Arbitration

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In litigation—as in war—it is natural to focus on winning today’s skirmish and to defer planning for battles that might not happen for weeks or months.  But that shortsightedness can lead to strategic blunders—as one class action plaintiff suing Capital One Bank and credit counseling agency InCharge Debt Solutions recently learned the hard way.

In King v. Capital One Bank (USA), N.A. (pdf) (W.D. Va.), the plaintiff, who had asked InCharge to help her with a debt-management plan for some debts she owed to Capital One, alleged that (among other things) the two companies had a hidden relationship that violated…

Continue Reading Class Action Plaintiffs Can’t Have It Both Ways When Opposing Motions to Compel Arbitration

Two years ago, the Supreme Court held “that a party may not be compelled under the [Federal Arbitration Act] to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” Stolt-Nielsen v. AnimalFeeds International Corp., 130 S. Ct. 1758, 1775 (2010) (emphasis in original). But the Court expressly declined at the time “to decide what contractual basis may support a finding that the parties agreed to authorize class-action arbitration.” Today, the Supreme Court granted review in Oxford Health Plans LLC v. Sutter, No. 12-135, to resolve a circuit split over what counts—consistent with the FAA—as an agreement to authorize class arbitration. This issue is important to businesses that seek to enforce arbitration agreements in the context of putative class actions when those agreements do not expressly address class arbitration.
Continue Reading Supreme Court Grants Review in Class Arbitration Case, Oxford Health Plans LLC v. Sutter

The Supreme Court’s unanimous summary reversal in Nitro-Lift last week sends a strong message that state courts must adhere to the Federal Arbitration Act—a legal principle that is important to businesses seeking to enforce their contractual arbitration rights when plaintiffs file non-removable class actions in state court. Just as importantly, it confirms that the Court is more than prepared to step in when state courts defy its clearly controlling precedents.

But some state courts still may not have gotten the message. Just three days after Nitro-Lift was handed down, the Court of Appeals of Washington issued a puzzling published decision…
Continue Reading Washington State Appellate Court’s Ruling Appears To Contravene Federal Arbitration Law

We usually don’t report on Supreme Court cases that don’t involve class action issues. That said, regular readers of the blog know that the enforceability of arbitration agreements has become a critical issue in class action defense. For that reason, we wanted to apprise you of the Supreme Court’s latest arbitration decision in Nitro-Lift Technologies, L.L.C. v. Howard.

In Nitro-Lift, the Supreme Court summarily reversed a decision of the Oklahoma Supreme Court that had invalidated non-compete clauses contained in a pair of employment contracts that contained an arbitration provision. As the Supreme Court explained, the Oklahoma Supreme Court…
Continue Reading Supreme Court Summarily Reverses State Court For Failure To Follow High Court’s Arbitration Precedents

The Supreme Court has just granted certiorari in American Express Co. v. Italian Colors Restaurant, No. 12-133.   Earlier today, my colleague Andy Pincus previewed the issue presented to the Court, which is (in a nutshell) whether plaintiffs may avoid their agreements to arbitrate on an individual rather than class-wide basis by contending that they cannot “effectively vindicate” their federal claims without the use of the class device.

Since AT&T Mobility LLC v. Concepcion, the majority of courts have enforced arbitration agreements that waive class actions.   But a distinct minority of courts, relying on the Second Circuit’s decision…
Continue Reading Supreme Court Grants Certiorari in American Express Arbitration Case

When the Supreme Court convenes for its private conference today, the Justices will consider whether to grant certiorari in a case presenting one of the most significant questions regarding the meaning of the Court’s ruling in AT&T Mobility v. Concepcion that remains unresolved in the lower courts.

Following the Concepcion decision, opponents of arbitration tried to convince lower courts to limit Concepcion’s holding that arbitration clauses could not be invalidated on the ground that they required individual arbitration and prohibited class proceedings. The overwhelming majority of those arguments were rejected by district courts and courts of appeals, as explained in this article.

