By: Patrick Ouellette, ALR Senior Editor, 2021

Moses H. Cone Memorial Hospital v. Mercury Construction Corp. has been one of the most widely used and potent cases for arbitration since it was decided by the Supreme Court in 1983.[1] This case expressed that the legal system favors arbitration, and that where an arbitration agreement contains broad language, any ambiguity about whether a claim must be arbitrated should be resolved in favor of the arbitration.[2] This has lead to arbitration exploding in use, as parties attempting to avoid arbitration are frequently funneled back to arbitration using the reasoning from Moses H. Cone Memorial Hospital.

However, a case that was recently decided in the second circuit has shown that the ruling in Moses H. Cone Memorial Hospital, while expansive, is not necessarily a catchall. In Cooper v. Ruane Cunniff & Goldfarb Inc., the second circuit reversed a decision from the district court, saying that a dispute over the employee profit-sharing account was outside the purview of arbitration agreement.[3] The facts of the case are as follows: Cooper is an employee with DST Systems, Inc. (“DST”), a company that has an employee profit sharing account with a third party supplier, Ruane, Cunniff & Goldfarb, Inc. (“Ruane”). For his employment with DST, Cooper signed an employment agreement with DST, which included an arbitration agreement. During Cooper’s employment, Ruane invested a large portion of the profit sharing account into a single stock. The stock lost a significant amount of money, greatly reducing the value of the profit-sharing account. Cooper brought a putative class action against Ruane, who looked to avoid by compelling arbitration based on the nature of the dispute being related to Cooper’s employment.

The district court ruled that the arbitration was appropriate due to equitable estoppel doctrine. The district court reasoned that the dispute was related to Cooper’s employment at DST. However, the second circuit reversed, stating that the employment agreement does not pertain to Ruane’s handling of the profit sharing account.[4] Although the arbitration agreement covered any legal claims “arising out of or relating to employment,” the second circuit ruled that there must be some sort of direct relationship between the parties who signed the arbitration agreement.[5]

The implications of this case can be very interesting for arbitration in the future. While this case is certainly outside the normal course of arbitration agreements, it still shows that there is a limit to the broad power of Moses H. Cone. I believe that the court correctly ruled to reverse the district court decision. Similar to the second circuit, I believe that if there was not a limit placed on the broad mandate to arbitrate, an arbitration agreement could govern any dispute that occurs between an either party that signs the agreement and a third party.

[1] Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24 (1983)

[2] Id.

[3] Cooper v. Ruane Cunniff & Goldfarb Inc., 990 F.3d 173, 175 (2d Cir 2021)

[4] Id. at 185

[5] Id. at 184

By: Kyle Yager, ALR Senior Editor, 2021

Arbitration is one of the most commonly used forms of alternate dispute resolution in the U.S.[1] However, despite its commonality, some of the developed rules surrounding arbitration are rather unexpected. Accordingly, I have provided a short list briefly detailing some of the most unusual rulings from arbitration cases in the U.S.

First, in Dealer Computer Servs. v. Michael Motor Co., the Fifth Circuit Court of Appeals held that parties must preserve any basis for vacatur by objecting during the arbitration proceedings.[2] Essentially, the court held that a party interested in appealing an arbitral award based on arbitrator bias must first inform the arbitrator herself that they believe she is biased.[3] This certainly creates somewhat of a Catch-22 for arbitration parties who are concerned about bias of the arbitrator.

Second, in KPMG LLP v. Cocchi, the Supreme Court of the United States (“SCOTUS”) held that when a dispute presents some arbitrable claims and some nonarbitrable claims, the arbitrable claims must be arbitrated even if the result will lead to piecemeal litigation.[4] In its per curiam decision, SCOTUS reconciled the issue presented with the Federal Arbitration Act (the “Act”).[5] SCOTUS explained that “when a complaint contains both arbitrable and nonarbitrable claims, the Act requires courts to ‘compel arbitration of pendent arbitrable claims when one of the parties files a motion to compel, even where the result would be the possibly inefficient maintenance of separate proceedings in different forums.’”[6]

Lastly, in Buckeye Check Cashing, Inc. v. Cardegna, SCOTUS held that an arbitration clause is severable from the rest of the contract. [7] In so doing, SCOTUS explained that an arbitration clause in an unenforceable contract must, itself, be enforced unless the challenging party challenges the arbitration clause itself.[8] SCOTUS continued its analysis by explaining that, because the challenge was brought against the contract at large and not the arbitration clause itself, the arbitrator was the real decision making authority on the issue.[9]

These three cases represent some of the more surprising rulings in arbitration case law. Sometimes what may seem intuitive in arbitration is actually quite the opposite. Notably, this is not a comprehensive list, nor based on any sort of data set, and there are certainly many more unconventional results in arbitration cases throughout the U.S.

