, I’m recommending an article from early 2019, Arbitration Nation: Data from Four Providers, by Andrea Cann Chandrasekher and David Horton.  (Neither Liz nor I had any involvement in writing the article, despite its title, but the authors did secure permission from Liz to use the Arbitration Nation name.)

This article analyzes a huge data set on consumer, employee, and patient arbitration – 40,775 arbitrations filed between 2010 and 2016 and administered for four major institutions. I won’t spoil all the fun of reviewing the findings, but the authors conclude that three points emerge:

First, arbitration has the capacity to facilitate access to justice. Cases move quickly through the system, and corporations pick up most of the tab. Second, arbitration is not currently living up to this potential. Although businesses are correct that more individuals are arbitrating after Concepcion, this uptick has been modest. Moreover, companies are wrong about who is bringing those claims. Plaintiffs’ lawyers—not self- represented consumers, employees, or medical patients—have been taking advantage of arbitration’s speed and relative affordability. In fact, some attorneys have tried to create a simulacrum of the class action by initiating dozens or even hundreds of two-party arbitrations against the same defendant. Third, concern that arbitration favors repeat-playing corporations is well founded. Indeed, businesses that arbitrate often in an institution perform particularly well within that institution. Nevertheless, this is just one-half of the repeat-player story. Arbitration favors repeat players on both sides. In a variety of different settings, serially arbitrating plaintiffs’ law firms also fare particularly well.

For anyone thinking about the many sticky issues around consumer, employment, or patient arbitration clauses, this article warrants a close look.

Delegation provisions are a hot topic this year!  This week, we’re going to look at two more circuit court decisions centering on delegations and finding ways around them.

Just to set the stage, though, I’ve got to put a little egg on my own face.  To quote myself from back in June: “it’s almost impossible to imagine ‘an additional ground or basis’ for invalidating a delegation clause.  The target that a party wanting to avoid a delegation clause must hit is so small that it’s virtually invisible.”  Weeelllll . . . . Turns out that I might have been overstating things just a smidge.

Part of the reason that I said what I did was because of the unanimous decision by SCOTUS in Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019).  You’ll recall that Henry Schein sounded a death knell for the wholly groundless doctrine.  The wholly groundless doctrine was basically a smell test for arbitrability.  It gave courts the right to police at least the most questionable arbitration agreements despite the existence of a delegation provision.  A unanimous Supreme Court, however, reversed the Fifth Circuit and concluded that when the parties’ contract delegates arbitrability to an arbitrator, a court may not override the contract, even if the court thinks that the arbitrability claim is wholly groundless.

Still, SCOTUS “express[ed] no view about whether the [particular] contract at issue in th[e] case in fact delegated the arbitrability question to an arbitrator.”  Accordingly, the Court remanded the case to the Fifth Circuit.

Last week, the Fifth Circuit doubled down on its original conclusion.  It held that the contract at issue did not assign arbitrability to the arbitrator.  See Archer and White Sales, Inc. v. Henry Schein, Inc., 2019 WL 3812352 (5th Cir. Aug. 14, 2019).  Everybody agreed that the arbitration agreement was valid.  Moreover, everybody agreed that there was a valid delegation clause (through the AAA rules – Rule 7(a)).  One might have reasonably thought that this should end the matter.  But the claimant sought, at least partially, injunctive relief, and the arbitration clause carved out “actions seeking injunctive relief.”  Given the syntax of the clause, the Fifth Circuit determined that the delegation provision did not “clearly and unmistakably” assign arbitrability to the arbitrator.

A few weeks earlier, the Eighth Circuit also wrestled with a delegation clause and found that it didn’t mandate that arbitrability go to an arbitrator.  In Shockley v. PrimeLending, 929 F.3d 1012, 1015 (8th Cir. 2019), the court addressed the enforceability of an arbitration agreement and delegation provision in an employee handbook.

The handbook was available to employees on a computer network.  The employee accessed the handbook a couple of times, and the system logged an acknowledgement of her review.  The employee, however, testified that she did not recall reviewing the handbook and there was no other evidence to suggest that she ever opened or examined the handbook’s full text.

