Arbitration

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This morning we attended the Supreme Court’s oral arguments in Coinbase, Inc. v. Bielski. The issue presented in Coinbase is a procedural one, but of tremendous practical importance to defendants that seek to enforce arbitration agreements: does an appeal from an order denying a motion to compel arbitration automatically stay further proceedings in the district court during the appeal? 

Continue Reading Supreme Court hears oral argument in cases involving stays pending appeals of orders denying motions to compel arbitration

The plaintiffs’ bar has been trying to kill arbitration for more than a decade. But the courts have repeatedly rejected efforts to invalidate arbitration agreements. These lawyers have therefore switched to a different tactic: mass filing of arbitration demands.

When a single law firm or group of firms files 20,000 or 50,000 or 100,000 demands, does it really intend to resolve those claims on the merits? Or is the goal to use the costs of instituting an arbitration—which are disproportionately borne by companies when consumers or employees initiate arbitration—to coerce a settlement without regard to the merits of the underlying claim? If, for example, a company would immediately have to pay more than $10 million in fees upon the filing of 5,000 arbitration demands, just to be able to contest the merits, and thousands more for each claim that actually goes to arbitration—then paying a hefty settlement can seem like the only realistic option.

The U.S. Chamber of Commerce Institute of Legal Reform just issued a 75-page in-depth analysis of the mass arbitration phenomenon—Mass Arbitration Shakedown: Coercing Unjustified Settlements—that we authored. It documents the rise of mass arbitrations, the abusive consequences of these filings, and the ethical problems they present. We also suggest solutions that preserve the key benefit of arbitration—speedy, less-costly merit-based decisions—while also ensuring access to fair resolution of claims for injured consumers and employees.

Below the fold is a summary of the white paper.

Continue Reading US Chamber of Commerce Institute of Legal Reform releases report on mass arbitration, its abuses, and how to prevent them

Earlier this week, a Ninth Circuit panel sided with a coalition of business groups to affirm a preliminary injunction that stopped California state officials from enforcing California’s AB 51, a 2019 law that would have effectively prevented the formation of employment arbitration agreements in California. (Mayer Brown lawyers filed the lawsuit on behalf of the U.S. Chamber of Commerce and the California Chamber of Commerce and led briefing and argument in the Ninth Circuit.) This decision eliminates the considerable uncertainty about the use of arbitration to resolve employment disputes that had been caused by the enactment of AB 51 and…

Continue Reading Ninth Circuit Upholds Injunction Blocking a California Law That Would Have Severely Limited Employment Arbitration Agreements

Yesterday, the Supreme Court held in Viking River Cruises, Inc. v. Moriana (pdf) that the Federal Arbitration Act preempts a California rule invalidating arbitration agreements that provide for arbitration of an employee’s own claims under California’s Private Attorney General Act (PAGA), but waive the employee’s ability to assert PAGA claims affecting others.

The decision is enormously important to companies seeking to enforce workplace arbitration agreements in California. The decision also provides businesses with powerful arguments that California laws restricting arbitration in the consumer setting are preempted as well. (Disclosure: we filed an amicus brief (pdf) in support of the petition…

Continue Reading Supreme Court strikes down California rule barring individualized arbitration of California PAGA claims

The anti-arbitration rule issued by the Consumer Financial Protection Bureau in July is now just one short step away from elimination.

The Senate tonight voted 51-50 (with Vice President Pence casting the deciding vote) to invalidate the CFPB’s rule under the Congressional Review Act (“CRA”). That vote follows the House of Representatives’ disapproval of the rule in July.

The last remaining step is the President’s signature on the legislation, which seems highly likely given the Administration’s statement today (pdf) urging the Senate to invalidate the rule.

The President’s approval will trigger two provisions of the CRA.

First, the rule…
Continue Reading Congress votes to invalidate CFPB’s anti-arbitration rule

The Supreme Court kicked off its October 2017 Term yesterday with a spirited oral argument in the three cases involving the enforceability of arbitration agreements in employment contracts.

As we have explained, these cases—Epic Systems v. Lewis, Ernst & Young LLP v. Morris, and NLRB v. Murphy Oil USA—present the question whether an arbitration agreement in an employment contract that requires bilateral arbitration, and prohibits class procedures, is invalidated by Section 7 of the National Labor Relations Act (NLRA), which gives employees the right “to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” According to the National Labor Relations Board, Section 7 protects employees’ right to seek relief on a class-wide basis, and therefore renders unenforceable arbitration agreements that bar class procedures—even though the Supreme Court has twice held that the Federal Arbitration Act (FAA) protects the enforceability of such agreements, in AT&T Mobility LLC v. Concepcion (2011) and American Express Co. v. Italian Colors Restaurant (2013).

