Court Rejects Losing Party’s Post-Award Contention That Arbitrator Was Impaired By Pain Killers

The recent California appellate decision in Alper v. Rotella begins by noting that “four business partners had a dispute that ultimately led to a nine-day arbitration hearing. During the hearing, the arbitrator openly took pain medications. After the arbitrator issued a final ruling, the two losing partners filed a petition in the trial court to vacate the arbitration award. They alleged—for the first time—that the arbitrator was ‘unable to properly perceive the evidence or . . . unable to properly conduct the proceeding.’”

With evidence that was, at best, inconclusive as to any impairment–the victors, of course, asserted that “[the arbitrator] interjected with pointed questions, paid full attention, heard and ruled on motions and objections. He held numerous proceedings before, during and after the arbitration, and considered briefings and argument at each stage of the process,” and even the losing party submitted a letter from a physician asserting a professional opinion that “a dose of Percocet, on its own, does not generate sufficient impairment immediately after taking it, in the experienced user”–the court refused to set aside the award.

The court focused on the loser’s full awareness that the arbitrator admittedly and openly was taking pain killers due to a recent injury, and raised no issue of alleged impairment until after receiving an adverse result. Indeed, the victor’s counsel asserted in a declaration that “I spoke to [plaintiffs’] counsel frequently during breaks in the arbitration, and before and after the arbitration itself. We discussed a myriad of topics and issues, ranging from case related to where to have dinner. Never once did Plaintiffs, Mr. Bailey or Mr. Hargan come close to express any concern or observation to me regarding [the arbitrator’s] competency or ability to be impartial. Nor did I ever observe Plaintiffs or their counsel express concern to [the arbitrator] directly or ask him if he was okay.”

“Preparing Clients for Productive Mediations”

In this article available at JD Supra, Abby Silverman offers helpful insight into “participants’ reaction to one aspect of the mediation process—the bargaining.” As she explains, “[t]he emotions surrounding litigation may explain why participants in mediations, experienced and inexperienced litigants alike, are shocked and surprised in the normal course of mediation it becomes a bargaining session.” She discusses the opportunities available to prepare and condition parties to transition from discussions about the emotions and merits of the dispute to the colder reality of back-and-forth negotiation.

“First Circuit Concludes App User Is Bound By Arbitration Clause In App’s Terms and Conditions”

The First Circuit’s recent decision in Emmanuel v. Handy Technologies, Inc. is the subject of this JD Supra article by Carlton Fields. As the article explains, the court compelled arbitration of a putative class action brought on behalf of nannies and housekeepers offering services through the defendant’s app, alleging that they were misclassified as independent contractors rather than employees. The court found that click through terms and conditions providing for arbitration were enforceable.

“Data Protection Obligations in International Arbitration”

This article, available in The National Law Review and authored by Leith Ben Ammar of Greenberg Traurig, discusses “the applicability of data protection laws to international arbitration, describes who is responsible for compliance with the data protection laws, and identifies key rules and principles likely to apply.”

Prevailing Party In Arbitration Loses Right To Seek Attorneys’ Fees By Not Presenting Evidence Prior To The Issuance Of An Award

Parties often include a demand for attorneys’ fees in claims submitted for arbitration. The opportunity to recover attorneys’ fees is dependent upon the success of the underlying substantive claim, so the inclination of a party is often to wait until the arbitrator issues the award on the claim.

However, because the Federal Arbitration Act and comparable state statutes impose limitations on an arbitrator’s ability to act following the issuance of an award, a party must be proactive regarding the attorneys’ fees claim. Once an award issues, the arbitrator becomes functus officio, losing the power to act, except for exceedingly narrow reasons granted by statute, such as correcting an evidence mathematical miscalculation.

Therefore, a party who hopes to recover attorneys’ fees has two options. First, the party can submit the evidence and legal claims for the attorneys’ fees before the arbitrator issues the award, thereby presenting the issue squarely to the arbitrator.

Second, the parties and arbitrator can discuss the efficiencies involved in deferring the attorneys’ fee evidence and arguments until the arbitrator issues the award on the merits, since an award adverse to the claimant will moot the issue. If the parties agree to pursue this route, the arbitrator will issue an “interim award” on the merits, with the case being kept open so that attorneys’ fees issues can be subsequently entertained.

The risks of doing neither recently became apparent in Chen v. Kyoto Sushi, Inc. d/b/a Kyoto Sushi, in which the Eastern District of New York refused to modify an arbitration award to include attorneys’ fees, costs, and expenses. The prevailing claimant argued that the arbitrator “made ‘an evident material mistake’ in failing to include attorney’s fees and costs in the award. The court, however, held that responsibility belonged to the claimant, not the arbitrator: “it was not the arbitrator who made a mistake, but Chen, who failed to submit
arguments and evidence in support of reasonable attorney’s fees and costs prior to or concurrently with his post-arbitration brief.”

