Matthew Iverson of Nelson, Mullins has this post, available at Lexology, describing the competing desires to seek vacatur of an unfavorable arbitration award and maintaining the confidentiality of the result. He discusses the Second Circuit’s decision in Stafford v. International Business Machines Corp, where the court held that sealing the award was appropriate when the prevailing party sought to make it public through the confirmation process in order to utilize the award in other litigation matters.

This article, by Frank Shuster at Constangy, Brooks, Smith & Prophete, LLP, and available at JD Supra, provides solid mediation reminders to attorneys. My personal favorite is “Rule No. 3: Declare your victory when you see it,” where Attorney Shuster advises:

“Once your defined victory has been presented to you by the mediator, take it. Don’t waver. Don’t overreach based on the transient events of the day…If you have defined your victory and can see it in front of you, hesitation or delay could cause it to slip away.“

James F. Bogan III of Kilpatrick Townsend has authored this article, available on Lexology, discussing the recent federal court decision in Montoya v. King.Com Limited. The court held that the question of arbitrability–where there was a conflict between general contractual terms of use, and those specifically applicable to a “Candy Crush All Stars” tournament–was for the arbitrator to determine. The larger takeaway for contract drafters, however, is the importance of ensuring consistency among multiple agreements: if a party decides in one agreement to provide for arbitration, it should take care that related documents do not conflict.

Those who include arbitration provisions in commercial contracts follow one of two paths. In most instances, the parties agree to arbitrate in accordance with the rules of a leading arbitration provider such as the American Arbitration Association. Providers such as AAA have a developed, robust set of rules that are continually reviewed and updated to reflect material legal decisions and evolving thoughts regarding the appropriate guidelines that should govern an arbitration.

In other cases, parties craft arbitration rules the parties believe are most appropriate for their contractual relationship. Sometimes they start from scratch, but more often the parties begin by incorporating the rules of an arbitration provider. They then supplement the provider’s rules with specifics that the parties desire to make part of their agreement. Frequent topics include the size of the arbitration panel (1 or 3 arbitrators), the experience and qualifications of those who will be deemed to be satisfactory arbitrators, and the scope and nature of discovery that will be permitted in the arbitration. Recognizing that parties may want to tailor arbitration provisions to address particular contractual circumstances, AAA makes available a ClauseBuilder® Tool that contracting parties can use to assist them in drafting an arbitration agreement.[1]

One topic not typically addressed by either an arbitration provider’s rules or the parties’ contract embellishments is the statute of limitations. Providers such as AAA do not address limitations periods presumably because of a desire not to intrude upon substantive law established by state or federal courts and legislatures. As for the attorneys drafting arbitration agreements, I suspect they typically do not address statutes of limitation because they are unaware there is an issue requiring attention.

But there is.

Picture the following:

Your client, George Workerbee, seeks to bring a claim against his longtime software development partner, John Entrepreneur. George informs you that seven years ago John misappropriated a corporate opportunity by bankrolling his daughter-in-law in the development of an artificial intelligence protocol. At the time, AI’s commercial viability was speculative, but now John’s stake in the AI protocol is worth millions, and George wants his share.

You are justifiably skeptical, wondering why George sat on his hands for years. Clearly, this claim will be met with a defense that it is barred by the statute of limitations.

But then George hands you the parties’ ten year old partnership agreement, and you notice that it contains an arbitration provision.

Is George out of luck, or not?

Courts in a number of states have held that statutes of limitations do not apply to arbitration. These courts have deemed the language of such statutes— referencing “civil actions”— to be limited to judicial proceedings, i.e. not arbitration.

A recent decision from Maryland drives home the point. As the court explained in Park Plus, Inc. v. Palisades of Towson, LLC, 478 Md. 35 (2022), “[w]hen parties agree to arbitrate a dispute, whether they realize it or not, they are also agreeing to curtail the role that courts may play in resolving their dispute.” Thus, for the Maryland court, the issue of timeliness was one of contract; if the parties did not contractually agree to limit the time in which an arbitration claim could be brought, the statute of limitations—which applied only to judicial actions—would not serve to preclude the claim.

