Arbitration Case Law Update 2012

Parties to arbitration agreements sometimes invoke the judicial system to litigate collateral issues arising out of the arbitration process, such as arbitrability of some or all of the claims, arbitrator bias, and award enforcement or vacatur. When deciding these collateral issues arising out of securities arbitration, courts interpret and apply the Federal Arbitration Act (FAA). This chapter identifies recent decisions by the Supreme Court under the FAA, as well as selected lower court decisions that could have an impact on securities arbitration practice

AT&T Mobility and the Future of Small Claims Arbitration

This article focuses on small claims arbitration and examines the impact of AT&T Mobility on the legitimacy of the process. Part II of the article describes the Supreme Court’s AT&T Mobility decision, which held that the FAA preempts a California rule that declared a class arbitration waiver in a consumer contract unconscionable. Part III describes the primary features of the two options remaining for the Concepcions—small claims court and small claims arbitration, as well as their perceived advantages and disadvantages. Part IV demonstrates that courts have endorsed simplified arbitration. Part V examines whether simplified arbitration is a fair method of resolving small arbitration claims. Part VI explores other dispute resolution models for resolving small dollar value commercial disputes, including on-line dispute resolution, telephonic arbitration, and a small claims arbitrator. Part VII concludes by urging dispute system designers to consider changing the default mechanism of arbitrating small claims cases from paper or “desk” arbitration to a live hearing before a small claims arbitrator

Democracy and Dispute Resolution: The Problem of Arbitration

This article seeks to bring the submerged issue of arbitration\u27s relationship to democracy to the surface of the mandatory arbitration debate. Its goal is relatively modest: To recognize and articulate the relationship between democracy and arbitration as an issue worth considering, to analyze the democratic character of arbitration and to suggest some implications of this assessment

The Majority Approach to Arbitration Waiver: A Workable Test or A License for Litigants to Play Games with the Courts?

[Excerpt] “The freedom of parties to agree to arbitrate their disputes is enshrined by contract law and federal law. By inserting a mandatory arbitration clause in a contract, both parties agree that, should a dispute arise between them, they will not bring the matter to court. Instead, they agree to submit any disputes to a mutually-agreed-to third party, such as the American Arbitration Association; this third-party acts like a judge and resolves the dispute. Arbitration has many advantages, such as reducing the cost and increasing the efficiency of dispute resolution. Because of these reduced costs and greater efficiency, businesses can pass along their savings to consumers by offering them lower prices and more value. Notwithstanding all of these advantages, the freedom of parties to insert enforceable arbitration clauses in their contracts has its fair share of detractors. Big businesses often insert such clauses in take-it-or-leave-it consumer contracts, such as credit card and cell phone agreements. Consumers who want or need the service provided by these businesses are forced to agree to mandatory arbitration clauses, which grant to both parties the legal right to insist upon arbitration as the sole dispute resolution method. While almost no one disagrees that arbitration is efficient and less costly, some argue that it is an unfair process. Since the business party usually appears before the third-party arbitrator repeatedly, whereas the consumer appears before him only once, the arbitrator may feel inclined to find in favor of the business party, its repeat customer. This debate between efficiency and the unfairness underlies any discussion about arbitration. This note will address this debate by analyzing merely one facet of arbitration: arbitration waiver. All of the circuits agree that when a party with a contractual right to arbitrate chooses to litigate a dispute, the party’s election to litigate may waive his ability to move the case out of court and into arbitration. However, they disagree about what test should be applied to decide whether a particular election to litigate constitutes arbitration waiver. The circuits have formulated primarily two different tests. In the majority of circuits, two elements must be proven: (1) the party seeking arbitration must have participated in litigation; and (2) the party resisting arbitration must show that he will suffer prejudice. A minority of circuits keep the first element, but the prejudice requirement has been eliminated.

The Impact of Compulsory Arbitration on Bargaining Behavior: An Experimental Study

A series of experiments compares bargaining behavior under three different settings: no arbitration, conventional and final offer arbitration. Under no arbitration disputes with zero payoffs were around 10%, while the pie was equally split in less than half of the cases. Under conventional arbitration - where the arbitrator is free in choosing his award - every third negotiation ended in dispute giving evidence for a modified chilling effect. Under final offer arbitration – where the arbitrator has to award to the bargainers either one of their final offers - there was only a small increase of disputes while equal splits have doubled to 80%. The experiment shows final offer arbitration, though having lower dispute rates, to interfer more with bargaining behavior than conventional arbitration where the bargaining behavior was similar to the no-arbitration treatment. Under final offer arbitration, negotiators adjust their bargaining strategy to the arbitrator´s expected award. --Bargaining,Arbitration,Experiments,Fair Awards

