As announced by U.S. Department of Homeland Security (DHS) Secretary Janet Napolitano, U.S. Senator Mary Landrieu of Louisiana and Federal Emergency Management Agency (FEMA) Administrator Craig Fugate, (see press release here) FEMA created a new arbitration process to expedite resolution of outstanding public assistance projects stemming from hurricanes Katrina and Rita. The administrative rules to govern this new arbitration process were published by FEMA on August 31 (find the rules here). Technorati tags: arbitration, ADR, law, FEMA
Continue reading...Part IVA: Who Decides? By Philip J. Loree Jr. I. Introduction In Part III (here) we examined the background of Stolt-Nielsen and identified four issues that the United States Supreme Court will likely confront when it decides the case. In this part IVA we consider the first issue: Who decides whether class arbitration can be imposed on the parties when their arbitration agreements are silent on that point? Put differently, is the question one of arbitrability for the court or one of procedural arbitrability or contract interpretation for the arbitrators? Resolution of the question defines the standard of review. Questions of arbitrability are reviewed de novo on the law and for clear error on the facts. But if the question is one of procedural arbitrability or contract interpretation, the standard is the deferential one provided by Federal Arbitration Act Section 10, the one applied by both the District Court and the United States Court of Appeals for the Second Circuit. The arbitrators in Stolt-Nielsen decided that class arbitration was authorized by the parties’ arbitration agreements even though the agreements said nothing about class arbitration. We believe that at least five Justices will conclude that this question was one of arbitrability for the Court to decide, and will either decide the issue de novo or remand it to the lower courts to decide. II. Who Decides Whether Imposing Class Arbitration on the Parties is Consistent with the Federal Arbitration Act When the Parties’ Agreement is Silent on Class Arbitration? Courts get to decide questions of arbitrability unless the parties “clearly and unmistakably” agreed that arbitrators get to decide them. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 945-46 (1995). Before discussing whether we are dealing with an arbitrability question, we must therefore consider whether Stolt-Nielsen has clearly and unmistakably submitted arbitrability questions to the arbitrators. If so, then the question is moot, and the applicable standard of review will be the deferential one under Federal Arbitration Act Section 10. A. Assuming the Question is one of Arbitrability, Has Stolt-Nielsen Clearly and Unmistakably Submitted it to the Arbitrators? We believe that at least five members of the Court will conclude that Stolt-Nielsen did not clearly and unmistakably submit arbitrability questions to the arbitrators. “[M]erely arguing the arbitrability issue to an arbitrator does not indicate a clear willingness to arbitrate that issue. . . .” First Options, 514 U.S. at 946. As discussed in Part III (here), in its submission agreement Stolt-Nielsen appears to have reserved its rights to argue the court should decide whether the parties consented to class arbitration. Stolt-Nielsen also argued to the Second Circuit that the arbitrators had no authority to decide whether the parties consented to class arbitration. Because Stolt-Nielsen “forcefully objected” to the arbitrators’ authority, and otherwise appears to have reserved its right to a judicial determination, we do not think Stolt-Nielsen clearly and unmistakably agreed that the arbitrators could decide arbitrability. See 514 U.S. at 946. B. Is the Question One of Arbitrability? One of the foundational tenets of arbitration law is that “arbitration is simply a matter of contract between the parties; it is a way to resolve. . . disputes — but only those disputes — that the parties have agreed to submit to arbitration.” First Options, 514 U.S. at 943. As a general rule, arbitrability questions concern “whether the parties have submitted a particular dispute to arbitration. . . .” Howsam v. Dean Witter Reynolds, Inc.,, 537 U.S. 79, 83 (2002). The Supreme Court has said that “[l]inguistically speaking, one might call any potentially dispositive gateway question a ‘question of arbitrability,’ for its answer will determine whether the underlying controversy will proceed to arbitration on the merits.” 537 U.S. at 83. But the term “arbitrability” has “a far more limited scope,” and is “applicable in the kind of narrow circumstance where contracting parties would likely have expected a court to have decided the gateway matter, where they are not likely to have thought that they agreed that an arbitrator would do so, and, consequently, where reference of the gateway dispute to the court avoids the risk of forcing parties to arbitrate a matter that they may well not have agreed to arbitrate.” Two classic examples of arbitrability questions are whether: (a) “the parties are bound by a given arbitration clause;” and (b) “an arbitration clause in a concededly binding contract applies to a particular type of controversy. . . .” 537 U.S. at 84 (citations omitted). But “the phrase ‘question of arbitrability’ [is] not applicable in other kinds of general circumstance where parties would likely expect that an arbitrator would decide the gateway matter.” 537 U.S. at 84. There is a doctrine known as “procedural arbitrability under which procedural questions which grow out of the dispute and bear on its final disposition are presumptively not for the judge, but for an arbitrator, to decide.” Id. (citation and quotations omitted) These types of questions generally concern “whether prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate have been met. . . .” 537 U.S. at 85 (citation and quotations omitted; emphasis deleted). And there is also a presumption that arbitrators decide “’allegation[s] of waiver, delay, or a like defense to arbitrability.’” See 537 U.S. at 84 (quoting Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)). The plurality in Bazzle determined that the issue before it – whether the parties’ contracts authorized or precluded class arbitration – was a question of procedural arbitrability. On the facts before it the plurality characterized the question as concerning “what kind of arbitration proceeding the parties agreed to.” (See Part II, here.) It was, indeed, a “gateway” question; it was –- according to the plurality decision — simply not the type of “gateway” question that courts get to decide because it involved a disputed issue of contract interpretation. The question in Stolt-Nielsen is likewise a “gateway” question: Did the parties to each […]
