Justia Arbitration & Mediation Opinion Summaries

Articles Posted in US Supreme Court
by
The case involves the interpretation of Section 3 of the Federal Arbitration Act (FAA), which outlines procedures for enforcing arbitration agreements in federal court. The petitioners, current and former delivery drivers for an on-demand delivery service operated by the respondents, filed a lawsuit alleging violations of federal and state employment laws. The respondents moved to compel arbitration and dismiss the suit. The petitioners agreed that their claims were arbitrable but argued that Section 3 of the FAA required the District Court to stay the action pending arbitration rather than dismissing it entirely. The District Court issued an order compelling arbitration and dismissed the case without prejudice. The Ninth Circuit affirmed the decision.The Supreme Court of the United States reversed the Ninth Circuit's decision. The Supreme Court held that when a district court finds that a lawsuit involves an arbitrable dispute and a party has requested a stay of the court proceeding pending arbitration, Section 3 of the FAA compels the court to issue a stay, and the court lacks discretion to dismiss the suit. The Court reasoned that the statutory text, structure, and purpose all point to this conclusion. The Court further explained that the FAA's structure and purpose confirm that a stay is required. The Court concluded that staying rather than dismissing a suit comports with the supervisory role that the FAA envisions for the courts. The case was remanded for further proceedings consistent with the Supreme Court's opinion. View "Smith v. Spizzirri" on Justia Law

by
Neal Bissonnette and Tyler Wojnarowski, distributors for Flowers Foods, Inc., a major producer and marketer of baked goods, sued the company for alleged violations of state and federal wage laws. Flowers Foods moved to compel arbitration under the Federal Arbitration Act (FAA). The key issue was whether the exemption from coverage under the FAA for any "class of workers engaged in foreign or interstate commerce" is limited to workers whose employers are in the transportation industry.The District Court dismissed the case in favor of arbitration, stating that for Bissonnette and Wojnarowski to be exempt from the FAA, they must be "transportation workers." The court concluded that their broader scope of responsibility under the Distributor Agreements belied the claim that they were primarily truck drivers. The Second Circuit affirmed the District Court's decision on the alternative ground that Bissonnette and Wojnarowski "are in the bakery industry." According to the Second Circuit, §1 of the FAA exempts only "workers involved in the transportation industries."The Supreme Court of the United States disagreed with the Second Circuit's interpretation. The Court held that a transportation worker does not need to work for a company in the transportation industry to be exempt under §1 of the FAA. The Court emphasized that the relevant question is what the worker does for the employer, not what the employer does generally. The Court vacated the judgment of the Second Circuit and remanded the case for further proceedings consistent with its opinion. The Court did not express an opinion on any alternative grounds in favor of arbitration raised below. View "Bissonnette v. LePage Bakeries Park St., LLC" on Justia Law

by
Bielski filed a putative class action, alleging that Coinbase, an online currency platform, failed to replace funds fraudulently taken from its users’ accounts. Coinbase’s User Agreement provides for binding arbitration. The district court denied Coinbase’s motion to compel arbitration. Coinbase then filed an interlocutory appeal under the Federal Arbitration Act, 9 U.S.C. 16(a), and moved the district court to stay its proceedings. The district court and Ninth Circuit denied stay motions.The Supreme Court reversed. A district court must stay its proceedings while an interlocutory appeal on the question of arbitrability is ongoing. Section 16(a) does not say whether district court proceedings must be stayed pending resolution of an interlocutory appeal but an appeal, including an interlocutory appeal, “divests the district court of its control over those aspects of the case involved in the appeal.” Because the question on appeal is whether the case belongs in arbitration or in court, the entire case is essentially “involved in the appeal,” and precedent requires that the court stay its proceedings while the interlocutory appeal on arbitrability is ongoing. If the court could move forward with proceedings while the appeal was ongoing, many of the asserted benefits of arbitration (efficiency, less expense, less intrusive discovery) would be irretrievably lost. Absent a stay, parties could be forced to settle to avoid discovery and trial that they contracted to avoid through arbitration. When Congress wants to authorize an interlocutory appeal, but not to automatically stay district court proceedings pending that appeal, Congress typically says so. View "Coinbase, Inc. v. Bielski" on Justia Law

