Nora Valenza-Frost

Sixth Circuit Affirms Ruling That Arbitrator Is to Determine Arbitrability of Employment Dispute Between Franchise Employees and Domino’s

July 9, 2020 by Nora Valenza-Frost

The plaintiffs filed a class action against Domino’s, alleging that the company’s franchise agreement violated federal antitrust law as well as state law. Domino’s moved to compel arbitration, and the plaintiffs opposed on the basis that Domino’s couldn’t enforce the arbitration agreements because Domino’s hadn’t signed the agreements; only their franchises had. However, incorporation of the AAA rules in the plaintiffs’ agreements provided “clear and unmistakable” evidence that the parties agreed to arbitrate “arbitrability.”

The plaintiff offered several arguments against such conclusion: (1) the arbitration agreement incorporates the AAA rules only as to claims that fall within the scope of the agreement; (2) the relevant AAA rule addresses only the “existence, scope, or validity” of his agreement, not whether non-signatories may enforce arbitration agreements under the FAA; (3) even if the relevant AAA rule gives arbitrators the power to decide the question of “arbitrability,” it does not give them the exclusive power to do so; (4) Sixth Circuit precedent has held, in certain instances, that incorporation of the AAA rules does not provide “clear and unmistakable” evidence that the parties agreed to arbitrate “arbitrability”; (5) the incorporation of the AAA rules is not “clear and unmistakable” evidence that the parties agreed to arbitrate “arbitrability”; and (6) a ruling for Domino’s would mean that anyone could force him to arbitrate “arbitrability” no matter how frivolous the argument for arbitration. The circuit court did not find these arguments availing and affirmed the Eastern District of Michigan’s ruling referring the matter to arbitration.

Blanton v. Domino’s Pizza Franchising LLC, No. 19-2388 (6th Cir. June 17, 2020).

Ninth Circuit Affirms Ruling That Successor Is Bound to Collective Bargaining Agreement

July 7, 2020 by Nora Valenza-Frost

“Although a predecessor collective bargaining agreement does not automatically bind a ‘perfectly clear’ successor, it may if the employer expresses an intent to be bound.” Here, Vectrus Systems Corp. entered into an agreement with Teamsters Local 631, wherein it promised to accept the terms and conditions of the preexisting collective bargaining agreement before staffing its operations. Thus, the fact that the staffing determination that gave rise to the dispute took place before the effective date of the collective bargaining agreement did not divest the arbitrator of the authority to arbitrate the dispute. The District of Nevada’s denial of Vectrus’ petition to vacate the arbitration award was affirmed.

Vectrus Systems Corp. v. Teamsters Local 631, No. 19-16640 (9th Cir. June 11, 2020).

New Jersey District Court Rejects Challenge to Arbitration Award on the Basis of Public Policy

June 17, 2020 by Nora Valenza-Frost

The petitioner challenged an arbitration award on the basis that it conflicted with public policy. “[T]he Third Circuit has explained that this exception does not … sanction a broad judicial power to set aside arbitration awards as against public policy.” Thus, the limited public policy exception applies only when “the arbitration decision and award create an explicit conflict with an explicit public policy.” For example, the court referenced numerous situations in which arbitration awards were vacated on public policy grounds where the safety of the general public is implicated, such as vacating an arbitration award that reinstated a pilot who flew while intoxicated or overruling an award that reinstated an employee who violated a public safety regulation at a nuclear power plant. Here, citing various labor laws, the petitioner argued that his employment contract’s forfeiture provision deprived him of wages that he earned based on his performance at Wells Fargo Advisors, and he was prevented from working off his loan obligations because he was discharged without cause. The court found that the petitioner’s dispute was a private contractual relationship between him and Wells Fargo Advisors and did not implicate public policy or public harm.

The petitioner also argued that the panel manifestly disregarded the law, as Wells Fargo Advisors encouraged the panel to resolve the dispute based on “industry practice” instead of the applicable law and that “representations that Wells Fargo Advisors advanced during the proceedings, in conjunction with the [a]ward which it received, raise an inference that the law was ignored.” The court’s review of the record indicated that the panel “was neither encouraged nor directed to disregard the law in resolving the parties’ dispute” and that support for the award can be derived from the terms and provisions of the petitioner’s employment contract.

Lastly, the petitioner argued that the panel excluded certain evidence during the hearings, which would have established that he was discharged from Wells Fargo Advisors without cause. The court found such evidence would have been irrelevant, as the petitioner’s letter offer stated that he was hired on an at-will basis, providing Wells Fargo Advisors a right to terminate the petitioner’s employment at any time, with or without advance notice and with or without cause.

The arbitration award was confirmed.

Caputo v. Wells Fargo Advisors, LLC, No. 3:19-cv-17204 (D.N.J. May 29, 2020).

Second Circuit Affirms EDNY Ruling That Customer Is Bound to Arbitration Clause in Amazon’s Conditions of Use

June 15, 2020 by Nora Valenza-Frost

A customer argued that he is not bound to the arbitration clause included in Amazon’s conditions of use since August 2011 because he never received notice of the clause or manifested his assent to it. Nonetheless, the customer had made at least 27 purchases through Amazon.com since he received notice of the arbitration clause through this litigation, conduct that “a reasonable person would understand to constitute assent.” The circuit court found it irrelevant that the customer denied ever reading the terms and conditions that included the arbitration clause in connection with his purchases because to be bound “an internet user need not actually read the terms and conditions or click on a hyperlink that makes them available as long as [he] has notice of their existence.” The district court’s ruling compelling the parties to arbitration was affirmed.

Nicosia v. Amazon.com, Inc., No. 19-1833 (2d Cir. June 4, 2020).

Fifth Circuit Affirms Ruling That Parties Lacked Agreement to Arbitrate

May 28, 2020 by Nora Valenza-Frost

The Western District of Texas had previously concluded that there was no “meeting of the minds” between the parties with respect to arbitration and denied the defendants’ motion to compel arbitration. On appeal, the Fifth Circuit found that the policies and procedures, incorporated by reference into the parties’ agreement, contained conflicting language. The policies and procedures stated that “[i]f mediation is unsuccessful, any controversy or claim arising out of or relating to the Agreement, or the breach thereof, will be settled by arbitration,” while the parties’ agreement contained a jurisdiction and choice-of-law clause, which stated that “[a]ny legal action concerning the Agreement will be brought in the state and federal courts located in Salt Lake City, Utah.” Relying on similar case law from the Tenth Circuit, the Fifth Circuit concluded that the jurisdiction and choice-of-law clause in the agreement signed by the plaintiff was “compelling evidence against an intent to arbitrate breaches of the Agreement.” Given the irreconcilable conflict between the two clauses, and that there was no limiting language in the parties’ agreement suggesting that the jurisdiction and choice-of-law clause only applied to disputes not subject to arbitration, there was no “meeting of the minds” with respect to arbitration.

O’Shaughnessy v. Young Living Essential Oils, L.C., No. 19-51169 (5th Cir. Apr. 28, 2020).