By: Patrick  Ouellette, ALR Senior Editor, 2021

The Court of Arbitration of Sport (“CAS”) is a group of arbitrators that are highly specialized in the practice area of sports law and arbitration.[1] The CAS arbitrators are free of influence from any single organization, instead acting as a pool of arbitrators for any athlete who wishes to work through a grievance in arbitration.  The arbitrators assigned from this organization have all the same powers as an arbitrator presiding over any other dispute, in that their decision will be free from judicial scrutiny, save where it runs afoul of the FAA. What makes the CAS so interesting is that the organization handles anything that relates to sport, both directly and indirectly.

Direct relation to sport is the more obvious of the two. For example, if an athlete is facing a suspension for doping (the use of illegal performance enhancing drugs), the athlete can appeal the suspension. According to either the union contract or the individual contract, this process is likely settled in arbitration. The parties would likely pick the arbitrator who is a member of the CAS. The arbitrator would have the ability to hear the case and make a determination. However, an arbitrator from the CAS would also hear indirect cases. For instance, say that the athlete had a dispute about insufficient payment from a sponsor. The CAS would still hear this case, due to the fact that an athlete is one of the parties.

Arbitrators who work for the CAS are considered the premier arbitrators for all matters related to sports. As such, the roles are extremely coveted and difficult to attain. The CAS will only let arbitrators from its organization participate in any proceedings. Under section 14 of the code that created the CAS, the International Council of Arbitration in Sport (“ICAS”) is responsible for appointing all arbitrators to the CAS.[2] The ICAS only appoints arbitrators with “appropriate legal training, recognized competence with regard to sports law and/or international arbitration, a good knowledge of sport in general and a good command of at least one CAS working language.”[3]

The CAS has played a role in some of the most high profile cases that the sports world has seen. The CAS is involved in the MLB salary arbitrations. CAS played a role in Lance Armstrong’s doping trial, as well as UFC light heavyweight champion Jon Jones. Suffice it to say, next time you read a case involving a high profile athlete involved in an ongoing dispute, know the CAS will likely be supplying the arbitrator that will hear that case.

[1] Frequently Asked Questions, TAS CAS, available at https://www.tas-cas.org/en/general-information/frequently-asked-questions.html

[2] Code: ICAS Statutes, TAS CAS, available at https://www.tas-cas.org/en/icas/code-icas-statutes.html

[3] Id.

By: Kyle Yager, ALR Senior Editor, 2021

There is no denying the pervasive impact COVID-19 has had on the world.[1] From the losses of loved ones to widespread economic crisis, everyone has felt the tragic effects of this disease.[2]

Included in the widespread impact is the process of international arbitration.[3] International arbitration practitioners have been forced to adapt, and the result has been accelerated technological advancements.[4] A major advancement has been the use of video platforms, such as Zoom and WebEx, to conduct various aspects of the arbitration process.[5] Before the pandemic, there was often reluctance to implement video technology because of concerns about functionality and lack of IT knowledge to ensure effective performance.[6] However, the pandemic has necessitated their usage, and their “barriers to entry” have been largely overcome.[7]

Although video usage does seem to allow for similar execution of the same arbitration process as in-person, there are some challenges. Some of the in-person aspects are difficult to recreate virtually.[8] “For example, the consensus-building process among arbitrators is often advanced through informal caucusing at the hearing site, comparing notes during breaks about the evidence just elicited, and conferring with one another about the evolution of the case.”[9] Additionally, it may be more difficult for parties to make observations on what the tribunal and opposing parties are thinking.[10]

Notwithstanding some of the negative aspects, the use of video technology for some parts of the arbitration process is likely not going away.[11] The pandemic may have been the catalyst behind their implementation, but these technological advancements were likely going to become part of the process at some point down the line. When international parties are using the arbitrational process to settle disputes, there are travel and time concerns that are major factors in planning and conducting a given arbitrational dispute. Video technology alleviates some of these concerns, and can create a more efficient process in a lot of ways. Although the limitations of video technology may influence arbitrators to operate in-person after the pandemic for things like evidentiary hearings, video arbitration is here to stay. [12]

[1]. See John V.H. Pierce, PREDICTING THE FUTURE: INTERNATIONAL ARBITRATION IN THE WAKE OF COVID-19, 13 N.Y. St. B.J. 2 (2020).

