Part I: Introduction By Philip J. Loree Jr. Introduction The Loree Reinsurance and Arbitration Law Forum is delighted to guest post once again on Karl Bayer’s and Victoria VanBuren’s wonderful ADR blog, Disputing. Because Victoria and I have both written fairly extensively about Hall Street Assoc. v. Mattel, Inc, 128 S. Ct. 1396 (2008), and about two of the most frequently cited cases construing Hall Street’s dictum on manifest disregard of the law — Citigroup Global Markets, Inc. v. Bacon, 562 F.3d 349 (5th Cir. 2009) and Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), petition for cert. granted June 15, 2009 (No. 08-1198) – and because the United States Supreme Court has granted certiorari in Stolt-Nielsen, we thought that our joint-readership might appreciate an analysis of the issues that the Supreme Court will likely address – or at least face — in Stolt-Nielsen. That’s what we have set out to do in this four-part guest post. (Victoria’s posts on Hall Street and manifest disregard of the law are here, here, and here and mine are here, here, and here.) In Stolt-Nielsen the Second Circuit found that an arbitration panel did not exceed its powers when it construed two standard-form maritime charter-party agreements to permit class arbitration even though the contracts were concededly silent on that point. The Court held that this construction of the contracts was not in manifest disregard of federal maritime law, New York state law or a line of cases holding that the Federal Arbitration Act prohibits courts (and, by necessary implication, arbitrators) from imposing consolidated or class arbitration on parties whose contracts are silent concerning such relief. See, e.g., Glencore, Ltd. v. Schnitzer Steel Products, 189 F.2d 264 (2d Cir. 1999); United Kingdom v. Boeing Co., 998 F.2d 68 (2d Cir. 1993); Champ v. Siegal Trading Co., 55 F.3d 269 (7th Cir. 1995). On June 15, 2009 the United States Supreme Court granted certiorari in Stolt-Nielsen. Up until that time, Stolt-Nielsen was best known for having ruled that “manifest disregard of the law” remained a viable basis for vacating an award after Hall Street because it was subsumed within the ambit of Federal Arbitration Act Section 10(a)(4), which permits courts to vacate awards where the arbitrators “exceeded their powers. . . .” The question whether the Second Circuit correctly decided that the panel did not manifestly disregard the law — or whether the Second Circuit’s decision was otherwise consistent with the Federal Arbitration Act — received little or no attention. But the lawyers for Stolt-Nielsen and the other parties opposing class arbitration came up with an interesting and creative twist on the case, and we believe that is what convinced the United States Supreme Court to grant certiorari. They pointed out that six or seven years previously the Court had granted certiorari to decide whether imposing class arbitration on parties whose arbitration clauses are silent on class arbitration was consistent with the Federal Arbitration Act. And while the Court set out to decide that question in Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003), it was unable to do so because there was a disputed issue of contract interpretation as to whether the parties’ arbitration clauses were, in fact, silent on class arbitration or whether they permitted or precluded class arbitration. A four-Justice plurality reasoned that the arbitrator should be permitted to decide whether the agreements precluded class arbitration, with Justice Stevens concurring in the result and providing the fifth vote necessary for the Court to remand the case to the arbitrator. The key point, argued the Stolt-Nielsen petitioners, was that in Bazzle the Court never decided the issue that it had set out to decide, and the plurality opinion coupled with Judge Stevens’ concurrence had caused confusion among the lower courts. Here’s how they phrased the “Question Presented” in their petition for certiorari: In Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003), this Court granted certiorari to decide a question that had divided the lower courts: whether the Federal Arbitration Act permits the imposition of class arbitration when the parties’ agreement is silent regarding class arbitration. The Court was unable to reach that question, however, because a plurality concluded that the arbitrator first needed to address whether the agreement there was in fact “silent.” That threshold obstacle is not present in this case, and the question presented here–which continues to divide the lower courts–is the same one presented in Bazzle: Whether imposing class arbitration on parties whose arbitration clauses are silent on that issue is consistent with the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. (The four sentences you just read should be included among other fine examples of crisp and clear legal prose that all law students should be required to read.) Now that the Court has granted certiorari in Stolt-Nielsen, the principal focus has shifted from the question whether or not “manifest disregard” is a permissible ground for vacatur under Federal Arbitration Act Section 10(a)(4) to whether the Second Circuit should have vacated the award because the arbitrators imposed class arbitration on the parties when the parties’ contract neither authorized nor prohibited that relief. The Second Circuit’s finding that the panel did not manifestly disregard pre-Bazzle Federal Arbitration Act cases was based on its interpretation of the Court’s plurality opinion in Bazzle, which it read as “abrogating” those cases. The United States Supreme Court will presumably determine, among other things, whether the Second Circuit correctly read the plurality opinion in Bazzle and, if not, whether that error of law requires vacatur of the arbitration panel’s award. The Supreme Court’s resolution of the question presented in Stolt-Nielsen may have wide-ranging consequences, not only for consumer arbitration, but also for commercial arbitration generally. First, a number of courts, including the Second Circuit, have read Bazzle as authorizing arbitrators to order class action arbitration or consolidated arbitration in cases where the contract is silent on class or consolidated arbitration. The Supreme Court will presumably decide […]

