SCOTUS to decide Coinbase Arbitrability

Last week, the U.S. Supreme Court granted cert and agreed to hear a cryptocurrency case that would move a dispute with users of a cryptocurrency exchange out of courts and into private arbitration. At issue is whether upon creating their Coinbase accounts, users agreed to resolve disputes through arbitration. A subsequent agreement related to a Dogecoin sweepstakes stipulated that any issues related to the contest must be addressed in state court. Users later accused Coinbase of violating California’s false advertising law by luring them into a sweepstakes offering Dogecoin prizes so they brought a class-action lawsuit in federal court. A federal district judge in California refused Coinbase's request to enforce arbitration, as the company argued its user agreements required. The Ninth Circuit Court of Appeals affirmed the trial judge's decision. In a related dispute last summer, the U.S. Supreme Court ruled 5-4 in favor of Coinbase. In that case, the justices supported Coinbase’s request to suspend customer lawsuits while seeking appeals to move disputes from courts to private arbitration. The review of the current case will likely impact the current status of arbitrability decisions by courts verus arbitrators and the utilization of arbitration clauses and enforcement of user agreements, especially in digital currency trading. When parties enter into successive contracts, and the first contains an arbitration agreement with a delegation clause but the second does not, who decides whether the first contract’s arbitration agreement governs any later disputes? This may finally resolve a regional circuit split. See more here-- https://tinyurl.com/ycy8xr67 and https://tinyurl.com/32s87z6t and https://tinyurl.com/2z57nbez

Valentine's date? Arb Forum 2/14

Join us for the Alternative Dispute Resolution (ADR) Section of the Florida Bar's next Arbitrator's Forum on February 14, 2023 at 8 am EST live on Zoom. Invite a fellow arbitrator or litigator to this complimentary event on Valentine's Day as we speak to statewide practitioners about their preferences and practices. This month, we will discuss “What Arbitrators Need To Know About Remedies, Attorney's Fees, Punitive Damages, and More!” The Florida Bar ADR Section's standing Arbitration Committee instituted the forum series last year to create a community of better informed arbitration neutrals in our state. We listen and learn from each other by talking through common arbitration challenges and how they might be better resolved. Our discussion is frank and encourages participation by all. Please also consider becoming an official ADR Section member as lawyers from those practice areas dealing with arbitration join their full-time neutrals colleagues to discuss what works, what confounds, and how to improve skills in this growing field. See more here-- bit.ly/ADR_ArbForum_6

SCOTUS Arbitration Decisions

As this tumultous term comes to a close, a pair of recent employment case rulings has given some to insight into the future of the U.S. Supreme Court's direction on arbitration which has been pretty firm as of late. Traditionally, the Court has relied upon precendent and the Federal Arbitration Act (FAA) in enforcing the right to arbitrate as contractual in nature and upholding those agreements. More recently, the Court is reversing decisions that apply even-handed rules to the FAA. In Morgan v. Sundance, a unanimous Court rejected the two-part test applied by most federal circuits in evaluating whether a party has waived its right to compel enforcement of an arbitration agreement. Under that test, waiver would be found only if a party acted in a manner inconsistent with its arbitration rights and that inconsistency caused prejudice to the other side. The principal justification for requiring prejudice was federal policy favoring arbitration. Finding that the usual test for contractual waiver typically requires only inconsistent conduct, the Court held it improper to add a prejudice requirement onto the waiver analysis just for arbitration agreements. The text of the FAA makes clear that courts are not to create arbitration-specific procedural rules. In Viking River Cruises v. Moriana, eight of nine justices agreed with the result relying in part on a severability provision in the arbitration agreement to narrow an otherwise invalid wholesale waiver of state Private Attorneys General Act (PAGA) claims. This suggests that whether courts will compel arbitration of individual PAGA claims may turn on the specific language of the arbitration agreement at issue. The lone dissent came from Justice Thomas, who long has viewed the Federal Arbitration Act does not apply to cases in state courts. The FAA also can preempt rules “that are generally applicable as a formal matter” but have the effect of making arbitration agreements ineffective because they are inherently inconsistent with arbitration. Such rules would include those that would require a party to arbitrate on a class basis or not at all. See decisions-- http://tinyurl.com/3e6hbek9 and http://tinyurl.com/57r87jzc and more here-- http://tinyurl.com/yeaw7sdd and http://tinyurl.com/yc4ktrmv

