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Michael Wolgin

Second Circuit Affirms Denial of NFL Player’s Petition to Vacate Arbitration Award, Rejecting Arguments of Harm Caused by Failure to Disclose CBA-Related Documents

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The case was brought by Philadelphia Eagles offensive tackle David Lane Johnson against the NFL Players Association, the NFL, and the NFL Management Council related to a 10-game suspension for using performance-enhancing substances. The collective bargaining agreement at issue included a policy regarding testing, discipline, and an arbitration appeal process for players found to be in violation. When Johnson appealed his suspension under the policy, the arbitrator issued an award upholding Johnson’s discipline. Johnson then sued the Players Association, the Management Council, and the NFL, seeking vacatur of the arbitration award and asserting claims for breach of the duty of fair representation, breach of the collective bargaining agreement, and violation of his rights under various labor laws. The district court denied Johnson’s petition for vacatur, confirmed the arbitration award, dismissed certain of Johnson’s claims, and ultimately granted summary judgment against Johnson as to all remaining claims.

On appeal, the Second Circuit rejected Johnson’s argument that the Players Association’s “failure to provide him with documents including ‘the complete Policy, his discipline file, and his testing history file’ amounted to a ‘per se‘ breach of its duty of fair representation.” Even assuming the failure of a union to produce documents constituted a breach, which the court indicated was unprecedented, Johnson still could not identify how the failure of the Players Association to provide these documents affected the outcome of his arbitration.

The Second Circuit also ruled that the district court did not err in granting summary judgment to the Players Association on Johnson’s claim that the union failed to provide him with copies of “side agreements” to the Management Council’s policy. The court was not persuaded by Johnson’s arguments, including that Johnson was entitled to damages for the late production of documents by the Players Association. Johnson was unable to dispute (1) the evidence in the record that all relevant documents had been produced; and (2) that there was no showing of any impact on the arbitral outcome or of bad faith.

The Second Circuit also affirmed the denial of the motion to vacate the arbitration award based on Johnson’s argument that he lacked a full and fair hearing. The Second Circuit concluded, “Johnson was given clear notice of the contemplated disciplinary action that was to be taken against him, the appeal was heard by a qualified arbitrator, and he had a full and fair opportunity to present arguments. That was more than sufficient under our precedent to confirm the award.”

Johnson v. National Football League Players Association, No. 19-2734 (2d Cir. July 17, 2020).

Ninth Circuit Remands Order Denying Motion to Compel Arbitration That Failed to Address the Effect of Delegation Clause in Parties’ Arbitration Agreement

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The delegation clause in the parties’ arbitration agreement provided that any “questions regarding the validity or enforcement of these Dispute Policies shall be delegated and submitted to the arbitrator, including whether the scope of the claim or dispute is subject to arbitration, and whether these Dispute Policies are enforceable as a matter of law.” The district court, however, ignored the clause and considered the validity and enforceability of the arbitration agreement by analyzing the unconscionability of portions of the agreement other than the delegation clause. That, the Ninth Circuit explained, was error.

The Ninth Circuit explained that the plaintiffs in the proceedings before the district court did not challenge the enforceability or validity of the delegation clause. Instead, the plaintiffs had contended that the defendants abandoned any argument relying on the delegation clause because they did not adequately raise the issue. The Ninth Circuit, however, disagreed that the defendants abandoned it, noting that the defendants had relied on the delegation clause in their briefing in support of their motion to compel arbitration. The Ninth Circuit also rejected the plaintiffs’ argument that the district court had found that the defendants had waived the delegation clause, observing that the lower court had actually indicated that it was uncertain as to whether waiver had occurred.

The Ninth Circuit concluded that the plaintiffs failed to meet their burden of proving a defense to the enforceability of the delegation clause. However, the Ninth Circuit ruled, because the district court did not address the issue, it would vacate the order and remand the case to allow the district court to provide “a full analysis,” which the Ninth Circuit held might assist the court in its review.

Cipolla v. Team Enterprises, LLC, No. 19-15964 (9th Cir. June 24, 2020).

Eleventh Circuit Affirms Denial of Imax Corp.’s Petition to Vacate Arbitration Tribunal Rulings That Included Awards of Nearly $1 Million in Arbitration Costs and Attorney’s Fees

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The arbitration awards involved several agreements for the sale, lease, and maintenance of Imax theater systems in South and Central America and the Caribbean. The arbitral tribunal issued a partial final award, and then several months later the tribunal issued its final award that resolved requests for relief on which it had deferred ruling. The tribunal ordered Imax to pay the opposing party $971,525.38 in arbitration costs, representing $800,000 in attorneys’ fees, and 70% of the administrative fees and expenses of the International Dispute Resolution Procedures of the American Arbitration Association, as well as 70% of the compensation and expenses of the arbitrators, which totaled $171,525.38. Imax challenged the awards, but the district court denied vacatur. The Eleventh Circuit then affirmed the denial, finding that the district court properly denied vacatur because Imax “failed to carry its burden to establish” (1) a defense under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards or (2) that the arbitral tribunal exceeded its powers under the Federal Arbitration Act.