By Holly Hayes As discussed in my previous post, Texas House Bill 2256 was signed into law on June 19, 2009. The bill provides a procedure for mediation of “balance billing,” which is the practice of billing insured patients for amounts or balances not covered by the insurer. HB 2256 also includes the following section on “bad faith” mediation: SUBCHAPTER C. BAD FAITH MEDIATION Sec. 1467.101. BAD FAITH. (a) The following conduct constitutes bad faith mediation for purposes of this chapter: (1) failing to participate in the mediation; (2) failing to provide information the mediator believes is necessary to facilitate an agreement; or (3) failing to designate a representative participating in the mediation with full authority to enter into any mediated agreement. (b) Failure to reach an agreement is not conclusive proof of bad faith mediation. (c) A mediator shall report bad faith mediation to the commissioner or the Texas Medical Board, as appropriate, following the conclusion of the mediation. Sec. 1467.102. PENALTIES. (a) Bad faith mediation, by a party other than the enrollee, is grounds for imposition of an administrative penalty by the regulatory agency that issued a license or certificate of authority to the party who committed the violation. (b) Except for good cause shown, on a report of a mediator and appropriate proof of bad faith mediation, the regulatory agency that issued the license or certificate of authority shall impose an administrative penalty. On a related note, Victoria Pynchon conducted recently an interesting survey about “bad faith” in negotiations. Lawyers, mediators, and clients came up with a list of 35 examples of what they considered “bad faith.” Find the survey results here. We welcome your comments about this post! Holly Hayes is a mediator at Karl Bayer, Dispute Resolution Expert where she focuses on mediation of health care disputes. Holly holds a B.A. from Southern Methodist University and a Masters in Health Administration from Duke University. She can be reached at: holly@karlbayer.com.

Disputing was cited once again by a Law Review Article. See Litigating Alternative Dispute Resolution in the Fifth Circuit, 41 Tex. Tech L. Rev. 739 (2009). Authors Donald R. Philbin Jr. and Audrey Lynn Maness do an excellent job at surveying Fifth Circuit decisions related to arbitration. Check it out! Technorati Tags: arbitration, ADR, law, Fifth Circuit

Ever wondered how technology is changing the discovery process? This weekend, I stumbled upon an article written by Peter S. Vogel about the impact of electronically stored information (“ESI”) on litigation and arbitration. Here is an excerpt: In 2006, the federal rules of civil procedure (and since then, many state rules as well) were changed to specifically deal with ESI. If you have been reading any reports of trials, you will know that there have been some very high-profile companies that have lost millions of dollars as a result of destruction of emails (Zubulake v. UBS), failing to provide all 14,000 backup tapes of emails during discovery (Coleman v. Morgan Stanley), or hiding more than 41,000 relevant emails (Qualcomm Inc (Nasdaq: QCOM) . v. Broadcom). All of these cases could have avoided such litigation disaster had the lawyers and IT been communicating. When evidence has been destroyed (spoliated), a judge or arbitration panel can grant a verdict against the destroying party, fine the party, or issue an adverse inference to the jury. An adverse inference directs the jury to assume that the reason the party destroyed the evidence was that it was adverse to its claims in the lawsuit. Most of the time, juries will accept the judge’s instructions and agree that the evidence destroyed was damaging, which is what happened in the Zubulake and Coleman cases. Mr. Vogel concludes that: Judges and arbitration panels are having to come to grips with the fact that they have to understand ESI, since every case has some critical evidence that is only electronic. However, only about 5 percent of the cases filed actually go to trial, and most litigation is settled during the discovery process. Read the full article: The Stunning Impact of E-Discovery on IT, E-Commerce Times, Peter S. Vogel, July 9, 2009. Technorati Tags: arbitration, ADR, law, e-discovery