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A few months ago I posted about actions that FINRA and the NLRB were taking in support of allowing class arbitration, and those agencies have recently taken additional actions that help consumers or employees with relatively low dollar claims.
The NLRB brought a complaint against 24 Hour Fitness USA, Inc. The complaint alleges that 24 Hour Fitness’s requirement that all of its employees waive their rights to any type of collective or class action suits — whether in arbitration or litigation — “violates protections guaranteed by the National Labor Relations Act.” The complaint cites seven instances where classes of employees were claiming wage and hour violations and 24 Hour Fitness moved to compel those plaintiffs to individual arbitrations.
FINRA also recently approved a change in its arbitration rules. In recognition that $25,00 is no longer the cutoff for “smallish” claims, FINRA raised the dollar limit for its simplified and streamlined arbitration from $25,000 to $50,000. Cases under $50,000 can now be heard by one arbitrator on written submissions with expedited discovery. This should help securities customers with lower damages afford to prosecute their claims.
In a significant case applying Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 130 S. Ct. 1758 (2010), the Court vacated a class arbitration award as exceeding the arbitrator’s authority. Reed v. Florida Metropolitan University, No. 11-50509 (May 18, 2012). The Court found that the “any dispute” and “any remedy” clauses in the parties’ agreement did not authorise class arbitration, acknowledging a different conclusion by the Second Circuit inJock v. Sterling Jewelers, Inc., 646 F.3d 113 (2011). Op. at 19-22. Before reaching that result, the Court reviewed the applicable AAA rules and concluded that they allowed the threshold matter of class arbitration to be reviewed by the arbitrator. Id. at 8.
The interaction between arbitration and class/collective actions which seems to be continually evolving, took another positive step for employers in the 5th Circuit with today’s decision in Reed v. Florida Metro University, Inc. (5th Cir 5.18.12).
Reed sued claiming that his on line Bachelor’s degree in paralegal studies would not be recognized either by law schools, nor a police department where he sought employment. Since that was contrary to his understanding as to what the school told him, he filed suit claiming a violation of the Texas Education Code. He sought $51,000 plus attorneys fees, but also sought relief on behalf of a class of everyone who “contracted to receive distance education from Everest University Online while residing in Texas.”
The defendant successfully moved to compel arbitration, but the Court deferred the decision as to whether it could be brought as a class action to the arbitrator.
Noting it was a close question, the arbitrator held that the matter could proceed as a class action. Reed sought affirmation of that ruling and the School asked that it be vacated on the ground the arbitrator exceeded his powers. Judge Lee Yeakel in Austin denied the School’s Motion to vacate award.
The 5th Circuit first addressed whether Judge Yeakel’s decision to allow the arbitrator to decide whether or not the matter could proceed as a class action was correct and concluded that it was.
On the second issue, whether the arbitrator exceeded his powers in holding that it could proceed as a class action, the 5th Circuit found Judge Yeakel had erred. The Court reversed and held the arbitrator had exceeded his powers and since there was “only one possible outcome on the facts before us” held that the arbitration must proceed only between the two parties, rather than sending it back to the Arbitrator for reconsideration.
In doing so, the Court noted it was openly disagreeing with the 2nd Circuit’s interpretation of the Supreme Court’s decision in Stolt-Nielsen S.A. v. AnimalFeeds International Corp. (U.S. 2010). In Jock v. Sterling-Jewelers, Inc.(2nd Cir. 2011), cert. denied Mar. 19, 2012, the 2nd Circuit emphasized the deference to be given to the arbitrator, ultimately concluding that “whether the arbitrator was right or wrong in her analysis, she had the authority to make the decision, and the parties to the arbitration agreement or bound by it.”
The 5th Circuit chose to respectfully disagree with the 2nd Circuit, holding instead that a court had to ensure that an arbitrator has a basis for his class arbitration determination, even while applying a deferential standard of review.
Emphasizing the Supreme Court’s concerns about class action arbitration as expressed not only in Stolt-Nielsen, but its subsequent decision in AT&T Mobility v. Concepcion(U.S. 2011), the 5th Circuit chose to emphasize the Supreme Court’s view that there must be a showing that the parties consented to class action determination.
Although the Supreme Court may have had enough of class actions and arbitration for awhile, the 5th Circuit has done its best to tee up another one for them. In the mean time, employers whose arbitration agreements are silent on class actions can breathe a sigh of relief, at least in three states.
