Wednesday, July 26, 2017

House Votes to Rescind CFPB Arb Rules

A joint resolution of disapproval by Congress could nullify the “Arbitration Agreements” rule, 82 Fed. Reg. 33210 (July 19, 2017), just finalized by the Consumer Financial Protection Bureau (CFPB). The rules bar certain financial institutions from using contract clauses that provide for arbitration of disputes with customers to restrict participation in class-action lawsuits. The right of parties to avoid court and arbitrate contractual disputes comes from the Federal Arbitration Act of 1925. It provides that agreements to arbitrate disputes are enforceable. Decades after becoming a standard form of alternative dispute resolution, arbitration clauses were employed as a method to defeat class action lawsuits. The new rules by CFPB allow regular class-action lawsuits by consumers. The CFPB aims to prohibit financial companies from using mandatory arbitration clauses as a way to block class-action lawsuits. The new rules apply to most banks and nonbank lenders, payment processing companies, consumer reporting agencies, debt collection agencies and certain automotive finance companies. Pursuant to the Dodd-Frank Act, the arbitration rules will only apply to agreements entered into 180-days after the effective date and it will become fully effective on February 10, 2018. The Senate will take up the issue next via the Congressional Review Act, under which Congress may overturn a broad range of regulatory rules issued by federal agencies by enacting a joint resolution of disapproval within 60 days of the rules being announced. See more here-- http://bit.ly/2uCuiha and http://bit.ly/2uYGM4Q

Saturday, July 22, 2017

Comments Invited Following MEAC Rule Change

The Supreme Court of Florida recently adopted its Alternative Dispute Resolution Rules and Policy Committee's proposed amendments to Rule 10.910 of the Florida Rules for Certified and Court-Appointed Mediators regarding composition of the Mediator Ethics Advisory Committee (MEAC). The Committee’s petition follows another recent opinion adopting changes, In re: amendments to the Florida Rules for Certified & Court-Appointed Mediators, 202 So. 3d 795 (Fla. 2016). New Rule 10.910(b) (Appointment) provides membership of MEAC shall be composed of nine members, two from each of the four divisions of the Mediator Qualifications and Discipline Review Board (MQDRB), and one member from any of the four divisions. Additionally, Rule 10.910(c) (Membership and Terms) now requires that the membership of MEAC shall include one county mediator, one family mediator, one circuit mediator, one dependency mediator, one appellate mediator, and four additional mediators who hold any type of Florida Supreme Court mediator certification. Finally, Rule 10.910(e) (Opinions) is amended to allow the Dispute Resolution Center greater latitude in publishing advisory opinions of MEAC. Because the amendments to Rules for Certified and Court-Appointed Mediators are effective immediately and were not published for comment prior to their adoption by the court, interested persons must now file any comments with the court on or before August 21, 2017, as well as a separate request for oral argument if the person filing the comment wishes to participate in oral argument, which may be scheduled in this case. The Committee Chair then has until September 11, 2017, to file a response to any comments filed with the court. See full opinion here-- http://www.floridasupremecourt.org/decisions/2017/sc17-935.pdf

Friday, July 14, 2017

CFPB Arbitration Rule Final

This week, new arbitration rules were finalized by the Consumer Financial Protection Bureau (CFPB). The right of parties to avoid court and arbitrate contractual disputes comes from the Federal Arbitration Act of 1925. It provides that agreements to arbitrate disputes are enforceable. Decades after becoming a standard form of alternative dispute resolution, arbitration clauses were employed as a method to defeat class action lawsuits. Where parties agreed to arbitrate disputes, claims could still be brought, but on an individual basis in arbitration. The new rules by CFPB allow class-action lawsuits by consumers. The CFPB aims to prohibit financial companies from using mandatory arbitration clauses as a way to block class-action lawsuits, in which a large number of plaintiffs with similar complaints band together. This could result in higher litigation costs for banks, which they may offset either by raising the costs of consumer loan products or reducing services. Arbitration clauses have become widespread in recent years, aided by a string of court rulings that have limited the ability of consumers to file lawsuits. The agency’s action is the first significant check on arbitration since recent U.S. Supreme Court decisions that affirmed its widespread use. The new rules restore the ability of groups of people to file or join group lawsuits. The rules apply to most banks and nonbank lenders, payment processing companies, consumer reporting agencies, debt collection agencies and certain automotive finance companies. If Congress soon passes legislation neutering or killing the CFPB via the Congressional Review Act, it won’t be the first reversal of financial regulation. Until then, August 10, 2017 is the effective date. Pursuant to the Dodd-Frank Act, the arbitration rules will only apply to agreements entered into 180-days after the effective date and it will become fully effective on February 10, 2018. See more here-- http://bit.ly/2u13Aks and http://bit.ly/2vjGWAJ and http://bit.ly/2ulrGpQ

