John Pitblado

In this case, the question presented was whether a court or an arbitrator should determine whether an arbitration agreement authorizes class arbitration. The U.S. Supreme Court has not yet resolved this issue. Several circuit courts of appeal have considered this issue, but this was the first time it was presented in the Eighth Circuit.

The Eighth Circuit held that courts, not arbitrators, should answer the “who decides” question when the arbitration agreement at issue is silent on the subject, joining the Third, Fourth, and Sixth Circuits. In so holding, the court concluded that the question of “who decides” is a substantive question of arbitrability rather than a preliminary procedural question. Therefore, according to the Eighth Circuit, courts are the proper authority to answer the question, whereas arbitrators decide preliminary procedural questions. The Eighth Circuit noted that courts must play a threshold role to determine whether parties have submitted a particular dispute to arbitration because such issues presumptively lie with the courts. The Eighth Circuit also expressed some concerns about class arbitration, including the loss of confidentiality, due process concerns, and the lack of appellate review. Thus, the Eighth Circuit reversed the district court’s order denying plaintiff-appellant’s motion for summary judgment because the district court erred when concluding that the question of class arbitration was procedural rather than substantive. The court also remanded to the district court to determine whether there was a contractual basis for class arbitration.

Catamaran Corporation v. Towncrest Pharmacy et al., No. 16-3275 (8th Cir. July 28, 2017).

This post written by Jeanne Kohler.

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The parties in this case presented to a court the issue of whether a reinsurance syndicate for which Federal Insurance acted as “a front” was a real party in interest and should be involved in an arbitration between Federal Insurance and its reinsured. Although the Petitioner and Respondent agreed that the parties’ dispute was governed by an arbitration clause, the parties differed as to whether the reinsurer syndicate would have a role in the arbitration and, if so, the parameters of that role. With respect to that issue, Respondent’s cross-petition requested, in part, that the Court order Petitioner to arbitrate “which entities are the real parties in interest in the arbitration”.

Relying on the Supreme Court’s decision in PacifiCare Health Sys., Inc. v. Book, the Court stated that “[w]hether this issue will ever arise, whether [the syndicate’s] involvement will raise an issue of arbitrability that should be resolved by the Court, and whether the arbitrator will ever rule on it, is entirely speculative at this juncture.” The Court compelled arbitration, and declined to decide whether Respondent’s hypothetical motion would raise an issue of arbitrability. Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. Federal Ins. Co., 1:16-cv-08821 (USDC S.D.N.Y. June 8, 2017)

This post written by Nora A. Valenza-Frost.
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In this case, Ritarose Capili, a sales associate, brought an action against her former employer The Finish Line, Inc. (“Finish Line”), an athletic retailer in California federal court. Finish Line made a motion to compel arbitration based on an arbitration agreement in its employment application, which was denied. Finish Line appealed to the Ninth Circuit.

First, the Ninth Circuit agreed with the California federal court’s finding that the arbitration agreement was adhesive, and thus at least “minimally procedurally unconscionable” because it was essentially offered on a “take it or leave it” basis. Next, the Court also concurred with the district court’s finding that a cost-sharing provision in the arbitration agreement — which required the plaintiff to pay up to $10,000 at the outset of arbitration, not including the fees and costs for legal representation — was substantively unconscionable because it imposes substantial non-recoverable costs on low-level employees just to get in the door, effectively foreclosing vindication of employees’ rights. The Ninth Circuit also found that the district court correctly determined that a provision in the arbitration agreement that allowed Finish Line, but not the employee, to seek judicial resolution of specified claims, was substantively unconscionable. Thus, the Ninth Circuit held that based on the entire record, the district court did not err in finding that the arbitration agreement was both procedurally and substantively unconscionable. The Ninth Circuit also found that the district court did not abuse its discretion by declining to sever the unconscionable portions of the arbitration agreement, noting that “[w]here unconscionability permeates the entire agreement, California courts may refuse to sever unconscionable provisions.” Thus, the Ninth Circuit held that the district court properly denied Finish Line’s motion to compel arbitration.

Capili v. The Finish Line, Inc., No. 15-16657 (9th Cir. July 03, 2017).

This post written by Jeanne Kohler.

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