Arbitration

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In Heckman v. Live Nation Entertainment, Inc., a panel of the Ninth Circuit affirmed a lower court decision refusing to enforce the Ticketmaster arbitration provision in a purported consumer antitrust class action brought against Ticketmaster and Live Nation. In reaching its decision, the panel concluded that the arbitration agreement in question was both procedurally and substantively unconscionable. Going further, the panel went out of its way to hold, “as an alternative and independent ground,” that the Federal Arbitration Act (FAA) does not apply to the special multi-party arbitrations contemplated for mass arbitrations by the arbitration agreement in question.

On October 18, the U.S. Court of Appeals for the Fifth Circuit affirmed a district court’s vacatur of a maritime attachment order, providing a detailed analysis of the requirements for personal and in rem jurisdiction over attached property under the Federal Rules of Civil Procedure.

The U.S. Court of Appeals for the Fourth Circuit recently affirmed a district court’s decision denying a defendant’s motion to compel arbitration, underscoring the importance of clear and conspicuous notice in online arbitration agreements. Although the decision involves an arbitration provision in an online application for employment, it echoes lessons imparted by courts in cases involving consumer arbitration agreements. Read more here.

In a recent decision, the U.S. District Court for the Eastern District of Virginia denied a retailer’s motion to compel individual arbitration of a claim brought in a putative class action lawsuit. The complaint alleges that the retailer used deceptive sales tactics to induce the plaintiff to make an unnecessary online purchase. The court denied the retailer’s motion to compel arbitration, finding that a unilateral modification provision in its terms and conditions rendered the arbitration agreement illusory.

On May 23, the U.S. Supreme Court issued its decision in Coinbase, Inc. v. Suski et al., unanimously affirming the Ninth Circuit’s decision holding that when parties have agreed to two contracts — one sending arbitrability disputes to arbitration, and the other sending arbitrability disputes to the courts — a court must decide which contract governs. The decision teaches a cautionary lesson that parties with multiple contracts between them must keep issues of arbitrability consistent between the contracts.

Today, the U.S. Supreme Court issued a unanimous decision in Smith v. Spizzirri holding that § 3 of the Federal Arbitration Act (FAA) requires district courts to issue an order staying a federal case pending the outcome of arbitration, rather than dismiss the case when a motion to compel arbitration is granted. This decision resolves a circuit split where previously the Second, Third, Sixth, Seventh, Tenth, and Eleventh Circuits had held that the plain text of § 3 mandates a stay of the proceedings whereas the First, Fifth, Eighth, and Ninth Circuits had held that district courts have the discretion to dismiss the proceedings if the entire dispute was subject to arbitration.

On May 2, JAMS announced its new Mass Arbitration Procedures and Guidelines and Mass Arbitration Procedures Fee Schedule (together, the Procedures), with the express goal to “facilitate the fair, expeditious and efficient resolution of Mass Arbitrations” and implicit intent to reduce the administrative burden and onerous fees of mass arbitrations, as well as the delay and potential unfairness to the parties. While effective immediately, the Procedures only apply if the parties have agreed to their application in a pre- or post-dispute written agreement. This limitation significantly decreases the effectiveness of the Procedures as a tool for hedging risks and limiting the high costs of mass arbitration.

The U.S. Court of Appeals for the Ninth Circuit recently reversed a district court’s ruling, which had denied a motion to compel arbitration of Opportunity Financial (OppFi) on the basis that the arbitration clause was substantively unconscionable due to the choice of law provision in the loan agreement containing the arbitration clause. The Ninth Circuit vacated the decision and directed the district court to refer the matter to arbitration.

On January 15, the American Arbitration Association (AAA) issued amended Mass Arbitration Supplementary Rules and new Consumer Mass Arbitration and Mediation Fee Schedules (collectively, the New Rules). The New Rules will apply to all mass arbitration cases filed on or after January 15, but not to any mass arbitrations filed prior to that date. The New Rules aim to reduce friction and enhance process efficiency. However, unless the New Rules are supplemented by a well-constructed pre-dispute arbitration agreement, they will not solve the principal problems posed by mass arbitrations.