Category Archives: Arbitrability

Unanimous Supreme Court Upholds Arbitrator’s Interpretation of Contract Allowing for Classwide Arbitration

English: Elena Kagan, Associate Justice of the...

English: Elena Kagan, Associate Justice of the Supreme Court of the United States (Photo credit: Wikipedia)

The U.S. Supreme Court today unanimously affirmed an arbitrator’s interpretation of an arbitration clause to permit class proceedings.  Oxford Health Plans LLC v. Sutter, No. 12-135, 569 U.S. __ (June 10, 2013).  The Court considered whether an arbitrator, who found that the parties’ contract provided for class arbitration, “exceeded [his] powers” under §10(a)(4) of the Federal Arbitration Act, 9 U. S. C. §1 et seq.  Justice Kagan, delivering the opinion of the Court and citing Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U. S. 662, 684 (2010), concluded that the arbitrator’s decision survives the limited judicial review §10(a)(4) allows.

The arbitration clause at issue provided as follows:

No civil action concerning any dispute arising under this Agreement shall be instituted before any court, and all such disputes shall be submitted to final and binding arbitration in New Jersey, pursuant to the rules of the American Arbitration Association with one arbitrator.

Slip Op. at 2.

The Supreme Court in Oxford Health Plans LLC distinguished Stolt-Nielsen:

The contrast with this case is stark. In Stolt-Nielsen, the arbitrators did not construe the parties’ contract, and did not identify any agreement authorizing class proceedings. So in setting aside the arbitrators’ decision, we found not that they had misinterpreted the contract, but that they had abandoned their interpretive role. Here, the arbitrator did construe the contract (focusing, per usual, on its language), and did find an agreement to permit class arbitration. So to overturn his decision, we would have to rely on a finding that he misapprehended the parties’ intent. But §10(a)(4) bars that course: It permits courts to vacate an arbitral decision only when the arbitrator strayed from his delegated task of interpreting a contract, not when he performed that task poorly. Stolt-Nielsen and this case thus fall on opposite sides of the line that §10(a)(4) draws to delimit judicial review of arbitral decisions.

Id. at 7.

The Court decided that Oxford must live with its choice of arbitral forum and the arbitrator’s construction of the contract, “however good, bad, or ugly”:

So long as the arbitrator was “arguably construing” the contract—which this one was—a court may not correct his mistakes under §10(a)(4). Eastern Associated Coal, 531 U. S., at 62 (internal quotation marks omitted). The potential for those mistakes is the price of agreeing to arbitration. As we have held before, we hold again: “It is the arbitrator’s construction [of the contract] which was bargained for; and so far as the arbitrator’s decision concerns construction of the contract, the courts have no business overruling him because their interpretation of the contract is different from his.” Enterprise Wheel, 363 U. S. at 599. The arbitrator’s construction holds, however good, bad, or ugly.

Id. at 8 (emphasis supplied).

By CHARLES H. JUNG

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Ninth Circuit Compels Arbitration in Kilgore v. KeyBank, But Avoids Vitiating Broughton-Cruz Rule

English: Diamond Katana aircraft owned by Amer...

English: Diamond Katana aircraft owned by American School of Aviation, an FAA Part 141 flight school based in Atwater, California. (Photo credit: Wikipedia)

In a ruling that was expected to have a broad impact on mandatory employment arbitration agreements, the Ninth Circuit today compelled arbitration in Kilgore v. Keybank, National Association, but avoided a broad ruling vitiating the Broughton-Cruz rule.  Kilgore v. Keybank, National Association, No. 09-16703, __ F.3d __ (9th Cir. Apr. 11, 2013) (en banc).  The appeal involved a putative class action by former students of a failed flight-training school who seek broad injunctive relief against the bank that originated their student loans among others.  The en banc court held that the arbitration agreement was not unconscionable under California law and reversed and remanded with instructions to compel arbitration.

Arbitration Clause

The Court quoted the relevant part of the arbitration clause as follows:

IF ARBITRATION IS CHOSEN BY ANY PARTY WITH RESPECT TO A CLAIM, NEITHER YOU NOR I WILL HAVE THE RIGHT TO LITIGATE THAT CLAIM IN COURT OR HAVE A JURY TRIAL ON THAT CLAIM . . . . FURTHER, I WILL NOT HAVE THE RIGHT TO PARTICIPATE AS A REPRESENTATIVE OR MEMBER OF ANY CLASS OF CLAIMANTS PERTAINING TO ANY CLAIM SUBJECT TO ARBITRATION. . . . I UNDERSTAND THAT OTHER RIGHTS I WOULD HAVE IF I WENT TO COURT MAY ALSO NOT BE AVAILABLE IN ARBITRATION. . . .

Defendants sought a broad ruling that the U.S. Supreme Court’s 2011 ruling in Concepcion vitiated the Broughton-Cruz rule that makes unenforceable arbitration agreements that bar certain claims for public injunctive relief.  The Ninth Circuit did not reach this question: Continue reading

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“Any Dispute” Language Plus Incorporation of AAA Rules Manifested Clear and Unmistakable Intent to Delegate Arbitrability Decision to Arbitrator

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In an unpublished opinion, the Second District Court of Appeal held that an arbitration clause that states that “[a]ny dispute whatsoever arising out of or referable to this Agreement, . . . as to the arbitrator’s jurisdiction, or as to the ability to arbitrate any such dispute, shall be submitted to final and binding arbitration” manifested a clear and unmistakable intent to delegate the arbitrability decision to the arbitrator.  Gallo v. Youbet.com, Inc., 2012 WL 470426, No. B230274 (Feb. 14, 2012).

Background

Plaintiff Gallo is an attorney a former General Counsel of defendant Youbet.com, Inc. Id. He signed an employment agreement, which included the following arbitration clause:

Any dispute whatsoever arising out of or referable to this Agreement, including, without limitation, any dispute as to the rights and entitlements and performance of the parties under this Agreement or concerning the termination of Executive’s employment or of this Agreement or its construction or its validity or enforcement, or as to the arbitrator’s jurisdiction, or as to the ability to arbitrate any such dispute, shall be submitted to final and binding arbitration in Los Angeles, California, by and pursuant to the Labor Arbitration Rules of the American Arbitration Association with discovery proceedings pursuant to Section 1283.05 of the California Code of Civil Procedure.   The arbitrator shall be entitled to award any relief, which might be available at law or in equity, including that of a provisional, permanent or injunctive nature.   The prevailing party in such arbitration as determined by the arbitrator, or in any proceedings in respect thereof as determined by the person presiding, shall be entitled to receive its or his reasonable attorneys’ fees incurred in connection therewith.

Id.

Defendant moved to compel arbitration, and the trial court granted the motion except for two causes of action for alleged violation of FEHA.  Id. The trial court did not issue a written rationale for its ruling or orally explain its rationale at the hearing.  Id.

Discussion Continue reading

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