Dash for Arbitration

DoorDash delivery workers filed thousands of individual claims at once as initial fees approach $12 million for the company. Under District Judge William Alsup’s order this week in Abernathy v. DoorDash pending in the Northern District of California, DoorDash must arbitrate over 5,000 individual disputes with various workers who claim that they were misclassified as independent contractors, when they should be treated as employees. It also must pay a $1,900 fee for each of these individual arbitration proceedings. As with other gig economy platforms, DoorDash includes an arbitration agreement in its contracts with couriers, who deliver food orders. But after facing a flood of claims, DoorDash balked at the costs of going into arbitration administered by the American Arbitration Association (AAA) where couriers themselves paid more than $1.2 million in filing fees. After Uber imposed arbitration and a class action ban, more than 60,000 of those drivers sought to arbitrate claims against the company. Faced with legal costs of at least $600 million, Uber settled the a majority of these claims last spring. Could the same happen in this case? Another California federal judge similarly compelled arbitration in a case with thousands of claims against Postmates, asking the attorneys to explain how the company’s refusal to pay arbitration fees didn’t amount to contempt. A ruling is pending on that issue. DoorDash had asked to suspend the court proceedings until the approval of a settlement could be reached in a separate class-action case, given the potential for overlap. The company reportedly stands ready and willing to defend legitimate arbitration demands, but maintains it should only be responsible for arbitrating legitimate claims. See more here-- https://bit.ly/39uUehT and https://bit.ly/38qRDWa and https://bit.ly/2OSRQcW

TRO issued in Jay-Z AAA Arbitration

An injunction was issued this week by a New York judge in favor of Jay-Z on the grounds that the lack of African-American arbitrators provided by the American Arbitration Association (AAA) impeded his right to equal opportunity under the law. Judge Saliann Scarpulla issued a temporary restraining order, pushing arbitration back to next month at the earliest. The dispute involves Iconix, which acquired Rocawear in 2007, and sued the rapper last year for allegedly breaching their 2007 contract by using the Roc Nation logo on a new line of baseball caps. A countersuit argues that the contract applied only to Rocawear and not Roc Nation, at which point both parties entered AAA arbitration. Jay-Z claims AAA found only three potential African-American arbitrators, out of the hundreds it uses, for his case, and one already represented Iconix in related litigation. To begin the process, the AAA typically provides parties with a list of potential arbitrators from which they must eliminate names until they arrive at one. Reportedly, Jay-Z maintains that white arbitrators exhibit “unconscious bias” towards black defendants, and that the AAA’s lack of racial diversity consequently “deprives litigants of colour of a meaningful opportunity to have their claims heard by a panel of arbitrators reflecting their backgrounds and life experience.” His lawyers claim arbitration procedures in place by the AAA “deprive black litigants...of the equal protection of the laws, equal access to public accommodations, and mislead consumers into believing that they will receive a fair and impartial adjudication.” Although the ruling may not stop the proceeding altogether, it could set an important precedent for addressing diversity in neutral selection. See full news stories here-- https://bit.ly/2RpXHpr and https://nbcnews.to/2KIkQkm

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.

Trump Confidentiality Arbitration

Can you have it both ways? A former Donald Trump campaign staffer is asking a court keep a dispute from proceeding in arbitration. The Trump Campaign is accusing Samuel Nunberg of breaching a confidentiality agreement by allegedly leaking information to Politico about a confrontation between top staffers. Nunberg also is charged with disparaging staffers in an article published by GQ magazine. Trump is seeking at least $10 million in a claim first made at the American Arbitration Association. Nunberg asserts that the Trump Campaign is attempting to chill his free speech rights, so he is looking to a New York Supreme Court judge to stop the arbitration. The campaign accused Nunberg of attempting not only to propel himself back into the spotlight, but to use the court as a vehicle to disclose confidential information violating the agreement. Nunberg states while it may be the philosophy of the Trump Campaign that all publicity is good publicity, his arguments over arbitration are not a stunt. Reportedly, each side is fighting over which of two agreements is operative-- a consulting agreement with the presidential exploratory committee or an earlier agreement with another Trump entity. It appears that the latter contains an arbitration clause while the former mandates disputes in New York court. At issue, is screaming between former Trump campaign manager Corey Lewandowski and campaign spokesperson Hope Hicks also reported in the NY Post's Page Six. Nunberg's lawyer maintains embarrassing shouting on a public street can hardly qualify as confidential and that a citizen of a free country should be protected against prior restraints of speech. Maybe not. See full story here-- http://bit.ly/2b0v3Yj