New WIPO ADR Guide for IP Cases

The Arbitration and Mediation Center (AMC) of WIPO, the World Intellectual Property Organization, just released an updated guide providing an overview of Alternative Dispute Resolution (ADR) processes for intellectual property disputes. Since intellectual property portfolios became an essential part of business value, businesses started looking at more efficient methods to settle disputes than litigation. WIPO's AMC was created almost 25 years ago, recognizing a growing ADR trend where international parties informally gathered to settle disputes without litigation. The new WIPO guide is designed to provide an overview of ADR processes without purporting in any way to be authoritative or prescriptive. Chapter One of the guide offers background information concerning the early use and rise of ADR around the world, followed in Chapter Two by a description of potential advantages of ADR for intellectual property disputes. Chapter Three explains in more detail the different ADR procedures that may be used in intellectual property disputes, while Chapter Four outlines some practical considerations that may be relevant for IPOs and courts that wish to institutionalize such ADR procedures. For the substantive and procedural implementation of such procedures, the guide identifies as a core element the interface with existing regulations. The guide reminds litigants that ADR processes can deliver outcomes that provide a certain and conclusive resolution to disputes. This finality is a clear advantage for ADR, as the complexities of intellectual property litigation can make outcomes uncertain. Legal judgments can be overturned on appeal and jurors that often lack technical expertise may make incorrect decisions. See more here-- https://bit.ly/2vpuocT

Seeking to Compel or Stay Arbitration?

I'm often asked about requesting courts to compel arbitration when the opposing party commences a lawsuit or otherwise expresses the intention to avoid arbitration of a dispute even though the dispute is subject to a valid arbitration agreement. If there is no lawsuit pending, a party may ask a court to compel the other party to arbitrate the dispute under the consented terms of a contract or arbitration clause in an agreement. If a lawsuit has been filed, the party seeking to compel arbitration may make the request by motion in the pending litigation. In that case, the practitioner should consider applying to stay the litigation pending arbitration, compel arbitration, or both. When a party objects, citing arbitration language in a written agreement, the Revised Florida Arbitration Code, F.S. §682.01 et seq., provides that any party may apply by motion for an order directing the parties to a lawsuit to comply with a governing arbitration clause. A party seeking to compel arbitration has the burden of establishing an agreement to arbitrate exists. The statutory process is as follows: F.S. § 682.015 Petition for judicial relief.— (1) Except as otherwise provided in s. 682.20, a petition for judicial relief under this chapter must be made to the court and heard in the manner provided by law or rule of court for making and hearing motions. (2) Unless a civil action involving the agreement to arbitrate is pending, notice of an initial petition to the court under this chapter must be served in the manner provided by law for the service of a summons in a civil action. Otherwise, notice of the motion must be given in the manner provided by law or rule of court for serving motions in pending cases. See http://bit.ly/2wxydLH

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.

AHLA Arbitration Rule Changes

I have served as an American Health Lawyers Association (AHLA) panel neutral dispute resolver for about a decade. In this role, I have arbitrated cases involving medical issues, medical group practices, employment issues and disputes involving long-term care facilities There are a few rule types AHLA has depending on the subject matter-- Commercial, Employment, and Consumer. These rules are typically incorporated by reference in health care contracts by agreement of the parties and utilized upon a disagreement arising between them. Effective April 30, 2017, AHLA Dispute Resolution Service rules have changed as follows: Employment Rule 2.4 now puts the onus on the employer to pay the filing fee, at least initially, as employers generally have greater resources than employees. Commercial, Employment, and Consumer Rule 5.1 now provides that no party must pay more than one filing fee per claim. In consumer cases and some employment cases, it protects a health care provider or employer who files a counterclaim from having to pay two filing fees for the same claim. Commercial, Employment, and Consumer Rule 5.6 now vests the authority to rule on a motion to consolidate claims in the arbitrator or panel of the first claim to be filed. The rule also provides that if claims are consolidated, they will be heard by the arbitrator or panel of the first claim to be filed. Previous versions of the rules did not have a process for addressing motions to consolidate. Commercial, Employment, and Consumer cases will be assessed a $400 administrative fee if they remain inactive for more than one year because a significant number of cases required case managers be compensated for time and effort to keep the matter open. If the parties do not pay the fee, the Dispute Resolution Service can close the case after sending a single follow-up message. If a claim is arbitrated in accordance with the version of the rules in force on the date it is filed. The new rules do not apply retroactively to claims filed prior to April 30, 2017. See more here-- https://www.healthlawyers.org/dr/Pages/default.aspx

Free Arbitration CLE 6/1/16 - Join us!

