Federal Arbitration Case Update | Compelling and Appealing

Richard Birke

Richard Birke

By Richard Birke

Following are two recent federal court rulings related to arbitration.

Acknowledgement of Dispute Resolution Policy Sufficient to Compel Arbitration of Retaliation Claim
Ashbey v. Archstone Property Management, Inc.
United States Court of Appeals, Ninth Circuit

Michael Ashbey worked as an at-will employee at Archstone since 1996. In 2009, he acknowledged in writing that he understood and accepted the company’s dispute resolution policy, which included a requirement that any unresolved disputes go to binding arbitration.

In 2006, Ashbey’s wife, also an Archstone employee, complained that a fellow employee was sexually harassing her. In 2010, Archstone terminated Ashbey’s wife’s employment. Shortly thereafter, Archstone terminated Ashbey as well.

In 2011, Ashbey filed a complaint in state court (quickly removed to federal court) alleging unlawful retaliation.  Archstone filed a motion to compel arbitration. The district court denied the motion on the ground that Ashbey did not knowingly waive his right to a jury trial for Title VII claims. Archstone appealed.

The United States Court of Appeal for the Ninth Circuit reversed. They reviewed the evidence of Ashbey’s acceptance of the arbitration clause and concluded that “Ashbey knowingly waived his right to a judicial forum for his Title VII claim and equivalent state-law claims.”

District Court Ordered to Review Its Determination that Party Failed to Prove Existence of Agreement to Arbitrate
Dillon v. BMO Harris Bank
United States Court of Appeals, Fourth Circuit

James Dillon took out an online payday loan in North Carolina. He later filed a putative class action lawsuit alleging that the interest rates violated North Carolina usury law. The banks involved in processing and administrating the local aspects of the loans were named as defendants, and they responded by moving to compel arbitration of the dispute pursuant to the arbitration agreements between Dillon and the online lenders.

The district court held that the banks had failed to demonstrate the existence of an agreement to arbitrate between themselves and Dillon, given that they presented no contract that both had signed containing such an agreement. The banks gathered evidence and submitted a renewed motion to compel arbitration. The court deemed this motion something to reconsider and denied it. The banks appealed.

The United States Court of Appeal for the Fourth Circuit vacated and remanded, finding that the lower court should have considered the evidence in the renewed motion. The Court found that the FAA contemplated more than one “bite at the apple” and that the renewed motion was not a motion to reconsider. “The court’s prior ruling—that the pleadings did not establish arbitrability—did not determine whether Dillon consented to arbitration. Accordingly, the district court should have resolved the Renewed Motions on the merits.”

Enforcing Arbitration Agreements: The Choice of Procedural Law

Richard Chernick, Esq.

Richard Chernick, Esq.

By Richard Chernick, Esq.

The Federal Arbitration Act (FAA) applies generally to most arbitration agreements[1], but parties can choose to have the procedural law of the place of arbitration apply instead.  On many issues, there is no material difference between these two statutes, but in certain areas, the differences can be material.  One of these is where a party seeks to compel arbitration where there are other actions pending that are not subject to arbitration or where clams are made in the action sought to be compelled into arbitration and where non-signatory parties are also parties to the action.

The FAA, Chapter 1 (9 U.S.C. §§ 1-16) applies to domestic arbitrations.  The California Arbitration Act (Cal. Code Civ. Proc. §§ 1280-1294.2) governs domestic arbitrations seated in California.  The FAA’s substantive provisions preempt inconsistent state law.[2]  But parties may choose to be governed by state procedural law, in which case there would be no preemption.[3]

The two key provisions of these statutes relevant to this issue are FAA § 3 and CCP § 1281.2(c).

FAA § 3 provides the following:

If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall [author’s emphasis] on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.

CCP § 1281.2(c) provides that the court may deny a petition to compel arbitration, even when there is a valid, enforceable arbitration agreement, when the following occurs:

A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.

For more on Mr. Chernick’s discussion, please read the full article, Enforcing Arbitration Agreements: The Choice of Procedural Law, from Law.com.

[1]    Allied Bruce-Terminix Companies, Inc. v. Dobson, 513 U.S. 265 (1995).
[2]    AT&T Mobility v. Concepcion, 563 U.S. 321 (2011).
[3]    Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 US 468 (1989).


Consolidation and Conflict in the Health Care Industry

Viggo Boserup, Esq.

