An interesting article about alternative dispute resolution (ADR) in a labor and employment law context was recently published in the ABA Journal of Labor and Employment Law. In an article entitled “ADR in Labor and Employment Law During the Past Quarter Century,”25 ABA Journal of Labor & Employment Law 411 (Spring 2010), University of Michigan Professor Emeritus of Law Theodore J. St. Antoine discusses important decisions and developments since the U.S. Supreme Court’s 1991 decision in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991). The author also analyzes two bills being considered by the 111th Congress: the Employee Free Choice Act (EFCA) (H.R. 1409, 111th Cong. (2009), and the Arbitration Fairness Act (AFA) (H.R. 1020, 111th Cong. (2009). In Gilmer, the Court approved contractual “mandatory arbitration” of statutory employment claims, a decision St. Antoine says is “the most significant and most debated ADR decision in labor and employment law during the past quarter century.” St. Antoine argues the AFA’s proposal to prohibit all pre-dispute employment arbitration agreements “seems short-sighted and too heavy-heavy handed” given the evidence that “realistically, pre-dispute agreement to arbitrate, when neither party knows what the future holds, may be the most viable option for both sides.” On the other hand, St. Antoine states the EFCA may “have the most significant impact in history on the use of interest arbitration in the private sector.” The proposed law would amend the National Labor Relations Act by adding a new section “which would provide for interest arbitration in first-contract negotiations if the parties could not reach agreement within 120 days, including a thirty-day mediation period.” The resulting contract would be binding for two years. Currently, only about 39% of unions winning National Labor Relations Board elections are able to enter collective contracts in the first year. Although focused on the narrow area of ADR in the labor and employment context, the article offers an overview of many ADR issues and utilizes a wealth of primary and secondary sources to explain and support the author’s arguments. St. Antoine also discusses a variety of empirical studies on the use of ADR, as well as other developments such as the prevalence of class action waivers. The article is available online through the ABA Section of Labor and Employment Law (ABA Password and Login required). Technorati Tags: arbitration, ADR, law

A special master was recently appointed by the Northern District of Texas in NetSphere v. Baron (In re Ondova Ltd. Co.), No. 3-09CV988-RF. The underlying Chapter 11 bankruptcy case involves numerous parties, offshore entities and several related lawsuits. After the bankruptcy court held four status conferences related to the parties’ global settlement agreement (GSA), approved by the bankruptcy court on July 28, 2010, the bankruptcy judge made a “Report and Recommendation” to Senior District Court Judge Royal Furgeson which detailed the status of the GSA and recommended the appointment of a special master to mediate claims arising from the conduct of one of the parties. In large part, the bankruptcy court’s concern regarding the GSA arose from what the court termed Baron’s “Cavalcade of Attorneys.” Throughout the bankruptcy proceedings, Baron “has continued to hire and fire lawyers” and has instructed these lawyers to file pleadings against matters resolved by the agreement. The court also expressed concern that such constant turn-over in the “dozens of sets of lawyers” hired by Baron has generated “significant fees . . . to a level that is more than a little disturbing.” The court noted that this behavior “smacks of the possibility of violating Rule 11” or, “more troubling,” the possibility that “Baron may be engaging in the crime of theft of services.” Although the bankruptcy court’s report indicates that there was “substantial consummation” of the settlement agreement by most parties, the court nevertheless “has had lingering concerns at each of the status conferences regarding Jeffrey Baron’s commitment to completing his obligations under . . . and possibly taking actions to frustrate . . . [the settlement agreement].” The court also expressed concern that Baron’s practice of continuously switching legal counsel may pose a risk to the bankruptcy estate and expose other parties to the GSA to unwanted administrative expense. The bankruptcy court informed Baron that he would no longer be allowed to hire additional attorneys. He was given the option to retain his current legal counsel throughout