Benjamin Stearns of Carlton Fields has this article in JD Supra, discussing the Ninth Circuit’s decision in Walsh v. Arizona Logistics, Inc. As the article explains, “[t]he Department of Labor brought an enforcement action against Arizona Logistics Inc. for alleged violations of the FLSA’s minimum wage, overtime, record-keeping, and anti-retaliation requirements resulting from the alleged misclassification of delivery drivers as independent contractors rather than employees. Arizona Logistics moved to compel arbitration under its agreements with the drivers…” The Ninth Circuit refused to compel arbitration, holding that the Department of Labor was “master of [his] own case,” and not subject to the arbitration requirement.

Lexology has published this article by Alexandria Murphy, Brian Rostocki and Benjamin Chapple of Reed Smith, discussing the decision in Diamond Materials, LLC v. Tutor Perini Corp., C.A. No. N20C-05-162-MAA, mem. op. (Del. Super. Ct. Apr. 30, 2021), in which the court enforced a contract provision that entitled “one party to the contract unilateral authority to determine whether certain claims fall within the purview of an arbitration clause,” thereby “preclud[ing] the court from determining the issue.” As the court explained, “[w]hile [plaintiff] might not like what the arbitration provision in the [Subcontracting Agreements] affords to [defendant], it cannot ignore it. ‘Delaware is a freedom of contract state, with a policy of enforcing the voluntary agreements of sophisticated parties in commerce.'”

Yvonne Arvanitis Fossati, Hazel, Poei and Scott Jang of Jackson Lewis have this article in The National Law Review, discussing the Ninth Circuit’s recent decision in Franklin v. Community Regional Medical Center, in which the court held that a staffing agency’s employee’s claims against the hospital to which she was assigned to work were subject to arbitration, even though she had no arbitration agreement with the hospital. As the article explains, the court held that the arbitration agreement between the employee and the staffing agency was sufficient to require arbitration with the hospital, and “that the doctrine of equitable estoppel prevents a party from ‘playing fast and loose with its commitment to arbitrate.'”

A California federal court has weighed in on the question of whether discovery should be permitted while determination of a motion to compel arbitration is pending. In Nguyen v. BMW of North America, LLC, the court, noting that “the Federal Rules of Civil Procedure do not automatically stay discovery when a potentially dispositive motion is pending,” held that, under the facts and circumstances before it, the stay was warranted. A “preliminary peek” at the motion to compel revealed to the court “that they are potentially dispositive of the entire case,” and “any stay is likely to be brief,” given that the motion to compel was fully briefed and under submission.

Conversely, according to the court, “requiring Defendant to engage in discovery that may not be permitted or accepted later if the matter is sent to arbitration would be prejudicial to Defendant. A stay also will allow the Court to avoid any potentially unnecessary judicial expenditures such as discovery disputes that may or may not be relevant if the matter is remanded or sent to arbitration.”

When I read the Fifth Circuit’s recent decision in International Energy Ventures Management, L.L.C. v. United Energy Group, Limited, I thought about a news item years ago when an unlicensed individual was discovered working as a litigator in a law firm. Despite the absence of credentials, and the wrongfulness of his actions, he was considered to have been an effective advocate.

As noted by the Ninth Circuit, International Energy paints a story of a dispute that, over seven years, “has bounced back and forth between three courts and two arbitrations.” In the course of this tortured journey, two separate arbitrators determined that, by virtue of its litigation conduct, the plaintiff had waived its right to arbitrate. The Ninth Circuit, however, ruled that the arbitrators had no business determining the waiver question, as that question was one for the courts to address. Thus, the arbitrators were deemed to have exceeded their powers in violation of the Federal Arbitration Act.

However, in reviewing the substantive merits of the waiver issue, the Ninth Circuit agreed that the arbitrators got it right. Even moreso, in a decision serving to endorse the arbitrators’ analysis, the Ninth Circuit offered an extensive disagreement with the lower court which held that no waiver had occurred.

As many know, a number of corporations determined that the inclusion in their consumer agreement of a provision requiring arbitration on an individual and not class basis would substantially reduce the likelihood that they would defend claims, as the economics seemingly made the prosecution of claims cost-prohibitive given the potential recovery.

However, as this article in Ars Technica explains, “[t]ech-savvy lawyers have begun using digital marketing tools to recruit and sign up thousands—even tens of thousands—of customers to participate in arbitration.” The resulting arbitration fees to the companies, totaling nearly $10 million in one example described by Ars Technica, have caused the entities to rethink the strategy.

Now, according to the article, Amazon, facing 75,000 arbitration demands claiming privacy violations by its Echo devices, has changed its terms of use, replacing the previously mandated arbitration requirement with a provision contemplating a traditional lawsuit.

Eugene Volokh, in his Volokh Conspiracy blog, has flagged this decision in Dentons US LLP v. Zhang, in which the Southern District of New York denied a law firm’s request for leave to file under seal a petition to confirm an emergency arbitration award. Notwithstanding that “the parties agreed to file under seal any papers associated with an arbitration proceeding,” the court held that “while enforcement of contracts is undeniably an important role for a court, it does not constitute a ‘higher value’ that would outweigh the presumption of public access to judicial documents.”

Adam Hunt, Angela Kleine and Neil Tyler of Morrison & Foerster have this article, available at JD Supra, discussing two Ninth Circuit decisions (Stafford v. Rite Aid Corp. and Franklin v. Community Regional Medical Center), both issued on May 21, and reaching different results regarding the arbitrability of disputes based on equitable estoppel. As the authors explain, the divergent rulings confirm that “the way a company structures its business and contractual relationships can subject even the most carefully drafted arbitration provisions to an uncertain future,” and “demonstrate the fact-specific analysis involved” in seeking to compel arbitration when one of the litigants is not a party to the arbitration agreement.

In Aerotek, Inc. v. Boyd, the Supreme Court of Texas granted an employer’s application to compel arbitration of claims brought by four terminated employees based upon electronic records ostensibly demonstrating the parties’ agreements to arbitrate. In reaching this conclusion, the Supreme Court reversed the trial court and a divided appeals court which, relying on affidavits signed by the employees, found that the employees had not electronically signed the agreements upon which the employer relied.

In reversing, the Supreme Court accepted the company’s factual evidence about its onboarding, electronic contracting process to conclude agreements had been reached, notwithstanding the employees’ sworn denials.

In dissent, one justice took issue with the majority’s decision, asserting that the Supreme Court was improperly intruding on the trial court’s province to find the facts. As he noted, “[t]o put things bluntly, someone here testified under oath to facts that cannot be true. Either the employees were wrong (or lying) when they denied that they ever saw or signed the arbitration agreement, or Aerotek’s program manager was wrong (or lying) when she described how the electronic-onboarding process works.”

A Texas federal court in Nii-Moi v. McAllenHospitalist Group rejected a physician employee’s argument that his former employer waived a condition precedent to arbitration by failing to participate in a mediation proceeding mandated by the employment agreement. According to the court, the issue of waiver was for the arbitrator, not the court to decide. The court’s decision was perhaps preliminarily influenced by its observation that, “from the limited record,” the physician waived the mediation condition precedent by filing the lawsuit without first invoking the mediation process.