Click above for high-res gallery of the Fisker Karma
A few months back, Tesla Motors sued Fisker Automotive for allegedly stealing information related to the production of its upcoming plug-in electric sedan named Whitestar and using it to develop its series-hybird Beats by Dre, the Karma. Yesterday replica watches, a judge ruled in favor of Fisker Automotive by allowing the case to go into arbitration outside the courtroom Beats by Dre, which was apparently part of the original agreement between Tesla and Henrik Fisker in the first place. It appears that Tesla went outside that original agreement by bringing forth its lawsuit in the first place, though Tesla may have considered that contract void as the original lawsuit alleged that it was signed merely to gain access to confidential information.
Although the arbitration is to be handled outside of court replica watches, the judge has scheduled a management conference this August Tattoo Supplies, perhaps to be sure that negotiations are moving along. This is good news for Fisker, which is currently working to get its Karma PHEV sedan to market by the fourth-quarter of 2009.
Tanzania: Two Elected to Kagera Arbitration Committee Source: All Africa Sunday 13th May, 2012
Bukoba – Bukoba based Advocate Josephat Rweyemamu, has been elected Chairman of the Kagera Region’s Media Ethics and Arbitration Committee, while Meddy Mulisa was elected his Vice- Chairman.
The Media Ethics and Arbitration Committee was established according to the Constitution of the Kagera Press Club (KPC).
The Committee is entrusted among other things, to enhance ethics and to make arbitration among stakeholders and the media/reporters.
Patricia Kisare writes about the need for an international debt court in the latest Third Way Cafe.
The World Bank and the International Monetary Fund (IMF) are two of the largest sources of sovereign loans for low-income countries. While most of these loans are for poverty alleviation, the debt burdens they have created are themselves creating cycles of poverty.
High interest rates have made it more expensive for countries to service these loans, forcing governments to spend more on debt services than on social services for their citizens. As a result, many low-income countries continue to struggle with paying off their sovereign debts.
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Pre-Dispute Arbitration Agreements are Valid and Must Be Upheld byNicole Kellner-Swick
By Amanda R. Yurechko, Attorney
While the Federal Arbitration Act encourages the use of an arbitration provision in a contract and encourages the use of arbitration as an inexpensive and relatively quick way to resolve disputes, much of the discussion surrounding the use of an arbitration agreement in a nursing home admission agreement is less favorable. Such agreements have been criticized as favoring the nursing home industry and asking elderly residents to give up rights they otherwise have, at a time in the life when they are most vulnerable.
The Supreme Court issued a ruling this past February that no state can impose additional requirements upon arbitration agreements that conflict with the Federal Arbitration Act (FAA).[1] In Marmet Health Care Center v. Brown [2], the U.S. Supreme Court considered West Virginia’s requirement that all claims for wrongful death or negligence submitted to arbitration, must be accompanied by a post-dispute arbitration agreement. The West Virginia Supreme Court of Appeals had previously held that, “as a matter of public policy under West Virginia law, an arbitration clause in a nursing home’s admission agreement adopted prior to an occurrence of negligence that results in a personal injury or wrongful death, shall not be enforced to compel arbitration of a dispute concerning the negligence.”[3] The Supreme Court reiterated the federal policy in favor of arbitration as a dispute resolution tool.[4] It also relied upon its recent ruling in AT&T Mobility LLC v. Concepcion,[5] holding that “when a state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.” The Supreme Court struck down the West Virginia requirement of a post-dispute agreement to arbitrate, as a prerequisite to compel arbitration.
The debate about post-dispute agreements to arbitrate is far from settled however. Several major arbitration forums limit consumer arbitrations by refusing to handle them or by requiring a post-dispute agreement before they will accept an arbitration of a nursing home matter. As an example, The National Arbitration Forum no longer accepts any arbitration by a commercial entity against a consumer, including a nursing home against its resident. The American Arbitration Association requires this “post-dispute” agreement to arbitrate in a matter against a consumer. Further, Congress is still considering what has been billed as the “Fairness in Arbitration Act,” which seeks to eliminate the use of arbitration agreements in the nursing home-resident relationship.[6]
Notably, the arbitration agreements in the Marmet Health Care Center v. Brown line of cases contained provisions that exempted the collection of the balance due on the account from the requirements of the arbitration provision. When drafting an agreement with consumers, it’s important to consider this type of exemption, in order to streamline the collection and litigation of past-due accounts and avoid the issues raised by the courts regarding arbitration in this context.