The four Justices who dissented in either Concepcion or Italian Colors (or both) aggressively defended the NLRB’s determination. When the dust settled, however, it was not at all clear that they will be able to attract a fifth Justice to their position.Continue Reading Supreme Court Considers Class Waivers in Employment Arbitration Agreements

As many of our readers know, the Supreme Court will hear arguments next term in a trio of cases examining whether class waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act. Many observers—including the two of us—believed that the issue had been settled by the Supreme Court’s decisions in AT&T Mobility LLC v. Concepcion (2011) and American Express Co. v. Italian Colors Restaurant (2013). But—as detailed on our blog—in 2012 the National Labor Relations Board concluded in the D.R. Horton case that Section 7 of the National Labor Relations Act (NLRA), which protects the ability of employees to engage in “concerted activities” (for example, union organizing), supersedes Concepcion (and by extension, American Express) and requires that employees be allowed to bring class actions (either in court or in arbitration).

Over the past several years, a circuit split has developed over whether the Board’s approach in D.R. Horton rests on correct interpretations of the FAA and NLRA, with the majority of courts rejecting the Board’s position. In January, the Supreme Court granted review in three cases—NLRB v. Murphy Oil USA, Inc., Epic Systems Corp. v. Lewis, and Ernst & Young LLP v. Morris—to resolve the split. Briefing on the merits is now underway. We filed our amicus brief on behalf of the U.S. Chamber last Friday, and—while we believe our brief makes compelling arguments (which we discuss below)—the big development in these cases was the amicus brief that the United States filed on Friday.

Significantly, the United States has changed its position since last October, when the DOJ represented the NLRB in filing the petition for certiorari in Murphy Oil. That petition was a full-throated defense of the D.R. Horton rule, consistent with efforts by a number of federal agencies during the Obama Administration to circumvent Concepcion by banning class waivers or banning predispute arbitration entirely. Last Friday, however, the United States broke with the Board’s position, filing an amicus brief in support of Murphy Oil and the other two companies.

As the government explained in its brief on Friday, the Solicitor General’s office has concluded that its earlier briefs got the issue wrong:

In Murphy Oil, this Office previously filed a petition for a writ of certiorari on behalf of the NLRB, defending the Board’s view that agreements of the sort at issue here are unenforceable. After the change in administration, the Office reconsidered the issue and has reached the opposite conclusion. Although the Board’s interpretation of ambiguous NLRA language is ordinarily entitled to judicial deference, courts do not defer to the Board’s conclusion as to the interplay between the NLRA and other federal statutes. We do not believe that the Board in its prior unfair-labor-practice proceedings, or the government’s certiorari petition in Murphy Oil, gave adequate weight to the congressional policy favoring enforcement of arbitration agreements that is reflected in the FAA.

Continue Reading Solicitor General weighs in against NLRB’s anti-arbitration rule

As we’ve noted in this space before, one of the most persistent efforts to undermine the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion—which held that the Federal Arbitration Act (FAA) generally requires enforcing arbitration agreements that waive class or collective proceedings—has been spearheaded by the National Labor Relations Board. In 2012, the Board concluded in the D.R. Horton case (pdf) that Section 7 of the National Labor Relations Act (NLRA), which protects the ability of employees to engage in “concerted activities” (for example, union organizing), supersedes the Supreme Court’s interpretation of the FAA in Concepcion and its progeny and requires that employees be allowed to bring class actions (either in court or in arbitration).

Until recently, the D.R. Horton rule had been rejected by every appellate court to consider it—the Second Circuit, Fifth Circuit, and Eighth Circuit as well as the California and Nevada Supreme Courts—not to mention numerous federal district courts. But last year, the Seventh Circuit and Ninth Circuit parted ways with this consensus, agreeing with the Board and concluding that (at least in some circumstances) agreements between employers and employees to arbitrate their disputes on an individual basis are unenforceable.

This circuit split all but guaranteed that the Supreme Court would need to step in, and sure enough, last Friday, the Court granted certiorari in three cases involving the validity of the D.R. Horton rule. (We drafted amicus briefs for the U.S. Chamber of Commerce in each case). One case, NLRB v. Murphy Oil USA, Inc., arises out of a Board decision finding that an employer had engaged in an unfair labor practice by entering into arbitration agreements with its employees, and the other two, Epic Systems Corp. v. Lewis and Ernst & Young LLP v. Morris, are private-party disputes in which employees invoked D.R. Horton to challenge their arbitration agreements.Continue Reading Supreme Court Will Review NLRB’s Anti-Arbitration D.R. Horton Rule

The rule (pdf) just proposed by the Consumer Financial Protection Bureau to regulate arbitration agreements is not a surprise: the Bureau has said for months that it was developing such a rule.

This post examines the details of the proposal—how it would regulate arbitration, its scope, and its effective date. We also discuss the course of the rulemaking process, including potential judicial review of any final rule. In a future post, we’ll evaluate the CFPB’s purported justifications for the regulation.

The bottom line: The CFPB’s proposal is effectively a blanket ban on the use of arbitration by companies in the consumer financial services arena. It is an attempt to overrule by regulation the Supreme Court’s landmark decision five years ago in AT&T Mobility LLC v. Concepcion (in which we represented AT&T). Businesses that are concerned about the ramifications of this proposal will have 90 days from the date the proposal is published in the Federal Register to submit comments to the agency, and if a rule is adopted in the present form of the proposal, parties are certain to seek judicial review.Continue Reading The CFPB’s Proposed Anti-Arbitration Rule