Mediate First

Be careful not to jump the gun into arbitration when a contract requires other alternative dispute resolution processes as conditions precedent. An appellate court in Texas affirmed the vacatur of an arbitration award because mediation was a condition precedent to arbitration under the governing contract and was not satisfied or waived by the parties prior to arbitration. In affirming the vacatur, the court held that the dispute was never properly before the arbitrator and therefore exceeded his powers in issuing the award. Sometimes an arbitrator in a private arbitration is not given a copy of the entire contract upon being selected. This needs to happen early and counsel should ensure they are on the same page procedurally in order to avoid an expensive and wasted outcome. The agreement at issue essentially stated any controversy shall be resolved by mediation, and if such mediation is unable to resolve it, then exclusively by binding arbitration. The court reasoned that the controversy was not properly before the arbitrator unless and until the parties mediated. There was no sympathy to the appellant’s repeated attempts to mediate with appellees prior to arbitration and the court held ignoring such demands was not inaction or a waiver of the right to mediate. See more here-- https://bit.ly/3A3PRI9 and https://bit.ly/3jelAiL

No Prime Day For Amazon and Arbitration

The U.S. Supreme Court decided today not to consider whether drivers for Amazon’s Flex delivery service are interstate transportation workers who can avoid arbitration as part of a proposed class claim. Amazon.com Inc. had urged the high Court to review a federal appellate decision allowing a Flex driver to avoid arbitrating proposed class claims that he and others are misclassified as independent contractors because they’re interstate transportation workers exempt from the Federal Arbitration Act (FAA). The First Circuit Court of Appeals held last summer that those workers making local deliveries to Amazon customers qualify for the FAA exemption, even though they don’t cross state lines, because their work involves transporting goods in the flow of interstate commerce. Flex drivers, therefore, aren’t bound by arbitration agreements that would prevent them from litigating their state law wage claims. In recent years, Amazon used independent contractors to deliver goods through its Flex smartphone app. Flex contractors could sign up for shifts and use their own car while adhering to Amazon’s standards to deliver packages. However, if a contractor takes longer than their shift to complete their deliveries, they are not compensated for extra time, nor reimbursed for gas, vehicle maintenance, or cell phone data costs for the job. Working with Flex, an individual agrees to its terms of service, which requires settling disputes through arbitration governed by the FAA. Interestingly, earlier this month, the company changed its terms allowing people to bring individual or class action lawsuits against it. Amazon made the change in response to more than 75,000 pending arbitration demands on behalf of its Echo device users that would have required it to ante up tens of millions of dollars in filing fees in those cases. It now faces several class actions, including one alleging that it improperly recorded and preserved conversations through its Echo Dot Kids devices. See more here-- https://bit.ly/3vRYhzW and https://bit.ly/3qgc95x and https://bit.ly/2SKw54w

Consumer Reports Calls for Ban on Forced Arbitration

Calling arbitration an anti-consumer practice that’s becoming all too prevalent, Consumer Reports claims there isn't a single adult in the United States who is not subject to at least one binding mandatory arbitration clause. The magazine, through Consumers Union, its policy and advocacy arm, criticizes the take-it-or-leave-it way of settling disputes. Consumer Reports, which calls itself a public-service organization, says arbitration language is hidden in the fine print of an array of common consumer contracts, including cell phones and credit cards. The editors are disturbed that forced arbitration clauses are making their way into housing, employment, and nursing-home contracts. Their column states that proponents include corporations and the organizations representing arbitrators who frame arbitration as a benefit for consumers that offers a low cost, informal alternative to lawsuits. Forcing consumers to accept arbitration and give up their rights through legalese buried in the fine print raises red flags for consumer advocates, they say. Consumer Reports is backing the Arbitration Fairness Act, pending in Congress, that would ban the use of these forced-arbitration clauses in consumer and employment contracts. See editorial here- http://www.consumerreports.org/cro/news/2014/05/ban-the-use-of-these-forced-arbitration-clauses-in-consumer-and-employment-contracts/index.htm

Hyundai Drops Arbitration Clause

A policy that required some warranty disputes to be settled through binding arbitration, unless owners notified Hyundai within 90 days of purchasing the vehicle of their decision to opt-out of the arrangement, was recently dropped. Following an article about the arbitration requirement that appeared in The New York Times’s Automobiles section, Hyundai issued a statement saying it would change the policy. Hyundai said it didn't want the public to be misled that it would not stand behind "America’s best warranty.” Hyundai claims it has only used arbitration ten times since 2006. Under the earlier policy, failing to opt-out may have disqualified owners from joining class actions or collecting refunds if their vehicle was determined to be a lemon. Formerly binding arbitration was administered by the American Arbitration Association with owners paying a part of the cost and decisions not subject to appeal. Owners choosing to opt-out could seek resolution elsewhere, including court. Reportedly, notice directly from the automaker printed in the owner’s manual is unusual, according to consumer advocates. Hyundai previously maintained giving owners 90 days to opt-out of arbitration was fair notice included in the vehicle warranty brochure. Owners could still file lemon law, product liability or personal injury lawsuits. See article here-- http://nyti.ms/18wm7U3