When the employee filed a lawsuit in federal court for violations of the FSLA, the employer sought to compel arbitration.  The employee resisted on the ground that she had never assented to the arbitration agreement or the delegation provision.  The district court agreed, and the Eighth Circuit affirmed.

Essentially, the Eighth Circuit reasoned that, even if the employer had made an offer to the employee, the employee never accepted it.  Merely continuing to work does not manifest the necessary assent to the terms of arbitration.  At best, the employee “acknowledged the existence of the delegation clause. . . . [but the court said it] was aware of no legal authority holding that an employee’s general knowledge or awareness of the existence of a contract constitutes the positive and unambiguous unequivocal acceptance required” to form a contract.

I’m unpersuaded by either case. But both suggest that courts remain more willing to scrutinize delegation provisions than I’ve previously indicated on this Blog.

I can’t believe we’re more than a week into August!  I don’t know about you, but I feel like I’m going to have to say goodbye to summer too soon.   I love fall, so maybe that’s not so bad?

Anyway, speaking of farewells, this week we get a back-to-the-basics refresher from the Eleventh Circuit on waving bye-bye to the right to arbitrate.  Although the particulars involved a consumer arbitration agreement, the key reasoning applies more broadly to all arbitrations.

In Freeman v. SmartPay Leasing, LLC, 771 Fed.Appx. 926 (11th Cir. 2019), SmartPay and Freeman entered into an agreement providing that the party initiating arbitration could choose either the AAA or JAMS rules and administrative services.

Freeman had a beef with SmartPay.  So, she sued SmartPay in federal district court. Shortly thereafter, the parties filed a joint motion to stay and to refer the dispute to binding arbitration. Freeman selected JAMS as the arbitration forum, she filled out the required form, and she paid a $250 initial filing fee.

This is where things went off the rails. SmartPay alleged that there were important procedural differences between the parties’ arbitration agreement and the JAMS rules. The details aren’t overly important, but the gist is that SmartPay argued those differences meant that this wasn’t truly a “consumer arbitration” under JAMS rules. (Basically, SmartPay didn’t want to have to pay all of the costs of the arbitration, other than the initial $250 that Freeman paid.)

JAMS didn’t buy it. It said that it wouldn’t administer the “consumer arbitration” unless and until SmartPay finished paying $950 in filing fees and waived any provisions in the parties’ agreement contrary to JAMS’s Consumer Minimum Standards. SmartPay stood firm by its position that this wasn’t a “consumer arbitration.” So it refused to pay the balance of the filing fee. It ultimately took the position that if JAMS wouldn’t administer the arbitration the case would have to be dismissed and refiled with the AAA.

JAMS did dismiss, but Freeman opted not to refile with the AAA. Instead, she went back to the district court and asked that the stay be lifted. She argued that SmartPay had waived its right to demand arbitration by refusing to pay the remaining initial filing fee. The district court agreed.

On appeal, the Eleventh Circuit noted that under FAA § 3, a district court should stay the litigation “until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.” Default includes waiver. Waiver, in turn, hinges on whether a party has acted inconsistently with the right to arbitrate and that inconsistent behavior has prejudiced the other party.

The Eleventh Circuit agreed that SmartPay had waived its rights by failing to pay the filing fee. In so doing, it said the issue of whether the alleged conflicts between the arbitration agreement and the JAMS rules could be reconciled was one for the arbitrator. By refusing to pay the balance of the initial filing fee, SmartPay acted inconsistently with its right to demand arbitration. In turn, that prejudiced Freeman because it precluded her from seeking relief through her chosen arbitral forum.

I’m sympathetic to SmartPay in one sense: JAMS seemingly required SmartPay to waive its procedural arguments before it even got into arbitration. That’s problematic. But the lesson of the case is that arbitral institutions aren’t arbitrators. SmartPay could have and should have made its procedural arguments to the arbitrator. It agreed to JAMS as a forum. Once it did, couldn’t escape that forum on the grounds that the forum was applying arguably the wrong rules. That should have been taken up with the arbitrator herself.

Happy August!  What’s a better way to start the month than thinking about class arbitrability!  Again.  Ugh.