[2]. See id.

[3]. Id.

[4]. Id.

[5]. Id.

[6]. See Pierce, supra note 1.

[7]. Id.

[8]. Id.

[9]. Id.

[10]. Id.

[11]. See Pierce, supra note 1.

[12]. Id.

 

By: Patrick Brogan, ALR Senior Editor, 2021

February 2, 2021 marked the deadline to appeal the Court of Arbitration for Sport (CAS) December 2020 decision regarding Russian authorities’ non-compliance with World Anti-Doping regulations. Neither the claimant, World Anti-Doping Agency (WADA), nor the respondent, Russian Anti-Doping Agency (RUSADA), appealed the decision. The passing of the appeal deadline finalizes the Russian ban from international sports competition through December 2022, including the upcoming Tokyo Olympic and Paralympic Games.

In December 2019, WADA concluded that RUSADA officials tampered with laboratory data prior to and while it was being forensically copied by WADA in January 2019.[1] The alleged data tampering was in violation of WADA’s 2016 conditions for RUSADA reinstatement as a compliant anti-doping agency. As a result, WADA imposed a four-year ban on Russia from participating in international sporting competitions. Russian athletes not suspected of doping violations may still compete in international competition but are barred from representing their country’s name, flag, or anthem. In a statement following WADA’s conclusion on Russian wrongdoing, WADA President Sir Craig Reedie said: “Russia was afforded every opportunity to get its house in order and re-join the global anti-doping community for the good of its athletes and of the integrity of sport, but it chose instead to continue in its stance of deception and denial.”[2]

RUSADA disputed the WADA allegations, and the matter was referred to CAS. CAS, formed in 1984 and headquartered in Lausanne, Switzerland, operates as an arbitral body devoted to resolving disputes directly or indirectly related to sport.[3] In 2016, an anti-doping division within CAS replaced the International Olympic Committee (IOC) as the sole body responsible for hearing doping cases related to Olympic competition.[4]

In December 2020, a three-person CAS panel upheld WADA’s claim of RUSADA non-compliance with doping regulations.[5] However, the CAS panel reduced the length of Russia’s international sports competition ban in half, from four years to two. In support of reduced consequences, the panel stated that it “considered matters of proportionality and, in particular, the need to effect cultural change and encourage the next generation of Russian athletes to participate in clean international sport.”[6]

In a statement, WADA said it was disappointed the CAS panel did not impose all the consequences that WADA sought, including the full four-year period.[7] However, grounds of appeal to the CAS decision are limited to procedural matters such as jurisdiction. Therefore, WADA refrained from appealing under the belief that it would not serve a useful purpose.[8]

[1] See Final Report to the CRC Regarding the Moscow Data, WADA-AMA (Nov. 20, 2020) https://www.wada-ama.org/sites/default/files/201912_ii_report_final.pdf

[2] See WADA Executive Committee unanimously endorses four-year period of non-compliance for the Russian Anti-Doping Agency, WADA- AMA(Dec. 9, 2020) https://www.wada-ama.org/en/media/news/2019-12/wada-executive-committee-unanimously-endorses-four-year-period-of-non-compliance

[3] See History of the CAS, TAS/CAS https://www.tas-cas.org/en/general-information/history-of-the-cas.html

[4] See Karolos Grohmann, CAS to take over doping cases at Olympics, Reuters (Mar. 1, 2016) https://www.reuters.com/article/uk-olympics-doping-cas-idUKKCN0W35IA?edition-redirect=uk

[5] See WADA does not appeal CAS decision regarding Russian Anti-Doping Agency to Swiss Federal Tribunal, WADA-AMA (Feb. 2. 2021) https://www.wada-ama.org/en/media/news/2021-02/wada-does-not-appeal-cas-decision-regarding-russian-anti-doping-agency-to-swiss

[6] See CAS DECISION IN THE ARBITRATION WADA V. RUSADA (Dec. 17, 2020) https://www.tas-cas.org/fileadmin/user_upload/CAS_Media_Release_6689_decision.pdf

[7] See WADA does not appeal CAS decision regarding Russian Anti-Doping Agency to Swiss Federal Tribuna, WADA-AMA (Feb. 2. 2021) lhttps://www.wada-ama.org/en/media/news/2021-02/wada-does-not-appeal-cas-decision-regarding-russian-anti-doping-agency-to-swiss

[8] Id.

