SCOTUS on Arbitration:
Past and Future
Matt Furton & Julie Young
LOCKE LORD LLP
111 SOUTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
312.443.0700
November 12, 2015
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Overview of Presentation
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Future Rulings
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2015-16 term SCOTUS cases
Compelling arbitration—stay or dismiss?
Who decides issues of arbitrability—arbitrators or court?
Court intervention mid-arbitration
State anti-arbitration statutes v. FAA & NY Convention
Manifest disregard of the law
Past Rulings
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Past SCOTUS cases 2000–2015
Class arbitration issues
Survey of significant holdings
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Upcoming 2015 Term SCOTUS Cases
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MHN Gov’t Servs., Inc. v. Zaborowski, 601 Fed.
App’x 461 (9th Cir. 2014), cert. granted, 83 USLW
3914 (U.S. Oct. 1, 2015) (No. 14–1458).
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DIRECTV, Inc. v. Imburgia, 225 Cal. App. 4th 338
(Cal. Ct. App. 2014), cert. granted, 83 USLW 3736
(U.S. Mar. 23, 2015) (No. 14–462).
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Should the Court Stay or Dismiss an
Action After Compelling Arbitration?
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Several Circuits follow the “must stay” approach:
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The Second, Third, Seventh, and Tenth Circuits
conclude that Section 3 of the FAA require the
suit to be stayed until the conclusion of the
arbitration.
Other Circuits follow the “may dismiss” approach:
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The First, Fifth, Sixth, and Ninth Circuits conclude
the FAA does not preclude dismissal of a lawsuit
when all of the claims asserted will be submitted
to the arbitrator.
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Who Decides Arbitrability?
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A court determines arbitrability unless the parties
“clearly and unmistakably provide otherwise.”
Multiple arbitration rules provide for arbitrators to
decide issues of arbitrability:
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AAA, Rule R-7
JAMS, Rule 11(b)
UNCITRAL, Article 23
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Who Decides Arbitrability?
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Does incorporation of arbitration rules constitute
clear and unmistakable evidence to arbitrate
gateway issues?
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Yes: The First, Second, Fifth, Eighth, Ninth,
Eleventh, Federal, and D.C. Circuits.
No: The Tenth Circuit
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Court Intervention Mid-Arbitration
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Court review generally comes in the beginning and
end of arbitration and not in the middle.
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The Ninth Circuit leaves the door open for midarbitration review in “extreme” cases.
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All other Circuits close the door, or do they…
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The Arbitration of Insurance
Disputes
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Many states have statutes prohibiting the arbitration
of insurance disputes.
Should these state anti-arbitration statutes prohibit
arbitration?
Interplay between:
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State anti-arbitration statutes
The Federal Arbitration Act
The New York Convention
The McCarran-Ferguson Act
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Does Federal Law Govern?
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Outside the context of insurance, the FAA generally
preempts any conflicting state law. See AT&T
Mobility, LLC v. Concepcion (2011); but see 201516 term cases.
If insurance is involved, must ask whether the FAA
or other act of Congress reigns supreme because
the McCarran-Ferguson Act preserves the
regulation of the business of insurance to the states.
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The Possible Scenarios
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Non-Insurance
Dispute
Fed vs. State?
Split:
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State – see
cert. granted
Federal –
many
examples
including 11th
& 2nd
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Domestic
Insurance
Dispute
Fed vs. State?
Split:
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State – 11th,
10th, 8th
Federal – DE
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International
Insurance
Dispute
NY Convention
vs. State?
Split:
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State – 2nd
Federal – 4th &
5th
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Section 10 of the FAA
An Award may be vacated:
(1) where the award was procured by corruption, fraud,
or undue means;
(2) where there was evident partiality or corruption in the
arbitrators, or either of them;
(3) where the arbitrators were guilty of misconduct in
refusing to postpone the hearing, upon sufficient cause
shown, or in refusing to hear evidence pertinent and
material to the controversy; or of any other misbehavior
by which the rights of any party have been prejudiced; or
(4) where the arbitrators exceeded their powers, or so
imperfectly executed them that a mutual, final, and
definite award upon the subject matter submitted was not
made.
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Manifest Disregard of the Law
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Before 2008 “manifest disregard of the law” had
almost universal acceptance as a judicially created
ground to vacate an arbitration award.
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Hall St. Assoc. LLC v. Mattel, Inc., 552 U.S. 576,
585 (2008) called the continued use of “manifest
disregard of the law” into question.
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Manifest Disregard of the Law
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Post-Hall Street there is a split of authority:
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Manifest disregard of the law cannot be used to
vacate an award: The Fifth, Eighth, and Eleventh
Circuits.
Manifest disregard of the law can be used to vacate
an award: Second, Fourth, Seventh, Ninth, and
Tenth Circuits.
The First, Third, and Sixth Circuits have noted the
split of authority but have not ruled on the issue.