Trust me, I would much rather consider so many other exciting arbitration issues, but this one seems to be occupying a lot of court attention, so I’d be remiss not to report on it.

Since my last update, I ran across a recent state court’s perspective on the question of who decides class arbitrability.  In Alabama Psychiatric Servs. P.C. v. Lazenby, 2019 WL 2560096 (Ala. June 21, 2019), the Alabama Supreme Court essentially sided with the Second, Tenth, and Eleventh Circuits, concluding that a traditional delegation suffices to commit questions of class arbitrability to an arbitrator. That said, the court only generically references the circuit split.

The underlying facts of Lazenby are straight forward.  A group of employees filed a putative class action against their employer in state court.  The employer brought a motion to compel arbitration and, at the same time, asked the court to determine whether class arbitration was available.  The arbitration agreement was silent on the question. The state court compelled arbitration but declined to determine the class arbitrability issue, instead sending it to the arbitrator.

The arbitrator, in turn, decided that class arbitration was authorized.  He did so, though, on pretty sketchy legal bases.  Essentially, he says that the agreement was written by the employer, so ambiguities should be read against the drafter.  (Of course, you’ll remember that SCOTUS rejected a similar argument earlier this year in Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 203 L.Ed.2d 636 (2019).)  He then adds that the arbitration agreement promised employees that it was not altering their substantive rights, but that doing away will class proceedings would alter their substantive rights.  (This, of course, runs afoul of just about everything SCOTUS has said about class waivers, including in American Express Co. v. Italian Colors, 570 U.S. 228 (2013).)

The employer sought to vacate the arbitration clause construction award.  The lower court upheld it.

On appeal, the Alabama Supreme Court assumed without deciding that the “availability of class arbitration is a question of arbitrability,” by which it meant a question that should be resolved by a court absent a delegation provision.  The court then found that the parties included such a delegation.   (Technically, this issue is a little procedurally wonky, as the original court compelling arbitration reached this conclusion on dubious grounds but the employer failed to properly appeal, so the Supreme Court punts.)

The interesting thing about this decision is that Alabama Supreme Court concluded that once the parties delegated the question of class arbitrability to the arbitrator, they were stuck with the arbitrator’s conclusions so long as he arguably applied the law, even if he got it wrong.  In other words, the court determined that there was nothing special about class arbitrability.

As the previous post on this blog indicates, that’s turning into a hotly debated conclusion.  In fact, this Alabama case comes very close to being diametrically opposed to what the Fifth Circuit concluded in 20/20 Communications, Incorporated v. Crawford, 2019 WL 3281412 (5th Cir. July 22, 2019).

It doesn’t take a crystal ball to guess that this “who decides class arbitrability” issue will be at the heart of the next chapter in SCOTUS’s ongoing fascination with class arbitration.  The trouble, though, is that there aren’t many great cases yet that tee the issue up cleanly.

The Fifth Circuit just deepened (and confused) a Circuit split over the question of who decides whether an arbitration agreement permits class proceedings.  See 20/20 Communications, Incorporated v. Crawford, 2019 WL 3281412 (5th Cir. July 22, 2019).

Liz has written about the split here, here, and here.  (You might also recall that SCOTUS flagged this issue, though it punted on it, in Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 1417 n.4, 203 L.Ed.2d 636 (2019) (“This Court has not decided whether the availability of class arbitration is a so-called ‘question of arbitrability,’ which includes these gateway matters.”)  Basically, the issue is whether courts or arbitrators should determine the availability of class arbitration.