Comparing Mandatory Arbitration and Litigation: Access, Process, and Outcomes

[Excerpt] What do we know about mandatory arbitration and its impact? Some existing studies have examined samples of employment arbitration cases, usually obtained from the American Arbitration Association (AAA), which is currently the largest arbitration service provider in the employment area. Although some early studies found relatively high employee win rates and damage awards in arbitration, comparable to those in litigation, these results were mainly based on arbitration under individually negotiated agreements or in the securities industry and involved relatively highly paid individuals. More recent studies using larger samples of cases based on mandatory arbitration agreements find much lower employee win rates and smaller damage amounts than typical in litigation. Existing studies, however, have not been able to account for differences in the types of cases that are heard in arbitration. In particular, previous work has not been able to systematically compare outcomes in arbitration and litigation in the same study. In this study, we take a new approach to investigating mandatory arbitration that allows us to do a systematic comparison of arbitration and litigation, accounting for key factors that differentiate between the types of cases brought in these forums. We do this by collecting survey data on a comparable sample of arbitration and litigation cases from attorneys involved in those cases. We also investigate the overall experiences of the attorneys in representing plaintiff employees in mandatory arbitration and litigation. The ability to obtain and finance legal representation is a crucial, yet understudied aspect of the system of enforcement of employment rights. Absent the ability to obtain effective representation, employees may be unable to pursue and win cases even where their statutory rights have been violated. One of the potential benefits held out for arbitration compared to litigation is that it could provide a cheaper, more accessible forum to allow employee claims to be heard and adjudicated. It is certainly the case that existing research indicates many limitations of the litigation system, particularly the relatively poor outcomes obtained by plaintiff employees compared to other litigants. What we are able to investigate empirically in this study is whether mandatory arbitration ameliorates some of the limitations of the litigation system or whether it is equally or even more limited in its accessibility

Authority of United States Bankruptcy Courts to Stay International Arbitral Proceedings

Part I analyzes the decision of a U.S. bankruptcy court in Springer Penguin that stayed an international arbitration proceeding. Part II examines the Tribunal\u27s denial of the stay in the Behring award. Part III suggests that the Tribunal\u27s reasoning in deying applicability of the stay is consistent with recent U.S. policy favoring international arbitration of commercial disputes. This Note concludes that the interests involved in fostering international commercial arbitration mandate that once an arbitration clause is found to be enforceable, the arbitration should not be stayed by a petition in a U.S. bankruptcy court

Dispute Resolution in Commodities Futures

The commodities futures industry is experiencing rapid growth and a consequential rise in disputes between industry professionals and customers. In response to the growing number of disputes, the industry offers customers several methods for resolution, including the recently added National Futures Association (NFA). The NFA fills a gap in previously available forums, as it offers a much needed uniform and nationwide system of arbitration with jurisdiction over multi-exchange disputes. This Note suggests that requiring the exchanges to refer disputes to NFA and to include NFA as the forum for arbitration in pre-dispute arbitration agreements would greatly enhance the effectiveness of this new arbitration forum

Mass Arbitration

For decades, the class action has been in the crosshairs of defense-side procedural warfare. Repeated attacks on the class action by the defense bar, the U.S. Chamber of Commerce, and other defense-side interest groups have been overwhelmingly successful. None proved more successful than the “arbitration revolution”—a forty- year campaign to eliminate class actions through forced arbitration provisions in private contracts. The effects for civil justice have been profound. Scores of claims vanished from the civil justice landscape—claims concerning civil rights, wage theft, sexual harassment, and consumer fraud. The effects for social justice, racial justice, gender justice, and economic justice were especially profound, as the legal claims of minorities, women, wage-and- hour workers, and the working poor were systematically and disproportionately foreclosed. Yet now, just when one would expect the defense bar to be taking a victory lap, prominent defendants are abandoning the hard-fought right to disable the class action through arbitration and instead seeking refuge in class actions in court. Why the about face? A surprising counter-offensive to use individual arbitration to plaintiffs’ advantage—Mass Arbitration. This Article presents a foundational analysis of the subject. This Article develops the first and only case study of Mass Arbitration and provides a taxonomy of the results. What emerges is not a variation on old themes but, instead, a new and distinct model of dispute resolution. The investigation reveals significant ways in which the Mass Arbitration model challenges conventional litigation theory wisdom about the economics of individual claiming, uncovers important differences between the Mass Arbitration model and existing forms of aggregate dispute resolution, recasts long-standing debates in litigation theory and jurisprudence, and provides new perspectives on the relationships among private procedural ordering, public procedural reform, and civil justice. Mass Arbitration, in other words, is a phenomenon in its own right. More importantly, it offers a window into the future of civil justice