“The Skinny on Arbitrability of Judicial Dissolution Claims”

Peter Mahler of Farrell Fritz has authored this article, available at JD Supra, providing an insightful overview of the arbitrability of claims for the judicial dissolution of business entities. As Mahler notes, insofar as business entity dissolution is a creature of statute, the question of whether, and how, parties can implement or facilitate the process via arbitration is neither always clear nor consistent from one state to another.

Subsidiary Cannot Invoke Arbitration Based On Agreement Between Subsidiary’s Employee And Parent Company

The Ninth Circuit recently reversed the trial court’s decision that the issue of arbitrability of an employee’s putative class action claims was for the arbitrator to decide. In Ahlstron v. DHI Mortgage Company, the plaintiff employee had entered into an arbitration agreement with his employer’s parent company. The arbitration agreement on its face did not purport to make its provisions applicable to the subsidiary employer.

However, because the arbitration provision purported to delegate to the arbitrator “exclusive authority to resolve any dispute relating the formation, enforceability, applicability, or interpretation” of the arbitration agreement, the lower court determined that it was for the arbitrator, not the court, to determine whether the plaintiff’s claims were arbitrable.

On appeal, the Ninth Circuit reversed, holding that, contract language notwithstanding, “parties cannot delegate issues of formation to the arbitrator.” Thus, the court was required to determine whether an agreement to arbitrate existed between the employer and his employer, i.e. whether the subsidiary could invoke the arbitration rights provided by the parent company’s agreement with the employee. On this issue, which frankly provides the most important takeaway for employers, the court found that a parent-subsidiary relationship was insufficient to create a binding agreement between the employee and the subsidiary. Looking at the language of the agreement, the Ninth Circuit found nothing to suggest the contracting parties intended for the agreement with the parent to include the subsidiary. Consequently, the court held that the arbitration agreement, “as drafted, describes and governs [an employment] relationship between [the employee] and [the parent] that does not exist, and thus does not constitute a properly formed agreement to arbitrate.”

“Strike While the Arbitration Award Is Hot: Three-Month Window to File Motion to Vacate Does Not Prevent Earlier Confirmation”

Valerie Sanders of Eversheds has this article in Lexology discussing the Eleventh Circuit’s interesting decision in McLaurin v. Terminix International Co. in which, as Ms. Sanders’ article notes, the court addressed the question of “what happens when a motion to confirm is filed early, before the three months to file a motion to vacate has run?” As the court held, while prudent practice suggests that a court should “issue an order that sets simultaneous deadlines for a losing party to file an opposition to the motion to confirm, if any, and to file a separate motion to vacate, modify, or correct, if any,” a party disappointed with an arbitration award is not always entitled to receive the three months provided by the FAA to move to vacate. Instead, if the victorious arbitration party promptly moves to confirm the award, the disappointed party’s timetable will be dictated by the deadline for responding to the confirmation motion. This creates a potential trap for the unwary.

“Russian Supreme Court says sanctioned persons may ignore arbitration clauses”

Igor Gorchakov and Andrey Panov of Allen & Overy have this article, available at JD Supra, discussing the Russian Supreme Court’s recent decision in Uraltransmash vs PESA, which, as the article notes, is “of great interest for every party doing business with Russian companies.” As the article explains, finding that “sanctioned persons are free to choose between litigating (or arbitrating) abroad and litigating in Russia,” the court concluded that “the very fact of introduction of sanctions against a Russian person is sufficient to conclude that there are obstacles to access to justice for such a person in a foreign state that introduced such sanctions.” As such, the applicable Russian statute entitles a sanctioned person to “choose whether to pursue the case in a foreign court or arbitration, or to opt for exclusive jurisdiction of the Russian courts.”

“Arbitration Claimants Ask for Court Order Compelling UberEats to Pay AAA Fees”

Last year, in the aftermath of George Floyd’s murder, Uber adopted what it intended to be a supportive measure by freeing black-owned restaurants of delivery charges. The policy received pushback, resulting in a reverse discrimination claim by the state of Arizona that Uber subsequently settled. Additionally, and more relevant to this site, attorneys filed with the American Arbitration Association more than 20,000 individual claims by food providers alleging that the claimants, whose fees were not waived, were victims of Uber’s discriminatory policy. The arbitration agreements between Uber and its provider-customers would require it to pay millions in administrative fees to AAA, which it allegedly has not done for the vast majority of the cases. Accordingly, having not been paid for its services, AAA has failed to administer the cases.

Claimants’ counsel have now filed in federal court in California an action against Uber to compel arbitration. The petition is available here, and this article, available through Law Street Media, discusses the legal issues in more detail.

“Boy Scouts bankruptcy judge ousts mediator, questioning ‘impartiality'”

In the world of ADR, questions of impartiality most often with respect to arbitration. Insofar as an arbitrator is entrusted with picking a winner in a contested proceeding, prior relationships with the parties and their counsel warrant careful scrutiny to ensure there is no explicit or inherent bias.