All Circuits that have spoken about the matter (the 3d, 4th, now 5th, 6th, 7th, 8th, 9th, and 11th) agree that class arbitrability is a gateway question for courts, at least absent a delegation clause.  See Opalinksi v. Robert Half Int’l, Inc., 761 F.3d 326 (3d Cir. 2014); Del Webb Cmtys., Inc. v. Carlson, 817 F.3d 867 (4th Cir. 2016); Reed Elsevier, Inc. ex rel. LexisNexis Div. v. Crockett, 734 F.3d 594 (6th Cir. 2013); Herrington v. Waterstone Mortg. Corp., 907 F.3d 502 (7th Cir. 2018); Catamaran Corp. v. Towncrest Pharmacy, 864 F.3d 966 (8th Cir. 2017); Eshagh v. Terminix Int’l Co., L.P., 588 F. App’x 703 (9th Cir. 2014) (unpublished);JPay, Inc. v. Kobel, 904 F.3d 923 (11th Cir. 2018).  Moreover, the Second and Tenth Circuits have “assumed without deciding” that class arbitrability is a gateway question for courts.  Wells Fargo Advisors, LLC v. Sappington, 2018 WL 1177230 (2d Cir. March 7, 2018); Spirit Airlines v. Maizes, 2018 WL 3866335 (11th Cir. Aug. 15, 2018).  So, there’s substantial agreement about the notion that the availability of class proceedings constitutes a “foundational question of arbitrability.”  Herrington, 907 F.3d at 507.

The Circuit split focuses on delegations.

At least four Circuits (3rd, 4th, 6th, and 8th) have concluded that class arbitrability is a matter for courts even if the parties have included delegation provisions or incorporated institutional rules with a delegation provision, such as the AAA Rules. Similarly, the Seventh Circuit might fall in this camp.  In Herrington, the Seventh Circuit remanded the case for further proceedings at the district court level, without squarely determining whether incorporation of the AAA Rules delegated the question of class arbitrability to the arbitrator.

The Second, Tenth, Eleventh Circuits have openly disagreed.  In all of these Circuits, traditional delegations suffice to commit questions of class arbitrability to the arbitrator.

The Fifth Circuit has now joined the fray charting a confusing middle path.  See 20/20 Communications, Incorporated v. Crawford, 2019 WL 3281412 (5th Cir. July 22, 2019).  Ultimately, the court concluded that, notwithstanding delegation provisions, the question of class arbitrability was for the court.

The facts of the case are pretty simple, and I’ll simplify them even more.  An arbitration agreement between employees and their employer contained a provision permitting the arbitrator to “hear only individual claims,” and prohibiting arbitration “as a class or collective action . . . to the maximum extent permitted by law.”  Notwithstanding this provision, an arbitrator determined that the parties’ class arbitration bar was prohibited by federal law and consolidated the employees’ cases.

The arbitration agreement contained two typical delegation provisions: (1) “If Employer and Employee disagree over issues concerning the formation or meaning of this Agreement, the arbitrator will hear and resolve these arbitrability issues”; and (2) “The arbitrator selected by the parties will administer the arbitration according to the National Rules for the Resolution of Employment Disputes (or successor rules) of the American Arbitration Association (‘AAA’) except where such rules are inconsistent with this Agreement, in which case the terms of this Agreement will govern.” (The court talked about a third provision as well, but I’ll exclude it here because most Circuits would probably not find it sufficient to constitute a clear and unmistakable delegation anyway.)

The Fifth Circuit acknowledged that, “[d]ivorced from other provisions of the arbitration agreement (most notably, the class arbitration bar), these . . . provisions could arguably be construed to authorize arbitrators to decide gateway issues of arbitrability such as class arbitration.”  But the court went on to say that it didn’t need to decide if these provisions together or standing alone were sufficient to “clearly and unmistakably empower the arbitrator to decide questions of class arbitrability.” Instead, it concluded that these delegations could not be read harmoniously with the class action bar for two reasons.

First, the reference to the AAA is conditioned by the phrase “except where such rules are inconsistent with this Agreement.”  In the court’s view, the class action bar was inconsistent with a delegation of class arbitrability to the arbitrator.

Second, “even putting aside the exception clauses, none of these provisions speak with any specificity to the particular matter of class arbitrations. The class arbitration bar, by contrast, specifically prohibits arbitrators from arbitrating disputes as a class action, and permits the arbitration of individual claims only.”

I think both arguments essentially collapse to make the same point: there’s no decision about class arbitrability to delegate because the parties prohibited class proceedings. But the only way you get to the conclusion that the parties prohibited class proceedings is to read and interpret the contract.  The choice of arbitration paired with the delegation provision should send all contract interpretation issues to the arbitrator.