AAA's New Consumer Arbitration Rules

This month, the American Arbitration Association's new Consumer Arbitration Rules became effective. According to AAA, these rules apply when arbitration clauses exist in agreements between individual consumers and businesses where a business has standardized, systematic application of arbitration clauses to its customers and where the terms and conditions of the purchase of standardized, consumable goods or services are non-negotiable or primarily non-negotiable in most or all of its terms, conditions, features, or choices. The product or service must be for personal or household use. The AAA will have discretion to apply the Consumer Arbitration Rules and parties can bring any disputes concerning the application or non-application to the attention of the arbitrator. Businesses are required to submit their consumer arbitration clause to the AAA for review and determination that the clause substantially and materially complies with the due process standards of the AAA’s Consumer Due Process Protocol and the amended Consumer Rules. Businesses will only be included in the registry after the AAA reviews a submitted clause, receives the required fee and determines that it will arbitrate a consumer-related dispute under the clause. The fee has been lowered to $500 for clauses submitted in 2015. AAA will charge an annual renewal fee starting in 2016. Each variation of the business’s arbitration clause must be separately registered. If a business has not registered its consumer clause prior to the filing of a consumer case, the AAA will require that the business register its clause at that time for an additional fee of $250 for an expedited review. Additionally, any subsequent revisions to a currently registered arbitration clause must be resubmitted for review. A fee of $500 will be assessed to review revisions. See more here-- http://bit.ly/Z7rSWJ and http://bit.ly/1lAgU6l

AAA Appellate Arbitration Rules

The American Arbitration Association (AAA) has introduced a new set of Optional Appellate Arbitration Rules effective this month. These new rules provide parties with a streamlined, standardized, appellate arbitration procedure, allowing for review of arbitral awards. AAA maintains this appellate rubric remains consistent with the objective of an expedited, cost effective and just arbitration process. Courts have previously used only narrowly defined statutory grounds to set aside arbitration awards. This process now provides for an appeal within the arbitration. An appellate arbitral panel applies a standard of review more expansive than that allowed by existing federal and state law in vacating awards. Though optional, these rules were developed for large, complex cases where parties value the ability to appeal. Parties may use these rules with agreement by contract or stipulation. Appeals are only permitted on the grounds that the underlying award is based on errors of law that are material, prejudicial or is made on clearly erroneous determinations of fact. Generally, AAA appeals will be determined upon the written documents submitted by the parties, with no oral argument. As efficiency is desired, the Optional Appellate Arbitration Rules anticipate a three month process to complete resolution. At present, the panels consist of former federal and state judges and neutrals with strong appellate backgrounds. Interestingly, the parties may apply the rules whether or not the underlying award was conducted pursuant to AAA or International Centre for Dispute Resolution (ICDR) rules. See rules here-- http://bit.ly/1cDPGXy

New AAA Rules in effect for Complex Commercial Disputes

New rules by the American Arbitration Association (AAA) effective this month in "Large, Complex Commercial Disputes" help manage discovery by achieving an efficient and economical resolution of the dispute, while safeguarding a fair opportunity to present claims and defenses. Discovery in the form of production of documents is contemplated, as long as those material documents on which parties intend to rely are not otherwise available, reasonably believed to exist, and relevant to the outcome. This now specifically includes electronically stored information or ESI in the form most convenient and economical to the producing party-- unless the arbitrator finds good cause exists to require otherwise. The arbitrator also is empowered to determine reasonable search parameters for ESI and will weigh the need for ESI against the cost of locating and producing it. Reference to the arbitrator's power to authorize propounding interrogatories is removed, but the arbitrator can still permit depositions. Arbitrators may impose sanctions where there is willful failure to comply with obligations under AAA rules or an order of the arbitrator. Such sanctions could even limit a party's participation in the arbitration, adversely affecting determination of the outcome. However, defaults are not permitted as sanctions. Arbitrators under these new rules should be better equipped to control modern discovery and the costs associated with the advent of electronic discovery. They may also now hear and decide dispositive motions, if the arbitrator determines that the moving party has shown that the motion is likely to succeed and narrow the issues. See AAA rule changes here-- http://go.adr.org/LP=307 and summary http://bit.ly/16z6r3i

