Alex Silverman

Arkansas District Court Compels Arbitration of Post-Termination Wage Dispute

December 2, 2020 by Alex Silverman

Audra Patterson filed a putative class action against her former employer, American Income Life Insurance Company (AILIC), for alleged wage violations. AILIC moved to compel arbitration of her individual claims pursuant to an arbitration clause in her agency agreement. The agreement provided that all disputes shall be submitted to binding arbitration, specifically including those alleging violations of wage and hour laws. Patterson claimed the arbitration clause was nonetheless inapplicable, arguing the agency agreement was silent as to whether the arbitration clause survived termination of the agreement. The district court disagreed, finding the argument insufficient to overcome the strong presumption in favor of arbitration. Absent clear indication to the contrary, the court noted that federal arbitration law generally presumes an arbitration provision in a contract remains valid and enforceable even after the contract expires or is otherwise terminated. The court also rejected Patterson’s reliance on specific “survival” language in other contract provisions. Patterson claimed it was implicit from the language in those other provisions that the arbitration clause was not to survive upon termination of the contract. The court again disagreed, emphasizing that the U.S. Supreme Court and the Eighth Circuit have interpreted similar arbitration clauses as covering post-termination employment disputes. The court granted AILIC’s motion to compel accordingly.

Audra Patterson v. American Income Life Insurance Co. et al., Case No. 19-cv-00918 (E.D. Ark. Oct. 30, 2020).

California District Court Grants Motion to Compel, Referring Issue of Arbitrability to Hong Kong Arbitration Forum

November 30, 2020 by Alex Silverman

A district court in California granted a motion to compel arbitration pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. A shareholder’s agreement between the parties contained a provision requiring arbitration before the Hong Kong International Arbitration Centre (HKIAC), and also incorporated the HKIAC’s rules by reference. The plaintiff claimed the arbitration clause was inapplicable to the instant dispute. The defendants argued that arbitrability questions must be decided by the HKIAC. The district court agreed, finding the HKIAC rules clearly and unmistakably demonstrated the parties’ intent to delegate threshold arbitrability issues to the HKIAC. The district court also found the relevant shareholder’s agreement was enforceable against the plaintiff, even though he did not sign it, since his corporation signed the agreement as his alter-ego.

Michael Pak v. EoCell, Inc., et al., Case No. 20-cv-05791-VC (N.D. Cal. Oct. 28, 2020).

Second Circuit Affirms Arbitration Award of Over $2M in Fees to Prevailing Party

November 5, 2020 by Alex Silverman

EB Safe commenced arbitration proceedings against Mark Hurley arising out of a business dispute. The arbitrators ruled in Hurley’s favor and awarded him expenses and attorneys’ fees totaling more than $2 million. A New York district court subsequently denied EB Safe’s petition to vacate the award and granted Hurley’s cross-petition to confirm. On appeal, EB Safe argued the award should have been vacated because it was in manifest disregard of the law and/or because Hurley procured the award by fraud through committing perjury at the arbitration.

The Second Circuit disagreed in both respects, noting first that the “manifest disregard of the law” standard is limited only to the “exceedingly rare instances where some egregious impropriety on the part of the arbitrators is apparent.” EB Safe claimed that in deciding Hurley’s fee request, the arbitrators failed to apply the “reasonableness” standard required by Delaware law. But the court found no basis for the argument in the record, and thus found it was properly rejected by the district court. In addition, despite inconsistencies in Hurley’s arbitration testimony, the court found EB Safe failed to meet the burden for vacating an award purportedly procured by fraud. Because the inconsistencies could have been equally attributable to confusion, mistake, or faulty memory, the court found EB Safe failed to show clear proof of “willful intent to provide false testimony.” As such, the Second Circuit affirmed the district court order in its entirety.

EB Safe, LLC v. Hurley, 19-cv-3859 (2d Cir. Oct. 20, 2020)

Ninth Circuit Affirms That Uber Driver Not Engaged in “Foreign or Interstate Commerce” for Purposes of Exemption to FAA

October 15, 2020 by Alex Silverman

The Ninth Circuit denied a petition seeking to vacate an order compelling arbitration of an Uber driver’s putative class action. The district court held that rideshare drivers who pick up and drop off passengers at airports did not fall within an exemption in the Federal Arbitration Act (FAA) for workers engaged in foreign or interstate commerce, and therefore the petitioner may be judicially compelled to arbitrate in accordance with the terms of his employment contract. The Ninth Circuit affirmed, finding the decision was not clearly erroneous as a matter of law.

Section 1 of the FAA provides that arbitration clauses in “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” are “exempt” from the FAA’s coverage. In response to Uber’s motion to compel arbitration, the petitioner argued that he drives passengers engaged in interstate travel to and from airports, and thus qualifies for the exemption. The Ninth Circuit has interpreted section 1 as applying only to employees who “actually transport people or goods in interstate commerce,” although the court acknowledged that several recent federal court decisions have interpreted the clause more broadly. Notwithstanding the tension between those decisions and the district court’s ruling here, the court declined to find the district court’s decision was “clearly erroneous as a matter of law.” Analogizing the petitioner’s employment to that of local taxicab services, the court found that the petitioner never crossed state lines during his work, and cited no precedent holding that rideshare drivers, as a class, are “engaged in foreign or interstate commerce.” As such, the petition for a writ of mandamus was denied.

In re William Grice, No. 20-70780 (9th Cir. Sept. 4, 2020)

Washington Supreme Court Declines To Intervene in Ongoing Arbitration, Finding Judicial Authority Under FAA Limited To “Gateway” Disputes and Review of Final Awards

October 13, 2020 by Alex Silverman

Evette Burgess and Lithia Motors were arbitrating an employment dispute when, during the proceedings, Burgess filed a motion with the court seeking to terminate the arbitration and to rescind the arbitration agreement. The motion alleged that Lithia breached the agreement by failing to comply with discovery deadlines and that the arbitrator did so by failing to enforce applicable procedural rules. The superior court denied the motion for lack of jurisdiction and certified the issue to the Supreme Court of Washington. The Court affirmed the order, concluding that judicial review under the Federal Arbitration Act (FAA) is limited to disputes over “gateway” issues (i.e., enforceability of the arbitration clause in the first instance), and to the review of final awards.

Burgess argued that interlocutory challenges during arbitration proceedings is permitted by section 2 of the FAA. Lithia disagreed, arguing judicial review under the FAA is limited to the “bookends” of the arbitration: initial enforceability and review of the final award. The Court noted that the majority of federal circuit courts that have addressed the issue have agreed with Lithia, and that Burgess cited no case in which a court provided relief once the arbitration commenced. The Court also agreed with Lithia in this regard, explaining that sections 2, 3, and 4 of the FAA authorize courts to decide gateway arbitrability disputes, while sections 9, 10, and 11 allow courts to confirm, vacate, modify, or correct a final arbitration award at the conclusion of proceedings. The Court relied on a Sixth Circuit decision involving similar facts, where the court found it significant that the FAA is silent on judicial review between gateway disputes and review of final awards. Finding other circuit courts have likewise interpreted this silence as precluding interlocutory review, the Court affirmed the superior court decision declining to intervene and rescind the arbitration agreement while the subject arbitration was ongoing.

Evette Burgess v. Lithia Motors, Inc., et al., No. 98083-7 (Wash. Sept. 3, 2020)