“The power of the core concerns comes from the fact that they can be used as both a lens to understand the emotional experience of each party and as a lever to stimulate positive emotions in yourself and in others. If core concerns aren’t being met, work relationships are compromised, but more importantly an opportunity to “stimulate positive emotions” is missed.

The United States Fifth Circuit Court of Appeals has ruled that judicial estoppel made discovery available in a private foreign arbitration under 28 U.S.C. Section 1782. In Republic of Ecuador v. Connor, Nos. 12-20122, 12-20123, (5th Cir. Feb. 13, 2013), the Republic of Ecuador sought discovery from John Connor and his company, GSI Environmental, (“Connor”) related to an ongoing foreign arbitration with Chevron. Previously, Chevron successfully filed for arbitration of an environmental dispute with the Republic of Ecuador under the rules of UNCITRAL and allowed by a U.S.-Ecuador Bilateral Investment Treaty (“BIT”). Despite a Circuit split, both Ecuador and Chevron sought discovery related to the foreign arbitration on at least 20 occasions in various United States courts pursuant to Section 1782. As part of the BIT arbitration, Ecuador sought ancillary discovery from Connor in the Southern District of Texas and Chevron intervened in an effort to protect the company’s interests. The district court denied the discovery request after determining that the BIT arbitration was not a dispute pending in a “foreign or international tribunal” according to Fifth Circuit case law. Ecuador then filed an interlocutory appeal with the Fifth Circuit. On appeal, Ecuador argued that the BIT arbitration was a foreign proceeding under the statute. In addition, Ecuador argued even if the arbitration was not subject to the statute Chevron was judicially estopped from claiming discovery should be denied as the company previously benefited from using the statute in other U.S. courts to obtain discovery in the case. Chevron argued that the Fifth Circuit’s decision in Republic of Kazakhstan v. Biedermann Int’l, 168 F.3d 880 (5th Cir. 1999), prohibited discovery under Section 1782. In dismissing Chevron’s argument, the Fifth Circuit stated, Chevron has deliberately taken inconsistent positions on the availability of § 1782 discovery for use in “international tribunals.” Chevron successfully obtained such discovery by persuading courts to reject Ecuadorian (and related parties’) objections and by contending, opposite to its current position, that the BIT arbitration is an “international tribunal.” Finally, if Chevron is permitted to shield itself under Biedermann against Ecuador’s current discovery request, it will have gained an unfair advantage over its adversary. Chevron should be judicially estopped from asserting its legally contrary position here. Consequently, we need not and do not opine on whether the BIT arbitration is in an “international tribunal.” On remand, the district court should proceed in its discretion to evaluate Ecuador’s request for discovery pursuant to § 1782. Because Chevron was judicially estopped from asserting Section 1782 did not apply the BIT arbitration, the Fifth Circuit Court of Appeals reversed and remanded the discovery request to the district court.

A Financial Industry Regulatory Authority (FINRA) panel has stated broker-dealer Charles Schwab may enforce a class action waiver included in its customer arbitration agreement despite the existence of a FINRA rule that prohibits such waivers. According to the panel, the FINRA rule is preempted by the Federal Arbitration Act (FAA). In Department of Enforcement v. Charles Schwab & Company, Inc., No. 2011029760201, FINRA’s Enforcement Department sought to discipline Charles Schwab for adding a provision to the company’s arbitration agreement that requires customers to individually arbitrate any disputes that may arise with the company and barred FINRA arbitrators from consolidating those claims. After a California judge refused to hear the case, the matter went before a FINRA hearing panel. According to the panel, although Charles Schwab’s class action waiver is in violation of FINRA rules permitting customers to bring a class action in court, the FINRA rules do not apply because they are preempted by the FAA. The panel explained, Supreme Court precedent, however, compels the Hearing Panel to conclude that the FAA bars enforcement of FINRA’s Rules to the extent that the Rules require that customers be given the option to bring their claims in court in the form of judicial class actions despite any pre-dispute agreement to resolve disputes in arbitration. Rules that override an agreement to arbitrate and allow a party to an arbitration agreement to avoid arbitration represent the kind of “hostility” to arbitration that the Supreme Court has repeatedly found inappropriate and unenforceable under the FAA. In Shearson/American Express, Inc. v. McMahon and Rodriguez de Quijas v. Shearson/American Express, Inc., the Supreme Court established that securities law claims are no exception to the FAA’s mandate that a party to an arbitration agreement must go to arbitration to resolve any claim subject to the agreement. In AT&T Mobility LLC v. Concepcion, the Court established that class actions are no exception either, holding that a party to an arbitration agreement has no right to participate in a class action instead of arbitration on an individual basis. The panel continued by stating despite any overriding policy concerns, there could be no exception to the FAA’s mandate absent clear congressional intent. In addition, the FINRA panel found that Charles Schwab violated FINRA rules when the company sought to bar FINRA arbitrators from consolidating individual customer claims. Consequently, the hearing panel allowed FINRA to impose sanctions on Charles Schwab based solely on that claim.

Last week, the United States Supreme Court heard oral arguments in American Express Corp. v. Italian Colors Restaurant, et al. (No. 12-133). The appeal from the Second Circuit addresses whether an arbitration clause that prohibits class action lawsuits is enforceable under the Federal Arbitration Act despite that it would compel arbitration of federal antitrust claims. It is the third time in three years the Supreme Court has considered the scope of a class action waiver in an arbitration agreement. Transcripts from the oral argument are now available to read or listen to from the Oyez Project at IIT Chicago-Kent College of Law. Please stay tuned to Disputing for more about this case in the future!