by
California’s Labor Code Private Attorneys General Act (PAGA) authorizes any “aggrieved employee” to initiate an action against a former employer on behalf of himself and other current or former employees to obtain civil penalties that previously could have been recovered only by California’s Labor and Workforce Development Agency. California precedent holds that a PAGA suit is a “representative action” in which the plaintiff sues as an “agent or proxy” of the state. Moriana filed a PAGA action against her former employer, Viking, alleging multiple violations with respect to herself and other employees. Moriana’s employment contract contained a mandatory arbitration agreement with a “Class Action Waiver,” providing that the parties could not bring any class, collective, or representative action under PAGA, and a severability clause. California courts denied Viking’s motion to compel arbitration.The Supreme Court reversed. The Federal Arbitration Act, 9 U.S.C. 1 (FAA), preempts California precedent that precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate. Viking was entitled to compel arbitration of Moriana’s individual claim. Moriana would then lack standing to maintain her non-individual claims in court.A PAGA action asserting multiple violations under California’s Labor Code affecting a range of different employees does not constitute “a single claim.” Nothing in the FAA establishes a categorical rule mandating enforcement of waivers of standing to assert claims on behalf of absent principals. PAGA’s built-in mechanism of claim joinder is in conflict with the FAA. State law cannot condition the enforceability of an agreement to arbitrate on the availability of a procedural mechanism that would permit a party to expand the scope of the anticipated arbitration by introducing claims that the parties did not jointly agree to arbitrate. View "Viking River Cruises, Inc. v. Moriana" on Justia Law

by
Parties involved in arbitration proceedings abroad sought discovery in the U.S. under 28 U.S.C. 1782(a), which authorizes a district court to order the production of evidence “for use in a proceeding in a foreign or international tribunal.” One case, a contract dispute between private parties, was proceeding under the Arbitration Rules of the German Institution of Arbitration and involves a private dispute-resolution organization. The second case is proceeding against Lithuania before an ad hoc arbitration panel, in accordance with the Arbitration Rules of the U.N. Commission on International Trade Law.The Supreme Court held that the parties are not entitled to discovery. Only a governmental or intergovernmental adjudicative body constitutes a “foreign or international tribunal” under 28 U.S.C. 1782; the bodies at issue do not qualify. While a “tribunal” need not be a formal “court,” attached to the modifiers “foreign or international,” the phrase is best understood to refer to an adjudicative body that exercises governmental authority. The animating purpose of section 1782 is comity: Permitting federal courts to assist foreign and international governmental bodies promotes respect for foreign governments and encourages reciprocal assistance. Extending section 1782 to include private bodies would be in significant tension with the Federal Arbitration Act, which governs domestic arbitration; section 1782 permits much broader discovery than the FAA.The Court acknowledged that the arbitration panel involving Lithuania presents a harder question. The option to arbitrate is contained in an international treaty rather than a private contract but the two nations involved did not intend that an ad hoc panel exercise governmental authority. View "ZF Automotive U. S., Inc. v. Luxshare, Ltd." on Justia Law

by
Saxon, a Southwest Airlines ramp supervisor, frequently loads and unloads cargo alongside the ramp agents. Alleging that Southwest was failing to pay proper overtime wages to ramp supervisors, Saxon brought a putative class action under the Fair Labor Standards Act. Saxon’s employment contract required her to arbitrate wage disputes individually; she claimed that ramp supervisors were a “class of workers engaged in foreign or interstate commerce,” exempt from the Federal Arbitration Act, 9 U.S.C. 1.The Supreme Court affirmed the Seventh Circuit, holding that the act of loading cargo onto a vehicle to be transported interstate is itself commerce according to the “ordinary, contemporary, common meaning” of the word. By referring to “workers” rather than “employees,” the FAA directs attention to “the performance of work” and the word “engaged” similarly emphasizes the actual work that class members typically carry out. Saxon is a member of a “class of workers” based on what she frequently does, physically loading and unloading cargo on and off airplanes, and not on what Southwest does generally. Exempted workers must at least play a direct and “necessary role in the free flow of goods” across borders. Cargo loaders exhibit this central feature of a transportation worker. View "Southwest Airlines Co. v. Saxon" on Justia Law

by
Morgan, an hourly employee at Sundance's Taco Bell franchise, had signed an agreement to arbitrate any employment dispute. Morgan later filed a nationwide collective action asserting that Sundance had violated federal law regarding overtime pay. Sundance initially defended as if no arbitration agreement existed, filing an unsuccessful motion to dismiss and engaging in unsuccessful mediation. Months after Morgan filed suit, Sundance unsuccessfully moved to compel arbitration under the Federal Arbitration Act (FAA). Under Eighth Circuit precedent, a party waived its right to arbitration if it knew of the right; “acted inconsistently with that right”; and “prejudiced the other party by its inconsistent actions.”The Supreme Court vacated and remanded. The Eighth Circuit erred in conditioning a waiver of the right to arbitrate on a showing of prejudice. A court must hold a party to its arbitration contract just as the court would to any other kind and may not devise novel rules to favor arbitration over litigation. Federal policy is to treat arbitration contracts like all others, not to foster arbitration. Courts may not create arbitration-specific procedural rules. Because the usual federal rule concerning waiver does not include a prejudice requirement, prejudice is not a condition of finding that a party waived its right to stay litigation or compel arbitration under the FAA. The proper inquiry would focus on Sundance’s conduct. Did Sundance knowingly relinquish the right to arbitrate by acting inconsistently with that right? View "Morgan v. Sundance, Inc." on Justia Law

