Today’s trip into the arbitration weeds comes via the Ninth Circuit’s decision in Brice v. Plain Green, LLC, with explanatory help provided in this article authored by Om Alladi at Proskauer, available on JD Supra.
As explained by Attorney Alladi,
“An interesting puzzle arises when a contract contains both of these elements: a choice-of-law clause precluding the arbitrator from applying federal law, and a delegation clause requiring the arbitrator to resolve disputes relating to arbitrability. In such a case, there is an unresolved order-of-analysis issue: Does a court first look at the delegation clause and send the case to arbitration? Or does the court look first at whether the arbitration agreement would result in prospective waiver due to the choice-of-law clause?”
Tackling this issue, the Ninth Circuit in a 2-1 decision determined that the delegation issue takes priority. This decision conflicts with those of the Second, Third and Fourth Circuits, and sets up a scenario with major practical implications. As Attorney Alladi notes, the Ninth Circuit majority “explained that if there is a valid delegation clause, whether or not arbitration would result in waiver of federal rights ‘is not for us—nor anyone else wearing a black robe—to decide.’”
With the split in the circuits, this decision, if it survives en banc review in the Ninth, could be en route to the US Supreme Court.