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Gibbons Law Alert

Tagged: Arbitration

The End of a New ADR Era? Ninth Circuit Affirms Finding of Mass Arbitration Rules as Unenforceable

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Posted in Class Action

On January 22, 2025

The Ninth Circuit recently affirmed a district court’s ruling denying a motion by Live Nation and Ticketmaster to compel arbitration of claims by ticket purchasers, finding that the arbitration agreement contained in Ticketmaster’s website Terms of Use was procedurally and substantively unconscionable and thus unenforceable under California law. Notably, the arbitration clause required arbitration with a digital arbitration vendor (New Era ADR) under New Era’s rules for Expedited/Mass Arbitrations. Mass arbitration, a developing dispute resolution system, involves a large group of demands filed on behalf of or against a common party, out of which one plaintiff may be chosen to represent the larger group of plaintiffs, otherwise known as a “bellwether plaintiff.” The plaintiffs in Heckman v. Live Nation Entertainment, Inc. filed a putative class action alleging that the defendants engaged in predatory ticket pricing. In response, the defendants sought to enforce Ticketmaster’s Terms of Use, which required the dispute to be resolved through arbitration. These Terms specifically provided that claims stemming from current or prior online ticket purchases be decided by an arbitrator employed by New Era, who, under its delegation clause, also had the authority to determine the validity of the arbitration agreement. The district court denied the motion to compel arbitration. In affirming the district court’s decision, the Ninth Circuit emphasized the lack...

Without Further Ado: Third Circuit Limits Discovery on Motions to Compel Arbitration

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Posted in Class Action

On November 21, 2024

More than a decade after its seminal decision in Guidotti v. Legal Helpers Debt Resolution, L.L.C., the Third Circuit Court of Appeals has clarified that a plaintiff’s claims may be sent straight to arbitration, without any discovery, if there is no challenge to an arbitration agreement’s existence or validity. In Guidotti, the Third Circuit held that unless “it is apparent, based on ‘the face of a complaint, and documents relied upon in the complaint,’” that the “party’s claims ‘are subject to an enforceable arbitration clause,’” then a plaintiff should be given a chance to take “discovery on the question of arbitrability” before a motion to compel arbitration is decided under the summary-judgment standard of Rule 56 of the Federal Rules of Civil Procedure. Because most plaintiffs who file in court craft their complaints to try to avoid arbitration, the practical result of the Guidotti decision was that many cases went to discovery before a ruling on a defendant’s motion to compel – even when discovery was unlikely to impact the outcome. The Third Circuit’s recent published decision in Young v. Experian Information Solutions, Inc. limits the need for such pre-arbitration discovery. In Young, the plaintiff filed a putative class action complaint against Experian in the United States District Court for the District Court of New Jersey...

Yes, Prejudice May Be Included in a Court’s Analysis of a Waiver of Arbitration

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Posted in Appellate

On September 5, 2024

In a recent published opinion, Marmo & Sons General Contracting, LLC v. Biagi Farms, LLC, the Appellate Division affirmed the trial court’s finding that a party had waived its contractual right to compel arbitration. At issue was the non-moving party’s assertion that the U.S. Supreme Court’s 2022 decision in Morgan v. Sundance, Inc. forbade considerations of prejudice in the seven-factor waiver analysis originally set forth in 2013 by the New Jersey Supreme Court in Cole v. Jersey City Medical Center.

That’s a Wrap! United States Supreme Court Closes 2023 Term

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Posted in Appellate

On July 18, 2024

With the close of the U.S. Supreme Court’s October 2023 term, we offer this round-up, focusing on decisions of special interest from the business and commercial perspective. Administrative In a pair of cases, Relentless v. Department of Commerce and Loper Bright Enterprises v. Raimondo, the Supreme Court overruled the deference doctrine first articulated in Chevron v. Natural Resources Defense Council. That doctrine permitted federal courts to adopt an agency’s reasonable interpretation of its originating statute. Now, federal courts must interpret statutes anew and are free to adopt their own interpretations. Though the Supreme Court did not overrule any cases that relied on Chevron’s deference framework, it invited the bar to challenge those decisions in the future. The impact of this case will be dramatic, as courts across the country will be reinterpreting (what used to be) settled understandings of countless statutes, including the Clean Air Act, the Clean Water Act, the Civil Rights Act, the Securities Exchange Act, and many more. In another administrative case, the Court in Corner Post, Inc. v. Board of Governors of the Federal Reserve System held that the six-year statute of limitations for challenges under the Administrative Procedure Act accrues when a plaintiff suffers an injury from final agency action. That holding supplants the prior rule, which ended the statute of limitations six years after the...