by
Badgerow initiated an arbitration proceeding, alleging that her employment was unlawfully terminated. After arbitrators dismissed Badgerow’s claims, she filed suit in Louisiana state court to vacate the arbitral award. Walters removed the case and applied to confirm the award. Badgerow then moved to remand the case to state court, arguing that the federal court lacked jurisdiction to resolve the parties’ requests to vacate or confirm the award under Federal Arbitration Act (FAA) Sections 10 and 9. Normally, a court has federal-question jurisdiction whenever federal law authorizes an action but the FAA does not itself support federal jurisdiction. A federal court must find an independent basis for jurisdiction to resolve an arbitral dispute. In this case, neither application revealed a jurisdictional basis on its face. The district court applied the “look-through” approach, finding jurisdiction in the federal-law claims contained in Badgerow’s underlying employment action. The Fifth Circuit affirmed.The Supreme Court reversed and remanded. The “look-through” approach to determining federal jurisdiction does not apply to requests to confirm or vacate arbitral awards under Sections 9 and 10 of the FAA. The Court distinguished precedent that interpreted other FAA sections. Sections 9 and 10 lack specific statutory language that instructs a federal court to “look through” the petition to the “underlying substantive controversy.” When Congress includes particular language in one section of a statute but omits it in another section of the same Act, the choice is considered deliberate. View "Badgerow v. Walters" on Justia Law

by
ThyssenKrupp entered into contracts with F. L. for the construction of mills at ThyssenKrupp’s Alabama steel manufacturing plant. Each contract contained an arbitration clause. F. L. entered into a subcontract with GE for the provision of motors. After the motors allegedly failed, Outokumpu (ThyssenKrupp's successor) sued GE, which moved to compel arbitration, relying on the arbitration clauses in the F. L.-ThyssenKrupp contracts. The Eleventh Circuit concluded that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards allows enforcement of an arbitration agreement only by the parties that actually signed the agreement.A unanimous Supreme Court reversed. The Convention does not conflict with domestic equitable estoppel doctrines that permit the enforcement of arbitration agreements by nonsignatories. The Federal Arbitration Act (FAA) grants federal courts jurisdiction over actions governed by the Convention and provides that “Chapter 1 applies to actions and proceedings brought under this chapter to the extent that [Chapter 1] is not in conflict with this chapter or the Convention,” 9 U.S.C. 208. Chapter 1 does not “alter background principles of state contract law regarding the scope of agreements (including the question of who is bound by them).” The state-law equitable estoppel doctrines permitted under Chapter 1 do not “conflict with . . . the Convention,” which is silent on whether nonsignatories may enforce arbitration agreements under domestic doctrines such as equitable estoppel. Nothing in the Convention could be read to conflict with the application of domestic equitable estoppel doctrines. The court, on remand, may address whether GE can enforce the arbitration clauses under equitable estoppel principles and which body of law governs that determination. View "GE Energy Power Conversion France SAS v. Outokumpu Stainless USA, LLC" on Justia Law

by
In 2016, a hacker tricked an employee into disclosing tax information of about 1,300 Lamps employees. After a fraudulent federal income tax return was filed in the name of Varela, he filed a putative class action on behalf of employees whose information had been compromised. Relying on the arbitration agreement in Varela’s employment contract, Lamps sought to compel arbitration on an individual rather than a classwide basis. The Ninth Circuit affirmed the rejection of the individual arbitration request, authorizing class arbitration. Although Supreme Court precedent held (Stolt-Nielsen, 2010) that a court may not compel classwide arbitration when an agreement is silent on the availability of such arbitration, the Ninth Circuit concluded that Stolt-Nielsen did not apply because the Lamps agreement was ambiguous, not silent, concerning class arbitration.The Supreme Court reversed, Under the Federal Arbitration Act, 9 U.S.C. 2, an ambiguous agreement cannot provide the necessary contractual basis for concluding that the parties agreed to submit to class arbitration. Arbitration is strictly a matter of consent. Class arbitration, unlike the individualized arbitration envisioned by the Act, “sacrifices the principal advantage of arbitration—its informality—and makes the process slower, more costly, and more likely to generate procedural morass than final judgment.” Courts may not infer consent to participate in class arbitration absent an affirmative “contractual basis for concluding that the party agreed to do so.” Silence is not enough and ambiguity does not provide a sufficient basis to infer consent. View "Lamps Plus, Inc. v. Varela" on Justia Law