So, this case amounts to an elevation of the issue of class arbitrability.  Its doctrinal logic places the formation of a class action waiver on the same footing as the formation of an arbitration provision itself. If that’s right, then virtually no delegation provision, no matter how “clear and unmistakable” could ever empower an arbitrator to consider class arbitrability when the agreement also contains a class action waiver.

So, remember when we talked about Just How Small the Bullseye Is for Challenging a Delegation Clause a few weeks ago?  Apparently, the target is small but not necessarily as unhittable as I suggested.

You might recall that in that earlier post we were looking at a Missouri Supreme Court decision, State Ex Rel. Newberry v. Jackson, 2019 WL 2181859 (Mo. May 21, 2019).  There, Missouri’s highest court said, “Rent-A-Center teaches that a delegation clause must be treated as a separate contract within the larger arbitration contract and must be challenged on an additional ground or basis beyond the fact that it is contained in an arbitration contract that the party also contends is invalid.”  As a result, the Court rejected arguments that a delegation clause failed for the same reasons that the arbitration clause failed.

Apparently, the Eighth Circuit didn’t read Jackson (or didn’t agree with it) before it issued its recent decision in Shockley v. PrimeLending, 2019 WL 3070502 (8th Cir., July 15, 2019).

In Shockley, an employer was trying to force an employee to arbitrate alleged violations of the Fair Labor Standards Act.  The arbitration agreement, including a delegation clause, was contained in an employment handbook addendum.  This addendum was available to the employee electronically.

The lower court concluded that the employee hadn’t accepted the addendum and thus that there was no formation of either a contract for arbitration or the delegation clause.    The Eighth Circuit noted that the record was “resoundingly clear” that the employee had challenged the formation of the delegation provision.  “Because the delegation provision is ‘simply an additional, antecedent agreement’ that operates like any other contract,” it could be disabled by any contract formation defense, including lack of mutual assent.

Relying on Missouri law, the Eighth Circuit upheld the lower court, reasoning that “acceptance is [only] present when the offeree signifies assent to the terms of an offer in a ‘positive and unambiguous’ manner.”  The “mere continuation of employment” did not manifest “the necessary assent to [the] terms of arbitration” or the delegation clause.

In some language that’s also interesting (read “what the hell!”) in light of our earlier discussions of “wrap” agreements (see here,here, and here), the Eighth Circuit says that although the employee was presented with two opportunities to review the handbook addendum through an optional hyperlink on the company’s network, at best the employer could show that the employee “acknowledged the existence of the delegation provision.” But the court went on to say that “[w]e are aware of no legal authority holding that an employee’s general knowledge or awareness of the existence of a contract constitutes the positive and unambiguous unequivocal acceptance required under Missouri law.”  Huh.

Because the employee never agreed to the delegation provision, the court, rather than an arbitrator, could decide the validity of the arbitration agreement.  And because the arbitration agreement was also contained in the handbook addendum, the court concluded that the employee never agreed to it either.

So, just to drive the key points home, the Eighth Circuit invalidated a delegation clause for the same reason that it invalided the arbitration clause, which seems directly contrary to what the Missouri Supreme Court did in Jackson. Along the way, the Eighth Circuit also, perhaps more importantly, interpreted acceptance in Missouri general contract law, at least in employment relationships, to require more than notice. That conclusion tosses all manner of “wrap” agreements into doubt.

The Sixth Circuit just reminded us all that a forum selection provision identifying courts where any lawsuit may be filed doesn’t necessarily negate an arbitration provision.

In White v. ACell, Inc., 2019 WL 2929933 (6th Cir. July 8, 2019), an employee had entered into two separate agreements related to his employment.  One called for arbitration of “any dispute between us . . . , including but not limited to claims of employment discrimination,” but allowed the employer at its “sole option” to “forego arbitration of disputes relating to violations of” certain specified sections of that contract and “seek judicial enforcement, including injunctive relief” in “the state and federal courts of Montgomery County, Maryland.”  The other provided that “any lawsuit relating to” the employment “may be filed only in the state court located within Howard County, Maryland, or the federal courts located in the United States District of Maryland.”