While there may be benefits to using an arbitration agreement in general, the collection of a past due account should be exempted in order that the account may be collected quicker, more economically, and with less debate over the need for a post-dispute agreement to arbitrate. With pre-existing arbitration agreements, providers should look to the rules of the specific forum to determine whether they will take the arbitration, and review the procedures of the forum to determine if a post-dispute agreement is required. If post-dispute consent cannot be obtained, in some states, the resident will be deemed to have waived the right to arbitration by failing to raise it in state court litigation. Additionally, if the Arbitration Agreement itself is waived or deemed invalid, in most cases the nursing home can proceed to obtain a judgment under the remaining terms of its admission agreement.
While this is a very broad topic for an article of its own, keep in mind that all is not lost if the Arbitration Agreement cannot be enforced, which we will address in a follow-up advisory shortly. In the meantime, if you have any questions about your facility’s use of arbitration provisions in your admission agreements, or about the case law detailed in this advisory, please contact our office.
[1] 9 U.S.C. 1 et seq.
[2] 132 S. Ct. 1201 (2012)
[3] Brown v. Genesis Healthcare Corp. No. 35494 (W.Va., June 29, 2011
[4] KPMG LLP v. Cocchi, 132 S. Ct. 23, 25 (2011)
[5] 131 S. Ct. 1740, 1747 (2011),
[6] See S. 987, and H.R. 1873, introduced in the 2011-2012 term.
Amanda Yurechko is an associate in Consumer & Commercial Collections, focused on the Governmental Collections, Healthcare, Commercial Collections and Commercial Business Groups with Weltman, Weinberg & Reis Co., LPA. She is based in the Cleveland office. Amanda can be reached at 216.685.1060 and ayurechko@weltman.com.
Gary Born, “A New Generation of International Adjudication”, 61 Duke Law Journal 775-879 (2010)
Gary Born is, of course, widely recognised as not only one of the leading experts on international commercial arbitration, but also both a prominent arbitrator and a top practitioner. Consequently, a 100 page article published in a leading U.S. law review is unavoidably of interest to anyone who works inb or on arbitration. Indeed this article is clearly intended by Born to be a major statement on contemporary international adjudication. It should be emphasised, though, that this article is importantly different to the works for which Born is famous, as it is squarely aimed at scholars of public international law (PIL) rather than specialists in arbitration, and is intended to contribute to academic debate rather than legal practice.
With this in mind, it has to be acknowledged that the article is only a partial success. Born has identified an important point, and with his characteristic thoroughness makes a convincing case for his position. However, the article is ultimately undermined by both a one-sidedness that befits a legal brief more than an academic article, and a failure to address what Born himself identifies as the most difficult and interesting aspects of his topic.
Born’s goal in writing this article is to alter the approach that PIL scholars overwhelmingly adopt in discussing the nature of international adjudication. As Born notes, most PIL scholars discuss international adjudication as though it consisted solely of hearings before tribunals such as the International Court of Justice or the International Tribunal for the Law of the Sea, which Born labels “first generation” tribunals. Tribunals of this type hear only State-State disputes, cannot compel an unwilling State to participate in proceedings, are rarely (sometimes almost never) used, and lack any real power to enforce the judgements they deliver. Because of these characteristics, PIL scholars broadly concur that international adjudication is fundamentally different in nature to domestic court adjudication. At best it is merely a means of providing information to States that can be fed into a subsequent settlement between the parties, and at worst it is a useless charade adopted solely for political purposes.
Born spends a long time discussing the structure and operation of a number of first generation tribunals, and reiterates the conventinal criticism that they are ultimately ill-designed to resolve the disputes brought before them. In this respect, then, there is little innovative in Born’s argument, as he is merely repeating criticisms regularly made by PIL scholars themselves.
The important second step that Born takes, however, is to turn from first generation tribunals to what he calls “second generation” tribunals, including international investment arbitration tribunals and WTO tribunals. These tribunals, Born argues, are of a fundamentally different nature to first generation tribunals. They can compel unwilling States to participate in proceedings (or else conduct the proceedings without the State’s participation), are regularly used as fora for the resolution of disputes, and issue judgments that are far more enforceable than those issued by first generation tribunals.
These fundamental differences between first and second generation tribunals, Born argues, mean that any discussion of international adjudication that concentrates only on first generation tribunals will simply be inaccurate. Contemporary international adjudication simply cannot be understood without attending properly to the important role of second generation tribunals in the resolution of international disputes.
Born’s insight is important, and he makes his case convincingly. However, he makes no attempt to proceed beyond the simple identification of the need to attend to second generation tribunals. Instead, he simply notes that it is “striking and necessary” to consider the appropriateness of second generation tribunals for “future forms of international adjuducation”, but that such issues will be addressed in “a forthcoming companion piece” (876).