By: Kyle Yager, ALR Senior Editor, 2021

With the ongoing spread of COVID-19 significantly impacting virtually every American sector, the justice system has been no different.[1] The pandemic began by completely shutting down courts for everything except emergency matters.[2] As it has continued, the courts have evolved to resuming operations in as normal capacity as possible.[3]

In parallel to the operational issues, the pandemic has also strained the justice system with an over-abundance of lawsuits relative to the current system’s capabilities.[4] Unsurprisingly, some of these include COVID-19 specific lawsuits.[5] Naturally, courts are struggling with this resulting backlog.[6] Some courts already were heavily backloaded before the pandemic, and COVID-19 has only exacerbated the docket strain.[7]

Courts have responded in a variety of ways, including cancelling oral arguments and holding virtual hearings.[8] However, these innovations have only proved so effective. Civil jury trials are particularly more difficult to manage in the current climate.[9] Consequently, courts have had to delay civil lawsuits, some for over a year or two.[10]

Arbitration offers a solution to those who are considering filing a lawsuit but need a more efficient timeline.[11] Arbitration allows for “speed and flexibility in the scheduling and presentation of evidence and argument.”[12] Accordingly, as it can be held in a matter of months, arbitration presents a viable alternative to the traditional judicial process.[13]

“Instead of cases lasting years, jammed up with discovery disputes, and dependent on courthouse access, arbitrations can be resolved under a year, without significant discovery, and from anywhere where there is an internet or phone connection.”[14] In the interest of efficiency and timely resolution, arbitration provides an ideal format for the COVID-19 climate.[15] Especially with millions of people throughout the U.S. facing unprecedented hardship, an efficient dispute resolution can provide relief to parties in need that otherwise may spend years waiting for their turn at the table.

[1]. See Asli Budak et al., Arbitration During the COVID-19 Pandemic, Lexology (Oct. 16, 2020), https://www.lexology.com/library/detail.aspx?g=9c9a54d0-9b87-4b46-ad29-dece5e00ef86.

[2]. See Joe Meadows, Why You Should Consider Opting for Arbitration During the Coronavirus Pandemic, American Bar Association (Nov. 30, 2020), https://www.americanbar.org/groups/litigation/committees/commercial-business/practice/2020/opt-for-arbitration-during-coronavirus-pandemic/.

[3]. See id.

[4]. See id.

[5]. See Amanda Bronstead, Lawsuits Filed in 2020 Over COVID-19 Were Diverse, but Limited, Law.com (Dec. 29, 2020), https://www.law.com/2020/12/29/lawsuits-filed-in-2020-over-covid-19-were-diverse-but-limited/.

[6]. See Meadows, supra note 2.

[7]. See id.

[8]. Id.

[9]. See id.

[10]. Id.

[11]. See Meadows, supra note 2.

[12]. Id.

[13]. See id.

[14]. Id.

[15]. See id.

 

By: Patrick Ouellette, ALR Senior Editor, 2021

It is undeniable that technology has become increasingly useful in commerce. Advancements in both hardware and software have further stoked the flames of the online marketplace, allowing consumers to be connected with businesses by only the click of a few buttons. As online commerce has become more commonplace, merchants and service providers have provided the terms that the business wishes to conduct the transaction under in digital form. This practice has been deemed “clickwrap,” referring to clicking a button that denotes the acceptance of the proposed terms by the consumer. This practice of electronic signing of documents is considered acceptance under state law for all states in the US.

One common provision of a clickwrap e-signature is the arbitration agreement. Arbitration agreements have become a mainstay in almost any sales agreement, due to the increasingly friendly treatment that arbitration has been granted by the Supreme Court. However, two recent cases have called into question the uneven rulings courts have handed down in different districts regarding the enforcement of arbitration agreements in clickwrap standards.