the remainder of the bankruptcy litigation or proceed pro se. Further, the bankruptcy court recommended the Northern District of Texas appoint a special master to conduct a global mediation between Baron and “various attorneys who may make a claim” for reimbursement against the amount of $330,000 set aside by the bankruptcy court as a “security deposit” against the financial risks posed against the bankruptcy estate by the fees incurred by Baron’s attorneys. After consideration of the bankruptcy court’s report, the Northern District of Texas adopted the bankruptcy court’s recommendation in its entirety and appointed a special master to the case. Although the case is still pending, Judge Fergeson’s Order may be viewed here. The bankruptcy court’s Report and Recommendation is available at 2010 Bankr. LEXIS 3575 or 2010 WL 4226285 (N.D. Texas). Tags: special masters, mediation

A forthcoming article entitled “The Litigation-Arbitration Dichotomy Meets the Class Action” by Vanderbilt Law Professor and Director of the Cecil D. Branstetter Litigation & Dispute Resolution Program Richard A. Nagareda makes some interesting and compelling arguments related to AT&T Mobility, LLC v. Concepcion, 09-893, a case set for argument before the U.S. Supreme Court on November 9th. The article examines two cases from the Court’s October 2009 Term, Shady Grove Orthopedic Associates v. Allstate Insurance Co. and Stolt-Nielsen S.A. v. AnimalFeeds International Corp., and argues that “for all their salient differences, the Court’s accounts of class treatment under the Rules Enabling Act and the FAA evidence a deep, underlying convergence between litigation and arbitration doctrine.” Despite that Shady Grove and Stolt-Nielsen illustrate “divergent accounts of class treatment in litigation and arbitration,” their juxtaposition “serves to highlight deep structural similarities between the Court’s treatment of federal and state authority in litigation and the Court’s now-extensive jurisprudence on arbitration.” From this juxtaposition, the author concludes that the “critical precedent that guides the disposition of Concepcion is not Stolt-Nielsen but, rather, Shady Grove.” Here is the abstract: Courts and commentators often conceive of litigation and arbitration as dichotomous regimes for civil dispute resolution. Two new decisions from the Supreme Court provide the occasion to rethink this conventional view. In Shady Grove v. Allstate Insurance, the Court acknowledges that a class action often alters dramatically the incidence of claiming but, for purposes of the Rules Enabling Act, the Court deems this effect to be merely “incidental.” In Stolt-Nielsen v. AnimalFeeds, however, the Court deems the use of class-wide arbitration to be such a “fundamental” change as to lie outside the authority of arbitrators in the face of contractual silence as to class treatment. This Article – for the annual Federal Courts, Practice & Procedure issue of the Notre Dame Law Review – urges a more synthetic understanding of litigation and arbitration. For all their differences, the Court’s accounts of class treatment under the Rules Enabling Act and the Federal Arbitration Act (FAA) evidence a deep, but undertheorized, convergence. Shady Grove is the latest of the Court’s efforts to map the proper relationship between federal and state law under the Erie and Hanna doctrines. This Article explains how the Court’s arbitration jurisprudence has come to replicate key structural features of the Erie and Hanna doctrines in litigation. The Article then underscores the transnational dimensions of arbitration in our modern world of globalized commerce – one that frames in a new light the holding in Stolt-Nielsen within the context of the Court’s thinking about extraterritoriality and transnational recognition of judgments in litigation. The Article then turns to a case now before the Court – AT&T Mobility v. Concepcion – concerning an arbitration clause that would waive the opportunity for consumers to participate in either a class action or a class arbitration. The Article explains how the approach of the lower courts in Concepcion presents the Supreme Court with the counterpart, in the arbitration setting, to the mistaken application of state law rightly overturned in Shady Grove under the Hanna doctrine. Such a view nonetheless would afford ample latitude for contextual, Erie-like analysis of other arbitration clauses with class waivers tantamount to exculpatory clauses. The Article concludes by situating its synthetic conception of litigation and arbitration within ongoing debate over the proposed Arbitration Fairness Act. The article, slated to be published in Notre Dame Law Review’s Federal Courts, Practice and Procedure issue, 86 NOTRE DAME L. REV. (forthcoming 2011), is currently available for download here on Social Science Research Network. Disputing has been keeping a watchful eye on the forthcoming AT&T Mobility case. We blogged about the case several time this year including: here, here, here and here. Technorati Tags: arbitration, ADR, law