This article discussing Chen, authored by Alex Silverman of Carlton Fields, is available at JD Supra.

“Seventh Circuit Holds EEOC Right-to-Sue Letter Does Not Trump a Binding Arbitration Agreement”

Christina Gallo of Carlton Fields has authored this article, available at JD Supra, discussing the Seventh Circuit’s decision in Melton v. Pavilion Behavioral Health System. As the article notes, the court “found that the EEOC’s right-to-sue letter did not override the arbitration agreement; it merely allowed Melton to move beyond the administrative process and pursue any rights that he may have in court — rights that Melton had waived by previously entering into the binding arbitration agreement.”

“Arbitration, or Arbitrary Exception? The Unequal Treatment of Injunction Carveouts From Arbitration Provisions”

Gregg Weiner, Dan Ward and Carrie Sandstrom of Ropes & Gray “examine the state of the law in a number of jurisdictions, explore litigation pitfalls, and provide practice pointers related to the interplay between arbitration and injunctions” in this article, jointly published by New York Law Journal and

“FINRA Reminds Members About Requirements When Using Predispute Arbitration Agreements for Customer Accounts”

FINRA recently issued new guidance, reminding member firms that when they “use mandatory arbitration clauses in their customer agreements, FINRA rules establish minimum disclosure requirements regarding the use of such clauses and prohibit predispute arbitration agreements from including conditions that, among other things, limit or contradict FINRA rules.”

In particular, FINRA’s guidance emphasizes that “any predispute arbitration clause must be highlighted in the customer agreement and immediately preceded by disclosures that the customer agreement contains such a clause and that describe the consequences of agreeing to arbitration,” and that predispute arbitration agreements many not include a provision that “(1) limits or contradicts the rules of any self-regulatory organization (SRO); (2) limits the ability of a party to file any claim in arbitration; (3) limits the ability of a party to file any claim in court permitted to be filed in court under the rules of the forums in which a claim may be filed under the agreement; or (4) limits the ability of arbitrators to make any award.”

FINRA’s guidance appears to be precipitated by observations that certain firms were including items in their agreements that “attempt to dictate the location of the arbitration hearing,” “attempt to shorten or extend applicable statutes of limitations,” “attempt to limit a customer’s right to pursue class actions in court,” “attempt to limit the ability of a customer to file a claim or to limit the authority of the arbitrators to make an award,” and/or “require that the customer indemnify and hold harmless the member firm from all claims and losses arising out of the agreement.”

“First Circuit Enforces Delegation Clause in Arbitration Agreement”

Diane Saunders of Ogletree Deakins has this article, available in The National Law Review, discussing the First Circuit’s recent decision in Bossé v. New York Life Insurance Co. et al., pursuant to which she notes that “employers operating within the First Circuit can be more confident that if their arbitration agreements contain delegation clauses that clearly and unmistakably manifest an intent to delegate issues of arbitrability to arbitrators, courts within the First Circuit will likely enforce the clauses.” As the article describes, in Bossé, the court enforced an arbitration clause that provided it would “survive termination” of an underlying employment agreement, when subsequent to the employment relationship, “Bossé transitioned back to working as an agent under a separate agent agreement, which did not have an arbitration clause.”

Children Of Alexa Users Not Required To Arbitrate Their Claims Of Unlawful Wiretapping

Earlier this year, I referenced the Northern District of Illinois decision in Wilcosky v. Amazon.Com, Inc., compelling arbitration of claims against Amazon alleging that the company, through its Alexa device, violated the Illinois Biometric Information Privacy Act by illegally recordings their voices and storing their voiceprints. One claimant ordered to arbitration was not a purchaser or owner of an Alexa device, but was found to have agreed to arbitration by virtue of the Conditions of Use applicable to other products he had purchased from Amazon.

Last week, the Ninth Circuit issued an opinion, refusing Amazon’s motion to compel arbitration of claims brought by minor children of Alexa account owners who have alleged that Alexa “has intercepted or recorded their communications without their consent, in
violation of various state-wiretapping laws.” In B.F. v. Inc. the court noted that “it is undisputed that, if the parents brought the same claims as Plaintiffs, the terms to which they agreed would bind them to arbitration.”

However, the children were not signatories to the agreement their parents entered into with Amazon, and, for the court, the doctrine of equitable estoppel, frequently invoked to compel arbitration against non-signatories who benefit from the underlying agreement, was not applicable. According to the court,

“Plaintiffs are not asserting any right or looking to enforce any duty created by the contracts between their parents and Amazon. Instead, Plaintiffs bring only state statutory claims that do not depend on their parents’ contracts. In other words, irrespective of those agreements, Amazon would owe to Plaintiffs the legal duty that Plaintiffs claim has been violated.”