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U.S. Supreme Court Unanimously Upholds Arbitrator’s Finding of Agreement to Class Arbitration

In Arbitrability, Arbitration, Class-wide Arbitration on June 10, 2013 at 6:27 pm
U.S. Supreme Court building.

U.S. Supreme Court building. (Photo credit: Wikipedia)

In a ruling today with implications for wage & hour class actions, the U.S. Supreme Court 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.  Delivering the unanimous opinion of the Court and citing Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U. S. 662, 684 (2010), Justice Kagan concluded that the arbitrator’s decision survives the limited judicial review §10(a)(4) allows.  Slip Op. at 1-2.

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).

In sum, Oxford chose arbitration, and it must now live with that choice. Oxford agreed with Sutter that an arbitrator should determine what their contract meant, including whether its terms approved class arbitration. The arbitrator did what the parties requested: He provided an interpretation of the contract resolving that disputed issue. His interpretation went against Oxford, maybe mistakenly so. But still, Oxford does not get to rerun the matter in a court. Under §10(a)(4), the question for a judge is not whether the arbitrator construed the parties’contract correctly, but whether he construed it at all.Because he did, and therefore did not “exceed his powers,”we cannot give Oxford the relief it wants. We accordingly affirm the judgment of the Court of Appeals.

Id. at 8-9.

By CHARLES H. JUNG

Second District Holds That “Any Dispute” Language in Arbitration Clause Clearly and Unmistakably Delegated Arbitrability Determination to the Arbitrator

In Arbitrability, Arbitration, Delegation of Arbitrability Decision on February 17, 2012 at 6:53 am
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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

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First District Affirms Waiver of Right to Arbitrate in Wage & Hour Case

In Arbitration, Waiver on February 17, 2012 at 6:34 am
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In an unpublished decision, the First District Court of Appeal affirmed the trial court’s denial of a motion to compel arbitration in a wage and hour class action, where defendants conducted voluminous discovery and filed and fully litigating two motions to compel further responses to discovery, a motion for sanctions and a motion for a protective order.    Partridge, et al. v. Hott Wings, Inc., et al., No. A130266, 2012 WL 470458 (Feb. 14, 2012).

Discussion

The Court found that Defendants’ delay in filing their petition to compel arbitration “connotes an intent not to arbitrate”.  Id. Defendants conducted substantial discovery:

Between March 2010 and the October 2010 hearing on defendants’ motion to compel arbitration, defendants engaged in voluminous written discovery to which plaintiffs responded.   In addition, defendants deposed numerous plaintiffs and third party witnesses.   Although plaintiffs had begun deposing witnesses, they had not yet obtained basic documents from defendants through discovery.   The discovery focused on the liability of individual defendants and the franchise defendants that employ plaintiffs.   As a result of defendants’ discovery requests, plaintiffs provided information regarding plaintiffs’ estimated damages, which defendants were responsible for which violations, and the liability of the individual as well as the franchise defendants.   A reasonable inference is that the information gained from defendants’ discovery goes to significant issues in plaintiffs’ case.

Id.

In addition, the Court found that Defendants “substantially invoked the litigation machinery” by: Read the rest of this entry »