Viggo Boserup, Esq.

by Viggo Boserup, Esq.

The health care industry has experienced a significant increase in consolidations among providers of facilities and services alike.  From drugs to devices to service providers, 2014 saw the largest consolidation within the health care industry in the past 20 years.  These consolidations were spurred primarily by two distinct factors in the market.

The first is the reduction of reimbursements from both insurers and governmental agencies.  Both 2013 and 2014 saw some of the most dramatic reductions in Medicare and Medicare-related reimbursements to service providers.

The second factor is the effect of health care reform requiring a redesign of the clinical delivery system.  The Affordable Care Act (ACA) represents a transition from fee-for-service reimbursement to a results-based reimbursement.  It is no longer about how many services a provider can provide, but the quality of those services, often referred to as “population health.”

Mergers have been utilized to accommodate the foregoing two factors by realigning services to achieve greater scale of operations, an improvement in quality of care and/or enhanced access to care.  Variations on mergers with these goals in mind include strategic partnerships and shared-service agreements essentially consisting of purchasing networks.

These changes all bring greater opportunity for conflict.  They include contractual disputes over purchase price adjustments, valuations due to earn-out provisions, representations and warranties and countless other contractual provisions contained in the governing documents.  Likewise, non-contractual disputes will arise out of the natural friction occurring in any combination of two previously independent companies.

Contractual Disputes

Dispute resolution should be addressed in the acquisition agreement itself, and the arbitration clause in that agreement should be crafted with greater care than is typically the case.  Parties should attempt to incorporate the rules of arbitration providers specifically designed for arbitration in order to avoid the ambiguity inherent in references to statutes designed for civil litigation.  The number of arbitrators and the possibility of appellate review should also be considered.

To continue reading Viggo Boserup’s discussion, please read the full article, Consolidation and Conflict in the Health Care Industry, from Law.com.

“Getting to Yes” by Way of “I’m Sorry”: Settling Employment Discrimination Claims with Apologies

Maria Walsh

Maria Walsh

By Maria C. Walsh

Apologies are difficult.  By expressing regret and accepting responsibility for a harmful act, the person apologizing transfers “power” from him- or herself to the person receiving the apology.  Parties negotiating settlement want all the “power” they can muster, and many fear they’ll convey weakness by apologizing.  Experienced negotiators, however, use apologies to help settle cases.

Most people self-identify as decent, competent and moral.  When accused of illegal employment discrimination, defendants recoil.  They’re not “discriminators”!  Why should they apologize for something they believe they never did?  Moreover, won’t an apology be perceived as an admission of wrongdoing, further emboldening the plaintiff?

Social science research suggests the opposite.  A well-crafted apology can reduce the ultimate price of settlement by communicating empathy and respect to the “victim.”  Studies of adverse medical outcomes reveal that injured patients are less likely to sue, and more likely to settle quickly, when doctors apologize for unintended harm.  Recognizing the value of apologies, more than 34 states have “apology laws” that exclude certain expressions of regret or sympathy from evidence, primarily in the context of medical malpractice cases.

When an employee is involuntarily terminated (other than for an indisputably neutral reason), rarely does he or she agree the termination is justified.  Defense lawyers know, and advise their clients, that employers need not have just cause to terminate (in the absence of a contrary contract).  Most terminated employees, however, facing the loss of professional identity, economic security and workplace community, challenge the validity of any termination decision.

Many employers avoid litigation through effective communication.  They convey appreciation for the employee’s past contributions, express regret for the necessity of the termination and volunteer assistance with the employee’s transition to a new opportunity.  Their communications convey respect for the employee and acknowledge the employee’s value.  The employee, trusting the employer’s action was an unfortunate, but not vindictive, decision, feels little or no animus and can accept the need to move on.

In contrast, employees who are figuratively (or literally) marched out the back door, offered little or no explanation for the reason or timing of termination and/or accused of bad acts tend to think the worst of their employer.  Shame, confusion and disempowerment converge with anger and suspicion.  Trust is destroyed.  The employee disbelieves the employer’s stated reason, concluding that the employer must be hiding an illegal motive.

To continue reading Maria C. Walsh’s discussion, please read the full article, “Getting to Yesi” by Way of “I’m Sorry”: Settling Employment Discrimination Claims with Apologies, from Law.com.