Gibbons Law Alert

Gibbons Law Alert

Tagged: Arbitration

U.S. Supreme Court Issues “Epic” Decision for Employers Upholding Arbitration Agreements and Class Action Waivers

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Posted in Alternative Dispute Resolution

On May 24, 2018

On May 21, 2018, the United States Supreme Court resolved the split amongst several Federal Circuit Courts by finding the Federal Arbitration Act (FAA) enables employers enforce class action waivers in arbitration agreements with their employees notwithstanding employees’ rights under the National Labor Relations Act (NLRA) to engage in “concerted activity.” The Court’s 5-4 decision, with the majority opinion authored by Justice Gorsuch, was rendered in In Epic Systems Corp. v. Lewis and companion cases Ernst & Young LLP et al. v. Stephen Morris et al. and National Labor Relations Board v. Murphy Oil, Inc. (all decided simultaneously). The Court ruled that Congress did not intend the NLRA to provide for class and collective actions, and although the NLRA provides employees the right to organize and bargain collectively, the statute does not dictate how claims must be adjudicated. Accordingly, the Court determined that the NLRA cannot be interpreted to provide employees with an implicit right to class and collective actions in contravention of the FAA, which explicitly confers upon employers and employees the ability to arbitrate and determine their chosen arbitration procedure. Instead, these laws must be interpreted consistently. The three companion cases involve employees challenging arbitration agreements containing class and collective action waivers entered into with their employers. As an example, in the Ernst &...

New Jersey Appellate Division Holds Rescission of Contract Also Rescinds Agreement to Arbitrate Contractual Disputes

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Posted in General Litigation

On May 15, 2018

In a recent published opinion, the New Jersey Appellate Division held that an arbitration provision will not survive rescission of the contract in which it is contained unless the parties expressly agree otherwise, and that the issue is properly decided by the trial court and not the arbitrator. This opinion marks one more step in New Jersey’s evolving landscape regarding questions of arbitrability. In Goffe v. Foulke Management Corp., the panel considered two actions consolidated on appeal. Both actions involved consumers who attempted to purchase cars from two separate dealerships. Both consumers signed some of the initial paperwork (which contained an arbitration provision), accepted possession of the vehicle, but returned the vehicles after a few days for different reasons. When their respective security deposits for the vehicles were withheld, they each brought suit claiming wrongful conduct on the part of the dealerships. The defendant dealerships successfully moved to dismiss, asserting that plaintiffs were contractually required to arbitrate their pleaded claims. Plaintiffs appealed. After determining that issues of fact as to whether valid sales contracts had been formed and were enforceable should have prevented dismissal of the actions, the Appellate Division addressed whether the arbitration provisions in the contracts were rescinded when the sales contracts were rescinded. Specifically, the Appellate Division considered “whether an arbitration provision...

Courts Send Signal That Care in Drafting Arbitration Provisions is Key

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Posted in Alternative Dispute Resolution

On September 5, 2017

Two recent decisions, one by the Third Circuit Court of Appeals and the other by the New Jersey Appellate Division, offer some interesting insight into the validity and viability of arbitration clauses that send employment-related disputes and claims out of the court system and into arbitration. In Moon v. Breathless, the Third Circuit Court held that an arbitration provision in an exotic dancer’s independent contractor agreement did not encompass her statutory FLSA and state wage-and-hour claims. Appellant Alissa Moon (“Moon”), a dancer at Breathless Men’s Club (“the Club”), filed a putative collective and class action against the Club in the District of New Jersey alleging violations of the Fair Labor Standards Act, the New Jersey Wage Payment Law and the New Jersey Wage and Hour Law. The Club moved to dismiss based upon an arbitration provision contained in the Independent Dancer Rental Agreement (the “Agreement”) that Moon signed. The Agreement also contained a provision stating Moon was an independent contractor and not an employee. The District Court denied the Club’s motion to dismiss and directed the parties to engage in limited discovery on whether Moon’s claims were subject to a valid arbitration provision. Following discovery, the District Court found that Moon’s claims fell within the scope of the Agreement’s valid arbitration provision and granted the...

Dos and Don’ts for Online Retailers Listing Terms and Conditions on Their Websites

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Posted in Class Action Defense

On August 15, 2017

A recent California federal decision states clear guidelines for consumer-focused companies’ online terms and conditions. In McKee v. Audible, Inc., the plaintiff signed up on his smartphone for a free one-month trial with Audible, an Amazon subsidiary offering audiobook subscription services. Thereafter, the plaintiff filed a putative class action against Audible and Amazon.com taking issue with Audible’s policy regarding unused credits. Defendants then filed a motion to compel arbitration. The motion to compel arbitration was granted as to Amazon, but denied as to Audible. The court found that while both companies’ arbitration agreements were valid and enforceable, Audible’s customer user agreements were not clearly displayed when consumers signed up for the service online and were blocked by certain images when using the Audible app. Therefore, customers were not given the requisite actual or constructive notices of the terms of service, such that they could mutually assent to the terms of service in order to create a valid and enforceable contract. The court offered the following guidelines for constructive notice in internet commerce: (1) “terms of use” will not be enforced where there is no evidence that the website user had notice of the agreement; (2) a user should be encouraged by the design and content of the website and the agreement’s webpage to examine the...