This is, though, simply to sidestep the truly interesting and important aspects of the topic he is addressing. After all, first generation tribunals do not adjudicate the same disputes as second generation tribunals, so can hardly be taken to have replaced them. Moreover, Born has spent the entire article comparing the structures of first and second generation tribunals, and criticising first generation tribunals as inadequately designed for the resolution of international disputes. Yet he does not even consider whether these differences in structure indicate that the two types of tribunal are intended to serve different functions – and that the resolution of international disputes is not actually the primary function of a first generation tribunal.
This is a particularly important omission because the dismissive approach that Born takes to first generation tribunals (stating at one point, for example, that “it is impossible to conclude that the ICJ has played a significant role in international affairs over the course of its sixty-five year history” (807)) suggests that even in this article’s companion piece this issue is unlikely to get the attention it deserves.
This is because Born’s standard for the effectiveness of an international tribunal ultimately focuses overwhelmingly on the ability of that tribunal to resolve specific disputes. That is, to resolve the cases brought before it. Yet it is hardly surprising that second generation tribunals, which address narrow disputes and have the power to award financial damages (of one form or another), are more successful than first generation tribunals, which focus on the development of broad points of international law and deliver verdicts that impact directly on issues of national sovereignty (such as the awarding of territory between disputing States). A more modest goal is always easier to reach.
It is not clear, though, why the resoution of specific disputes should be the standard by which international tribunals are judged. It may be appropriate for a second generation tribunal, which is indeed designed specifically for this purpose, but it is unclear that first generation tribunals really serve this role any longer. That is, while a decision by the International Court of Justice is still technically the resolution of a dispute between two States, and is not formally binding on any other State, it is actually approached both by the Court and by those reading the judgment as a statement of the content of international law. First generation tribunals, that is, are perhaps better understood as fora for the development of principles of law, rather than as fora for the resolution of specific disputes.
Yet if it is true that first and second generation tribunals serve different purposes, as their different structures would suggest, it is inappropriate to judge both of them by their ability to achieve a goal that only one of them is attempting to achieve.
A real evaluation of international adjudication, then, certainly requires attention to second generation tribunals as well as first generation tribunals, as Born convincingly argues. However, it also requires careful attention to the nature of each tribunal, in order to understand its function within the broader scheme of international adjudication, and this is something that in this article Born fails to achieve.
Herbert Smith has announced the promotion of Francesca Albert to Of Counsel. Francesca is an English-qualified lawyer of Italian and US nationality specialising in international arbitration. Working from the Moscow office, Francesca has developed a particular expertise in advising Ukrainian, Russian and international clients in relation to commercial and shareholder disputes in various industry sectors including the construction, property development, hospitality sectors. Francesca has also spent a year and a half in Tokyo where she advised in particular on the applicability of international treaties to structuring investments in emerging markets. In addition to native English, she is fluent Russian, Italian, Spanish and French. Francesca is viewed as one to watch in the international arbitration community, admired for her “great promise” and “professionalism” by clients (Chambers Global).
Francesca has acted on behalf of:
a Cayman Islands company in an ICSID arbitration against the Republic of Kazakhstan in relation to an investment dispute
a Chilean company in an ICSID arbitration against the Government of Peru under the Chile/Peru bilateral investment treaty in relation to expropriation of an investment
a Russian container company in a potential UNCITRAL arbitration under the UK/Ukraine bilateral investment treaty against the Government of the Ukraine
acting for a US owned company against an East European Government in an LCIA arbitration in relation to a state-sponsored industrial restructuring programme
a Japanese trading house in an arbitration under the auspices of the Iraq Debt Reconciliation Office against the Government of Iraq to recover debts incurred during the first Iraq war.
a Japanese trading company on its rights under a bi-lateral investment treaty between Russia and Japan
a Russian real estate company in an LCIA arbitration in relation to the enforcement of a call option agreement
a Russian design and construction company for large scale industrial projects in an LCIA arbitration against a Kazakh company in a breach of warranty claim.
acting for a confidential US client in ICC arbitration over a defence industry licensing dispute involving an Italian manufacturer
Russian shareholders of Lenta supermarkets chain in a shareholders dispute in connection with obtaining injunctions in the BVI courts
Independence car dealership in connection with a shareholders dispute related to the construction and financing of a dealer centre in Moscow and potential LCIA arbitration
a Russian mobile operator in an LCIA arbitration under the Russian law against a US investment fund relating to an alleged breach of a preliminary lending services agreement
a Russian shareholder in respect of a fraud claim relating to the acquisition of a majority stake in a JV intended to create a wireless telecoms network in Russia
