The Tenth Circuit Court of Appeals recently affirmed a district court's decision to lift the stay in federal proceedings due to the arbitrator's decision to terminate proceedings based on a party's failure to pay the arbitration fees. It reached this decision by concluding it had proper jurisdiction to hear the appeal and that the district court had reached the correct decision on the merits - that the employee was in default of his obligation to pay the arbitrator's fees and that the proceedings were properly terminated.
Massachusetts law recognizes arbitration as "a remedy created by statute which limits its availability to the parties to an arbitration agreement." Rae F. Gill, P.C. v. DiGiovanni, 34 Mass.App.Ct. 498, 503 (1993). In other words, a statute - the Massachusetts Arbitration Act (G.L. c. 251) ("MAA") - creates the ability for parties to settle their legal disputes through arbitration, but those parties also must have a prior agreement to do so. But what happens when one party refuses to arbitrate?
The Massachusetts Appeals Court has ruled that an arbitrator exceeds her authority only when "she awards relief beyond the scope of the arbitration agreement, beyond that to which the parties bound themselves, or enters an award prohibited by law." Conway v. CLC Bio, LLC, 2015 WL 9883907, Mass. App. Ct. No. 14-P-350 (June 12, 2015), at 5-6. The Court also reiterated that the Federal Arbitration Act ("FAA") requires enforcement of an agreement to arbitrate statutory claims "absent a question of arbitrability, countervailing Congressional command, or cognizable challenge to the validity of the agreement to arbitrate." Id., at 10.
The Seventh Circuit recently ruled that a party was bound to an arbitration award despite not being a signatory to the agreement to arbitrate. The court based its decision on the doctrine of "direct benefits estoppel," ruling that, even though the plaintiff was a non-signatory to the franchise agreement that contained an arbitration clause, she had received a direct benefit from the franchise agreement, and thus was bound under the terms of the arbitration award.
In a recent case, the California Court of Appeal for the Fourth Appellate District handed down a decision involving the question of whether the court or the arbitrator decides if a case involving a class action can be arbitrated when the arbitration agreement is silent as to that issue. Specifically, the court asked: "Who decides whether an agreement to arbitrate disputes between the parties to the agreement authorizes class and/or representative arbitration when the contract is silent on the matter--the arbitrator or the court?"
In yet another decision that underscores the "elemental tenet" of arbitration that a party cannot be compelled to arbitrate if he or she has not agreed to arbitrate, the Massachusetts Appeals Court recently ruled that a non-signatory to an agreement cannot be compelled by a signatory to arbitrate a dispute that the non-signatory did not agree to arbitrate.
Party discovery in arbitration is quite limited, particularly in comparison to the scope of discovery permitted by the Federal Rules of Civil Procedure. However, to what extent can an arbitrator order a third party - who, it should be noted, never agreed to arbitrate -- to appear and testify at an arbitration or to produce documents or other tangible items for use as evidence at an arbitration?
Employers and employees everywhere should check their employee handbooks - if it has an arbitration provision, it is likely any disputes between the two will take place in arbitration rather than in court.
In a recent decision, the Ninth Circuit Court of Appeals ruled that parties cannot agree under a contract to limit the scope of judicial review of an arbitration award as delineated by the Federal Arbitration Act (the "FAA"). This ruling complements a 2008 Supreme Court case, Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008), where the Court held that a clause in an arbitration agreement providing for expanded judicial review beyond what was provided for in the FAA was unenforceable. In light of the Ninth Circuit's new ruling, parties also cannot go the other way and curtail the scope of review to which the parties are entitled under the Federal Arbitration Act.
The American Arbitration Association recently released Optional Appellate Arbitration Rules, which aim to provide parties with an opportunity to have appeals of an arbitral award heard within the arbitration process itself. Typically, applications to vacate arbitral awards are heard in courts, and the grounds for vacatur are quite limited pursuant to federal and state arbitration statutes.
In an important development, the American Arbitration Association has revised its Commercial Arbitration Rules to include a host of changes that seek to streamline arbitration and make the process more cost-effective and tightly managed. The rules, which can be found here, are amended and effective as of October 1, 2013. As a result, practitioners filing new arbitration claims that will be governed by the Commercial Arbitration Rules will need to familiarize themselves with the revisions, as they provide significant changes in the process. Litigators should also note that parties to ICDR proceedings may choose to use these rules instead of the ICDR International Arbitration Rules.
