The Great Arbitration Debate April 30, 2014

Transcription

1 The Great Arbitration Debate April 30, 2014

2 LEGAL & CONSTITUTIONAL ISSUES WITH ARBITRATION

3 Legal & Constitutional Issues With Arbitration Given the constitutional hurdles (i.e., the Seventh Amendment right to a jury trial in civil cases and the Tenth Amendment rights of States), why has the FAA been so impregnable?

4 Legal & Constitutional Issues With Arbitration In practice, do arbitration agreements really meet the knowing waiver requirement?

5 Legal & Constitutional Issues With Arbitration Is it too easy to waive our constitutional right to a jury trial?

6 Legal & Constitutional Issues With Arbitration The FAA places arbitration agreements on an equal footing with other contracts and requires courts to enforce them according to their terms. Rent-A-Center, W., Inc., v. Jackson, 130 S. Ct. 2772, 2776 (2010). Based on your experience, do you find that arbitration agreements are being treated on par with other contracts or given more of a presumption of vailidity than other contracts?

7 Legal & Constitutional Issues With Arbitration If the FAA is so revered, why does every new retaliation and whistleblower scheme carve out arbitration agreements? (e.g., SOX, Dodd-Frank, The Franken Amendment- withhold defense contracts from companies if they require employment arbitration agreements.)

8 Legal & Constitutional Issues With Arbitration Is it appropriate to require a non-signatory party to participate in arbitration? (Arbitration provisions in handbooks or credit card applications that do not have the employee/consumer sign and acknowledge the specific arbitration provision.) Does it matter whether the context is employment arbitration or commercial arbitration? Is there a difference?

9 IS ARBITRATION GOOD PUBLIC POLICY?

10 Is Arbitration Good Public Policy? Do arbitration panels reflect the diversity of our communities?

11 Is Arbitration Good Public Policy? Is the scope of what is deemed unconscionable been unfairly narrowed? Given the current state of the law, does anything go?

12 Is Arbitration Good Public Policy? Given the presence of unequal bargaining power in the employment context, should there be a presumption for or against arbitration?

13 Is Arbitration Good Public Policy? Class and collective actions are perceived as some to be powerful weapons for effecting change. Therefore, are class action waivers (often contained in arbitration agreements) good public policy?

14 THE BUSINESS CASE (FOR AND AGAINST) ARBITRATION

15 The Business Case (For And Against) Arbitration In your experience, is arbitration really faster, cheaper, and more effective for businesses?

16 The Business Case (For And Against) Arbitration Why have traditional labor-management relationships successfully employed arbitration for decades without significant controversy?

17 The Business Case (For And Against) Arbitration Does the arbitration process favor the employer?

18 The Business Case (For And Against) Arbitration Does the arbitration process keep verdicts lower for employees when employees prevail?

19 The Business Case (For And Against) Arbitration Why not make arbitration the law for settling all workplace disputes?

20 The Business Case (For And Against) Arbitration Recent developments in arbitration waivers in Class and Collective Actions. Is it fair that the employer can dictate whether an employer can prohibit a class or collective action waiver? If arbitration is beneficial for an individual claim, then why not for a collective or class action? Sauce for the goose is sauce for the gander?

21 The Supreme Court Has Spoken Arbitration Agreements Must Be Enforced As Written AT&T Mobility LLC v. Concepcion, 131 S.Ct (2011) CompuCredit Corp. v. Greenwood, 132 S.Ct. 665 (2012) Marmet Health Care Center, Inc. v. Brown, 132 S.Ct (2012) Nitro-Lift Technologies, LLC. V. Howard, 133 S.Ct. 500 (2012) 21

22 AT&T Mobility v. Concepcion The Federal Arbitration Act prohibits States from conditioning the enforceability of arbitration agreements on the availability of class-wide arbitration procedures. 22

