“Ninth Circuit Underscores the Need for Careful Drafting of International Arbitration Clauses”

Frederick Acomb and Ahmad Chehab have this article in The National Law Review, discussing the Ninth Circuit’s decision in Setty v. Shrinivas Sugandhalaya LLP, holding that, in an international arbitration, “a non-signatory can in fact enforce an arbitration clause under the doctrine of equitable estoppel provided the claims in the case are “intertwined” with the contract containing the clause.” The authors note that the U.S. Supreme Court in last year’s decision in GE Energy Power Conversion France SAS v. Outokumpu Stainless USA, LLC, had left open this issue.

Second Circuit Holds Court, Not Arbitrator, Must Decide Whether A Dispute Is Arbitrable

In his ADR Highlights blog, Dave Reif provides an excellent discussion of the Second Circuit’s recent decision in DDK Hotel, LLC v. Williams-Sonoma, Inc., noting that “the holding is a big deal in the litigation of motions to compel arbitration.”

In DDK Hotel, the parties’ agreement incorporated by reference the American Arbitration Association Commercial Rules, including Rule 7(a)’s admonition that, with respect to jurisdiction, “[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.” However, as the Second Circuit held, while incorporation of the AAA rule provides evidence of the parties’ intention to delegate the question of arbitrability to the arbitrator, it is not determinative. According to the court, “context matters”: “Where…the arbitration agreement is narrower, vague, or contains exclusionary language suggesting that the parties consented to arbitrate only a limited subset of disputes, incorporation of rules that empower an arbitrator to decide issues of arbitrability, standing alone, does not suffice to establish the requisite clear and unmistakable inference of intent to arbitrate
arbitrability.”

In DDK Hotel, as Mr. Reif explains, “[t]he parties’ arbitration clause was not a ‘broad’ one covering all disputes, but, rather, applied only to ‘Disputed Matters,’ which the agreement defined as those ‘requiring Board or Member approval.’”  Thus, while “Disputed Matters” were subject to the AAA rules, “[i]f the parties’ dispute raises any other question, there is no referral of the merits to the AAA and none of its rules, including those invoking competence-competence, clearly apply.”

Mr. Reif suggests the Second Circuit decision may engender interest by the United States Supreme Court.  

“Arbitration Agreement with Conflicting Provision in Two Languages Saved by FAA Default Rule”

John Lewis of Baker Hostetler has this article, available in Lexology, discussing a California appellate court’s decision in Western Bagel Co. Inc. v. Superior Court of Los Angeles County and Jose Calderon, in which the trial court had rejected an employer’s motion to compel binding arbitration because the agreement contained a material inconsistency. Paragraph 1 of the agreement provided that “to the maximum extent permitted by law,” the parties “mutually agree to resolution through binding arbitration for all claims or causes of action…” Elsewhere, however, the agreement provided that, “if any provision of this Agreement…is found to be unenforceable….this finding will not affect the validity of the rest of the Agreement and the Agreement will be carried out to the fullest possible extent to ensure that the resolution of all disputes between the parties . . . are resolved via neutral non-binding arbitration.”

The trial court, applying the doctrine of contra proferentem to interpret the agreement against the drafter (i.e., the employer), determined that the ambiguity warranted a finding that the arbitration must be non-binding.

As the article explains, the appellate court reversed, “focus[ing] on the use of contra proferentem doctrine in an agreement where the FAA governs.” The appellate court, holding that “the FAA provides a ‘default rule’ that ‘ambiguities about the scope of arbitration must be resolved in favor of arbitration.’”

The takeaway from the case, according to the article, is that “[w]here an ambiguity exists as to the scope of coverage in an arbitration agreement subject to the FAA, it must be resolved in favor of binding arbitration.”

“Amazon Ends Use of Arbitration for Customer Disputes”

The New York Times reports in this article, which begins as follows:

“Amazon told customers this week that it would no longer require them to resolve their legal complaints involving the technology giant through arbitration, a significant retreat from a strategy that often helps companies avoid liability.”

The Times notes that Amazon’s email to its customers provided no explanation for the change, but discusses the strategy being utilized by consumer lawyers to “filing [arbitration] claims en masse,” thereby imposing substantial arbitration expenses upon the defendant companies.

“District Court says retailer not an intended third-party beneficiary of a credit card arbitration provision”

Lexology has published this article by Buckley, discussing the decision by a California federal court in Hayden v. The Retail Equation, Inc. refusing to find that a retailer was a third party beneficiary of a consumer’s agreement with its credit card company. Summarizing the decision, the article notes that “the contract did not clearly ‘express an intention to confer a separate and distinct benefit on [the retailer].’ Moreover, the court noted the contract at issue instructed the plaintiff to send any arbitration demand notices to the bank, adding that ‘[i]t seems unlikely that the parties would expect a demand for arbitration solely against the [retailer]—that does not involve [the bank]—to be sent to [the bank].’”