Arbitration has been a hot topic this year, whether in the form of coming changes to consumer and class arbitration or developments in cross-border and international agreements. Some practitioners prefer including these clauses in their contracts, while others seemingly avoid including dispute resolution before a neutral or panel of neutrals as an option to avoid court when disagreements arise. Next month, I will be joined by Gary Salzman, Esq. and Beppy Owen, Esq. at the Orange County Bar Association on June 1, 2016 for an Arbitration CLE hosted by its Business Law Committee. We plan to cover the nuts and bolts of the process, as well as hints in avoiding traps while drafting arbitration provisions at the outset. We will also discuss qualifications of the arbitrator and the perception that subject matter expertise is helpful to the dispute resolver selected. This complimentary CLE also addresses recent trends in this venerable form of alternative dispute resolution and will take place from 12:00 p.m. – 1:00 p.m. at the OCBA Center, 880 N. Orange Ave. in Orlando. The registration deadline is May 30, 2016. Please RSVP to Marie West at 407-422-4551, ext. 233. See more information here-- http://www.orangecountybar.org/products/seminars and http://www.attorneyatlawmagazine.com/orlando/arbitrator-lawrence-kolin-speak-ocba/

Armstrong Seeks To Vacate Arbitration Award

When cyclist Lance Armstrong finally confessed doping to Oprah Winfrey in 2013, the Dallas sports insurance company that paid him millions of dollars in victory bonuses sued for fraud, asking for its money back. After SCA accused Armstrong and filed suit which was sent to arbitration, Armstrong unsuccessfully tried for an appeal with the Texas Supreme Court to have the case blocked. The dispute with Armstrong actually began over a decade ago, after the former U.S. Postal Service team member won the 2004 Tour de France, the sixth of his seven consecutive victories. Following doping allegations, that case went to arbitration in 2005. SCA Promotions paid Armstrong $7.5 million in 2006. Evidence from that arbitration was used later against him, including testimony from a former teammate and his wife, who said they heard Armstrong admit to using performance-enhancing drugs back in 1996. Armstrong was banned for life by the United States Anti-Doping Agency and stripped of his Tour titles in August 2012. Last February, SCA won a $10 million ruling against him after this case went back to the same arbitration panel that handled the 2005 dispute. The panel said Armstrong used perjury and other wrongful conduct to secure millions of dollars of benefits from SCA. One of the three neutral panelists dissented, noting that the parties entered into a final and binding settlement agreement the last time around. The dissenter apparently believes the majority's sanction is an unwarranted, unlawful reversal of a prior settlement agreement already made and effectuated. Armstrong's attorneys reportedly say the arbitration panel exceeded its authority with its recent ruling. According to news reports, Armstrong's attorneys claim the panel's issuance of sanctions violates well-established Texas public policy favoring settlements and arbitrations for efficient and final resolution of disputes. Court documents show Armstrong and Tailwind Sports, which owned the U.S. Postal Service team for which Armstrong raced, are seeking to vacate the award, insisting it “effectively eviscerated a fully negotiated and binding settlement agreement” reached between Armstrong and SCA Promotions in 2006. The arbitrators have said, “Perjury must never be profitable.” SCA Promotions is now asking a Texas state judge to confirm the arbitration award against Armstrong. It wants the court to enter a $10 million judgment against Armstrong and the former team owner so it may proceed to collect payment. Armstrong’s lawyers maintain the dispute settled voluntarily and finally years earlier. Interestingly, Armstrong previously offered to pay SCA despite the absence of any legal basis for the sanction, and SCA refused to accept. Armstrong is also facing a $100 million fraud lawsuit from the federal government. See full stories here-- http://bit.ly/1F4qXrH and http://usat.ly/1Kqgxm2 and link to motion to vacate pleading here-- https://www.scribd.com/doc/264558280/Lance-Armstrong-Does-Not-Want-to-Pay-SCA-10-Million