Appellate Division Affirms: Binding Dispute Resolution Provisions in Standard AIA Construction Contracts Are Enforceable

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Posted in Construction

On May 10, 2023

In a recent unpublished opinion, the New Jersey Appellate Division held that an agreement to arbitrate set forth in the binding dispute resolution provision in a standard form American Institute of Architects (AIA) construction contract between a condominium association and contractor was enforceable. The binding dispute resolution provision appears in the AIA standard form as a series of checkboxes in which the parties may select arbitration, litigation, or another dispute mechanism by placing an “X” in one of the boxes. The AIA standard form also contains language that applies if the parties have selected arbitration as the method of binding dispute resolution, including the rules for conducting that arbitration and finalizing an award. Arbor Green Condo. Ass’n, Inc. v. Start 2 Finish Restoration & Bldg. Servs., LLC et al. arose out of Start 2’s alleged deficient workmanship under a construction contract to restore two buildings damaged by a storm, which resulted in Arbor Green terminating the contract. Start 2 subsequently filed two construction liens and two demands for arbitration (one for each building) in accordance with the selected dispute resolution method in the parties’ AIA form agreement. Arbor Green failed to answer the demands for arbitration, resulting in awards in Start 2’s favor. Start 2 then filed two orders to show cause and verified complaints that...

New Appellate Division Decision Highlights Limited Scope of Review of Arbitration Awards

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Posted in General Litigation

On March 8, 2023

In a recent to-be-published opinion, the New Jersey Appellate Division held that parties may not agree to expand the scope of judicial review of an arbitral award in an arbitration agreement governed by the Federal Arbitration Act (FAA), which does not permit courts to vacate or modify awards for errors of fact or law. The case, Strickland v. Foulke Management Corp., arose out of the plaintiffs’ purchase of a used car from the defendant. The parties executed an arbitration agreement, which provided that it was governed by the FAA except as provided elsewhere in the agreement. The agreement also stated that the arbitrator should render a decision only in conformity with New Jersey law and that a court may reverse the award based on “mere errors of New Jersey law.” The defendant repossessed the vehicle after the plaintiffs missed several monthly payments. The plaintiffs filed an arbitration demand asserting violations of the New Jersey Consumer Fraud Act and other state and federal statutes, as well as common law fraud. Following an arbitration hearing, the arbitrator entered an award dismissing all of the plaintiffs’ claims, finding that the claims were barred by contractual limitations periods contained in the arbitration agreement and other purchase documents and also that they lacked merit. The plaintiffs sought to vacate the...

Express Waiver of Rights in Arbitration Provisions Called Into Question by Recent New Jersey Appellate Decision

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Posted in Appellate

On February 21, 2023

In an opinion issued on February 8, 2023, the New Jersey Appellate Division carved out an exception to the New Jersey Supreme Court’s requirement in Atalese v. U.S. Legal Services Group, L.P. that arbitration provisions must contain clear and unambiguous waiver-of-rights language, holding that Atalese does not apply to sophisticated commercial parties with relatively equal bargaining power. An agreement that the County of Passaic entered into with Horizon Healthcare Services, Inc. contained a dispute resolution provision simply stating that “the parties shall submit the dispute to binding arbitration under the commercial rules of the American Arbitration Association.” After the trial court granted Horizon’s motion to compel arbitration based on this provision, the county appealed, arguing that the arbitration clause was unenforceable because it lacked an express waiver of access to the courts, as required by Atalese. The Appellate Division affirmed, relying on section 2 of the Federal Arbitration Act, which provides that a written arbitration provision “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” That provision, the Appellate Division reasoned, requires courts to apply standard contract principles, including “notions of unconscionability,” in order to determine whether mutual assent to the arbitration clause exists, thus rendering the arbitration clause enforceable. Importantly, whether such assent...