The case that demonstrates the majority view on arbitration in clickwrap scenarios is from the Third Circuit in Dicent v. Kaplan University[1]. In Dicent, the plaintiff claimed that she did not assent to the arbitration agreement because she was tricked into agreeing with to the arbitration agreement in the clickwrap agreement.[2] The plaintiff claims she was not aware when enrolling in the course that she would be agreeing to arbitration, and thus she should be allowed to use the courts as a means of resolving her case.[3] The Third Circuit disagreed, stating the arbitration agreement was clearly outlined in the course enrollment.[4] Additionally, Pennsylvania state law considers an e-signature assent to a contract.[5] Therefore, the Third Circuit ruled that a contract has clearly been formed, and that the plaintiff has agreed to the arbitration agreement.[6]

While Dicent represents the majority position, a case out of the First Circuit has challenged the traditional rulings related to clickwrap agreements. In Krauders v. Uber Technologies, Inc., the First Circuit ruled that the user of the Uber app did not assent to the contract, and therefore the arbitration agreement.[7] The court ruled that the arbitration agreement was in a place that was so difficult to find, it amounted to encouraging the user not to read.[8] Therefore, the user could not assent to the terms of the arbitration agreements.[9]

Herein lies the problem with future clickwrap agreements. While the majority view claims that a customer who uses a product has the responsibility to understand what the terms are that the customer is agreeing to, at least the First Circuit has ruled that companies cannot employ tactics that are deemed “deceptive” to get customers to agree to their terms. Neither court established a bright line rule that would be helpful for future litigants. This lack of ruling will likely result in future agreements being deemed enforceable until there are cases that establish a clear test to determine assent in a clickwrap agreement.

[1] Dicent v. Kaplan University, 758 Fed. Appx 311, 313 (3rd Cir. 2019)

[2] Id.

[3] Id.

[4] Id.

[5] Id.

[6] Id.

[7] Krauders v. Uber Technologies, Inc. 486 Mass. 557, 571 (Jan. 2021)

[8] Id.

[9] Id.

By: Patrick Brogan, ALR Senior Editor, 2021

On January 25, 2020, the Supreme Court dismissed its decision to review Henry Schein Inc. v. Archer and White Sales Inc., as improvidently granted.[1]

The case centers around an arbitration clause with a “carve-out” for certain actions and remedies. Specifically, the parties agreed that “any dispute arising under or related to this Agreement (except for actions seeking injunctive relief and disputes related to trademarks, trade secrets, or other intellectual property…), shall be resolved by binding arbitration in accordance with the arbitration rules of the American Arbitration Association.”[2]

This is the second time the Court was asked to review this case, an antitrust action involving distributors of dental equipment. In the first decision, offered in 2019, the Court unanimously held that when a contract clearly and unmistakably delegates questions of arbitrability to an arbitrator, a court may not determine arbitrability questions, even when the court finds the argument for arbitration to be “wholly groundless.”^[3]

Justice Kavanaugh’s opinion emphasized the Court’s previous holdings that parties may delegate threshold arbitrability questions to the arbitrator, so long as the parties’ agreement does so by “clear and unmistakable” evidence.[4]  However the court’s 2019 decision did not answer whether the contract in question delegated questions of arbitrability to the arbitrator.

The case was remanded to the Fifth Circuit who ruled on the issue of arbitrability delegation. The Fifth Circuit ruled that the arbitration clause in question created a carve-out for “actions seeking injunctive relief,” and therefore, a claim seeking injunctive relief was beyond the scope of arbitration.[5] Accordingly, issues carved-out from the arbitration clause are for the court to decide, not an arbitrator.[6]

In the case’s return to the Supreme Court, the issue was whether a provision in an arbitration agreement that exempts certain claims from arbitration negates an otherwise clear and unmistakable delegation of questions of arbitrability to an arbitrator.[7]

In Henry Schien’s view, the arbitration agreement’s incorporation of the AAA rules clearly and unmistakably delegates questions of arbitrability to the arbitrator. Further, Henry Schien argued that the presumption of arbitrability requires that ambiguities in the scope of the agreement should be resolved in favor of arbitration.

On the other hand, Archer & White’s position is that the question of arbitrability is for the court due to the carve-out in the arbitration agreement and that reference to the AAA rules in the arbitration agreement alone does not clearly and unmistakably show the intent of the parties to delegate arbitrability questions.

The Court’s dismissal means that the decision of the Fifth Circuit’s decision from August 2019, remains. So too does the question of who decides questions of arbitrability when parties limit the scope of arbitration agreements by carving out specific actions and remedies. While questions remain to be answered on this issue, one thing that is certain is that the dispute between the parties, which date back to 2012, could have been avoided by language that clearly and unmistakably detailed the intentions of the parties when it comes to delegating questions of arbitrability.