The Fifth Circuit Court of Appeals has held in an unpublished opinion that an arbitration provision in a multilevel marketing program contract which could be amended at the sole discretion of one party and bound the other party “upon notice” was illusory and unenforceable. In Juan Torres v. S.G.E. Management, L.L.C., No. 09-20778, (5th Cir., October 5, 2010), Ignite operated as a subsidiary of a retail provider of electricity in Texas. Ignite relies on a multilevel marketing program which recruits people to invest money to purchase an Ignite Services Program (ISP) through a current member of Ignite. Once a person purchases an ISP, he becomes an Independent Associate (IA). Juan Ramon Torres and Eugene Robison (plaintiffs) purchased ISPs from Ignite and became IAs. In order to become members of Ignite, plaintiffs signed an agreement which contained an arbitration clause. Plaintiffs sued Ignite’s parent company, Stream Energy, and number of other defendants (collectively Ignite) in district court alleging that Ignite’s marketing program constituted an illegal pyramid scheme. Ignite filed a motion to dismiss for improper venue based on the arbitration clause in the parties’ agreement. The district court granted Ignite’s motion to dismiss the case and plaintiffs appealed. Plaintiffs argued the arbitration clause was illusory and thus unenforceable because Ignite could amend the clause “in its sole discretion” and effective immediately. Applying Texas law, the Court explained that “an arbitration agreement can be illusory if a party can unilaterally avoid the agreement to arbitrate.” The Court then determined whether Ignite could, in fact, amend the arbitration clause in its sole discretion and whether such an amendment would become effective immediately. A Terms and Conditions clause in the parties’ contract conflicted with a Policies and Procedures clause because it provided that amendments made by Ignite would be effective upon 30 days’ notice, while the Policies and Procedures section provided that amendments would become binding “upon notice.” The agreement stated, “that ‘in the case of any conflict’ between the Policies and Procedures and other parts of the agreement, ‘these Policies and Procedures will prevail.’” According to the Court, “these provisions conflict, and the provision in the Policies and Procedures governs. Thus, any amendment to the agreement binds the IAs ‘upon notice.’” Finally, the Court examined In re Halliburton Co., 80 S.W.3d 566 (Tex. 2002), J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003), and In re AdvancePCS Health, L.P., 172 S.W.3d 603 (Tex. 2005), decided by the Texas Supreme Court and the Fifth Circuit decision in Morrison v. Amway Corp., 517 F.3d 248 (5th Cir. 2008), which considered the validity of an arbitration clause under Texas law. According to the Court: Here, the arbitration clause may be eliminated or modified “upon notice,” and the agreement contains no clause preventing a modification from applying to disputes arising before the modification. The circumstances are similar to those in Morrison. As in Morrison, “[t]here is nothing in any of the relevant documents which precludes amendment to the arbitration program . . . from eliminating the entire arbitration program or its applicability to certain claims or disputes.” And like Morrison, “[t]here are no Halliburton type savings clauses which preclude application of such amendments to disputes which arose . . . before the amendment.” Ignite essentially could renege on its promise to arbitrate by merely posting an amendment to the agreement on its website. The Fifth Circuit held that Ignite’s promise to arbitrate under the terms of the agreement was hollow and the arbitration provision in the parties’ contract was illusory and unenforceable. The Court reversed the district court’s order dismissing the case for improper venue and remanded the case. Disputing blogged here about In re 24R, Inc., a recent Texas Supreme Court case which also examined In re Halliburton Co. We also blogged here about Morrison v. Amway Corp. when it was decided. Technorati Tags: arbitration, ADR, law