So, for folks keeping track at home, we have: (1) the employee promising to arbitrate everything; (2) the employer being authorized to bring a public court lawsuit in Montgomery County for certain contract breaches by the employee; and (3) a general forum selection provision saying that any lawsuit related to the employment “may be filed only” in Howard County.  If it seems to you that at least (1) and (3) are in conflict, you’re not alone.

The employee, in fact, argued that all of these provisions conflicted.  As a result, he claimed that there was no mutual assent to the arbitration provision.

The Sixth Circuit, however, made short work of this argument.  “[C]ourts generally have interpreted [similar] contractual provisions to complement, rather than contradict, each other.”  This approach squares, according to the Sixth Circuit, with the general principle of interpretation requiring that contracts be read as a whole and harmoniously, so that all provisions can be given meaning and applied.

The court then went on to say that the arbitration clause was mandatory – using the term “shall” – while the forum selection provision for public court litigation was permissive – using the term “may.”

I’m not sure I buy that argument.  First the “may” is paired with “be filed only,” which seems to convert it into a mandatory requirement.  Second, it seems pretty clear that under the first agreement the employer could seek judicial enforcement of certain contract terms in Montgomery County.  But such enforcement would certainly constitute “any lawsuit related to” the employment, which under the terms of the second agreement “may be filed only” in Howard County.  In short, at least with respect to litigation by the employer against the employee, it’s very unclear how these forum selection clauses lined up.

But that’s, as we say in the law prof biz, a red herring.  The question the court was faced with wasn’t confusion over where the employer could file a lawsuit. Instead, the issue was whether the employee could file a lawsuit at all.  The Sixth Circuit says there’s no confusion about that.  The employee promised to arbitrate, plain and simple.  To the extent that the employee might have to seek court support for the arbitration, either by compelling arbitration or in enforcing (or reviewing) an arbitration award, he would have to do so in Howard County.  Whatever confusion there might be in some hypothetical case where the employer was suing the employee doesn’t undercut assent by the employee to arbitration.

Two posts on arbitration law in one day!  What?!? Is it your birthday?

No, no.  (Well, maybe.  And if so, happy birthday!)  It’s just that I finished reading what I think are the three most significant and fascinating arbitration cases to be decided so far this year.  I’m so excited that I had to write a second post today!

All three cases address whether a rule articulated by the California Supreme Court in McGill v. Citibank, N.A., 2 Cal.5th 945, 216 Cal. Rptr. 3d 627, 393 P.3d 85 (2017), is preempted by the FAA.  Spoiler alert: the Ninth Circuit says the McGill rule isn’t preempted.  That’s sure to raise some eyebrows, including by SCOTUS justices.

Deep breath!  Let’s wade into this.

In McGill, the California Supreme Court held that an agreement waving the right to seek public injunctive relief violates California Civil Code § 3513, which provides that “a law established for a public reason cannot be contravened by a private agreement.”  (Liz wrote about McGill here.)  To understand what this means, it helps to see the distinction between what California considers private injunctive relief and public injunctive relief.

Public injunctive relief has “the primary purpose and effect of prohibiting unlawful acts that threaten future injury to the general public.”  In contrast, private injunctive relief “resolve[s] a private dispute” between the parties and “rectif[ies] individual wrongs,” though such injunctions may benefit the general public incidentally.  In a nutshell, the difference hinges on who primarily benefits from the relief, the public at large or only an individual.  A number of California consumer protection statutes provide for public injunctive relief.

The contract at issue in McGill was an arbitration agreement waiving the plaintiff’s right to seek public injunctive relief in arbitration and requiring arbitration of all claims. Because this waiver prevented the plaintiff from seeking a public injunction in any forum, it was unenforceable.

