The Ninth Circuit has affirmed a lower court’s decision compelling arbitration of claims brought by the estate of Michael Jackson that a confidentiality agreement entered into as part of a 1992 feature retained vitality years letter when HBO aired a documentary that disclosed information regarding Jackson’s personal life.

Noting that the merits of the estate’s argument regarding the alleged breach of the confidentiality agreement remained to be determined, the appellate court held that the issue was one for the arbitrator, as the 1992 agreement contained a broad arbitration provision:

“HBO contends the agreement is expired, but ‘where … the agreement contains a broad arbitration clause covering all disputes concerning the meaning of the terms and provisions of the agreement …. [d]isputes over expiration or termination must be submitted to arbitration.’… We have reaffirmed this principle and clearly stated ‘a dispute over whether a contract has expired or has been terminated or repudiated …. is for the arbitrator if the breadth of the arbitration clause is not in dispute.'”

Teresa Santin of Brouse McDowell has this informative article in Lexology explaining under applicable law the ways to ensure an arbitration provision does (or does not) encompass disputes that arise prior to the date of the arbitration agreement.

A California District Court has provided an imprimatur to the American Arbitration Association to determine, in the absence of a contract directive, which of its rules apply to arbitration matters it administers. In Hagan v. Park Miller LLC individual investors brought an arbitration against their investment adviser pursuant to an agreement which provided for arbitration in accordance with AAA rules.

AAA determined its consumer rules, not its commercial rules, were applicable, a determination with practical impact since the consumer rules (in accordance with applicable California law) required the investment adviser to front all arbitration fees. Responding to the investment manager’s claim that the AAA should be directed to apply its commercial rules, the court held as follows:

“Park Miller’s argument that the Court must order the AAA to follow its commercial rules is meritless. The parties’ Agreement is silent as to whether AAA commercial or consumer rules apply in arbitration. But the Agreement unequivocally states that AAA rules apply… Those rules give the AAA the ‘initial authority’ to decide whether its consumer rules apply. If a party ‘disagrees with the AAA’s decision,’ the party can submit an ‘objection,’ as Park Miller did. But ‘the arbitrator shall have the authority to make the final decision on which AAA rules will apply.’

“Thus, it is for the AAA, not the Court, to decide whether the AAA consumer or commercial rules apply. And the AAA has decided to apply its consumer rules. Even if Park Miller is ight that the AAA erred in this decision, Park Miller breached its arbitration agreement by refusing to abide by the AAA’s decision. Neither the parties’ agreement nor any other authority cited by Park Miller empowers the Court to second-guess the AAA’s decision or otherwise short-circuit the arbitration process. Park Miller must submit to arbitration and abide by the AAA’s determinations regarding which AAA rules to apply.”

A Texas appeals court has reversed a trial court’s orders compelling post-arbitration discovery designed to obtain evidence regarding ostensible conflicts of the arbitrator. During the arbitration, a party objected to the arbitrator’s continued service on the ground that decades previously he attended law school and served on the law review with one of the opposing firm’s attorneys and that the arbitrator’s son played recreational basketball with another attorney involved in the matter. The American Arbitration Association, which was administering the arbitration, followed its protocols and determined that these matters did not constitute a disqualifying conflict.

After the arbitrator issued his award, the party raising the conflict moved to vacate and prevailed upon the trial court to authorize limited discovery. The appellate court reversed holding that the connections claimed as conflicting “are distant, trivial, and attenuated, and they are immaterial because they would not create in an objective observer a reasonable impression of the arbitrator’s partiality.”

David Reif shares the following cringeworthy arbitration morass in his “go to” blog:

“Judge Rosenthal refers to the proceedings surrounding Sullivan v. Feldman, 2020 U.S. Dist. LEXIS 227774 (S.D. Tex. Dec. 4, 2020) as “the Bleak House of arbitration.”  The case involves, by the judge’s count, twenty-one parties spread across six different arbitrations in front of six different arbitrators.  Unless you are engaged in the litigation or enjoy figuring out the difference between a second cousin three times removed and a third cousin twice removed, do not worry about the facts of the case. Its interest lies in two issues. First, is venue selection a question of procedure or arbitrability?  After citing cases from numerous Circuits and Districts, the court holds that the factual issues related to venue should be left to the arbitrator, at least where, as here, they raise an “unclear procedural question.”  However, he distinguishes cases where the party demanding arbitration or the arbitrators themselves have chosen “a location clearly foreclosed by the parties’ forum selection clause,” which situations may need judicial intervention.  Second, the opinion briefly addresses the issue raised in the age of COVID shutdowns and remote arbitrations – where is a virtual proceeding being “held.”  While the discussion here is dictum and cites to only two authorities, the potential issue reminds arbitrators holding virtual proceedings to designate a venue, as this may become relevant in determining where vacatur or confirmation hearings may be held and what court gets involved if judicial assistance is needed during the proceedings. Likewise, parties drafting arbitration clauses should consider inserting language providing that their designated venue controls, even if no one is literally in that location.”

