Whenever people ask me why I choose arbitration law to write and talk about, one of the reasons I give is that the law is in flux, creating a demand for information and analysis. Despite the fact that the Federal Arbitration Act has been around for over 90 years, there are constantly new developments in its interpretation. Especially in the past two decades, with the Supreme Court highly engaged in the enforcement of arbitration agreements, the pace of legal development has quickened. That pace means that litigants, advocates, arbitrators and judges are struggling to keep up. It also means that even on recurring issues, there is still a lack of consensus on how to apply the rules that have been developed.
To demonstrate this point, I went back through the important cases from 2017. I found multiple instances where two cases with very similar facts received opposite results. And I am not talking about circuit splits over novel issues like the NLRB and “wholly groundless” exception. I am talking about issues like formation, waiver, and non-signatories, where the “rules” have ostensibly been settled for some time.
Two Tales of Non-Signatories
These two cases involve a bank teaming up with a retail entity to issue branded credit cards that offered rewards. The credit card agreement, which called for arbitration of disputes, was only between the consumers and the banks, however. In each case, plaintiffs sued the retail entity regarding the card and the retail entity moved to compel arbitration as a non-signatory to the credit card agreement. In one case, White v. Sunoco, Inc., 2017 WL 3864616 (3d Cir. Sept. 5, 2017), the retail entity’s motion was denied. In the other, Bluestem Brands, Inc. v. Shade, 2017 WL 4507090 (W. Va. Oct. 6, 2017), the retail entity’s motion was granted. While these cases depend on the laws of different states, the courts were applying the same general estoppel rules, but reaching opposite results.
Two Tales of Waiver
Whether a party has waived its contractual right to arbitrate is an issue that comes up regularly. Yet it remains surprisingly hard to predict whether a court will find waiver or not on any set of circumstances.
These two cases involve lenders bringing collection actions in state court for credit card debts. In both, they were granted a default judgment. And in both, the credit card holder later sued for problems with the collection efforts. In response to that suit, the lenders moved to compel arbitration. In one case, Cain v. Midland Funding, LLC, 156 A.3d 807 (Md. Mar. 24, 2017), the court denied the motion to compel, finding the lender had waived its rights. In the other, Hudson v. Citibank, 387 P.3d 42 (Alaska Dec. 16, 2016), the court granted the motion to compel, finding the lender did not waive its rights. In both cases, the analysis turned on whether the default action and later action were sufficiently related.
Two Tales of Formation
All of us do more and more of our business over mobile devices and the internet, where we don’t physically sign our name to contracts, and in fact we generally don’t read the terms and conditions. That leads to hard legal questions over when a contract is validly formed and what terms the parties agreed to.
In the first case, the provider was not successful in compelling arbitration. James v. Global Tellink Corp., 852 F.3d 262 (3d Cir. Mar. 29, 2017). In the second case, the provider was successful in compelling arbitration. Meyer v. Uber Technologies, Inc., 868 F.3d 66 (2d Cir. Aug. 17, 2017). Can it be that the wording difference between “your account.. is governed” and “by creating an account, you agree” explains the outcomes? Or the fact that the consumers in the Uber case could have just clicked on the terms from the same device they were using to set up the account, while the prisoners in the first case would have had to hang up their telephones, find a computer and find the website? The cases really give us no assistance in figuring that out.
Maybe every area of law has similar issues regarding the predictability of decisions. But arbitration law is rife with legal “rules” to guide decision making that are so flexible as to hardly constitute rules at all. And courts have not yet applied those rules enough times to allow them to develop a systemic approach, with internal consistency between the decisions. And I predict that will only get worse, not better, as consumers and employees find new and creative ways to challenge arbitration agreements.