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.
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.
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.
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.”
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.”
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.”
Under the Federal Arbitration Act, when does a party’s delay in seeking arbitration constitute a waiver of its contractual right? There is a split in the federal circuits, with a majority holding that prejudice must be demonstrated, while a minority holding that prejudice is only one factor to consider in determining whether a party has waived its right to arbitrate. The Supreme Court will address this split, having granted certiorari in Morgan v. Sundance, Inc.
Although I have long since forgotten the genesis, I learned many years ago that the safest way to ensure an arbitration provision would capture the full scope of contractual matters between the parties was to use the incantation “all disputes arising out of or relating to the agreement.” Dave Reif’s most recent discussion of arbitration and mediation decisions confirms the importance of a belt and suspenders approach. He discusses Aryze, LLC v. Sweig, in which the U.S. District Court in Massachusetts was presented with a contractual arbitration provision that only went halfway, as it provided that “[a]ny disputes between the parties arising from this Agreement will be settled through binding arbitration…” (emphasis added). Dave’s post describes how the court “parses in detail each count of the parties’ arbitration claim,” mandating arbitration of claims that, in the court’s words, “undoubtedly involve construction of the Agreements’ provisions,” however rejecting those that do not since the arbitration “provision does not mean that any claim brought by Defendants … related to their business relationship must be arbitrated.”
The takeaway for contract drafters seeking to provide for arbitration of the widest universe of contractual matters: don’t be stingy with the contract language; belt and suspenders works where one alone may not.
This Lexology article, by John Lewis at Baker Hostetler, nicely encapsulates the issues before the U.S. Supreme Court in the recently argued Badgerow v. Walters case. As the Court grapples with the language and intent of the Federal Arbitration Act, in particular regarding the subject matter jurisdiction of the federal courts to confirm or vacate arbitration awards, the practical ramifications involve the deference paid under the FAA to the sanctity of an arbitrator’s award, as compared to a more activist review of the merits that certain state statutes allow their courts to exercise.
Adam L. Sorensen and Lena H. Hughes of Morrison Foerster have this article, available in Lexology, discussing the Ninth Circuit’s recent decision in Dario Martinez-Gonzales v. Elkhorn Packing Co. LLC. Summarizing the court’s decision–which reversed the lower court for the asserted reason that “we are firmly convinced the district court overlooked key facts”–the author’s explain that the Ninth Circuit held “that a farm laborer who was directed to sign an arbitration agreement in a hotel parking lot, after traveling to the U.S., without an opportunity to read the agreement or consult an attorney, was not subjected to economic duress or undue influence under California law.” The panel’s 2-1 vote may receive additional review.