The Federal Speak Out Act and Implications for Employers

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Posted in Employment Agreements

On January 10, 2023

In December 2022, President Biden signed into law the Speak Out Act (the “Act”), which has become effective. As discussed below, the Act prohibits pre-dispute nondisclosure and nondisparagement agreements relating to sexual assault and sexual harassment disputes. In connection with the new law, Congress presented, inter alia, the following findings: Sexual harassment and assault continue to be pervasive in the workplace. 81 percent of women and 43 percent of men experience some type of sexual harassment or assault in their lifetime. One in three women has encountered sexual harassment in the workplace, yet an estimated 87 to 94 percent of those who have experienced harassment never file any type of formal complaint. Many women leave their job or industry or pass up advancement opportunities as a result of sexual harassment. To combat sexual harassment and assault, victims must be able to report and publicly disclose such issues. Nondisclosure and nondisparagement provisions in agreements between employers and employees can allow harassment and assault to continue by silencing victims and those with knowledge of the conduct, while protecting those engaging in such conduct, thus allowing it to continue. Prohibiting nondisclosure and nondisparagement clauses will provide transparency around unlawful conduct, allow victims to come forward, hold perpetuators accountable, and make workplaces safer. Explanation of the Act The Act...

Third Circuit Holds That Non-Signatory Medical Practices Were Bound by Arbitration Agreements Entered Into by Practices’ Purchasing Agents

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Posted in Class Action Defense

On July 11, 2022

In In re Rotavirus Vaccines Antitrust Litigation, Merck Sharp & Dohme Corp. secured a victory in the Third Circuit, which held in a precedential decision that the plaintiffs’ antitrust bundling claims must be arbitrated. The medical practice plaintiffs contracted with “Physician Buying Groups” (PBGs) that arranged for the purchase of Merck’s vaccines at a discount through the drugmaker’s loyalty program. The matter involved two sets of contracts. The first set, between Merck and the PBGs, entitled participating PBG members to discounts if they purchased a threshold quantity of vaccines from Merck. These contracts contained an arbitration provision. The second set of contracts, between the PBGs and the medical practice plaintiffs, gave the plaintiffs discounts on Merck vaccines for enrolling in the PBGs. Thus, the PBGs operated as middlemen: the plaintiffs bought their vaccines directly from Merck but received discounts for belonging to PBGs. The plaintiffs were not parties to the contracts between Merck and the PBGs; as such, the plaintiffs did not sign on to the relevant arbitration provisions. The District Court for the Eastern District of Pennsylvania held that the PBGs did not have authority to bind the plaintiffs to the arbitration agreements, in part because the plaintiffs were not aware of those agreements. Reversing, the Third Circuit held that the PBGs, as agents,...

Third Circuit Enforces Delegation Provision in Arbitration Agreement

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Posted in Alternative Dispute Resolution

On August 23, 2021

A “delegation provision” in an arbitration agreement authorizes the arbitrator to decide issues concerning the arbitrator’s own jurisdiction over disputes before him or her. Absent a delegation provision, such jurisdictional issues are for courts to decide when adjudicating motions to compel arbitration. In its recent decision in Carrone v. United Health Care Group Inc., the United States Court of Appeals for the Third Circuit clarified the circumstances under which courts may entertain challenges to arbitration agreements with delegation provisions. Background Michele Carrone filed suit in federal district court in New Jersey charging her employer and coworkers with discrimination. The defendants moved to compel arbitration. The parties’ arbitration agreement incorporated by reference the Employment Dispute Resolution Rules of the American Arbitration Association (AAA). Rule 6(a) of those rules sets forth a “delegation” provision, to wit: “The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement”; and, further: “The arbitrator shall have the power to determine the existence or validity of a contract of which an arbitration clause forms a part.” Carrone opposed the motion to compel arbitration on the grounds that “(1) the arbitration agreement’s amendment provision rendered the agreement illusory, (2) the arbitration agreement as a...

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