Slow Down You’re Moving Too Fast: Third Circuit Directs District Court to Resolve Motion to Compel Arbitration Before Motion to Dismiss

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Posted in General Litigation

On August 2, 2017

In a recent decision, the Third Circuit made it abundantly clear that a motion to compel arbitration must be decided before a Rule 12(b)(6) motion to dismiss. Joshua Silfee filed a lawsuit against ERG Staffing Service, his former employer, in the Middle District of Pennsylvania, claiming the company’s payroll policies violated state law because workers were required to use a fee-carrying debit card. ERG filed a motion to compel arbitration pursuant to Section 4 of the Federal Arbitration Act, asserting that the arbitration agreement between Silfee and ERG’s payroll vendor precluded the suit against ERG. ERG also filed a Rule 12(b)(6) motion to dismiss Silfee’s complaint based on the merits of his state law claims against the company. The district court decided to delay consideration of ERG’s motion to compel arbitration and denied the company’s motion to dismiss the case. ERG appealed. The Third Circuit concluded that the district judge erred in delaying the arbitrability inquiry, explaining that arbitrability is a “gateway” issue and that, after a motion to compel arbitration is filed, a court “must refrain from further action until it determines arbitrability.” The Third Circuit noted that “[t]he seeds of the District Court’s confusion may have been sown by our decision in Guidotti,” where the court explained that a motion to compel arbitration...

Wrap Up of United States Supreme Court’s 2016-17 Term

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Posted in General Litigation

On July 13, 2017

With the close of the United States Supreme Court’s 2016-17 term, we offer this wrap up of the term’s most important business and commercial cases (excluding patent cases): Kindred Nursing Ctrs, L.P. v. Clark: The Supreme Court continued its full-throated support of arbitration agreements, again rejecting a state supreme court’s effort to apply an ostensibly arbitration-neutral rule of law to invalidate an arbitration agreement. In Kindred, the Kentucky Supreme Court held that an arbitration agreement signed by an attorney-in-fact under a broad power of attorney was invalid because the power of attorney did not expressly give the attorney-in-fact the right to waive the principal’s right to a jury trial. According to the Kentucky Supreme Court, to grant an attorney-in-fact the authority to waive a “fundamental constitutional right,” a power of attorney must grant that authority expressly and unambiguously. Because the right to access the courts and the right to a jury trial are such “fundamental constitutional rights” and because the power of attorney did not expressly and unambiguously waive them, the attorney-in-fact was not authorized to agree to arbitrate the principal’s claims, and no enforceable arbitration agreement was created. The Supreme Court found that the Kentucky Supreme Court’s facially arbitration-neutral rule—that the authority to waive “fundamental constitutional rights” must be expressed unambiguously in a power...

Third Circuit Holds That Challenges to the Validity of a Contract Containing an Arbitration Provision Can Only Be Adjudicated by the Arbitrator

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Posted in General Litigation

On November 30, 2016

In a recent precedential decision, South Jersey Sanitation Co., Inc. v. Applied Underwriters Captive Risk Assurance Co., Inc., the Third Circuit held that although arbitration agreements may be invalidated by generally applicable contract defenses, like fraud, in order for the court to decide the issue, the challenge “must focus exclusively on the arbitration provision, rather than on the contract as a whole.” “If the challenge encompasses the contract as a whole, the validity of that contract, like all other disputes arising under the contract, is a matter for the arbitrator to decide.”

Court Compels Arbitration of Lawsuit Filed by Employees Discharged After Discovery of Personal Text Messages About a Coworker on a Company-Issued iPad

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Posted in Class Action Defense / General Litigation / Policies and Handbooks / Technology Developments and Issues

On September 12, 2016

A recent decision from the District of New Jersey granting a motion to compel arbitration not only reinforces the strong federal policy in favor of arbitration, but also highlights issues pertaining to company-issued devices and employees’ personal use of these devices. While employed by Anheuser-Busch, Victor Nascimento received a company-issued iPad. Nascimento and other employees exchanged text messages about a coworker over their personal cell phones outside of the work day, but the messages were received on Nascimento’s company-issued iPad because the iTunes account on his iPad was linked to his personal cell phone.

New Jersey District Court Enforces Comprehensive Arbitration Clause Between Car Dealer and Consumer

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Posted in Class Action Defense

On September 8, 2016

Notwithstanding a recent trend of seemingly anti-arbitration decisions in the state courts, a New Jersey District Court recently dismissed a consumer fraud complaint that it found to be duplicative of a prior arbitration award. In 2009, the plaintiff purchased a vehicle, and then leased an additional car from the same dealer in 2010. Despite signing agreements to arbitrate with the dealer, the plaintiff filed a complaint in state court against the dealer, Metro Honda, which was dismissed on the ground that the arbitration agreements were enforceable and required her to arbitrate her dispute. Plaintiff filed a demand for arbitration, citing a variety of consumer fraud statutes. An arbitration award was entered denying all of the plaintiff’s claims, and she neither appealed nor moved to vacate or modify the award.

Ninth Circuit Holds Class Action Waivers Illegal Under the NLRA

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Posted in Alternative Dispute Resolution

On August 30, 2016

On August 22, 2016, in Morris v. Ernst & Young, LLP, the Ninth Circuit Court of Appeals joined the Seventh Circuit Court of Appeals in holding that class action waiver provisions in arbitration agreements governing employment disputes are illegal under the National Labor Relations Act (NLRA or the Act) because these waivers interfere with the right of employees to engage in concerted activity protected by Section 7 of the Act (Section 7). The holdings of these courts are in indirect conflict with an opinion of the Fifth Circuit Court of Appeals, which upheld the validity of such waivers in the face of a challenge under Section 7. Employers in jurisdictions whose courts have not yet decided this issue, and who employ such waivers in their arbitration agreements or otherwise, should be prepared for attacks on their arbitration agreements by employees seeking to bring class or collective actions or by the National Labor Relations Board (NLRB).

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