ALTERNATIVE DISPUTE RESOLUTION

Issues

The Supreme Court will decide how courts should treat agreements delegating gateway questions of arbitrability to arbitrators—questions of whether an arbitrator has the authority to hear a case. Henry Schein, Inc. (“Henry Schein”) argues that, to honor such an agreement, the court must allow the arbitrator to decide gateway questions of arbitrability, even if the case clearly belongs in the court.  In support of their argument, Henry Schein contends that under the Federal Arbitration Act (“FAA”), courts must allow arbitrators to decide the merits of claims delegated to arbitrators by contract, even if the merits are not arguable. Archer and White Sales, Inc. (“Archer and White”) counters that if a claim to arbitrability is “wholly groundless,” the court does not have to make the arbitrator evaluate the claim. Archer and White assert that the FAA does not ask courts to compel arbitration when plaintiffs file claims where they clearly belong—in court. From a policy perspective, this case asks the Court to balance the FAA’s strong policy in favor of arbitration with the need to protect the parties to an arbitration clause from arbitration proceedings they did not agree to.

Questions as Framed for the Court by the Parties

Written by

Edited by

Additional Resources

Issues

Lamps Plus, Inc. (“Lamps Plus”) and Frank Varela (“Varela”) executed an arbitration agreement which contained a clause waiving Varela’s right to sue his employer or institute any other civil action or proceeding concerning his employment at Lamps Plus. After a data breach caused by an internet phishing incident, Varela sued Lamps Plus alleging negligence, breach of contract, and invasion of privacy. Lamps Plus moved to compel arbitration of Varela’s individual claims, but the district court decided to dismiss Varela’s claims without prejudice and to compel class arbitration of the claims. Lamps Plus appealed, arguing that, as the Federal Arbitration Act (“FAA”) requires a contractual basis showing the parties’ intent to arbitrate class actions, the court could not read in an agreement to class arbitration based on language relating to personal disputes. Further, the company argues that even if the agreement is ambiguous as to that intent, Supreme Court precedent indicates that courts must resolve such ambiguity in favor of arbitration. Varela counters that issues of jurisdiction and standing prevent the Supreme Court from deciding this case and that, even if the Court were to examine the case on the merits, California contract-law interpretive principles used by the lower court were neutral, applied properly, and, thus, permissible. The Supreme Court’s decision has implications for the employment sector and will likely influence the decision of employers to expressly exclude class actions from future arbitration agreements to maintain the efficiency and informality of arbitration.

Questions as Framed for the Court by the Parties

Written by

Edited by

Additional Resources

Issues

This case gives the Supreme Court an opportunity to determine whether a dispute over the applicability of the Federal Arbitration Act’s (“FAA”) Section 1 exemption is an arbitrable issue pursuant to a valid delegation clause. Additionally, the Court has the opportunity to decide whether the Section 1 exemption for contracts of employment includes, as a matter of law, independent contractor agreements. Section 1 of the FAA carves out an exception from the Act’s applicability for contracts of employment of seamen, railroad employees, and other classes of workers engaged in interstate commerce. New Prime argues that the delegation clause covers threshold disputes such as the applicability of the FAA and that the phrase “contract of employment” does not include independent contractor agreements. Oliveira counters that courts must first determine the applicability of the FAA before requiring arbitration and also that the ordinary meaning of “contracts of employment” at the time the FAA was enacted included independent contractor agreements. The Supreme Court’s decision has implications for the trucking industry and will likely influence whether this industry will continue to resort to arbitration to resolve disputes.

Questions as Framed for the Court by the Parties

Written by

Edited by

Additional Resources

Issues

This case asks the Supreme Court to determine whether the Federal Arbitration Act demands that state courts enforce an arbitration agreement’s waiver of the statutory right of action to collect penalties on behalf of the state, despite state law prohibiting such a contractual waiver. Petitioner Viking River Cruises argues that the Federal Arbitration Act requires that arbitration agreements signed by employees must be enforced as written for claims brought under California’s Private Attorney General Act (PAGA) because such claims are individual disputes and incompatible with the procedures of individual bilateral arbitration. Respondent Angie Moriana counters that PAGA claims involve the state, not the individual, and that PAGA’s anti-waiver rule is necessary to bolster the state’s labor law enforcement. The outcome of this case has important implications for the enforcement of state labor codes, the availability of civil remedies for workers, and the effectiveness of arbitration agreements to resolve employment-related disputes.

Questions as Framed for the Court by the Parties

Additional Resources