I don’t want to get too lost in the weeds, but the issue of the arbitrability of public injunctive relief isn’t new in California.  A prior set of cases, Broughton v. Cigna Healthplans of California, 549 Cal. 4th 1066, 90 Cal.Rptr.2d 334, 988 P.2d 67 (1999) and Cruz v. Pacificare Health Systems, Inc., 30 Cal. 4th 1157 (2003) (collectively referred to as Brougthton-Cruz) created a rule establishing that public injunctive relief in California was not arbitrable at all.  The Ninth Circuit found that the Broughton-Cruzrule was preempted in the wake of AT&T v. Concepcion.  See Ferguson v. Corinthian Colls., 733 F.3d 928 (9th Cir. 2013).  So, anyone watching California law had to wonder about the fate of McGill.

The difference between Broughton-Cruz and McGill, however, is that the latter case doesn’t purport to prevent the arbitrability of public injunctive relief. It says, instead, that parties cannot waive the recourse to public injunctive relief in any forum.  (If you think that sounds ominously similar to the Discover rule preempted by  AT&T v. Concepcion – which said that parties couldn’t waive the right to class actions in any forum – you’re not wrong.)

The Ninth Circuit, however, bought the distinction.  In Blair v. Rent-A-Center, Inc., WL 2701333 (9th Cir. June 28, 2019), the court concluded that McGill is not preempted by the FAA.  That conclusion was reiterated in two concurrently released decisions: McArdle v. AT&T Mobility LLC(No. 17-17221) and Tillage v. Comcast Corp., 2019 WL 2713292 (9th Cir. June 28, 2019).  Blair lays out the key logic of the Ninth Circuit, so I’ll focus on that decision here.  According to the Ninth Circuit, the McGill rule does not run afoul of the FAA for essentially four reasons.

First, the McGill rule does not prevent the arbitrability of public injunctive relief, either expressly or covertly.  So, it’s not openly hostile to arbitration.  Instead, the McGill rule merely prevents waiver of the right to pursue public injunctive relief, regardless of forum.

Second, and critically, the court says that the arbitration of public injunctive relief doesn’t require the sort of formalities inconsistent with bilateral arbitration that class arbitration does.  In this regard, the court explains how SCOTUS’s objection to class arbitration in AT&T v. Concepcion seems to rest on the notion that class actions require far more complex procedural processes, many of which are aimed at protecting the due process rights of absent class members.  These complicated processes just don’t square with the hallmark informality of bilateral arbitration.  In contrast, the arbitration of public injunctive relief does not require any sort of complicated process because the real party in interest is the state, not absent parties.  So, nothing about the arbitrability of public injunctive relief, according to the Ninth Circuit, interferes with a fundamental attribute of arbitration.

Third, and relatedly, the fact that things could substantively get more complicated when litigating about public injunctive relief doesn’t matter.  The Ninth Circuit draws a distinction between procedural complexity, which was the animating concern in AT&T v. Concepcion, and substantive complexity, which SCOTUS has said isn’t relevant when thinking about arbitration. See, e.g., Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 633 (1985) (considering the tangle of factual and legal issues associated with antitrust claims and stating that “potential complexity should not suffice to ward off arbitration”).

Finally, the Ninth Circuit wishes away, without a lot of analysis, two related concerns about injunctive relief generally.  It dismisses a concern that “multiple injunctions [could be issued] against the same defendant imposing conflicting obligations” as “conjectural and unpersuasive.” It dismisses the concern that “[o]ngoing injunctions sometimes need monitoring or modification” as insignificant because “[a]rbitrators have long had the authority and ability to address requests for injunctive relief within bilateral arbitration.”

The consequences of Blair are momentous.  Plaintiffs who are not able to band together to pursue class-wide relief in arbitration can still pursue injunctive relief on behalf of all harmed consumers, at least in California and at least for the moment.  So, for instance, in Blair, the plaintiffs sought a public injunction against Rent-A-Center enjoining future violations of law, requiring an accounting of monies illegally obtained from California consumers, and requiring that Rent-A-Center provided individualized notice to those consumers of their statutory rights.  While this isn’t quite the same as a class action, of course, the requested relief certainly constitutes an end-run around the class action waiver in the arbitration agreement.