“Eleventh Circuit Judge Suggests Substantive Canon of Interpretation Favoring Arbitration Conflicts With Textualism”

Matthew Allen of Carlton Fields has this article, available in JD Supra, discussing the Eleventh Circuit’s recent decision in Calderon v. Sixt Rent A Car, LLC, in which the court held that a customer’s agreement with orbitz.com to arbitrate disputes related to “any services or products provided,” did not extend to the customer’s dispute with the provider of the rental car that was secured through the Orbitz website. As the court held, “the phase ‘any services or products provided’ is most naturally read to refer to services and products provided by Orbitz rather than those provided by anyone.”

Perhaps most interesting, Mr. Allen describes in the article the unusual step that the opinion’s author, Judge Kevin Newsom, took in issuing a concurrence to his own opinion, the purpose of which was to question the appropriateness of the United States Supreme Court’s decades long admonition that “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Reviewing this judicial canon, articulated by the Supreme Court in Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24-25 (1983), Judge Newsom observed that “So far as I can tell, the Moses H. Cone canon is just made up. We should rethink it.” Emanating from current judicial views advocating a more textual reading of statutes, Judge Newsom urges courts to bring the same rigor to its review of arbitration provisions under the Federal Arbitration Act: “Rather than employing the traditional tools of textual interpretation, courts are made to forgo meaningful interpretation in the name of, among other things, reducing court congestion.”

“Trial Court Order Enforces Condominium Declaration’s Pre-Suit Mediation and Arbitration Provisions”

Jonathan Ayers of Bilzin Sumberg has this article in JD Supra, discussing the Florida Circuit Court decision in Coach Homes II at Gran Paradiso Condominium Association, Inc. v. Lennar Homes, LLC , in which the court held that a condominium association’s claims against the developer for construction defects were subject to provisions in the condominium declaration requiring that such claims be mediated and arbitrated. As the article explains, the court’s order “recognizes that courts will not hesitate to enforce written mandatory pre-suit requirements—even when such requirements may be located in a recorded condominium declaration. Declarations operate like any other contract.”

“Automatic Stay Must Give Way: Bankruptcy Court Lets Non-Core Claims Be Decided Through Arbitration”

Shmuel Vasser of Dechert has this article in JD Supra, discussing the Maryland Bankruptcy Court’s decision in In Re McPherson, addressing the interplay between the competing judicial presumptions favoring enforcement of arbitration agreements and the centralization of claim determination in bankruptcy proceedings. As the article explains, the court resolved the conflict by holding that non-core matters subject to an arbitration agreement could be resolved outside the bankruptcy. Both the article and the underlying opinion provide helpful analysis for those facing such matters.

New Jersey Appellate Court Holds Online Consumer Arbitration Agreement To Be Unenforceable

In Wollen v. Gulf Stream Restoration and Cleaning, LLC, the New Jersey Appellate Court was required to determine whether a consumer, who selected a contractor through the HomeAdvisor service, could be compelled to arbitrate claims in accordance with the website’s terms and conditions. Drawing a distinction between websites that require one to click on to the terms and conditions in order to proceed and a “browsewrap” agreement that, while encouraging users to review the terms and conditions, does not require users to expressly manifest assent, the court held that HomeAdvisor’s arbitration requirement contained in the terms and conditions was not enforceable.

Asserting that its review was predicated upon a “fact-intensive inquiry,” the court held that, at least in this consumer context, a button adjacent to a statement that “by submitting this request, you are agreeing to our Terms & Conditions” which was “offset in blue font and acted as a hyperlink to a separate seven-page document,” was insufficient to constitute an agreement to arbitrate. According to the court, “[a]lthough the terms of the hyperlink, ‘Terms & Conditions’ were displayed in ‘blue font’ against a white background, those terms were not underlined, bolded, or enlarged,” and thus were not “clear and unmistakable.” Similarly, for the court, “the statement, ‘By submitting this request, you are agreeing to our Terms & Conditions,'” did not constitute an “indication that the user was required to read the terms and conditions before submitting her request for service professionals.”

In conclusion, the court noted as follows:

“Our decision should not be interpreted to suggest that a consumer contract cannot be formed by reference to a hyperlinked document, or that we are invalidating browsewrap agreements in toto. At the very least, however, the internet user should be directed in words – and not just by font of a different hue – to click on that hyperlink. In the alternative, the hyperlinked document, itself, should contain some semblance of an acknowledgment, or inability to submit a request unless the user scrolls through the terms and conditions at issue.”

Having Successfully Moved To Compel Arbitration, Nursing Home Operator’s Failure To Proceed Leads Court To Reverse Its Decision

In Laude v. SSC Greenfield Operating Company LLC, a Wisconsin federal court granted a nursing home operator’s motion to compel arbitration of claims brought by the estate of a deceased patient. Having secured the right to arbitrate, the operator engaged in a twenty-two month period of inaction described by the court as “delayed indecisiveness bordering on apathy.” The court therefore found that “[d]efendants have impliedly waived their rights to arbitrate by repeatedly snubbing Plaintiffs’ efforts to arbitrate the matter for well over a year.” Holding that “[d]efendants may not compel arbitration and then avoid it for over a year, leaving Plaintiffs without a remedy for their alleged injury,” the court restored the case to the docket.