Presenting a live 90-minute webinar with interactive Q&A Agreements to Arbitrate Disputes on an Individual Basis: Lessons for Class Action and Contracts Counsel Drafting Strategies to Avoid or Defeat Challenges to Scope or Enforceability of Arbitration Agreements TUESDAY, OCTOBER 11, 2016 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Archis A. Parasharami, Partner, Mayer Brown , Washington, D.C. Kevin S. Ranlett, Partner, Mayer Brown , Washington, D.C. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Agreements to Arbitrate Disputes on an Individual Basis Lessons for Class Action and Contracts Counsel Archis A. Parasharami Kevin S. Ranlett 202-263-3328 202-263-3217 October 11, 2016 Co-editors, Class Defense ( classdefenseblog.com ) Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe-Brussels LLP both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.
I. The Sound of Silence: Oxford Health Plans LLC v. Sutter II. Express Class Waivers: Concepcion and American Express Co. v. Italian Colors Overview Restaurant III. Choice-of-Law Clauses: DIRECTV, Inc. v. Imburgia IV. Best Practices for Implementing a Consumer Arbitration Program V. Proposed Regulations Restricting Arbitration 6
Advantages of Arbitration Fair, Reduced Less expeditious transaction adversarial dispute costs than litigation resolution 7
Congressional Support for Arbitration Federal Arbitration Act (FAA) adopted in 1925 to reverse long-standing judicial hostility to arbitration. Section 2 of the Act provides that arbitration agreements must be enforced, unless there is a generally applicable rule of state law that would authorize invalidating any contract. 8
The Road to Oxford Health Plans LLC v. Sutter Initially, few arbitration agreements addressed class proceedings because arbitration traditionally was bilateral. Class arbitration was postulated in the 1980s, but remained a virtual unknown for years. In the late 1990s and early 2000s, courts began to disagree about whether “silent” arbitration agreements permitted class proceedings. In Green Tree Financial Corp. v. Bazzle , 539 U.S. 444 (2003), the Court had granted review to decide whether the Federal Arbitration Act permits the imposition of class arbitration when the parties’ agreement is silent regarding class arbitration. But a plurality concluded that first the arbitrator should decide whether the agreement there was in fact “silent.” 9
Stolt-Nielsen S.A. v. AnimalFeeds International Corp. In Stolt-Nielsen , the parties stipulated that the arbitration agreement was “silent,” thus eliminating the obstacle in Bazzle to reaching the question. The Court held that the arbitrators had exceeded their powers in ordering class arbitration based on their own policy preferences rather than looking to applicable substantive law. The Court then clarified that “a party cannot be compelled under the [Federal Arbitration Act] to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” 10
Oxford Health Plans LLC v. Sutter Oxford Health Plans is the sequel to Stolt-Nielsen Circuit split: – Second Circuit (joined by Third Circuit): judicial review of arbitrator’s ruling that “silent” arbitration clause permits class arbitration is limited to determining whether the issue was properly presented to the arbitrator. Jock v. Sterling Jewelers Inc. , 646 F.3d 114 (2d Cir. 2011). – Fifth Circuit: district court properly vacated award construing “silent” clause to permit class arbitration because arbitrator “exceeded his powers.” Reed v. Florida Metro. Univ., Inc. , 681 F.3d 630 (5th Cir. 2012). 11
Oxford Health Plans LLC v. Sutter Supreme Court affirms 9-0 (Kagan, J.). Holding: Federal Arbitration Act bars court from vacating arbitral award authorizing class arbitration when (1) the arbitrator’s decision is based on an arguable effort to construe the contract and (2) the parties had agreed that the arbitrator should decide issue. If so, “[t]he arbitrator’s construction holds, however good, bad, or ugly.” Court distinguished Stolt-Nielsen as involving manifest disregard of the contract. Footnote 2: Oxford didn’t argue that class arbitration was a “gateway” question of arbitrability. Alito concurrence: If we actually were reviewing the merits, “we would have little trouble” reversing. 12
Oxford Health Plans LLC v. Sutter Key Takeaways – Companies should revise their arbitration clauses to make prohibitions of class arbitration express. – Court meant what it said in Hall Street . – Be careful what you wish for. Don’t submit issues of arbitrability, including questions about whether the arbitration provision permits class arbitration, unless you are prepared to accept the consequences. 13
Post- Oxford Health Plans Controversy Who decides whether an arbitration agreement is silent on class arbitration? – A “gateway question” of “ arbitrability ” is presumptively for the court to decide. Howsam v. Dean Witter Reynolds, Inc. (2002). – Is the availability of class arbitration a “gateway question”? And what if the agreement incorporates arbitration rules that assign all issues to the arbitrator? – Courts have reached varying outcomes, depending upon the language of the agreement: • For court: Chesapeake Appalachia, LLC v. Scout Petroleum, LLC , 809 F.3d 746 (3d Cir. 2016), cert. denied (Oct. 3, 2016); Huffman v. Hilltop Cos. , 747 F.3d 391 (6th Cir. 2014). • For arbitrator: Robinson v. J&K Admin. Mgmt. Servs., Inc. , 817 F.3d 193 (5th Cir. 2016) (relying on delegation clause). 14
Enforceability of Agreements to Arbitrate on an Individual Basis: Concepcion and American Express 15
Concepcion and American Express Many arbitration agreements expressly require arbitration on an individual basis. AT&T Mobility LLC v. Concepcion , 131 S. Ct. 1740 (2011), addressed the patchwork of state-law rules regarding the enforceability of such arbitration agreements. Even before Concepcion , most states enforced these agreements if they otherwise were fair. Courts in other states — led by California — held that these agreements either are unconscionable or violate public policy. 16
AT&T Mobility LLC v. Concepcion Supreme Court holds (5-4) that FAA preempts California's rule requiring class proceedings to be available in arbitration. “[C]lass arbitration” is “not arbitration as envisioned by the FAA” and “lacks its benefits.” “Requiring the availability of class -wide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.” Rationale : States may not require use of procedures that are inconsistent with fundamental attributes of arbitration. 17
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