23 As for the State Courts, the U.S. Supreme Court s Judicial Fuse is Getting Short States may not rely on their public policy to preclude enforcement of arbitration agreements covered (and therefore protected) by the FAA. Marmet Health Care Center, Inc. v. Brown, 132 S.Ct (2012) West Virginia Supreme Court: Based on state public policy, tort claims arising out of mistreatment of nursing home patients were not arbitrable. U.S. Supreme Court: When this Court has fulfilled its duty to interpret federal law, a state court may not contradict or fail to implement the rule so established. Nitro-Lift Technologies, LLC. V. Howard, 133 S.Ct. 500 (2012) Oklahoma Supreme Court: An arbitration clause in an illegal non-competition agreement was not enforceable. U.S. Supreme Court: Oklahoma disregards this Court s precedents on the FAA. OUCH!

24 Silent Agreements Class Arbitration Stolt-Nielsen S.A. v. Animalfeeds Intl. Corp., 130 S.Ct (2010) The inquiry is, did the parties agree to authorize class arbitration? Silent agreement does not allow for class arbitration. Under the FAA, a party may not be compelled to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so. An implicit agreement to authorize class-action arbitration, however, is not a term that the arbitrator may infer solely from the fact of the parties agreement to arbitrate. Fundamental differences between bilateral arbitration and class arbitration are too great to allow for such a presumption. Arbitration panel exceeded its authority under the arbitration contract by allowing class arbitration despite no contractual basis to do so. 24

25 Fifth Circuit overturns NLRB Attacks on Pre-Dispute Class Action Waivers Contained In Employment Arbitration Agreements D.R. Horton, 357 NLRB No. 184 (Jan. 3, 2012): Participation in class actions is a form of concerted protected activity. Mandatory pre-dispute agreements containing class action waivers violate Section 7 of the NLRA. D.R. Horton, Inc. v. NLRB (Dec. 2013) Effect of the Board s interpretation disfavored arbitration; requiring a class mechanism violated the FAA. Clarification on right to pursue claims with the NLRB was required.

26 Not All State Laws are Preempted Arbitration agreements cannot be singled out for harsher treatment than other contracts, BUT 2 of the FAA provides: state law defenses applicable to all contracts may be applied to arbitration agreements. So, generally applicable state laws (e.g. laws re: unconscionability) may be applied in deciding whether arbitration agreements are enforceable. The states, not the Supreme Court, create contract law. Do the states control the application of that law to arbitration contracts? State courts hostile to arbitration have seized on this, leading to decisions like...

27 Brewer v. Missouri Title Loans, Inc., 364 S.W.3d 486 (Mo. 2012), cert. denied Original Mo. Supreme Court Decision issued in 2010; MTL appealed in light of Concepcion. Concepcion permits state courts to apply state law defenses to the formation of the particular contract at issue. Applying traditional Missouri contract law court found unconscionability in the formation of the agreement and revoked the arbitration clause.

28 Brewer and Unconscionability in Contract Formation Entire agreement was non-negotiable; difficult to understand. Company had superior bargaining position. No consumer ever renegotiated the contract terms. Parties were to bear their own costs and company did not waive right to seek attorney's fees. Testimony from 3 lawyers: consumer unlikely to obtain counsel for individual claims. Company reserved right to use court system but required consumer to use Individual arbitration.

29 What Employers Can Do Review existing agreements in light of most current cases Draft defensively anticipate the antiarbitration arguments that might fly in your jurisdiction (both federal and state) Make agreements mutual each party must arbitrate its claims (but it s OK to allow parties to go to court for provisional relief) Agree to pay all arbitration costs and fees, at least to the extent required by law Make it a stand alone agreement that both parties sign

30 What Employers Can Do Do not overreach limiting available remedies can lead to unconscionability finding Include a class waiver. Consider allowing employees to opt out of arbitration Include an informal complaint resolution process Do not stack the deck rigid limits on discovery can be attacked allow arbitrator to order further discovery as needed Rule of thumb litigants get in arbitration what they get in court, except for juries and class actions

31 Questions and Answers

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