The latest Arbitration news for you

Arbitration News

September 2020

The Kluwer Summer 2020 Arbitration Quiz

By Catherine A. Rogers (Arbitrator Intelligence, Inc.), Michael McIlwrath (Baker Hughes), Fahira Brodlija (Arbitrator Intelligence) and Gregory King (Arbitrator Intelligence) on Aug 23, 2020

As the global pandemic has constrained in-person gatherings, many arbitration practitioners will have foregone most of their summer travel. Fortunately, for this summer’s holiday (quiz), we can all take a trip together to Transparency Land, where all arbitrators and institutions are above average, but may not all be equal in how they manage proceedings.

With thanks to our friends at Arbitrator Intelligence, the quiz this summer is based on actual data compiled about arbitrators and institutions.

Have you never wondered whether arbitral tribunals seated in Central and Eastern Europe are likely to encourage amicable settlement and mediation while sipping a relaxing cocktail by the sea? Or, while safely socially distancing at the supermarket, asked yourself what the most common grounds are for granting document production in construction arbitrations? And certainly, while attending an on-line fitness class, had stray thoughts about the methods most tribunals adopt when calculating damages in oil and gas arbitrations?

Take the Quiz here

Seventh Circuit: Key Takeaways from Wallace v. Grubhub

Bryan Cave Leighton Paisner LLP

In a recent opinion, the Seventh Circuit decided that delivery drivers for a popular, nationwide mobile food-delivery service were not “engaged in foreign or interstate commerce” for purposes of determining whether they were exempt from coverage under the Federal Arbitration Act.

Grubhub, an online and mobile food-ordering and delivery marketplace operating in cities nationwide, considers its delivery drivers to be independent contractors rather than employees entitled to the protections of the Fair Labor Standards Act. A group of its drivers, who drove for Grubhub in Chicago, Portland, and New York, filed two putative class action lawsuits against Grubhub, alleging that Grubhub violated the Fair Labor Standards Act by failing to pay them overtime. The cases quickly hit a procedural roadblock, however, because each of the drivers had signed a “Delivery Service Provider Agreement” that required them to submit to arbitration for “any and all claims” arising out of their relationship with Grubhub. Based on these agreements, Grubhub moved to compel arbitration, and the district courts agreed. In so doing, the district courts rejected the drivers’ argument that their contracts with Grubhub were exempt from the Federal Arbitration Act.

Section 1 of the Federal Arbitration Act exempts from the Act’s coverage “contracts of employment” of two specifically enumerated categories of workers—“seamen” and “railroad employees”—and of a residual category of “any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1. In the district courts and in a consolidated appeal of their cases in the Seventh Circuit, the drivers argued that they qualified as “workers engaged in foreign or interstate commerce,” such that their Delivery Service Provider Agreements were exempt from the Federal Arbitration Act’s coverage. The district courts and the Seventh Circuit disagreed. See Wallace v. Grubhub Holdings, Inc., --- F.3d ---, 2020 WL 4463062, at *3 (7th Cir. August 4, 2020).

Relying on the Supreme Court’s interpretation of Section 1 of the Federal Arbitration Act in Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001), the Seventh Circuit held that Grubhub’s drivers, as a class, were not “engaged in foreign or interstate commerce” as that phrase is used in Section 1. See Wallace, 2020 WL 4463062, at *3. In reaching this conclusion, the Seventh Circuit limited application of Section 1’s residual category to transportation workers who are “actually engaged in the movement of goods in interstate commerce.” Id. at *2 (quoting Int’l Brotherhood of Teamsters Local Union No. 50 v. Kienstra Precast, LLC, 702 F.3d 954, 956 (7th Cir. 2012). The Court further emphasized that “to fall within the exemption, the workers must be connected not simply to the goods, but to the act of moving those goods across state or national borders.” Id. at *3. In other words, the mere fact that the goods transported by the drivers had crossed state lines was not enough to trigger Section 1. Because the drivers, as a class, had failed to demonstrate that they were actively involved in the interstate movement of those goods, they could not rely on Section 1 of the Federal Arbitration Act to avoid arbitration. Id. (“Section 1 of the FAA carves out a narrow exception to the obligation of federal courts to enforce arbitration agreements. To show that they fall within this exception, the plaintiffs had to demonstrate that the interstate movement of goods is a central part of the job description of the class of workers to which they belong.”).

Read on Lexology

Competence-Corrections: Fifth Circuit in the US Says Arbitrators Decide What “Correction” Means

-- Catherine Bratic

Awards are final—mostly. Many institutional rules allow arbitrators to correct clerical errors in their awards, but prohibit revisions to the merits of their decisions. The U.S. Court of Appeals for the Fifth Circuit signaled in a recent case that it will defer to arbitrators in interpreting institutional rules regarding the scope of their correction authority, even if their interpretation appears to be wrong.

Read Full Article on Kluwer

Second Circuit Reaffirms Federal Courts May Not Order Discovery for Private Commercial Arbitrations Abroad

-- Cahill Gordon & Reindel LLP

Whether private international commercial arbitrations are proceedings for which 1782 may be invoked

In In Re Guo, No. 19-781, 2020 WL 3816098 (2d Cir. July 8, 2020), as amended (July 9, 2020) 1, the United States Court of Appeals for the Second Circuit evaluated whether the Supreme Court's decision in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004), required reconsideration of the Second Circuit's prior holding that 28 U.S.C. 1782(a) is inapplicable to discovery sought in connection with private international commercial arbitrations.2 See National Broadcasting Co. v. Bear Stearns & Co., 165 F.3d 184 (2d Cir. 1999) ("NBC"). After carefully considering the Supreme Court's analysis in Intel and recognizing the existence of a circuit split on the issue, the Second Circuit reaffirmed its prior decision, concluding that "nothing in the Supreme Court's Intel decision alters our prior conclusion in NBC that 1782(a) does not extend to private international commercial arbitrations."