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Past SCOTUS Rulings
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Key Issues Addressed by the Supreme
Court Since 2000:
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Class Arbitration Issues
Survey of Significant Holdings
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SCOTUS Arbitration Cases 2000–
2015
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Cortez Byrd Chips, Inc. v. Harbert Constr. Co.
(2000)
Green Tree Fin. Corp. – Ala. v. Randolph
(2000)
E. Associated Coal Corp. v. United Mine
Workers of Am., Dist. 17 (2000)
Major League Baseball Players Ass’n v.
Garvey (2001)
Circuit City Stores, Inc. v. Adams (2001)
C. & L. Enters., Inc. v. Citizen Band
Potawatomi Indian Tribe of Oklahoma (2001)
Equal Emp’t Opportunity Comm’n v. Waffle
House, Inc. (2002)
Green Tree Fin. Corp. v. Bazzle (2003)
Citizens Bank v. Alafabco, Inc. (2003)
PacifiCare Health Sys., Inc. v. Book (2003)
Buckeye Check Cashing, Inc. v. Cardegna
(2006)
Hall Street Assocs., L.L.C. v. Mattel, Inc.
(2008)
Preston v. Ferrer (2008)
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Union Pac. R. Co. v. Bhd. of Locomotive Eng’rs
& Trainmen General Comm. of Adjustment,
Cent. Region (2009)
14 Penn Plaza LLC v. Pyett (2009)
Arthur Andersen LLP v. Carlisle (2009)
Vaden v. Discover Bank (2009)
Stolt-Nielsen v. Animalfeeds Int’l Corp. (2010)
Granite Rock Co. v. Int’l Bhd. of Teamsters
(2010)
Rent-A-Center, West, Inc. v. Jackson (2010)
AT&T Mobility LLC v. Concepcion (2011)
KPMG LLP v. Cocchi (2011)
Marmet Health Care Ctr., Inc. v. Brown (2012)
CompuCredit Corp. v. Greenwood (2012)
Nitro-Lift Technologies, LLC v. Howard (2012)
Oxford Health Plans v. Sutter (2013)
Am. Express Co. v. Italian Colors Rest. (2013)
BG Grp. PLC v. Republic of Argentina (2014)
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Class Arbitration
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Stolt-Nielsen v.
AnimalFeeds (2010)
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Class action by consumers
of shipping service
Parties stipulated that their
contract was silent as to
class arbitration
SCOTUS held that the
Arbitrator exceeded his
authority by allowing class
arbitration
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Oxford Health Plans v.
Sutter (2013)
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Class action by doctors
claiming compensation from
insurer was too low
Parties’ agreement was
silent as to class arbitration
SCOTUS held that the
Arbitrator did not exceed his
authority by allowing class
arbitration
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Class Arbitration
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AT&T Mobility v.
Concepcion (2011)
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FAA preempts state
laws that prohibit
contracts from
disallowing class-wide
arbitration
Result: Corporations
require individual
consumer arbitrations
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Am. Express v. Italian
Colors Restaurant
(2013)
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Class action waivers are
enforceable under the FAA
even though claimants
would face high costs for
individual arbitrations
Result: Corporations require
individual consumer
arbitrations
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Survey of Significant Holdings
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Nitro-Lift Techs., L.L.C. v. Howard: An arbitrator
decides if the noncompetition agreement is null and
void as a matter of applicable state law.
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Cortez Byrd Chips, Inc. v. Harbert Constr. Co.: The
FAA venue provisions for 9 U.S.C. § § 9–11 allow
an arbitration award to be confirmed, vacated, or
modified in the district where the award was made
or “in any district proper under the general venue
statute.”
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Survey of Significant Holdings
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KPMG LLP v. Cocchi: A court must compel arbitration
under the FAA for arbitrable claims even if there are nonarbitrable claims—“A court may not issue a blanket
refusal to compel arbitration merely on the grounds that
some of the claims could be resolved by the court
without arbitration.”
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Preston v. Ferrer: “When parties agree to arbitrate all
questions arising under a contract, state laws lodging
primary jurisdiction in another forum, whether judicial or
administrative, are superseded by the FAA.”
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Survey of Significant Holdings
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Major League Baseball Players Ass’n v. Garvey (per
curiam): “Judicial review of a labor-arbitration decision
pursuant to such an agreement is very limited. Courts
are not authorized to review the arbitrator’s decision on
the merits despite allegations that the decision rests on
factual errors or misinterprets the parties’ agreement.”
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E. Associated Coal Corp. v. United Mine Workers of
Am., Dist. 17: Considerations of “public policy” (a policy
against reinstating workers who used drugs) do not
require courts to refuse to enforce an arbitration award.
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Questions?
Matt Furton & Julie Young
LOCKE LORD LLP
111 SOUTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
312.443.0700
mfurton@lockelord.com
jyoung@lockelord.com
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© 2015 Locke Lord LLP
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