Continue reading...The One Hundred Eleventh United States Congress began on January 3, 2009 and will last till January 3, 2011. Following is a summary of some alternative dispute resolution bills currently being considered during this session. Click on the bill number for its text and on the status link to find the bill’s most recent legislative action. Stay tuned to Disputing for more legislative updates! The Arbitration Fairness Act of 2009 would ban mandatory pre-dispute arbitration in employment, consumer, and franchise contracts. Senate version: S. 931 and Status. House version: H.R. 1020 and Status. The Employee Free Choice Act of 2009 would amend the National Labor Relations Act to require first mediation and then binding arbitration if both parties are unable to reach an agreement within a certain time frame. Senate version: S. 560 and Status. House version: H.R. 1409 and Status. The Payday Loan Reform Act of 2009 would amend the Truth in Lending Act to establish additional payday loan requirements to protect consumers. This bill prohibits a mandatory arbitration clause that is “oppressive, unfair, unconscionable, or substantially in derogation of the rights of consumers.” H.R. 1214 and Status. The Fairness in Nursing Home Arbitration Act of 2009 would render pre-dispute arbitration clauses in nursing home contracts unenforceable. S. 512 and Status. The Mortgage Reform and Anti-Predatory Lending Act of 2009 would amend the Truth in Lending Act of 1968. The bill provides that “[n]o residential mortgage loan and no extension of credit under an open end consumer credit plan secured by the principal dwelling of the consumer, other than a reverse mortgage may include terms which require arbitration of any other nonjudicial procedure as the method for resolving any controversy.” H.R. 1728 and Status. The Labor Relations First Contract Negotiations Act of 2009 would amend the National Labor Relations Act to require the arbitration of initial contract negotiation disputes. H.R. 243 and Status. The Consumer Fairness Act of 2009 would treat arbitration clauses which are unilaterally imposed on consumers as an unfair and deceptive trade practice and prohibit their use in consumer transactions. H.R. 991 and Status. Technorati Tags: arbitration, ADR, law, legislation, Arbitration Fairness Act of 2009, Employee Free Choice Act of 2009, Payday Loan Reform Act of 2009, Fairness in Nursing Home Arbitration Act of 2009, Mortgage Reform and Anti-Predatory Lending Act of 2009, Labor Relations First Contract Negotiations Act of 2009, Consumer Fairness Act of 2009
Continue reading...By Peter S. Vogel The mandatory mediation provision of the software development agreement seemed like a good idea to me since a mediation conference was required before litigation could be filed. However, it turned out to be a ploy. The California software vendor had a contract for software development for the implementation of a new Enterprise Resource Program (ERP) system for a large company in Mississippi. Unfortunately as things turn out about 65% of the implementation of ERP systems fail, so it was not a surprise to me that the Mississippi customer demanded a refund of the monies paid. In response, the software vendor invoked the mandatory mediation provision. For the mutual inconvenience of everyone the mediation was in Houston, so I traveled from Dallas, the software vendor from California, and the customer from Mississippi. Mediation As Normal I should have known something was up since the software vendor did not bring a lawyer, rather showed up with just the CEO and VP of Operations. The customer brought the President, Information Technology folks, and their outside counsel. Each side made an opening statement in our joint session, and each made a demand. The customer wanted their money back or roughly $1 million, and the vendor wanted to be paid the balance of the contract which was also about $1 million. Mediation Not So Normal When I broke the parties into two rooms I met first with the customer, who explained their view of the case and was willing to pay the vendor a modest sum to terminate the contract so they could move on. So I explained to the software vendor the customer’s explanation of its position and its offer to pay a modest amount to the software vendor, and what happened next was astonishing to me. The software vendor refused to budge one cent, and the CEO told me that he had no intention of ever settling but now he understood the customer’s issues. He went on to tell me that he routinely used mediation conferences as a form of discovery, and that he had an E&O policy that would cover the cost the attorneys’ fees to defend the customer’s claims so it would not cost him anything. It seems to me that the point of requiring a mediation conference before litigation should not be to get some advantage, but rather a way for the parties to avoid continued litigation. I was extremely disappointed about the software vendor’s business model and sorry that he took advantage of the mediation conference solely to help him in litigation, never intending to settle at the mediation conference. Technorati Tags: ADR, law, mediation Peter S. Vogel is a trial partner at Gardere Wynne Sewell LLP where he is Chair of the Electronic Discovery Group and Co-Chair of the Technology Industry Team. Before practicing law he worked as a computer programmer, received a Masters in Computer Science, and taught graduate courses in information systems. For 12 years he served as the founding Chair of the Texas Supreme Court on Judicial Information Technology which is responsible for helping automate the Texas court system and putting Internet on the desktops of all 3,200 judges. Peter has taught courses on the Law of eCommerce at the SMU Dedman School of Law since 2000. Many of Peter’s topics are discussed on his blog www.vogelitlawblog.com.
Continue reading...Disputing is published by Karl Bayer, a dispute resolution expert based in Austin, Texas. Articles published on Disputing aim to provide original insight and commentary around issues related to arbitration, mediation and the alternative dispute resolution industry.
To learn more about Karl and his team, or to schedule a mediation or arbitration with Karl’s live scheduling calendar, visit www.karlbayer.com.
Disputing is published by Karl Bayer, a dispute resolution expert based in Austin, Texas. Articles published on Disputing aim to provide original insight and commentary around issues related to arbitration, mediation and the alternative dispute resolution industry.
To learn more about Karl and his team, or to schedule a mediation or arbitration with Karl’s live scheduling calendar, visit www.karlbayer.com.