Hall Street Associates v. Mattel: more briefs to be filed
November 16, 2007 by Ross Runkel at LawMemo
Oral arguments were held November 7. The issue in this case is whether a federal court must (or may) enforce the parties' agreement that expands the scope of judicial review of an arbitration award beyond what is provided by the Federal Arbitration Act.
The Court's order identified three issues for the parties to brief:
(1) Does authority exist outside the Federal Arbitration Act (FAA) under which a party to litigation begun without reliance on the FAA may enforce a provision for judicial review of an arbitration award?
(2) If such authority does exist, did the parties, in agreeing to arbitrate, rely in whole or part on that authority?
(3) Has petitioner in the course of this litigation waived any reliance on authority outside the FAA for enforcing the judicial review provision of the parties’ arbitration agreement?
Briefs are due November 27. Replies are due December 3.
My view: I thought this case would be easy, and that the Court would not allow private parties to expand the role of the federal courts beyond what is laid out in the Federal Arbitration Act.
Now it appears that the Court is looking for some other way (outside of the FAA) to enforce the parties' agreement. As far as I can tell, this legal argument was never brought up previously in this litigation, and I think it should be too late to bring it up now.
Acceptance by continuing to work
November 14, 2007 by Ross Runkel at LawMemo
Lots of blog buzz about Seawright v. American General (6th Cir 11/13/2007), which held that Seawright accepted her employer's offer of an arbitration agreement by continuing to work.
The case discusses some basics of contract law: offer, acceptance, consideration, unconscionability.
Offer: A couple of blogs have suggested that the employer's offer was made by mailing the new arbitration program to employees. Well, partly true. In fact, the employer announced the program in a bulletin, mailed a letter, and held informational meetings. Seawright signed a form indicating that she attended a meeting and received a copy of the new program. So, it seems to me that there is no significant issue as to whether the employer made an offer that was received by Seawright.
Acceptance: The offer said, "Seeking, accepting, or continuing employment ... means that you agree to resolve employment claims ... through this process instead of through the court system." The offer was made in 1999 and Seawright continued working for six more years.
The court held that under Tennessee law her continuing to work was an expression of assent to the offer. Therefore, she accepted the offer.
The dissent argued that there was no proof that Seawright assented. She didn't sign an arbitration agreement, and "no Tennessee court has decided whether continuing employment is effective as a waiver of constitutional rights."
The dissenting judge (Hon. Boyce F. Martin, Jr.) deserves an award for his Homer Simpson footnote:
Homer Simpson talking to God: “Here’s the deal: you freeze everything as it is, and I won’t ask for anything more. If that is OK, please give me absolutely no sign. [no response] OK, deal. In gratitude, I present you this offering of cookies and milk. If you want me to eat them for you, please give me no sign. [no response] Thy will be done.” The Simpsons: And Maggie Makes Three (Fox television broadcast, Jan. 22, 1995).
My view: The dissent reflects a continuing (growing?) distaste for cases in which an employer requires agreement to arbitration as a condition of employment. My view is that this represents a failure of judges to follow the command of the Federal Arbitration Act that requires courts to enforce arbitration agreements under the same standards that they enforce all other contracts.
No signature: Seaworth did not sign an arbitration agreement. This was a big deal for the dissenting judge. However, the FAA does not require a signature. It requires only that the agreement be in writing, which it was.
Consideration: Consideration was present because both Seaworth and the employer agreed to arbitrate. Their mutual promises were consideration for each other.
Illusory promise: Seaworth argued that the employer's promise was illusory because the employer retained the unilateral right to change or terminate the arbitration program. However, the employer had to give 90 days notice beforehand. Thus, the agreement was totally binding for at least 90 days, and thus was not "illusory."
More on this case from other sources:
- Workplace Prof Blog - Sixth Circuit Enforces Arbitration Agreement Mailed to Employees
- Daily Developments in EEO Law
- Wall Street Journal's Law Blog - Footnote Of the Day: Homer’s Unilateral Contract With God
- Ohio Employers Law Blog - Mmmmmmmm, arbitration clauses
Justice Breyer: "The case of the century"
November 07, 2007 by Ross Runkel at LawMemo
"The case of the century" - That's what Justice Breyer said about Hall Street Associates v. Mattel during today's oral argument.
At issue is whether a federal court must (or may) enforce an arbitration agreement that gives the court authority to review the arbitrator's award to see whether "the arbitrator's conclusions of law are erroneous."
Justice Breyer referred to this case as the "case of the century" "because it's going to take a hundred years to finish."
Arbitration awards typically are enforced by courts without inquiring into the correctness of the arbitrator's legal conclusions. The Federal Arbitration Act provides this framework. Justice Breyer seems to think that allowing the parties to expand the review power of the federal court will result in additional delay and lack of finality. Me too.
It's pretty hard to tell - from reading the transcript - which way the Supreme Court is leaning in this case. I'm still betting [here's my prediction] that the Court will not allow private parties to expand the role of federal courts -- simply because that's Congress's job.
Statute of limitations for vacating an award (ouch)
November 02, 2007 by Ross Runkel at LawMemo
The Federal Arbitration Act has a three months statute of limitations for moving to vacate an award.
This invites two questions, both of which were answered today in Webster v. A. T. Kearney, Inc (7th Cir 11/02/2007):
- When does the period begin?
- When does the period end?
Webster took his age discrimination and breach of contract case to arbitration, and lost. So he wanted to get a court to vacate the arbitrator's award.
The three months begins:
On January 4 the award was placed in the mail and emailed.
On January 4 the email reached Webster's attorney's computer.
On January 5 Webster's attorney opened the email.
On January 9 Webster's attorney received the award in the mail.
The FAA says the three months begins when the award is "filed or delivered."
The court noted that Webster agreed to use the AAA Rules, including this one: "The parties shall accept as legal delivery of the award the placing of the award or a true copy thereof in the mail."
Aha! The court held that the statutory word "delivered" meant putting the award in the mail, because that's what Webster agreed to.
This way, the court ducked the issue of whether "delivered" normally means when the mail arrives, and the issue of whether "delivered" means when an email comes into one's computer.
The three months ends:
On April 3 Webster filed his motion to vacate.
On April 5 the employer was served.
(Oops, one day after the end of three months.)
The court had to pick between the filing date and the service date.
This was easy. The Federal Arbitration Act says "service of notice." Never mind what the Rules of Civil Procedure say, because the FAA trumps the rules.
In the end, Webster lost because he didn't serve the defendant within three months of when the award was delivered.
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