IMAX Corp. v. Giencourt Investments, S.A., No. 20-10491 (11th Cir. May 28, 2020).

Third Circuit Affirms Denial of Motion to Compel Car Rental Class Action to Arbitration Based on Insufficiently Incorporated Arbitration Provisions

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Seven plaintiffs filed a putative class action against a car rental company and its subsidiary for allegedly unauthorized charges incurred when the plaintiffs rented cars from the company. The car rental companies moved to compel the plaintiffs to arbitrate their claims under the Federal Arbitration Act based on an arbitration clause that, for six out of the seven plaintiffs (the “U.S. plaintiffs”), was located on the paper jacket into which rental associates folded the car rental agreement, and for the seventh plaintiff (the “Costa Rica plaintiff”), was located on the back of the agreement.

Each U.S. plaintiff signed below the final paragraph on the agreement, which provided: “I agree the charges listed above are estimates and that I have reviewed & agreed to all notices & terms here and in the rental jacket.” The rental associates, however, were not trained to alert customers to the additional terms in the rental jacket, and the rental associates did not say anything about the rental jacket when the U.S. plaintiffs reviewed their agreements. Additionally, five U.S. plaintiffs used websites to reserve their car rentals, each of which had terms of use that included an arbitration provision. Regarding the agreement signed by the Costa Rica plaintiff, the front and back sides of the document both had signature lines, but the Costa Rica plaintiff signed only the front.

The district court denied the car rental companies’ motion to compel arbitration. The court found: (1) the U.S. plaintiffs did not assent to the arbitration provision in the rental jacket; (2) the record was not sufficiently developed with respect to the arbitration clause on the websites; and (3) a disputed factual issue existed as to whether the Costa Rica plaintiff was on reasonable notice of the arbitration provision.

On appeal, the Third Circuit found that it possessed jurisdiction over all three of the above issues under the FAA. The Third Circuit then determined that the rental car companies failed to demonstrate that the rental jacket containing the arbitration provision was incorporated into the U.S. agreements based on applicable state contract law. The agreement did not define or clearly describe the rental jacket, and there was no evidence that the plaintiffs were aware of the arbitration provision before they executed the agreement.

The court also rejected the defendants’ arguments that the plaintiffs who booked online agreed to each website’s terms of use and arbitration provision or that the district court erred in excluding unauthenticated evidence concerning the websites. Finally, the court affirmed the district court’s ruling that genuine issues of material fact existed as to whether the Costa Rica plaintiff had reasonable notice of the arbitration provision on the back of the car rental agreement. The court noted that the front side of the agreement did not direct the customer to the back of the agreement (containing the arbitration provision) or inform the customer of the terms. The Third Circuit therefore affirmed the district court’s refusal to compel arbitration.

Bacon v. Avis Budget Group, Inc., No. 18-3780 (3d Cir. May 18, 2020).

Court Compels FMLA Employment Dispute to Arbitration, Finding That Arbitration Agreement Delegated Arbitrability to Arbitrator and Agreement Appeared Not to Be Void or Unconscionable

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A former executive and in-house lawyer for the Miami Heat basketball franchise sued the team for allegedly violating her rights under the Family and Medical Leave Act when she was terminated from her employment. The Heat filed a motion to compel arbitration, which the plaintiff opposed. First, the plaintiff contended that the arbitrability of the dispute was for the court, not the arbitrator. The court disagreed, holding that, while the agreement did not contain an express delegation clause, the agreement’s incorporation of the American Arbitration Association rules served to delegate the issues regarding the validity of the arbitration agreement to the arbitrator.

The plaintiff also argued that the agreement was void as against public policy, contending that the agreement’s provisions for the arbitrator to award reasonable fees to the prevailing party and for each party to be responsible for one-half of any administrative costs imposed by the AAA precluded her from vindicating her complete rights under the FMLA. Although the court did not need to decide this issue – having already found that arbitrability was delegated to the arbitrator – the court found that even if the fees and costs provision was unenforceable due to a failure to provide the plaintiff with remedies fully consistent with the FMLA, the provision was not the essence of the parties’ agreement and was therefore severable.

The plaintiff also contended that the agreement was unconscionable because the Heat allegedly did not permit her time to review the agreement, seek legal counsel, or negotiate the terms. The court rejected this argument finding that the plaintiff failed to provide any evidence to “explain any specific reason she felt rushed to sign the agreement, had no ability to negotiate it, or lacked employment alternatives.” The court further rejected the plaintiff’s argument that the agreement was substantively unconscionable because it required her to arbitrate all her claims, “while only requiring the Defendant to arbitrate counterclaims that it ‘is or should be aware [of] at the time a demand for arbitration is made.'” The court explained that the plaintiff overlooked the provision in the agreement that required “that any claims ‘arising in the workplace environment’ be subject to arbitration.” “Certainly,” the court concluded, the agreement was not “outrageously unfair” and did not “otherwise shock the judicial conscience.” The court compelled arbitration and dismissed the case.

Yakovee v. Miami Heat L.P., No. 1:20-cv-20540 (S.D. Fla. Apr. 30, 2020).