Rapid Arbitration in Delaware

Delaware lawmakers are moving quickly to approve legislation streamlining the closed-door resolution of corporate disputes, after an earlier state-sponsored secret arbitration program was struck down as unconstitutional by a federal court. Delaware lawmakers previously passed legislation allowing state judges to preside over private corporate arbitration proceedings. The Delaware Coalition for Open Government challenged the program on constitutional grounds, arguing that citizens have a First Amendment right to access court hearings. The new legislation cleared the Senate Judiciary Committee without debate and already passed the House. Delaware Senators were expected to take up the measure and send it to the governor for signature this week. The bill's supporters say the revised rapid arbitration process doesn't run afoul of the Delaware or U.S. Constitution because, unlike the earlier secret arbitration scheme, the new program would not be run by sitting state judges. Delaware's Chief Justice advocated for a new arbitration program, and the legislation was drafted by a committee of the Delaware State Bar Association. A longtime corporate darling, Delaware is legal home to more than 1 million corporate entities, and more than two-thirds of Fortune 500. Corporations choose Delaware for access to friendly business laws and the Delaware Chancery Court, which is widely recognized for its judicial expertise in matters of corporate law. The new legislation requires resolution of arbitration disputes in 180 days or less, and gives the parties flexibility in choosing expert arbitrators. Other provisions also allow for the speedy resolution of disputes, which state officials claim offer Delaware another advantage as a legal home for corporate entities. See stories here-- http://delonline.us/1FIOcZP and http://bit.ly/1CdZst6

Alleged Texting During Arbitration

The Orlando firefighters' union is going to battle with the city over a cell phone the deputy fire chief is accused of using to text witnesses during an arbitration hearing. The City of Orlando maintains it doesn't have access to texts, and the union couldn't inspect the phone because it had been lost. Last month, the city claimed the phone was either lost or stolen and filed a police report indicating the phone was sent to city hall through interoffice mail, but it never arrived. Apparently, Sprint, the city's carrier, is unable to provide the content of the messages. In a circuit court complaint filed this week in Orange County, the union said the city provided a list of incoming and outgoing texts from the phone, but 411 of 520 messages were redacted. Firefighters sued the city for failing to turn over text messages from the deputy chief's phone. They are requesting a judge to find the city in violation of Florida's public records law. Union leaders accuse the deputy chief of improperly texting with witnesses during the arbitration. Reportedly, phone numbers belonging to police and firefighters are exempt from the public records law, and city officials say that's why they were redacted. The lawsuit asks that a judge privately review the text information to determine whether city officials were right to redact so much information or have violated Florida's Sunshine Law. It will be interesting to see if this story gains traction like the Orange County Commission's "textgate." The private nature of arbitration hearings will also be in question with the public lawsuit. It remains to be seen whether there was witness tampering or spoliation of electronic evidence that could effect the outcome of the award. See stories here-- http://bit.ly/1fGQX1V and http://bit.ly/SlYrxk and http://bit.ly/1mq5iTk

Supreme Court Defers to Arbitrators in International Arbitration

Last week, in a 7-2 decision, the U.S. Supreme Court held that arbitrators should decide whether a precondition to arbitration has been satisfied, and courts should only review their interpretation with considerable deference. In reaching this conclusion, the majority interpreted a bilateral investment treaty as if it were an ordinary contract, where the language of the contract is silent and courts must decide the parties’ intentions. A provision requiring disputes to be submitted to local courts for an eighteen month period before initiating arbitration was not satisfied as a precondition; but arbitrators decided such failure did not impact their arbitral jurisdiction. In affirming a $185 million arbitration award against the Republic of Argentina, the Court reversed the finding of the Court of Appeals for the District Court of Columbia that the arbitration panel lacked jurisdiction over the dispute, finding that the arbitrators, and not a court, properly determined whether the treaty's conditions to arbitration had been satisfied. The Court held that the arbitrators had not “exceeded their powers” in deciding that they had jurisdiction. Courts are to presume that parties intend for procedural issues regarding arbitration to be decided by the arbitrator and for substantive issues to be decided by the courts. Thus, an arbitration panel's determination that it had jurisdiction over the the dispute cannot be disturbed. Justices Roberts and Kennedy dissented, reasoning that there is no express agreement to arbitrate between a host country and an investor. Justice Roberts stated. "It is no trifling matter for a sovereign nation to subject itself to suit by private parties; we do not presume that any country – including our own – takes that step lightly." See decision here-- BG Group PLC v. Republic of Argentina, 572 U.S. __ (2014) http://www.supremecourt.gov/opinions/13pdf/12-138_97be.pdf