Other states, such as New York, have attempted to address the issue by statute. NY CPLR §7502(b) empowers a party to run to court to challenge an untimely claim brought in arbitration. But suppose an attorney is unaware of that statutory right and proceeds to file an answer to the arbitration demand? While §7502(b) still permits the party to assert the untimeliness of the claim in arbitration, the law says it is up to the arbitrators “in their sole discretion [to] apply or not apply the bar.” Wow…talk about abdicating to an arbitrator the right to invoke his or her sense of equity to decide the substantive claims of parties.

The takeaways are obvious and simple:

First, determine the legal landscape in the states where you practice. What do the courts and legislature say about statutes of limitation and arbitration?

Second, add the statute of limitations issue to the checklist of provisions for potential inclusion in arbitration contracts. If the parties (or at least your client) contemplate stale claims being subject to rejection for untimeliness, include language providing that an arbitration demand must be asserted before the expiration of the statute of limitations applicable to such a claim.

[1] https://www.clausebuilder.org/

Attorneys practicing in the Second Circuit take note. Allison Frankel of Reuters has authored this detailed and interesting analysis of United States District Judge Jesse Furman’s recent decision holding that a protective order entered in an arbitration cannot trump a grand jury subpoena. This decision, appearing to be one of first impression, distinguishes arbitral protective orders from those entered in civil litigation. As the article notes, longstanding Second Circuit authority (unlike that of other circuits) shields confidential civil discovery from grand jury subpoenas. Judge Furman’s decision notes that “[a]rbitrations do not possess the same stature.”

Attorney Joanne Deschenaux has authored this article, available at SHRM.org, discussing the California Court of Appeals decision in Hasty v. American Automobile Association of Northern California, Nevada & Utah.

As the article explains, the appellate court deemed an arbitration agreement between the defendant association and an employed insurance sales agent to be both procedurally and substantively unconscionable, and thus unenforceable. Summarizing the opinion, the article notes that:

“The arbitration agreement consisted of two letter-size pages, consisting of seven single-spaced paragraphs in a small font size. There was no mention of an arbitration agreement during the employee’s interview or when she accepted the verbal employment offer. She received an employment offer by email, which contained links to various documents that she was to read and sign. At the time she received the offer, she did not own a personal computer or tablet and relied exclusively on her smartphone for internet access. Although the written employment offer indicated the employee would sign an arbitration agreement on the first day of her employment, she did not physically or electronically sign an arbitration agreement on the first day.“

The case should serve as a reminder for employers–and employers’ attorneys–that inclusion of an arbitration provision may be insufficient. Care also should be taken as to the manner in which the provision is presented, including font size, prominence in the document, and the circumstances in which it is communicated to the employee.

Companies seeking to avoid defending class actions sometimes include in contractual terms and conditions provisions requiring consumers claiming aggrievement to arbitrate their claims in individual proceedings. Attorneys representing consumers have responded by asserting mass claims–sometimes numbering in the thousands–which require the companies to pay exceedingly large fees to arbitration service providers to have the claims administered. The companies, unhappy with the predicament in which they have found themselves, sometimes resort to the courts, which largely have been unsympathetic, finding that the companies brought the problem on themselves by contractually requiring consumers to forego class action litigation in favor of individual arbitrations.

More recently, arbitration service providers, including the American Arbitration Association, have begun to address the mass arbitration phenomenon by adopting and/or amending their rules regarding administrative fees.

This article, by Stefan Mentzer, W. Kyle Tayman, Scott Weingaertner and Matthew Wisnieff at Goodwin Proctor, available at JD Supra, reviews the recent changes to rules and fee schedules adopted by AAA, including an affirmation requirement intended to ensure that the parties are appropriately invoking the new rules and schedules.

Retired judge, John Moore, who recently joined the ADR group at Pullman Comley offers great reminders for mediators–which attorneys also will benefit from reviewing–in this article available at JD Supra.

Thanks to Dave Reif for inviting and encouraging me to participate in the sharing of ideas regarding ADR issues that hopefully are timely and of interest. Here’s a discussion about how the Supreme Court may practically impact the timing and orderly pursuit of arbitrations.