In a rare setback to the growing arbitration field, the Third Circuit Court of Appeals recently struck down on a 2 to 1 vote Delaware's confidential state-sponsored arbitration program. The Court held that, as with the chancery courts, the public had a First Amendment right of access to the court's arbitration proceedings.
An international crisis appears to lurching towards a resolution, as the Russian government has dropped piracy charges against 30 Greenpeace activists it arrested last month in the Arctic Circle. Instead, Russia will charge the protestors with "hooliganism," which is punished with a maximum of 15 days in jail, in contrast to piracy's 15-year sentence.
Like other states, Massachusetts has enacted an arbitration statute that provides a streamlined procedure for compelling a party to arbitrate. Section 1 of the Massachusetts Uniform Arbitration Act, G.L. c. 251, recognizes two types of arbitration agreements: (i) those requiring parties to a contract to submit any dispute arising between them to arbitration, and (ii) those requiring parties to submit an existing dispute to arbitration. If a party reneges on either type of agreement, the aggrieved party can file an application in the Massachusetts Superior Courts to compel arbitration. Such applications are heard as motions and typically must be served on the non-arbitrating party in the manner required for original writs of summons, though the parties can agree, and often do agree, on another procedure for service.
In a major decision, the U.S. Court of Appeals for the Eleventh Circuit recently confirmed an arbitral award that permitted class arbitration when the underlying arbitration clause was silent on the permissibility of class arbitration. By issuing this decision in Southern Communications Services, Inc v Thomas, No 11-15587, 2013 WL 3481467 (11th Cir July 12 2013), the court once again underscored the extremely high level of deference granted to arbitrators, while at the same time threw a lifeline to the sputtering class action practice in the United States.
In a closely watched decision, the U.S. Court of Appeals for the Federal Circuit recently determined that an order of the International Trade Commission ("ITC") terminating an investigation on the basis of an arbitration agreement is an appealable final determination under 19 U.S.C. § 1337(c). As a result of this case, the federal circuit now has jurisdiction over appeals based on determinations of the ITC to terminate investigations due to pre-existing arbitration agreements.
In yet another example of the great deference accorded to arbitral decisions by U.S. Federal Courts, the Fifth Circuit recently declined to vacate or modify an award based on allegations of arbitrator misconduct. Despite intimations that the conduct of the opposing party and the arbitrator may have led to a reversal had it occurred in the district court, the Fifth Circuit cited the bedrock principle that, due to a "strong federal policy favoring arbitration," judicial review of arbitration awards is "extremely narrow," and refused to vacate the award.
In the recent decision of Oxford Health Plans v. Sutter, the U.S. Supreme Court ruled unanimously that even a "grave error" of an arbitrator is not enough to vacate an award in most cases. Oxford Health Plans had gone to federal court seeking to vacate an arbitrator's decision that John Sutter, MD, could bring a class action on behalf of himself and other New Jersey physicians alleging that Oxford failed to make full and prompt payment for services provided to members of Oxford's network.
Alternative dispute resolution is rightly gaining steam as an efficient, fair mechanism for the resolution of complex business disputes. Many companies are redrafting their standard-form contracts to include mandatory arbitration clauses. This is particularly true for companies doing business across state or national borders, so that they might avoid being hauled into court in a foreign jurisdiction. But what if you agree to arbitrate a dispute and end up losing? Do you have any recourse?
The Permanent Court of Arbitration ("PCA"), an intergovernmental body based in The Hague and established by treaty over a century ago to provide international dispute resolution services, has recently issued the first set of rules specifically designed to govern arbitrations relating to outer space activities. The PCA Optional Rules for Arbitration of Disputes Relating to Outer Space Activities (the "Optional Space Rules"), formally adopted on December 6, 2011, took three years and over a dozen leading experts in air and space law to develop. The Space Rules are based on the standard UNCITRAL Arbitration Rules, but contain modifications to meet the particular needs of disputes arising out of outer space activities.