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Posts Tagged ‘arbitration agreement’

Ninth Circuit’s Decision Upholding Arbitration Clause Enables Uber To Sidestep Substantive Issues Regarding Misclassification

Posted on: October 10th, 2018

By: Laura Flynn

In O’Connor v. Uber, a case in which California Uber drivers assert they should be categorized as employees rather than independent contractors, the Ninth Circuit Court of Appeals recently issued an order reversing the district court’s denial of Uber’s motions to compel arbitration. The Court rejected Plaintiffs’ assertion Uber’s arbitration agreements were unenforceable. The Court’s decision reversing the order denying arbitration was based on Mohamed v. Uber, 848 F.3d 1201 (9th Cir.  2016) wherein the Court found the relevant provisions delegated the threshold question of arbitrability to the arbitrator, that the delegation provisions were not adhesive and were therefore not procedurally unconscionable, and that the provisions allowing drivers to opt-out of arbitrations were not illusory. The Court rejected Plaintiffs’ additional argument the arbitration agreements were unenforceable because they contained class action waivers that violate the National Labor Relations Act of 1935 pointing to the recent Supreme Court decision in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018). As the class certification by the district court was premised on its determination the arbitration agreements were unenforceable, the order certifying a class of approximately 160,000 Uber drivers was also reversed.

Based on the Court’s decision, it appears Uber drivers will have to purse their misclassification claims individually through arbitration. The limited pool of arbitrators, the amount of time it takes to arbitrate an individual claim, the smaller payout for attorneys, and lack of precedential value associated with arbitrations will likely discourage some drivers from pursuing their claims.

If you have any questions or would like more information, please contact Laura Flynn at [email protected].

 

For further reading, see our blogs discussing this matter:

Arbitrability – Who Decides?

Posted on: September 14th, 2018

By: Ted Peters

The question of arbitrability (i.e., Who decides whether a dispute is arbitrable? The court or the arbitrator(s)?) is as ageless as the conundrum of what came first, the chicken or the egg.  In 2010, the Supreme Court decided Rent-a-Center, Vest Inc. v. Jackson, wherein it concluded that agreements to arbitrate questions of arbitrability are, themselves, enforceable.  That dispute involved an employee who had signed an arbitration agreement that provided for arbitration of disputes arising out of his employment, including discrimination claims.  The agreement expressly provided that the arbitrator, and not a court, had the exclusive authority to resolve any disputes relating to the enforceability of the arbitration agreement.  The Ninth Circuit Court determined that the employee’s argument that the agreement was unconscionable was a matter of fact for the court rather than the arbitrator.  In a split vote, the Supreme Court found otherwise, and concluded that because the employee challenged the agreement as a whole (and not only the delegation provision), the determination had to be made by the arbitrator.

The US Supreme Court will weigh in again on the issue of arbitrability. On June 25, 2018, the Court accepted certiorari in the case of Henry Schein, Inc. v. Archer & White Sales, Inc., a case in which the Fifth Circuit addressed the arbitrability of antitrust claims asserted against a distributor of dental equipment.  The defendants/appellants sought to enforce an arbitration agreement.  The magistrate granted a motion to compel arbitration, concluding that the threshold question of the arbitrability of the claims was vested in the decision of an arbitrator, and not for a court to decide.  The district court, however, reversed, finding that it had the authority to rule on the question of arbitrability and concluded that the claims at issue were not arbitrable.  The Fifth Circuit affirmed finding that submission of the dispute to the arbitrator was not necessary because the assertion of arbitrability was “wholly groundless.”  The appellate court explained that the arbitration clause in question created a carve-out for “actions seeking injunctive relief,” but did not limit the exclusion to “actions seeking only injunctive relief.”  The court reasoned that even though the agreement would allow the plaintiff/respondent to avoid arbitration by simply adding a claim for injunctive relief did not change the clause’s plain meaning.

The decision in Henry Schein underscores that a conflict has developed among the lower courts; some recognizing an exception for “wholly groundless” claims of arbitrability, but others not.  Defendants/appellants seek to have the Supreme Court reject the “wholly groundless” exception, asserting that the Fifth Circuit’s decision cannot be reconciled with the Federal Arbitration Act’s text or its overarching purpose: “to ensure that private agreements to arbitrate are enforced according to their terms.”  The question presented before the Court is simple: “Whether the Federal Arbitration Act permits a court to decline to enforce an agreement delegating questions of arbitrability to an arbitrator if the court concludes the claim of arbitrability is “wholly groundless.”

Oral argument is scheduled for October 29, 2018.

If you have questions or would like more information, please contact Ted Peters at [email protected].

Arbitration Clauses Are Only As Good As the Signatory’s Power to Bind, Obviously

Posted on: November 29th, 2017

By: Shaun Daugherty

A name is just a name when it was found on the signature line of an arbitration agreement between a Tift County Georgia nursing home and one of its residents. A U.S. District Judge in the Middle District of Georgia rejected the nursing home’s request to enforce the agreement and move the litigation to arbitration under the Federal Arbitration Act (“FAA”).  Why?  Because the daughter that signed the agreement did not have the power to do so on her mother’s behalf.

A negligence suit1 against the nursing home was filed in state court following the death of the plaintiff’s mother at the facility. The case was removed to federal court and the defendant moved to have the case dismissed and to compel arbitration pursuant to the arbitration agreement that was signed at the time of the admission of the decedent.  The defendant claimed that the FAA applied and preempted state laws that may say otherwise.

The court agreed that the agreement would have been enforceable under the FAA, that is, if it had been a valid agreement. However, in order to determine the validity of the agreement, the court looked to state law first.  Upon the admission of the mother to the nursing home, the daughter signed the admission paperwork that included the arbitration agreement.  Unfortunately for the nursing home, the daughter did not have power of attorney at the time.  In addition, there was no evidence that the mother had given implied authority to the agreement as she was apparently not aware of its existence and was not present when it was signed by the daughter.  These facts led the federal judge to determine that there was no valid or binding agreement between the mother and the facility and the pending litigation remains pending for a potential jury trial.

This could be a costly lesson for this particular facility and should be a valuable example for other long-term care facilities that have implemented arbitration agreements for this very purpose. It seems basic, but it bears repeating, make sure that a person signing an agreement, if not the resident, has the actual power to bind the resident.  Contract law dictates that an enforceable arbitration clause must be valid between the facility and the resident.  If the resident is not the signatory, put a copy of the power of attorney, or other rights-transferring legal document, in the resident’s file.  If there is no such document, get as much evidence of implied authority as possible and follow up often until you get something official in the file.  It could be the evidence that keeps your company out of a courtroom and in front of an arbitrator.

Plaintiffs would prefer to have the case before a jury where sympathy and emotion can be inflamed with strategic evidence presentation, including graphic photographs of the decedent. Indeed, the attorney for the plaintiff in this particular case is quoted as indicating that litigation often leads to fairer outcomes for his clients compared to arbitration.  Reading between the lines, that generally equates to larger jury verdicts versus arbitration awards.  He also indicated that state court allows for more “robust” discovery.  As those of us that have dealt with these cases know, that typically means extensive, expensive discovery requests by the plaintiffs’ counsel in hopes of obtaining some discovery sanction from the court for alleged failure to respond.  Arbitration can be much more focused and streamline the process.  Bottom line, attorneys for injured parties prefer a jury.

The moral of the story is if you want a valid agreement, you must get the right binding signature.

If you have any questions or would like more information, please contact Shaun Daugherty at [email protected].

 

1. [Davis v. GGNSC Administrative Services LLC, case number 7:17-cv-00107, in the U.S. District Court for the Middle District of Georgia.]