Read More at Lexology

In brief: arbitration formalities in USA

Schulte Roth & Zabel LLP

UNCITRAL Model Law

Is the arbitration law based on the UNCITRAL Model Law?

Congress enacted the Federal Arbitration Act (FAA) in 1925 to validate agreements to arbitrate and to provide mechanisms for their enforcement. The Supreme Court has held that the FAA applies in both federal question and diversity jurisdiction matters, and in some cases pre-empts state statutes precluding arbitration. The FAA is not based on the UNCITRAL Model Law, and differs from it in several ways, including the basis for setting aside an award, the power to modify or correct an award, the procedure for the appointment of arbitrators and the arbitral tribunal’s power to rule on its own jurisdiction.

Arbitration agreements

What are the formal requirements for an enforceable arbitration agreement?

According to FAA section 2, an agreement will be valid, irrevocable and enforceable, except upon such grounds as exist at law or equity for the revocation of any contract, if there is a written provision or contract evidencing a transaction involving commerce to settle by arbitration a controversy arising thereafter, or a transaction or refusal to perform the whole or part thereof of such contract, or an agreement in writing to submit to arbitration an existing controversy arising out of such contract, transaction or refusal. Generally, courts will apply the ordinary state-law principles that govern the formation of contracts to determine the validity of an agreement. An agreement to arbitrate is considered a separate contractual undertaking; the validity of an arbitration clause does not depend on the validity of the underlying contract.

Choice of arbitrator

If the arbitration agreement and any relevant rules are silent on the matter, how many arbitrators will be appointed and how will they be appointed? Are there restrictions on the right to challenge the appointment of an arbitrator?

Typically, parties will specify the procedure for the appointment of arbitrators, or adopt procedural rules of an administering arbitral institution such as the American Arbitration Association (AAA), JAMS or the International Chamber of Commerce International Court of Arbitration, which provide default rules for the appointment of arbitrators. In the absence of a contractual provision regarding the procedure for the appointment of arbitrators or the adoption of the procedure of an administering arbitral association, the appointment of arbitrators shall be made upon application to the court. The court may designate and appoint any arbitrator or arbitrators as the case may require. If the contract is silent about the number of arbitrators, the court shall appoint a single arbitrator for the action (FAA section 5).

Arbitrator options

What are the options when choosing an arbitrator or arbitrators?

The available arbitrator options will depend on the chosen arbitral association or court. Generally, each arbitral association or court maintains a roster of available mediators and arbitrators. Eligibility for those rosters is based on each association or court’s own criteria and evaluation. For example, the JAMS roster mainly comprises retired judges and other professional neutrals. The AAA roster tends to include arbitrators with more varied industry experience. Usually, the arbitral association or court can provide arbitrators with sufficient knowledge or experience to address the complexity of the issues presented.

Arbitral procedure

Does the domestic law contain substantive requirements for the procedure to be followed?

The domestic statutory law provides almost no requirements regarding the procedure to be followed. The arbitrators once appointed typically control the procedure, conducting the hearings, administering oaths and making awards. The FAA grants an arbitrator or arbitrators the power to summon the attendance of witnesses. The courts defer to the arbitrator on procedural matters.

If the parties have contractually adopted an administering arbitral association’s rules, those rules will bind the arbitrator or panel’s actions. The AAA provides different rules of procedure depending on the type of case (commercial, construction, labour, international, etc). Any procedural rules in the arbitration agreement will overrule the institutional rules.

Court intervention

On what grounds can the court intervene during an arbitration?

Federal courts have jurisdiction to hear arbitration-related issues for matters with federal question jurisdiction or diversity jurisdiction. Judicial intervention is commonly sought when the arbitration demand is made (to compel or stay a proceeding) or after the award (to enforce, modify or vacate). However, during an arbitration, parties may turn to the courts to enforce a subpoena issued by the arbitrator. If a person summoned to testify refuses or fails to appear, the parties may petition the district court in which the arbitrator (or a majority of the arbitrators) sits to compel attendance or punish said persons for contempt (FAA section 7).

Interim relief

Do arbitrators have powers to grant interim relief?

The FAA does not provide for provisional remedies, but the majority view is that arbitrators can and should grant preliminary injunctive relief to preserve the status quo pending arbitration. Likewise, administering arbitral associations often give arbitrators the power to grant interim relief.

Award

When and in what form must the award be delivered?

Under the FAA, there are no formal requirements regarding the delivery and form of the award. The rules of the administering arbitral association may require, or the parties may stipulate, that the award be in writing and signed by the majority of arbitrators. The timing of the award may also be governed by the administering arbitral association or the arbitration agreement.

Click here to read on Lexology

Newletter Subsriptions and Details

In an effort to recognize the specialization in the ADR community, we are creating 3 separate newsletters broadly covering these areas: Mediation - Arbitration - International ADR.

A newsletter focused in one of those areas will be sent out bi-monthly. In order for you to subscribe to as many types of newsletters that fit your particular practice/interests, please click on the Update Profile/Email Address link at the bottom of this email. From there you will be able to select which newsletters you wish to receive or if you would like to opt out all together.

Thank you for reading my newsletter, and as always, if you have any questions on any of the articles listed, do not hesitate to contact me.

Sincerely,

Thomas P. Valenti

350 W. Hubbard St., Suite 630

Chicago, IL 60654

T: 312-925-0081

F: 888-667-2485

email: [email protected]