In Byars v. Asbury Management Services, LLC, a Mississippi District Court denied a motion by a former employer defendant to compel arbitration of claims brought by a former employee. Even though the employee had executed an arbitration agreement tendered by her employer, the employer had failed to sign the agreement. As the court noted, “[t]he arbitration agreement at the heart of our case has ‘express language clearly indicat[ing] an intent for the parties to be bound to the arbitration agreement by signing.’”

According to the court, “[w]hile it may seem strange to not let Gray Daniels [the employer] enforce an arbitration agreement it wrote and presented to [the employee], the Court is simply honoring the words Gray Daniels chose– words that indicated Gray Daniels had to sign too. The result is that the arbitration agreement cannot be enforced.”

Litigation pending before a federal district court in Minnesota provides a next chapter in the response to consumer contracts that prevent class arbitrations. Those following these developments have seen in the past couple of years law firms filing numerous individual claims, each small in amount, which have served to impose upon the defendants substantial arbitration filing fee obligations on top of the need to defend.

CenturyLink’s efforts to resolve a class action matter involving 17 million class members has presented the most recent judicial development in this arena. The CenturyLink class resolution required it to address claims by 1000 consumers represented by a law firm that filed simultaneous, individual arbitration claims on their clients’ behalf.

CenturyLink responded by purporting to exercise a contractual right to terminate and revoke the arbitration contracts, claiming that the mass filing of individual arbitration claims constituted a waiver of the arbitration agreement’s prohibition against class actions. Disputing this, the consumers’ counsel filed a motion to compel on behalf of six of its clients, challenging CenturyLink’s attempt to abrogate the arbitration provision.

Siding with the consumers, the court ruled as follows:

“The Court holds that Movants did not materially breach the Arbitration Contract by breaching the class action waiver … and simultaneously filing a large number of individual demands for arbitration. [Counsel] attempted to leverage a mass settlement on behalf of all of its clients and refused to individually negotiate each claimant’s claim. However, [counsel] filed individual arbitration claims for each claimant. None of its claimants assert that they represent anyone else or seek recovery beyond the damages which they claim that they are individually owed. Moreover, there is no allegation that any claimant who has filed an arbitration claim waited too long to do so, so the fact that [counsel] “stockpiled” claims and then filed 1, 000 timely claims at one time does not to violate any provision of the Arbitration Contract. CenturyLink wrote the Arbitration Contract; if its system is overwhelmed by 1, 000 individual claims being filed simultaneously, it can alter its system or the filing requirements in the Arbitration Contract.”

CenturyLink also asserted that the movants failed to adequately comply with a requirement of the arbitration agreement providing that “[b]efore commencing arbitration you must first present any claim or dispute to CenturyLink in writing to allow CenturyLink the opportunity to resolve the dispute. If the claim or dispute is not resolved within 60 days, you may request arbitration.” The court held that issues surrounding the fulfillment of this obligation are for the arbitrators to decide.

The court’s imprimatur of the mass filing of individual arbitration claims likely will lead those with arbitration provisions precluding class actions to rethink and restructure their contractual arbitration protocols.

A California appellate court has refused to enforce a contractual arbitration provision “because the clause is as inconspicuous as a frog in a thicket of water lilies.” As the court explained in Domestic Linen Supply Company, Inc. v. LJT Flowers, Inc.,

“Here the trial court could reasonably determine that there was no agreement to arbitrate. The form of the rental agreement is deceptive. The arbitration clause is not above the purchaser’s signature, where one would expect to find it. Instead, it is after the purchaser’s signature, on the back of the agreement. The back is filled from top to bottom with closely spaced lines of small type. The arbitration clause is number 15 of 21 paragraphs. There is nothing to distinguish paragraph 15 from any other paragraph. There is no heading, boldface, italics, or capitalization that would draw attention to it. It is simply hidden in a thicket of fine print. The warning that the garments Domestic provides are not fire-resistant is in capitalized, boldface type, but not the provision waiving the purchaser’s constitutional right to a jury trial.

“Moreover, Domestic’s sales representatives are not trained to bring attention to the arbitration clause. Instead, they are advised to have the purchaser read the personal guaranty while they fill out the contract, thus diverting the purchaser’s attention from the back of the contract. There is no mention of arbitration in the personal guaranty.

“If the contract is not intentionally deceptive, it has that effect. There was simply no agreement to arbitrate.”

Adding insult to injury, the party seeking to enforce the arbitration provision was required to pay the attorneys’ fees of the prevailing party.

In Ali v. Daylight Transport, LLC, a California appellate court determined that a proposed class action lawsuit brought by truckers claiming that they were misclassified as independent contractors and thus denied certain employment benefits was not subject to arbitration, for the reason that the arbitration agreement was unconscionable and unenforceable. For interested practitioners, the opinion provides a detailed analysis of the issues surrounding claims of procedural and substantive unconscionability of arbitration agreements.

In this article, published in Lexology, Leah Mintz of Duane Morris tees up this week’s United States Supreme Court argument in Henry Schein, Inc. v. Archer & White Sales, Inc. redux, as the Court continues to provide direction on whether arbitrability questions are to be determined by courts or arbitrators.