[1] Henry Schein, Inc. v. Archer & White Sales, Inc., No. 19-963 (2019).

[2] Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019).

[3] Id at 531.

[4] Id. at 530.

[5] Archer & White Sales, Inc. v. Henry Schein, Inc., 935 F.3d 274 (5th Cir. 2019).

[6] Id.

[7] Henry Schein, Inc. v. Archer & White Sales, Inc., No. 19-963 (2019).

By: Patrick Ouellette

Arbitration Law Review, Senior Editor, 2020-2021

In October of 2019, the California Governor signed into effect AB-51, which prohibited employers from forcing their employees to sign arbitration agreements as a condition for continued employment.[1] Under the law, employees could litigate claims that were previously covered under the strict arbitration agreements, such as harassment, discrimination, and wrongful termination suits.[2] These suits could result in embarrassment or negative publicity for the employer. However, immediately after signing the bill to be effective January 2020, a federal court issued a temporary restraining order (“TRO”) on the bill. After litigating the claim, a judge found the law to be preempted by the FAA.[3]

California legislature passed the bill to undo the unfair bargaining power that employers have over their employees. Although courts have been clear on their position concerning arbitration, California in particular has felt that mandatory arbitration forces employees to waive their rights for nothing in return. Many companies can use the mandatory arbitration as a shield that prevents systemic issues from being litigated in open court. Of course, companies may argue that these agreements prevent a potential adversarial party from using the court of public opinion against the company. However, it is difficult to argue that the employer is the one who holds all the bargaining power with respect to the arbitration agreement.

But was AB-51 the best way to rectify the inequities created by mandatory arbitration agreements? AB-51 had language that clarified that it was not attempting to preempt any cases that would be controlled by the FAA. The FAA itself contains a preemption clause, which states that except “upon grounds as exist at law or in equity for the revocation of contract,” courts are required to enforce arbitration agreements.[4] Since the purview of the FAA is so vast, the FAA would likely control all cases that AB-51 hopes to control. It is likely that AB-51 would have been largely toothless legislation, which may have contributed to the judge’s decision to strike down the order.

California has long been trying to find ways around the FAA’s wide mandate, derived from the expansive language and continued support at the Supreme Court’s level.[5] It is likely that AB-51 represents just another chapter in California’s fight for employee rights. However, due to the overwhelming support that the Supreme Court has shown for arbitration as a way of settling disputes, it is challenging to see how California make any headway in their continued fight.

[1] California Assembly Bill No. 51.

 

[2] Id

 

[3] Chamber of Commerce of the United States v. Becerra, 438 F. Supp. 3d 1078 (E.D. CA 2020)

 

[4] 9 U.S.C. §2

[5] Concepcion v AT&T Mobility LLC, 563 U.S 333 (2011)

By: Kyle Yager

Arbitration Law Review, Senior Editor, 2020-2021

In Lamps Plus, Inc. v. Varela, the Supreme Court of the United States shut off the proverbial light switch on parties’ ability to compel class arbitration when an employment agreement is ambiguous to it.[1] The Court illuminated the uncertainty by explaining that parties have the power to turn on the lights themselves; there simply must be a contractual basis more than ambiguity to enforce class arbitration.[2]

In 2016, a hacker deceived a Lamps Plus, Inc. employee into divulging the tax information of approximately 1300 company employees.[3] This resulted in the fraudulent filing of a federal income tax return in the name of Lamps employee Frank Varela.[4] Varela subsequently filed a putative class action against Lamps representing employees whose information had been compromised.[5]

Relying on an arbitration clause in the employment contract, Lamps moved to compel arbitration on an individual basis and dismiss the suit.[6] The District Court dismissed the suit and granted the motion to compel arbitration, but only on a class wide basis.[7] On appeal, the Ninth Circuit affirmed.[8] Lamps then petitioned for a writ of certiorari, which the Supreme Court granted.[9]

The Court reversed, holding that the Federal Arbitration Act (“FAA”) bars courts from compelling “class arbitration absent an affirmative contractual basis for concluding the parties agreed to do so.”[10] The Court reasoned that class arbitration is both significantly different than “traditional individualized arbitration” and it subverts its most important benefits.[11] Also, the Court explained that its holding “is consistent with a long line of cases holding that the FAA provides the default rule for resolving certain ambiguities in arbitration agreements.”[12] Accordingly, the Court determined that courts may not infer consent to class arbitration from an ambiguous agreement.[13]