[1]. See Tala Esmaili & Krystyna Blokhina Gilkis, Alternative Dispute Resolution, Cornell Law School (June 8, 2017), https://www.law.cornell.edu/wex/alternative_dispute_resolution.

[2]. Dealer Computer Servs. v. Michael Motor Co., 485 Fed. Appx. 724, 727 (5th Cir. 2012).

[3]. See id.

[4]. See KPMG LLP v. Cocchi, 565 U.S. 18, 22 (2011).

[5]. See id. at 19.

[6]. Id. at 22.

[7]. Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445 (2006).

[8]. Id. at 445–446.

[9]. Id. at 446

By: Patrick Brogan, ALR Senior Editor, 2021

In April 2021, Postmates Inc., dropped appeals in the Ninth and Seventh Circuit Courts of Appeals that attempted to fight off thousands of arbitration demands filed by the company’s contracted couriers.

Postmates, founded in 2011, offers its customers on-demand delivery of food, groceries, and other goods from restaurants and retailers.^[1] Orders are placed online or via mobile application and delivered directly to consumers by Postmates couriers.

Postmates’ couriers have accused Postmates of improperly classifying them as independent contractors, rather than employees, to deny the couriers of employment benefits. Upon working for Postmates, couriers agree to resolve all job-related disputes with Postmates in arbitration. Accordingly, over 10,000 couriers filed arbitration demands against Postmates in a strategic mass arbitration campaign. Under the California state law known as SB 707, the company is responsible to pay the fees and costs of arbitration.[2]

In an attempt to avoid the payment of these arbitration expenses, Postmates filed a motion in district court to strike down SB 707. Judge Philip Gutierrez denied Postmates’ motion and ruled that the California state law is not preempted by the Federal Arbitration Act and does not violate either the federal or state constitutions.[3] In denying Postmates’ motion, Judge Guitierrez ordered Postmates to pay the fees and costs of arbitration to the American Arbitration Association (AAA).

In its next attempt to avoid payment of arbitration expenses, Postmates pointed to the class action waiver in its contracts with couriers. In an appeal of a motion to compel arbitration of the first wave of courier demands, Postmates argued that the mass arbitration campaign violated the class action waiver. The Ninth Circuit Court of Appeals held that the issue of breach of contract was for an arbitrator, not the court, to decide.[4]

While many may have expected Postmates to appeal the Ninth Circuit’s decision, Postmates business filed motions for voluntary dismissal in the Ninth and Seventh Circuits. This decision may open the door for the arbitration cases to move forward, though it may also signal that the sides have or will agree to a settlement.

The case is an interesting one to follow as the debate over categorization of gig-economy workers continues. Undoubtedly, companies in Silicon Valley will keep a close eye on the progress of arbitration claims brought en masse by independent contractors. One of those companies particularly interested in this case is Uber. In December 2020, Uber Technologies completed its acquisition of Postmates for $2.65 billion to strengthen its delivery of food, groceries, and other goods to customers.^[5]

[1] See About Us (Apr. 9, 2021) https://postmates.com/about.

[2] See 2019 California Senate Bill No. 707.

[3] Postmates Inc. v 10,356 Individuals, CV202783PSGJEMX, 2020 WL 1908302 (CD Cal Apr. 15, 2020).

[4] Adams v Postmates, Inc., 823 Fed Appx 535, 536 (9th Cir 2020).

[5] See Uber Completes Acquisition of Postmates (Dec. 1, 2020) https://investor.uber.com/news-events/news/press-release-details/2020/Uber-Completes-Acquisition-of-Postmates/default.aspx#:~:text=SAN%20FRANCISCO%2D%2D(BUSINESS%20WIRE,process%20of%20integrating%20U.S.%20operations.

Author: Professor Richard Bales, https://www.onu.edu/directory/richard-bales