Confronted with conflicting dispute resolution provisions between the employment and LLC agreements that encompassed the relationship between a principal of an investment firm and his partners, the Delaware Chancery Court issued this opinion in Fairstead Capital Management LLC v. Blodgett. Sidley Austin’s Heather Benzmiller Sultanian and Rebecca B. Shafer provide a thorough analysis of the court’s decision, and the pitfalls of inconsistent dispute resolution provisions, in this article, available on Lexology. With the court concluding that the disputes in the Fairstead Capital case would need to be adjudicated in multiple fora, the takeaway in the article is that “drafters of agreements should be cognizant of other potentially intersecting contracts and should draft forum-selection clauses with an eye toward avoiding potentially costly and inefficient ‘collisions’ between arbitration and the courts.”
Scott Jang of Jackson Lewis has authored this article, available at Lexology, discussing the California Court of Appeals decision in Iyere v. Wise Auto Group. As suggested by the article’s title, Mr. Jang’s takeaway is that, especially when an arbitration agreement contains the employee’s signature, the “decision may aid employers seeking to enforce arbitration agreements by thwarting employees who attempt to dodge their arbitration agreements by submitting a declaration that merely states, ‘I do not recall signing.’”
John Lewis of Baker Hostetler provides thorough summary of the recent decision by the Southern District of New York in Mullo v. DoorDash, Inc. The analysis, available at Lexology, discusses the court’s treatment (and rejection) of a “grab-bag of arguments” challenging arbitrability, including consent, class waiver and structural arbitrator bias. The takeaway for Mr. Lewis is that “[c]ourts are increasingly likely to reject wholesale challenges to arbitration agreements.”
Rebecca Bjork of Duane Morris has authored this article, available at Lexology, discussing the Southern District of New York’s decision in Querette v. Chromalloy Gas Turbine, LLC, As Attorney Bjork notes, “the Court’s order represents a master class in how to properly apply contract interpretation principles and enforce all clauses in arbitration agreements.”
By: Rob Harris
The Michigan Court of Appeals’ recent decision in S.P. v. Lakelands Golf and Country Club raised a number of arbitration-related issues pertaining to a golf club employee who alleged she suffered a workplace sexual assault by an individual who, based on who you believe, was asserted to be either a “member-owner” or a “former member” of the club. Following the assault, the plaintiff left the employment, claiming she was constructively discharged. The legal issues generally were standard fare for established precedent pertaining to arbitration–largely concerning the manner in which the employment-related claims would be arbitrated pursuant to an employment handbook provision.
However, one cannot read the opinion without sensing that the Court of Appeals, at the expense of fairly well-established arbitration precedent, was determined to ensure that the plaintiff would be able to bring claims for assault and battery to a jury, not an arbitrator.
Not only was the Court of Appeals faced with arguments by the club and the (former) member that the assault and battery claims should be arbitrated, but the the employment handbook provision incorporated the American Arbitration Association’s Employment Rules. Those rules provide that “[t]he arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement.”
Ample recent authority, from both federal and many state courts, holds that incorporating the AAA rules empowers the arbitrator–not the court–to determine whether a dispute is arbitrable. Thus, under this authority, the Court of Appeals could and perhaps should have deferred this “gateway” issue to the arbitrator, i.e. relying on the arbitrator to decide whether the assault and battery claims should be determined in arbitration or in court. While there was no reason to think that an arbitrator would rule in favor of arbitration over court, the Court of Appeals eliminated this risk altogether by determining that the Court, not the arbitrator, should determine arbitrability. In doing so, the court elected to disregard this ample precedent from the federal and other state courts, noting that defendant “has presented this Court with no published authority indicating that, under Michigan’s uniform arbitration act, the mere agreement to conduct arbitrations in accordance with the AAA rules is sufficient to indicate a clear and unmistakable agreement that ‘gateway’ questions of arbitrability should be submitted to the arbitrator rather than the courts.”
While the desire to enable the plaintiff to present her claims for assault and battery to a jury is understandable, there is no reason to believe that an arbitrator, just as easily as the court, would interpret the handbook’s arbitration provision to permit this to occur. By displacing the arbitrator’s role in this process, the Court of Appeals rejected the parties’ agreement to follow AAA’s Rules, and perhaps holding Michigan back from the evolutionary arbitration movement in the federal courts and other states.
“In Lavvan, Inc. v. Amyris, Inc., No. 21-1819 (2d Cir. Sept. 15, 2022), the Second Circuit affirmed order denying motion to compel arbitration, holding that there was not clear and unmistakable evidence in the parties’ contract of an intent to arbitrate arbitrability and that the appellant’s claims were not subject to arbitration.” So begins this article by Christina Cerutti and David Zaslowsky of Baker McKenzie, available on Lexology. The court’s decision exemplifies the importance to contracting parties of clearly addressing the issue of arbitrability.
In this article, available on JD Supra, Joseph Palmore and Adam Sorensen of Morrison & Foerster discuss the Supreme Court’s recent grant of certiorari. The court’s decision will have a meaningful impact on the timing of certain disputes emanating from agreements with arbitration provisions, as it will determine whether cases can proceed in a lower court pending appellate review of the lower court’s determination that the dispute is not arbitrable.
Rebecca Gobeil of Gordon Rees offers valuable insights to contract drafters in this article available at Lexology. Although Attorney Gobeil’s focus is on construction contracts, the thought process suggested is valuable in all commercial agreements. I particularly endorse her suggestion that a “great option” is to provide for mediation as a condition precedent to the institution of litigation or arbitration.
Questions about whether a non-party is to be brought within the ambit of an arbitration agreement is an ongoing issue when disputes arise. This article, by Joshua Barlow and Aakruti Vakharia of Haug Partners, available at JD Supra, provides an insightful discussion, including a review of relevant case law.
Jared Slater of Ervin Cohen & Jessup has this article, available at JD Supra, discussing the California Court of Appeal decision in Espinoza v. Superior Court, in which the court rejected an employer’s attempt to arbitrate a dispute based on the untimely submission of a filing fee. Although the lower court had found the delay to be the unintentional result of a clerical error, the appellate court held that a California statute setting forth payment requirements was mandatory and that “substantial compliance” would not suffice. Consequently, the employer was unable to avail itself of the arbitration provision in its agreement with the plaintiff employee.