Arbitration under fire on NPR

According to recent news reports and The Diane Rehm Show today, an ever growing number of companies are including 'forced' or mandatory arbitration clauses in their contracts. What consumers and job seekers give up when they sign these contracts is their right to sue. Her guests included Professor Morrison, of GW Law School, who cited Kaiser's California health care plan arbitration that is working well. (But when asked by Ms. Rehm, he didn't know whether his own contract with the school includes and arbitration clause). Andrew Pincus, who represented AT&T in the Concepcion case before the Supreme Court, a former Assistant to the Solicitor General in the United States Department of Justice, who prevailed. The Court upheld the clause in that case on federal preemption grounds. Mr. Pincus felt the small claims represented by the plaintiff's class provided an incentive to utilize the process in bringing legitimate litigation. Richard Naimark, SVP of the American Arbitration Association, defended the process which he said has been growing the past dozen years. AAA's neutrals are independent third parties not beholden to anyone according to Mr. Naimark and have existed since the Federal Arbitration Act was passed in 1925. The process has evolved into consumer and employment rules which have differing fee structures, with businesses paying most fees. He argues arbitration is cheaper and easier than access the courts. AAA is taking a neutral position on the issue of mandatory clauses and primarily focuses on consensual arbitration. He maintains a common-sense explanation is all that is required on forms to get before an arbitrator. Christine Hines, a consumer and civil justice advocate at Public Citizen's Congress Watch wishes people to understand access to the courts. She seeks restoring rights of choice to the consumer, who unknowingly gave up their rights, when a dispute arises. She argues there is no transparency and that no public knowledge of corporate misconduct is bad for consumers. She is also worried about repeat business for private arbitrators favoring the corporation. However, arbitrators are required to disclose factors affecting neutrality according to AAA. Ms. Rehm said the process feels constricting and that transparency is lacking with regard to achieving justice which is not true in the courts. Mr. Naimark said courts are under budget stresses and are increasingly difficult for average people to navigate such that justice is best served through arbitration. Finally, though unlikely to pass, the guests discussed the introduction of the Arbitration Fairness Act last year as S. 987 and H.R. 1873 calling for arbitration to be agreed upon by both parties after the dispute arises and not just inserted in the fine print of often one-sided adhesion contracts. Listen here: http://thedianerehmshow.org/shows/2012-03-08/waiving-your-right-sue and also read an NY Times editorial on this subject here: http://www.nytimes.com/2012/03/07/opinion/stuck-in-arbitration.html

Arbitration in the crosshairs

I attended an arbitration seminar at my Inns of Court tonight that was put on in conjunction with the AAA. Arbitration is controversial in that no appellate rights really exist in the absence of fraud or mistake. Further, despite the reported cost savings over protracted civil litigation, administrative and panel neutral fees can be expensive.

Suffice it to say that arbitration is becoming unpopular at least in the consumer side of law, with unconscionable agreements and clauses being attacked and litigated.

As the recent oral argument in the case of AT&T Mobility LLC v. Concepcion has raised the question whether the federal act permitting arbitration forbids states from overriding contractual waivers of the right to bring class action lawsuits. AT&T’s practice of drafting contracts with the clause blocking class-action filings in favor of arbitration is not unique, with many such companies adopting that language.

Of course, large companies favor negotiations handled in a confidential setting. That is one of the benefits touted of arbitration, versus a public court file and trial.

The ultimate outcome in that U.S. Supreme Court matter will certainly have important nationwide ramifications for consumers and businesses alike.