ARBITRATION
ADLER
FALL 2012
I. Arbitration Basics
a. What is Arbitration?
i. Features different from litigation
1. No jury or judge
2. Final award
3. Consensus – can come up with own procedures contractually
4. Private – Federal Rules of Evidence do not necessarily apply
ii. Without consensus there is no arbitration
1. Struggle with when there is an agreement to arbitrate
2. No arbitration jurisdiction without agreement in contract
iii. Extremely difficult to overturn arbitration awards
iv. When is it used?
1. Labor agreements
2. Consumer cases
3. Broker agreements
v. Want to avoid large losses in front of juries
vi. Used in international commercial contracts/agreements
1. US has NO civil monetary judgment treaty with any other country
a. Not automatically enforced
i. Either: 1) Enforce
2) Deny
3) Re-Litigate
2. Arbitration enforcement treaty with about 153 countries
a. NY Convention – created this whole set of jurisprudence
i. Says that an award rendered in territory of any signatory can be enforced in any other signatory without having to litigate all over again
vii. Advantages
1. Faster conclusion
a. Slowing in beginning – to get started
b. Need to build your own courthouse
viii. Building consensus
1. Standard contract ([] = not essential)
a. How to pick arbitrator(s)
b. How the costs will be devided
c. The forum
d. Choice of law
e. Language in international cases
f. [timing]
g. [Scope of discovery] – no automatic presumption of discovery
h. Institutional v. ad hoc
i. Can use institutional standards in arbitration clauses
ii. Institutions charge a fee
i. Enforcement
ix. Claimant (Plaintiff) v. Respondent (Defendant)
x. Grant v. Eagles (2009)
1. Didn’t want to go to arbitration
a. Wanted to go before a jury
2. Signed an automatic agreement to arbitrate
3. 9 USC §3
a. Stay the trail until arbitration clause has been had
4. FAA showed desire to enforce arbitration acts
a. Tie goes to the party seeking arbitration
5. Any doubts concerning scope should be resolved in favor of arbitration
xi. AMF v. Brunswick (1985)
1. Arbitration agreements – need a third party non-binding agreement
a. Not invoking a final decision
2. Shall – one of the most important words in an arbitration agreement
a. May – one of the worst
xii. Advanced Body Care Solutions, LLC v. Thione Int’l, Inc. (2008)
1. Non-binging arbitration
a. Doesn’t exist – arbitration is binding
2. Mediation – not final and not binding
a. Various courts have a mediation requirement
3. Arbitration in some ways more binding than judicial opinions
4. Court not going to compel mediation
5. Cooling off clauses:
a. Can require mediation – if it doesn’t work than arbitration
b. Must be a meeting of principles within 30 days
6. Can create extra contractual consensus
7. If you pick an institution – all have rules on arbitrator selection
a. Expensive to use institutional
b. Con override provided there is consensus
xiii. Keep in mind struggles courts have with arbitration
1. Due Process issue: cannot bring claim to court
b. Arbitrability
i. Moses H. Cone Memorial Hospital v. Mercury Construction (1983)
1. “Any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration” *24-25
2. FAA does not create subject matter jurisdiction
a. State arbitration statutes exist to fill the gap
ii. Under Fed. R. Civ. P. 12 – arbitration divests Federal Court from jurisdiction
1. In alternative – stay the case under 9 USC 1 §3
iii. Green Tree Financial Corp. v. Conseco Financial Corp. (2003)
1. Arbitration clause constrains a provision waiving a jury trial
2. Class arbitration is brought
a. Green Tree attempted to compel arbitration
b. South Carolina certified class
3. South Carolina Supreme Court: silent in respect to class arbitration – authorized
4. Does arbitrator or judge decide whether class arbitration is allowed?
5. Gateway matters – what you need to enter
6. Here, what kind of arbitration clause is there
a. Arbitrator decides
iv. Puleo v. Chase Bank (2010)
1. Provision in arbitration that expressly bars class actions
a. Brought class action
i. Argued unconscionable and should submit to arbitrator to decide
2. Question of procedure
3. Held this is a question of arbitrability
a. If unconscionable then you do not have a valid contract to begin with
b. Need a severability clause
4. Dissent
a. Not a question of arbitrability – talking about procedure
b. Did politics agree to arbitrate questions of arbitrability
5. Piece of contract unconscionable
6. Court held class action waiver was a
7. Pemberton v. Hovensa (2009)
a. Efficient dispute resolution
i. Faster, but not necessarily more efficient
b. May want to take discovery on the clause
c. Court comes out right way although reflexive thinking
iii. Third Party Discovery
1. In litigation – subpoenas – court mandated
a. Nationwide discovery from anyone you have jurisdiction on
b. Subpoena duces tecum – must show up with documents
2. In arbitration
a. Can compel under § 7
b. Do not have consensus of 3rd party
3. § 7
a. Must bring documents physically and in person before the arbitrator
b. Can an arbitrator compel a third party to be at the hearing
i. Yes – no authority disputes this
c. Pre-hearing
i. Hypo – deposition would not be before arbitrator therefore no authority under statute
ii. Cannot have prehearing third party depositions
4. Three ways to get testimony
5. Issue of what does before them mean? (Skype, etc.?)
6. Stolt-Nielson v. Celanese (2005)
a. Ok to have hearing
b. Nothing in statute specifies when provided arbitrator is present
7. Circuit Split
a. 8th Circuit – implicit in arbitrators power
b. 3rd Circuit – strict construction of statute
i. Does not have implicit power
ii. Some may say it’s preferable – but way to give power is to amend the statute
8. Must consider if third party discovery is necessary
d. Severability
i. First Options Clause – requires issues of arbitrability to go before an arbitrator
ii. Prima Paint Corp. v. Flood & Conklin Mfg. Co. (1967)
1. Institutional arbitration clause
2. Claimed fraudulent inducement
a. Tricked someone into signing a contract
3. Argued contract was the product of fraud
4. Who should decide whether the contract is fraudulent
5. Arbitrator decides issues dealing with contract
6. A valid arbitration clause can survive even an invalid contract through severability doctrine