Overall, the decision shines light on the uncertainty regarding ambiguous arbitration agreements and class arbitration.[14] “[A] flickering light as to whether an arbitration agreement provides for class arbitration will not do.”[15] Unless the parties make it crystal clear that they “agreed to arbitrate on a class-wide basis, it is going to be lights out for any putative class.”[16]

The Court’s decision marks a win for employers who prefer to arbitrate workplace claims and consumer disputes on an individual basis.[17]

[1]. Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019).

 

[2]. Id. at

 

[3]. Id. at 1412.

 

[4]. Id.

 

[5]. Id. at 1413.

 

[6]. Lamps Plus, 139 S. Ct. at 1413.

 

[7]. Id.

 

[8]. Id.

 

[9]. Id.

 

[10]. Id. at 1416.

 

[11]. Lamps Plus, 139 S. Ct. at 1415.

 

[12]. Id. at 1418.

[13]. Id. at 1419.

 

[14]. See Pravin R. Patel, Lamps Plus: Supreme Court Turns Out the Lights on Class Arbitration, ABA (April 30, 2019), https://www.americanbar.org/groups/litigation/committees/mass-torts/practice/2019/lamps-plus-supreme-court-turns-out-the-lights-on-class-arbitration/.

 

[15]. Id.

 

[16]. Id.

 

[17]. See id.

 

By: Patrick Brogan

Arbitration Law Review, Senior Editor, 2020-2021

The Fourth Circuit Court of Appeals vacated a Northern District Court of West Virginia’s denial of DIRECTTV’s motion to compel arbitration.[1]

Diana Mey sued DIRECTV alleging that the company violated the Telephone Consumer Protection Act (TCPA) by calling her cell phone to advertise DIRECTV products and services even though her phone number was listed on the National Do Not Call Registry. DIRECTV moved to compel arbitration, asserting that the dispute was covered by an arbitration agreement in the contract governing Mey’s cellular phone service from DIRECTTV affiliate: AT&T Mobility (“AT&T”).

The arbitration agreement in question was extremely broad in both scope and duration. The relevant language of the agreement stated: AT&T and you agree to arbitrate all disputes and claims arising out of or relating to any aspect of the relationship between us, whether based in contract, tort, statute, fraud, misrepresentation or any other legal theory; claims that arose before this or any prior Agreement; and claims that may arise after the termination of this Agreement. Finally, the agreement defines any references to AT&T to also include any affiliates of AT&T.

Federal District Judge John Preston Bailey of the Northern District Court of West Virginia expressed his concern with the broad arbitration agreement, which has been referred to as an “infinite arbitration clause.”^[2] In denying DIRECTTV’s motion to compel arbitration, Judge Bailey stated that enforcing this arbitration clause would pave the road to more absurd results that the parties could not have reasonably anticipated when entering the contract.

DIRECTTV appealed the decision to the Fourth Circuit Court of Appeals, where the court ultimately vacated the district court’s order. Writing for the majority, Judge Allison Jones Rushing acknowledged the broad nature of the arbitration agreement, but quickly noted that Ms. Mey did willingly enter into a contract that included an agreement to arbitrate. In vacating the district court’s decision, Judge Rushing stated that the lower court applied the wrong standard when asking whether the arbitration agreement could be interpreted not to cover this dispute (emphasis added). Rather, the standard to apply, based in precedent, was whether the arbitration agreement is “‘susceptible of an interpretation that covers the asserted dispute.”^[3] The Circuit Court, applying this standard and interpreting the arbitration agreement based on its plain language, ruled that Mey’s TCPA claims concerning DIRECTV’s advertising calls fell within its scope of the arbitration agreement.

The favorable ruling for DIRECTTV in this case showcases the contractual nature of arbitration agreements and a court’s commitment to resolving disputes regarding the scope of arbitrable issues in favor of arbitration. With this ruling now in the pocket of corporations, consumers who actually take the time to read sales contracts should be on the lookout for agreements to arbitrate “all disputes” involving “all affiliates.”