It’s also worth noting, however, a strange consequence of the Blair holding.  In Blair, the court concluded that the request for public injunctive relief was not arbitrable because of a severability clause in the arbitration agreement.  That clause provided that “[i]f there is a final judicial determination that applicable law precludes enforcement of this Paragraph’s limitations as to a particular claim for relief, then that claim (and only that claim) must be severed from the arbitration and may be brought in court.”  In the other two concurrently released cases, the court relied on severability clauses to conclude that the entire arbitration agreements were voided. See McArdle v. AT&T Mobility LLC (“If this specific provision is found to be unenforceable, then the entirety of this arbitration provision shall be null and void.”); Tillage v. Comcast Corp. (“THIS WAIVER OF CLASS ACTIONS AND COLLECTIVE RELIEF IS AN ESSENTIAL PART OF THIS ARBITRATION PROVISION AND CANNOT BE SEVERED FROM IT.”).

In combination, these cases raise some important and fascinating issues.  If you have consumer, patient, or employment arbitration agreements in California, these decisions have immediate and significant relevance.

In fact, I go on record now: this issue’s going to SCOTUS!  These particular cases might not tee up things cleanly enough, but SCOTUS’s abiding interest in class action waivers virtually guarantees that this matter has to be reviewed.

Wrap agreements continue to present challenges.  I don’t often write about district court decisions, and particularly not unpublished ones, but a recent case out of Illinois warrants an exception.  (See earlier considerations of wrap arbitration agreements on this blog hereand here.)

Just as a quick refresher about wrap agreements, courts have refocused the notion of mutual assent on whether a reasonable person in the position of the recipient of boilerplate should have seen the terms and conditions of the proposed deal. If so, the recipient will be bound by those terms, regardless of whether she ever actually read or understood them. Constructive awareness coupled with an individual purchasing something from a commercial party amounts to assent. The trouble has been determining when an individual is made “constructively aware” of terms.

(I shouldn’t be too cavalier.  The trouble may also be that boilerplate contracting shouldn’t count as contracting at all.  In fact, the debates about the propriety of boilerplate have been raging for years. For instance, right now there’s a hot battle taking place over the proposed Restatement of Consumer Contracts.  I won’t recap all of the vociferous debates, but if you’re interested, you can find a point of entry here (discussing the objections of 23 state attorneys general to the draft Restatement).)

In Anand v. Heath, et al., 2019 WL 2716213 (N.D. Ill. June 28, 2019), the court jumps into the fray by considering what it described as a “hybridwrap” arbitration agreement.  According to the court, “[h]ybridwrap agreements typically prompt the user to manifest assent after ‘merely present[ing] the user with a hyperlink to the terms and conditions, rather than displaying the terms themselves.’”  This typology situates “hybridwrap” agreements somewhere between clickwrap agreements, which present users with terms and conditions and then requires them to click that they agree to be bound by these terms, and browsewrap agreements, which merely provide a link to terms and conditions of use at the bottom of a page and assume that continued use of the site constitutes assent.

The court goes on to refuse to enforce the hybridwrap arbitration agreement before it.  The rationale underlying the decision seems to be that the button manifesting assent to the terms and conditions wasn’t clearly connected to the actual terms and conditions.   The problem wasn’t just that the hyperlink to the terms and conditions was distant from the “Continue” button; it was also that there was no indication that clicking the “Continue” button was signifying agreement to the hyperlinked terms and conditions.

What’s interesting to me about the typology and rationale discussed by the Anand court is that it seems to bear at least a family resemblance to the “coupling” principle discussed in Starke v. SquareTrade, Inc., No. 17-2474, 2019 WL 149628 (2d Cir. Jan. 10, 2019).  (I wrote about Starke here.)  Basically, in Starke, the Second Circuit refused to enforce an arbitration agreement in part because the relevant hyperlink was “neither spatially nor temporally coupled with the transaction.”

I’m not sure that I would say that there’s a trend developing here, but I appreciate that the courts in both Starke and Anandare trying to render the concept conspicuousness more concrete.  The closer the temporal and spatial relationship between the mechanism signifying assent – an “I agree” button, for instance – and the terms, the more likely a court seems to be to enforce the terms.

The moral of the story: if you are writing boilerplate arbitration contracts in a wrap environment, I’d be reevaluating the degree of linkage between terms and conditions and the mechanisms for signaling assent.