Mediator impartiality, while certainly important, generally does not raise the same level of concern. Acting as a facilitator, a mediator does not have the ability to adjudicate the dispute or to declare a prevailing party. Indeed, many argue that a mediator’s prior experience with counsel is often conducive to more productive settlement discussions.

However, there are circumstances where mediator neutrality is questioned. As discussed in this recent Reuters article, a federal bankruptcy judge “has removed one of the mediators tasked with overseeing confidential settlement talks between the Boy Scouts of America and groups of sex abuse survivors who say they were abused as children by troop leaders, saying his ability to remain impartial had come into question.”

According to the report, the mediator was wearing an additional hat, having been selected by the Boy Scouts to review specific claims raised by abuse claimants as part of the Boy Scouts’ reorganization plan.” According to the court, this dual role–serving to facilitate a mediated settlement while also opining on the merits of specific claims–required that he be removed.

Additional reporting is available here.

“Sixth Circuit emphasizes the importance of challenging an arbitration agreement’s delegation clause to allow a court to resolve the arbitration agreement’s enforceability.”

Ellen Phillips of Squire Patton Boggs has authored this article, available at The National Law Review, discussing the Sixth Circuit’s recent 2-1 decision in In re: StockX Customer Data Security Breach Litigation. As Attorney Phillips emphasizes, the case serves as a reminder that “If one wants a court to determine whether an arbitration agreement is enforceable, they must check if there’s a delegation clause and, if so, specifically challenge it; otherwise, they’ll be left arbitrating whether they should be arbitrating.”

In this decision, as to arbitrability, the majority held that it was insufficient for attorneys representing minors with brokerage accounts to generally challenge the enforceability of the agreements based on infancy. Instead, they were required to specifically challenge the provision of the agreements delegating to arbitrators the issue of arbitrability. Finding that the minors had failed “to show that ‘the basis of [their] challenge [is] directed specifically’ to the ‘delegation provision,’” the court determined that the arbitrators–not the court–were required to address the arbitrability issue.

Federal Court Rejects Arbitration Provision As Being Contrary To Public Policy

In RTM Capital Partners, Inc. v. Barnes, a decision by my long ago law firm colleague, U.S. Magistrate Judge Dave Vatti, the court provides a detailed analysis of an arbitration provision that is worth reading in its entirety. Perhaps most interesting, however, is Judge Vatti’s view that the arbitration agreement, facially broad in that it purports to encompass “any dispute, claim, disagreement or other matter arising from or relating to this Agreement or the alleged breach of this Agreement,” is violative of public policy as to a party’s attempt to invoke it to address issues pertaining to a charging order against an asset of a judgment debtor. As the court explained, “[i]f this were a first party action … there is little dispute that this would fall within the purview of the Operating Agreement’s arbitration provision.”

However, insofar as the claims presented pertained to the enforcement of a court judgment, the court rejected arbitrability:

“In this Court’s view, there is an obvious and strong public interest in federal courts’
enforcement of their own judgments…. In this Court’s view, the ability of a party to enforce a judgment and the Court’s inherent ability recognized in Peacock to supervise such enforcement and conduct any proceedings to adjudicate issues relevant to and enforce a judgment are fundamental to inspiring the public’s confidence in the integrity of federal court judgments. It is a critical and important structural feature of the federal courts and the federal judiciary’s proper functioning.”

According to the court, judicial precedent and statutory authority governing judgments and their enforcement, create a framework which “embodies an explicit public policy by which federal courts have supervisory authority over their judgments and should not cede that authority to an arbitration forum, one of the major risks of which is the likelihood of delay… Severing [the issues pertaining to the charging order] to be litigated in arbitration would directly contravene a strong public policy interest in having this Court retain its ability to supervise a proceeding to enforce its judgment, to ensure against undue delay and to manage this process in a way that promotes efficient resolution of these proceedings.”

“Second Circuit Affirms Judgment Confirming Dismissal of Claims on Statute of Limitations Grounds and Order Enjoining Plaintiff From Refiling His Claims”

Brendan Gooley of Carlton Fields has this article, available in JD Supra, discussing the Second Circuit’s recent decision in Hermès of Paris, Inc. v. Swain. Summarizing the court’s holding regarding the scope of matters delegated to the arbitrator, the article explains that the court “affirmed the confirmation of an arbitrator’s decision dismissing claims on statute of limitations grounds against a claim that the arbitrator had no authority to consider such a defense.”

“Who’s in Charge Here? Federal Circuit Says An Arbitrator, not District Court, Should Decide Arbitrability”

Matthew Hurley of Mintz has this article in the National Law Review, discussing the Ninth Circuit’s recent decision in ROHM Semiconductor USA, LLC v. MaxPower Semiconductor, where, as the article notes, the court followed established precedent to hold that “an arbitrator, not a federal district court, should decide whether a dispute arising from a technology license is subject to mandatory arbitration.” As the court explained, “[v]irtually all courts to consider the question, including this court, have concluded that, in contracts between sophisticated parties, incorporation of rules with a provision on the subject is normally sufficient ‘clear and unmistakable’ evidence of the parties’ intent to delegate arbitrability to an arbitrator.”