Via the ADR Prof Blog, we learned that on May 19, the U.S. Securities and Exchange Commission (SEC) published for public comment a FINRA Rule Change Relating to Amending the Codes of Arbitration Procedure to Increase the Number of Arbitrators on Lists Generated by the Neutral List Selection System. Find the text of the proposed rule change here. The comment period expires on June 16, 2010. All Comments should refer to File Number SR-FINRA-2010-022 and may be submitted: At the SEC’s website: http://www.sec.gov/rules/sro.shtml Via email to: rule-comments@sec.gov , or Via regular mail (in triplicate) to: Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090. Technorati Tags: ADR, law, arbitration

[Ed. note: Following find interesting comments about AT&T v. Concepcion, a case pending before the U.S. Supreme Court. Read more about the case here. These comments were first posted at Paul Lurie’s excellent listserv and we are reprinting them with the author’s permission.] By James M. Gaitis Ultimately, we are faced with at least four different possible outcomes for consumer arbitration provisions containing class preclusion clauses. These potential outcomes depend both on what the Supreme Court does and, perhaps, on what lower courts might to on a case-by-case basis: Class preclusion clauses are deemed unenforceable (e.g., are unconscionable, violate public policy, etc.) and the remaining arbitration provision is deemed severable and enforceable (the result here is a class arbitration); Class preclusion clauses are deemed unenforceable and the remaining arbitration provision is not severable and thus, also, is unenforceable (the result here is no arbitration without a post-dispute agreement to arbitrate) (this, by the way, was what it appears the Federal District Court for the Northern District of California recently decided and then affirmed in a post-Stolt-Nielsen ruling in McArdle v. AT&T Mobility, 2010 WL 1875812 (May 10, 2010)) ; Class preclusion clauses are deemed enforceable but that makes the remaining arbitration provision unconscionable and thus unenforceable (the result here is no arbitration without a post-dispute agreement to arbitrate); and Class preclusion clauses are deemed enforceable as is the remaining arbitration provision (the result here is a standard, non-class arbitration). At this point in time, it is less than likely that the Supreme Court would resolve all of these issues. Rather, at most I would think we can expect the Court to possibly make a sweeping ruling on the enforceability of class preclusion clauses but not on associated issues regarding severability of the remainder of the arbitration clause or generic issues regarding the unconscionability of general consumer arbitration provisions. I think the correct balancing of federal preemption considerations in consumer cases (and by that I mean balancing both sides of the issue–e.g., the Casarotto type cases and the AT&T Mobility type cases) should, in the abstract, most often result in No. 3, above–i.e., that class preclusion clauses are, indeed, enforceable because they plainly evidence a party’s unwillingness to engage in a particular type of arbitration, but that the remaining consumer arbitration provision in many if not most cases will be (on a case-by-case basis) unconscionable because, in the absence of a class arbitration, it does not afford a realistic remedy. Having said that, I would guess (as Jim Madison suggests as a possibility) that when all the dust clears (whenever that might be) the present composition of the Court is likely to lead us toward result No. 4. One observation about preemption and the class preclusion clause: I believe that the application and enforcement of a type of federal substantive contract law (a concept I believe Tom Stipanowich and perhaps others have addressed) in the context of FAA preemption is not only appropriate but, also, necessary. I say that because in the absence of such a federal omnipresence, states could too easily circumvent the primary objective of the FAA–i.e., to enforce “agreements” to arbitrate. That is what the Montana legislature and then the Montana Supreme Court did in Casarotto. And, on the flipside of the analysis, that is what any state legislature or court could attempt to do in the context of unconscionability issues. Indeed, the Montana legislature easily could have stated that any arbitration contract that does not contain 20 point bold lettering in Red type, warning consumers of the presence of an arbitration provision, “is deemed unconscionable, per se.” The point here is that while state contract interpretation law understandably should determine what the parties intended when they signed an arbitration agreement, that law should not be used, or permitted, to subvert the primary rule that the parties must literally and freely agree to resolve their disputes through a specific dispute resolution procedure. As heinous as a class preclusion clause may be, the one thing that cannot be said about it is that it evidences an agreement to resolve disputes through class arbitration. Hence my view that result No. 3., above, is the most consistent with the precepts underlying the FAA and with the Court’s decisions to date. Technorati Tags: law, ADR, arbitration James M. Gaitis is the former Director of the International Dispute Management Programme at the Centre for Energy, Petroleum & Mineral Law & Policy, University of Dundee, Scotland, where he remains a member of the Global Faculty. He is the Editor-in-Chief of the second edition of The College of Commercial Arbitrators Guide to Best Practices in Commercial Arbitration (J. Gaitis, C. von Kann, R. Wachsmuth forthcoming Fall 2010) and the author of numerous law review articles on the topic of arbitration, several of which have been repeatedly cited to the United States Supreme Court and lower state and federal appellate courts. Over the past twenty years he has served on a diverse array of arbitration rosters, including as a Fellow of the College of Commercial Arbitrators, a Fellow of the Chartered Institute of Arbitrators, and as a panelist on the AAA Complex Case Panel and the Energy/Oil & Gas Panels of the AAA and CPR. He received his BA from the University of Notre Dame and his JD from the College of Law at the University of Iowa where he was an editor of the Iowa Law Review. He is also the author of two published novels. He may be reached via email at: gaitis1@aol.com.

Today, the U.S. Supreme Court denied certiorari to R.J. Reynolds Tobacco Company v. Montana, No. 09-911. The question presented was whether the Montana Supreme Court violated the Federal Arbitration Act by refusing to compel arbitration of a dispute between tobacco companies and settling states that courts of other states and territories have held arbitrable under the plain terms of the nationwide Master Settlement Agreement. Links to the case briefs and documents courtesy of the SCOTUS Blog: Opinion below Petition for certiorari Brief in opposition Petitioners’ reply Technorati Tags: ADR, law, arbitration

Mark your calendars! Don Philbin, contributor of this blog, will host next week an interesting Webcast entitled “Deal or No Deal: Leveraging Information to Overcome Psychological Barriers to Efficient Deals.” Following is the program description: Using newly-developed computer animation models and traditional decision trees, we will explore the interactive use of outcome scenarios as a means to overcome barriers to settlement. By eliciting party narratives and outcome expectations, “what if” testing those assumptions, and reaching the frontal cortex through verbal and visual channels, we incrementally reduce the “fight or flight” response that often impedes settlement. Since at least the first Kennedy-Nixon Debate, we’ve known that people process the “same” information differently – often with different outcomes depending on how it is conveyed. Educational psychologists recognize that we process verbal and visual information on different brain circuits – complete with different working memories. And pictures not only communicate information, they increase our motivation to study accompanying text. We use pictures, and even video presentations, in mediation. But we use them less frequently when negotiations get serious and it’s time to test offers against realistic alternatives. Animated outcome scenarios, together with graphed offer patterns, help us process improving information in a more rational way. “In my role as the Executive Vice President, General Counsel of JAMS I see and participate in many programs all over the world. Don Philbin is clearly head and shoulders above the rest and presents one of the most entertaining and most informative programs on risk analysis I have ever seen. Drop whatever you are doing and try to see him in action.” – Jay Welsh, Executive Vice President, General Counsel, JAMS Find out more about this live Webcast here.