Class action arbitration case hits US Supreme Court

Once again the US Supreme Court will wade into the contentious arena of class action arbitrations. In Stolt-Nielsen S.A. v. AnimalFeeds, 559 U.S. 662 (2010) [Decision] the Court held (5-3) that "a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so." [Emphasis in original.] The Court overturned an arbitration award that had allowed arbitration to proceed on a class basis. But Stolt-Nielsen was a pretty easy case because the parties stipulated that there was no agreement on the question of class arbitration.

On April 30 the US Supreme Court granted certiorari in Lamps Plus Inc. v. Varela (US S Ct cert granted 04/30/2018) [Briefs]. The official issue is: "Whether the Federal Arbitration Act forecloses a state-law interpretation of an arbitration agreement that would authorize class arbitration based solely on general language commonly used in arbitration agreements."

Varela was an employee who brought a class action suit claiming his employer Lamps Plus released his personal information in response to a phishing scam. Lamps Plus moved to compel bilateral arbitration pursuant to an arbitration agreement the parties had signed. The district court found that the agreement was a contract of adhesion and ambiguous as to class arbitration, construed the ambiguity against the drafter Lamps Plus, and compelled class-wide arbitration. The 9th Circuit affirmed (2-1) in an unpublished opinion. Varela v. Lamps Plus (08/03/2017) [PDF].

The 9th Circuit distinguished Stolt-Nielsen by saying that the lack of any express reference to class arbitration is "not the 'silence' contemplated in Stolt-Nielsen." The court then applied state law to interpret the agreement, found an ambiguity, and resolved the ambiguity against Lamps Plus. The court actually used a lot of the language in the arbitration agreement (which Lamps Plus characterizes as "general language commonly used in arbitration agreements"). For example, the 9th Circuit pointed out that "The Agreement then specifies that arbitrable claims are those that 'would have been available to the parties by law,' which obviously include claims as part of a class proceeding."

Judge Fernandez dissented in two sentences: "I respectfully dissent because, as I see it, the Agreement was not ambiguous. We should not allow Varela to enlist us in this palpable evasion of Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 684–85, 130 S. Ct. 1758, 1775, 176 L. Ed. 2d 605 (2010)."

Expect this case to be set for oral argument in the Fall of 2018.


Arbitration in the gig economy

Professor Charlotte Garden [Bio] at Seattle University School of Law is no fan of pre-dispute arbitration agreements. She has published an article in 2017 University of Chicago Legal Forum 205 (2018) entitled Disrupting Work Law: Arbitration in the Gig Economy. You can download the article [HERE].

This is the abstract:

It is presently in style to speculate about the disruptive potential of the “gig economy.” Will enterprises like Uber and Lyft change the way we get around, undoing taxi monopolies in the process? And what happens when tens of thousands of workers find work by logging onto a platform? Do the enterprises become the employers of some or all of these workers, or — as the enterprises themselves generally assert — should we regard these workers as newly minted micro-entrepreneurs?

That last question has emerged as a major unresolved issue with enormous importance to gig economy workers. Yet, there exists a major impediment to resolving it: the ubiquity with which gig economy companies require or encourage their workforces to resolve their disputes in individual arbitration proceedings. As this article will discuss, the effects of individual arbitration clauses (IACs) in the gig economy are significant. First, they make it unlikely that large swaths of gig economy workers will, as a practical matter, be able to resolve their employment status in any forum. Second, they make it more likely that — to the extent those questions are resolved at all — they will be resolved in arbitral proceedings that result in decisions that are non-precedential, secret, and applicable to only one worker at a time. Third, they reduce the costs of misclassifying workers — or at least they lead enterprises to believe they have reduced the costs of misclassification — by reducing the deterrent effect that the prospect of aggregate litigation can serve.

This article makes three contributions: first, it systematically reviews a group of IACs in gig economy worker agreements, discussing their similarities and differences; second, it offers a detailed look at how litigants and courts have responded to IACs in the gig economy so far, and discusses some consequences of IACs when they become ubiquitous in a segment of the economy; and third, it discusses possible ways to limit the effects of IACs in the work law context despite the Federal Arbitration Act (FAA), including responses at the agency, state, and private individual or organization levels.


Opening Statement - Arbitration Boot Camp

Here is a video with tips on making an opening statement at your arbitration hearing, including starting with a BANG, getting in the arbitrator's head, and telling your story.

All part of the "Arbitration Boot Camp" series [collected here], which also includes:


Who decides arbitrability question? US Supreme Court will decide

The US Supreme Court has granted certiorari in  New Prime Inc. v. Oliveira (US S Ct cert granted 02/26/2018) [Briefs]. This case will resolve an important question that arises under many arbitration agreements – whether it is for the arbitrator or for the court to decide the threshold question of whether the case will go to arbitration. It's pretty clear that - when one is applying the Federal Arbitration Act, and the arbitration agreement delegates arbitrablility to an arbitrator - then it's all for the arbitrator to decide. But in this case there is an issue as to whether the FAA applies in the first place. So we have a bit of a cat chasing its tail.

Dominic Oliveira was a truck driver who sued claiming violations of federal and state minimum wage statutes. New Prime – citing an arbitration agreement that Oliveira had signed – moved to compel arbitration. Oliveira's response was that (1) his contract was not covered by the Federal Arbitration Act, and (2) the trial court (rather than an arbitrator) should resolve that threshold question. The district court sided with Oliveira, and so did the 1st Circuit. Oliveira v. New Prime, Inc. (1st Cir 05/12/2017) [PDF].

Arbitration

The contract between Oliveira and New Prime provided for arbitration of "any disputes arising out of or relating to the relationship created by the agreement, and any disputes as to the rights and obligations of the parties, including the arbitrability of disputes between the parties."

New Prime's position is that the arbitration agreement itself delegates the question of the FAA's application to the arbitrator, not to the court. However, the 1st Circuit decided that New Prime's argument "'puts the cart before the horse' and makes no sense." Instead, the issue is a "'distinct inquiry' of whether the district court has the authority to act under the FAA — specifically, the authority under § 4 to compel the parties to engage in arbitration." This, of course, would be a judicial question and not a question for the arbitrator.

FAA exemption

The Federal Arbitration Act does not apply to "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." So, if the driver has a "contract of employment," then the FAA does not apply to that contract. And if that contract has an arbitration agreement, then the FAA does not require that it be enforced.

Using FAA-era dictionaries [circa 1925], the 1st Circuit said that "contracts of employment" contained in FAA § 1 means simply "agreements to do work." The court said:

"[W]e hold that a transportation-worker agreement that establishes or purports to establish an independent-contractor relationship is a contract of employment under § 1. We emphasize that our holding is limited: It applies only when arbitration is sought under the FAA, and it has no impact on other avenues (such as state law) by which a party may compel arbitration."

Here's a video I did that discusses the independent contractor question:


Cross Examination – Arbitration Boot Camp

 

Here's the latest video in the Arbitration Boot Camp series. It's 4:07 minutes.

I'm discussing two separate kinds of cross examination, and making six suggestions.

The Arbitration Boot Camp series is collected at www.RossRunkel.com/ABC.

Video: 4:07 minutes. Cross Examination.
Two separate kinds of cross examination, and six suggestions.