[1] Mey v. DIRECTV, 971 F.3d 284 (4th Cir. 2020).

[2] See Infinite Arbitration Clauses, 168 U. Pa. L. Rev., at 639.

 

[3] Am. Recovery Corp. v. Computerized Thermal Imaging, Inc., 96 F.3d 88, 92 (4th Cir. 1996).

 

 

By: Kyle Yager

Arbitration Law Review, Senior Editor, 2020-2021

On January 15, 2019, the Supreme Court of the United States unanimously ruled in favor of a long-haul truck driver, Dominic Oliviera, who filed a putative class action against his employer for failing to pay employees minimum wage.[1] The Court was tasked with deciding (1) whether a court has the authority to determine if a section 1 exclusion of the Federal Arbitration Act (“FAA”) applies before ordering arbitration, and (2) whether Oliviera’s classification as an independent contractor fell within the FAA’s exclusion of coverage of certain employment contracts.[2] The Court answered both questions in the affirmative.[3] As a result, economists have speculated about a potential ripple effect on consumer prices.[4]

Oliviera filed suit against New Prime, an interstate trucking company and his employer, alleging that, notwithstanding his employment contract labelling him an independent contractor, the company treated its drivers as employees and failed to pay them the statutorily due minimum wages.[5] New Prime responded by requesting the district court to invoke its statutory authority under the FAA and compel arbitration pursuant to the parties’ contract.[6] Notably, the FAA generally requires courts to enforce private arbitration agreements.[7]

The main dispute between the two parties hinged on section 1 of the FAA and court’s authority over it.[8] Oliviera argued that, regardless of his classification as an employee or independent contractor, he was exempted from the FAA’s coverage because his agreement with New Prime was a “contract of employment of a worker engaged in interstate commerce.”[9] Thus, Oliveira contended, the district court had no authority to compel arbitration.[10]

Conversely, New Prime contended that Oliviera’s status as an independent contract did not qualify him for the exemption, and, more importantly, that determination should be left to the arbitrator and not the court.[11]

The district court ultimately sided with Oliviera, and the First Circuit affirmed on appeal.[12] The First Circuit held that, in conflicts such as this one, court’s should determine whether the parties’ contract is included within the FAA’s scope prior to compelling arbitration pursuant to the statute.[13] The First Circuit also held that the FAA’s section 1 exclusion removed both employee-employer relationships and independent contractors from coverage.[14] New Prime subsequently appealed to the Supreme Court.[15]

The Supreme Court agreed and affirmed the First Circuit’s ruling.[16] The Court reasoned that, in order to compel arbitration, courts must first “know whether the contract itself” is covered by the FAA.[17] Further, the Court relied on the historical definition and context of “contracts of employment” at the time of the FAA’s drafting to determine that independent contractors were intended to be included in the FAA’s exclusionary provision.[18]

The Court’s decision “marks a rare win for workers at the high court.”[19] However, “[t]his is only the first phase of a battle.” [20] The next phase will be to determine whether these agreements would be enforceable under state law.[21]

Notably, the Court’s decision may have a significant causal sequence in the economy.[22] Some speculate that the decision’s impact could result in higher wages for truckers. [23] Further, if companies are forced to treat these independent contractors as employees, it could result in higher operating costs. This, in turn, could result in a considerable increase in consumer prices. [24]

[1]. New Prime Inc. v. Oliveira, 139 S. Ct. 532, 544 (2019).

[2]. Id. at 536.

[3]. Id. at 534.

[4]. See Tucker Higgins, Supreme Court, missing a justice, considers trucking case that could rattle the economy, CNBC (Oct. 3, 2018), https://www.cnbc.com/2019/01/15/transportation-stocks-sink-after-scotus-sides-with-trucker-against-employer.html.

[5]. New Prime, 139 S. Ct. at 536.

[6]. Id.

[7]. Id.

[8]. Id.

[9]. Id. (alterations omitted).

[10]. New Prime, 139 S. Ct. at 536.

[11]. Id. at 567.

[12]. Id.

[13]. Id.

[14]. Id.

[15]. Id.

[16]. Id. at 544.

[17]. Id. at 537.

[18]. Id. at 542–44.

[19]. Higgins, supra note 4.

[20]. Id.

[21]. Id.

[22]. See id.

[23]. Id.

[24]. Higgins, supra note 4.