Friday, June 30, 2017

Summary Judgment in Arbitration

Arbitration has become formal of late and has been criticized by scholars as costly, time-consuming and subject to hardball advocacy. See Stipanowich, Arbitration: The “New Litigation” University of Illinois Law Review Vol. 2010, No. 1. This trend is not surprising given that career litigators, having been trained in the techniques of discovery and motion practice, are hesitant stepping outside their comfort zone. See JAMS Dispositive Motions in Arbitration, Kleinberg, Summer 2015. This includes the increasing filing of Motions for Summary Judgment, mostly following rule changes in 2013 by AAA allowing them. Winning a dispositive motion in any forum is difficult. For example, statistical analyses of federal courts in three large districts showed that summary judgments are granted less than 10% of the time. See Id. While arbitrators have the authority to consider motions for summary disposition, arbitrators must take great care in exercising this power. Avoiding increasing the costs of the proceedings and/or delaying its conclusion must be paramount. How sound is the motion and what is its likelihood of success? Are there issues of fact that would preclude ruling in favor of the motion? Will the motion, if granted, really reduce costs and expedite the arbitration, or will it lead to just the opposite result? In many cases, striking a few claims or defenses of several asserted would not serve to abbreviate the proceedings. Consideration of a motion not likely to succeed will waste time and money. The cost and dilatory impact of court-style motion practice, where the making of dispositive motions is the norm, is precisely what arbitration should avoid. See Reflections on the Use of Dispositive Motions in Arbitration By Edna Sussman and Solomon Ebere, NYSBA New York Dispute Resolution Lawyer, Spring 2011, Vol. 4, No. 1. Such motions can only be considered if facts upon which the dispositive motion is made are not in dispute. Granting dispositive motions could be viewed as depriving parties of a fair proceeding. Arbitrators must also ensure that they have carefully considered any discovery requests by the opposing party. If a party is denied requested discovery that is material to the motion and could alter the result, there would likely be a finding that the party was denied its right to a fundamentally fair proceeding. See Id. As an arbitrator, I am not against streamlining a case-- just be careful in considering the potential challenges to final awards that defeat the purpose of an efficient process with finality.

Monday, June 19, 2017

NLRB Invalidates UBER Arbitration Agreements

Last week, an Administrative Law Judge (ALJ) for the National Labor Relations Board (NLRB) ruled an Uber Technologies arbitration agreement was unlawful. Uber was requiring its software engineers to sign an agreement that compelled arbitration of claims against the company. The ALJ found language in the agreement ambiguous as to employee rights to file charges with the NLRB, even though a provision in the agreement explicitly stated those interested in filing administrative charges could do so at the www.nlrb.gov website. Uber was ordered to rescind or revise its policy to more clearly state how employees can access NLRB processes. Uber is considering appealing the decision to the full NLRB, but has not yet done so. The U.S. Supreme Court is also currently considering a case in which employers are challenging the NLRB’s view that class action waivers in compulsory employment arbitration pacts violate the National Labor Relations Act (NLRA). Given this scrutiny, companies using or considering an arbitration program to resolve workplace disputes with employees should take care when drafting and implementing the agreements to account for recent NLRB decisions and guidance. Evidently, failure to do so may result in the program being partially or wholly invalidated. See more here-- http://bit.ly/2rI1Dt4 and http://bit.ly/2rIeaN9

Saturday, June 10, 2017

CMS Reversing Arbitration Ban

The Centers for Medicare & Medicaid Services (CMS) published a final rule for nursing homes just before last fall's election that included a provision prohibiting facilities from requiring pre-dispute binding arbitration to settle disputes over resident care. The final rule, which went into effect November 28, 2016 for facilities participating in the Medicare or Medicaid programs, was seen as a prohibition on regular practice in long-term care facilities of using resident agreement arbitration clauses upon admission. CMS just announced its intention to remove the ban on pre-dispute arbitration agreements. The rule, released after the agency abandoned its appeal in a lawsuit over the matter, would allow arbitration agreements that meet certain standards. For example, such documents would need to be written in plain language, be thoroughly explained to residents and their representatives, and be understood. A party in such agreement waives the rights to sue and to a trial by jury, to participate in a class action lawsuit, or to receive any type of judicial review apart from the very limited grounds applicable to setting aside arbitration decisions. The American Bar Association (ABA) previously commented that in many circumstances arbitration can be advantageous, and residents should continue to have the choice to use it to resolve disputes. Many recent court decisions, including the latest, Kindred v. Clark out of SCOTUS have upheld enforcing such agreements. See more here-- http://bit.ly/2semtQC and http://bit.ly/2s7WlGh and http://bit.ly/2pCk94L

Wednesday, May 31, 2017

Judge Vacates Emergency Order for Mediation Notes

This month, in an extremely rare move, a federal judge in Washington, D.C. first issued and later vacated an emergency order to preserve the notes of a mediation session in which an attorney allegedly threatened a female partner suing the firm for gender discrimination and pay inequity. Plaintiff, Jane Doe, alleges that another of her firm's attorneys illegally threatened retaliation against her during mediation, saying she was going to be terminated. Plaintiff desired the mediator’s notes in order to prove the exchange happened. The mediator was initially ordered to preserve notes and all other documents related to the session, with no indication whether material would ultimately be found relevant or admissible in the case. Such files are typically destroyed after mediation in order to preserve the confidentiality of the mediation process which allows the ability of parties to be open in session. Florida's Mediation Confidentiality and Privilege Act has very limited exceptions. Even in cases where mediation privilege is waived with consent of both parties, any records are produced in chambers in order to protect confidentiality. Allowing mediation notes to be used in lawsuits is quite disturbing and undermines the whole process, according to experts. JAMS, the ADR provider at this mediation, argued Doe should not have requested a preservation order for session notes because it already informed both parties that the notes would not be destroyed since they were subpoenaed. Doe acknowledged that JAMS said it would suspend its policy of destroying the records until issues surrounding the production of the documents in question are resolved, but asked the court to keep the preservation order in place. Plaintiff's motion was premised on an assertion that "a preservation order is necessary to preserve crucial evidence destined for immediate destruction" and that "absent a court order, it is virtually certain that this evidence will be lost." U.S. District Judge Amy Berman Jackson found since that did not appear to be the case, there is no longer any "emergency" warranting relief, and vacated her previous order. See Jane Doe v. Proskauer Rose LLP, case number 1:17-cv-00901 http://www.dcd.uscourts.gov and more reported here-- http://bit.ly/2rUuMAq and http://bit.ly/2rV5RfV