But a two-judge panel of the Second Circuit earlier this year endorsed the bizarre assertion that Concepcion applies differently depending on whether the claim to be arbitrated arises under state or federal law. In In re American Express Merchants’ Litigation, the panel held that agreements to arbitrate disputes on an individual basis need not be enforced when a plaintiff provides evidence that the costs of vindicating a federal claim make it “economically irrational” to pursue such a claim without the class-action procedure. Amazingly, the court found that the affidavit of the plaintiffs’ own economic expert provided sufficient “evidence” to invalidate the arbitration clauses. In other words, arbitration clauses that could be enforced with respect to a state claim might be unenforceable if the same plaintiff brought a virtually identical claim under federal law.

As noted in an earlier blog post, American Express filed a petition for a writ of certiorari seeking review of the Second Circuit’s ruling (American Express Co. v. Italian Colors Restaurant, No. 12-133) and Mayer Brown authored an amicus brief supporting the petition on behalf of the Chamber of Commerce, Business Roundtable, American Bankers Association, and National Association of Manufacturers.Continue Reading Supreme Court Poised To Decide Whether To Grant Certiorari In Major Arbitration Case (In re American Express)

As we previously reported, the Ninth Circuit granted rehearing en banc in Kilgore v. KeyBank, NA, to determine whether the Federal Arbitration Act preempts a California public-policy rule that declares claims for so-called “public injunctive relief” off-limits to arbitration. On October 26, 2012, my colleagues and I, working with the National Chamber Litigation Center, filed an amicus brief on behalf of the Chamber of Commerce of the United States supporting KeyBank.

As we discuss in the brief, California’s rule conflicts with the FAA for three principal reasons:

  • First, the FAA flatly forbids States from “prohibiting arbitration of

…
Continue Reading Chamber of Commerce Files Amicus Brief In Critical Ninth Circuit Case Explaining Why Plaintiffs Should Not Be Permitted To Use “Public Injunction” Claims As An End-Run Around Their Arbitration Agreements

In an effort to avoid the enforcement of arbitration agreements after AT&T Mobility v. Concepcion, the plaintiffs’ bar has sought to invoke provisions of California’s Unfair Competition Law and Consumers Legal Remedies Act that allow for consumers to pursue claims for injunctive relief on behalf of the “general public.” They point to two pre-Concepcion decisions of the California Supreme Court—Broughton v. Cigna Healthplans, 988 P.2d 67 (Cal. 1999) and Cruz v. PacifiCare Health Sys., Inc., 66 P.3d 1157 (Cal. 2003)—in which that court had declared such claims non-arbitrable.

Earlier this year, a panel of…
Continue Reading Ninth Circuit Grants Rehearing En Banc In Kilgore v. KeyBank To Determine Whether California May Exempt Claims For “Public” Injunctions From Arbitration

For years, the California Supreme Court was one of the strongest forces against arbitration in the country. A disproportionate number of the U.S. Supreme Court’s decisions addressing preemption under the Federal Arbitration Act have reversed decisions of the California state courts or of federal courts applying California law. A recent pro-arbitration decision (Pinnacle Museum Tower Ass’n v. Pinnacle Market Development (US), LLC, 54 Cal.4th 223, 145 Cal.Rptr.3d 514 (2012)) suggests that the tide may be turning.

We will soon find out. The court this week granted review in another major arbitration case, Iskanian v. CLS Transportation of Los Angeles, No. S204032. The new grant gives the court the opportunity to weigh in on several issues in the wake of AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). Concepcion held that the Federal Arbitration Act (FAA) preempted a California-law doctrine refusing enforcement to arbitration clauses that required individual arbitration and precluded class-wide dispute resolution.

Three issues in Iskanian are most prominent.Continue Reading California Supreme Court Grants Review In Iskanian v. CLS Transportation; Will Address Enforceability of Employee Arbitration Agreements After Concepcion

Since Concepcion, the plaintiffs’ bar has been searching for ways to avoid agreements to arbitrate on an individual basis. Because their efforts have largely failed so far, the new frontrunner is the argument that class procedures are necessary to permit “vindication of federal statutory rights.” Most courts to consider the argument have rejected it, but it has gained some real traction in the Second Circuit, which refused to enforce American Express’s arbitration agreement in the context of federal antitrust claims by a group of merchants. After the Second Circuit denied en banc review by a sharply divided vote, American…
Continue Reading Can Plaintiffs Dodge Concepcion By Arguing That They Need Class Actions To Vindicate Federal Statutory Claims?