“Arbitration Fairness Day” is today (see background here and here). O. Russel Murray wrote an interesting analysis on the Arbitration Fairness Act of 2009 (a.k.a. H.R. 1020; the status of the bill is here). He acknowledges that there have been some problems with mandatory arbitration within the context of employment, consumer, franchises, and civil right claims. However, Mr. Murray believes that the Arbitration Fairness Act might be worse than the problems it tries to address. See Guest Post: Arbitration Fairness Act – Right Problem, Wrong Solution, The Learned Lawyer, O. Russel Murray, April 27, 2009. Technorati tags: arbitration, ADR, law, Arbitration Fairness Act of 2009, Arbitration Fairness Day, April 29, Arbitration Fairness Act Right Problem, Wrong Solution

The Fifth Circuit heard arguments yesterday on Halliburton‘s appeal of Jones v. Halliburton, coming from the Southern District of Texas. The lower court refused to compel arbitration of plaintiff’s claims for: assault and battery, intentional infliction of emotional distress arising out of an alleged assault, negligent hiring, retention and supervision of employees involved in the assault, and false imprisonment. That court, however, stayed litigation of those claims until the parties complete arbitration of plaintiff’s arbitrable claims. We will blog on the Fifth Circuit’s decision when the opinion comes out. A WSJ article about the case is here. Also, Woodmen of the World Life Insurance Society/ Omaha Woodmen Life Insurance Society v. JRY, is a recent case on arbitration of tort claims decided by the Fifth Circuit blogged here. Geraldine Nicholas v. KBR, Inc. is another recent case involving arbitration of employment-related claims blogged here. Technorati Tags: arbitration, ADR, law, Halliburton, employment contract,

By Philip Loree, Jr. Introduction The Loree Reinsurance and Arbitration Law Forum is pleased and honored that Victoria VanBuren of Disputing has invited us to guest blog on the Arbitration Fairness Act of 2009 (the “Arbitration Fairness Act”). Our blog shall likewise be featuring Victoria as a guest blogger from time-to-time. Victoria suggested that the Arbitration Fairness Act would be a particularly pertinent topic in light of the “Arbitration Fairness Day” press conference event scheduled to take place in Washington, D.C. on Wednesday, April 29, 2009 (blogged here and here). The event is further evidence of growing public support for the Arbitration Fairness Act, which would render invalid and unenforceable predispute arbitration agreements requiring arbitration of consumer, employment, franchise and statutory civil rights disputes. Undoubtedly the blogosphere this week will feature many calls to arms insisting that Congress promptly pass the Act. And we suspect that other posts will argue that the Fairness Act is bad for consumers and good for lawyers. Personally, we are not fans of the Arbitration Fairness Act, but for now we will leave it to others to argue that it should not be passed. This post deals with a more mundane and pragmatic question: Assuming Congress jumps onto the anti-arbitration bandwagon, what specifically could the drafters of the Arbitration Fairness Act do to address the problems the Act may create in disputes between sophisticated commercial entities? The Problems The Arbitration Fairness Act would, among other things, significantly revise and restructure Section 2 of the Federal Arbitration Act (“FAA”), dividing it into four subsections, 2(a) through (d). FAA Section 2, as amended (“Proposed Section 2”) would provide, in pertinent part (with newly added, key language in bold): Sec. 2. Validity and enforceability. (a) A written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable to the same extent as contracts generally, except as otherwise provided in this title. (b) No predispute arbitration agreement shall be valid or enforceable if it requires arbitration of– (1) an employment, consumer, or franchise dispute; or (2) a dispute arising under any statute intended to protect civil rights. (c) An issue as to whether this chapter applies to an arbitration agreement shall be determined by Federal law. Except as otherwise provided in this chapter, the validity or enforceability of an agreement to arbitrate shall be determined by the court, rather than the arbitrator, irrespective of whether the party resisting arbitration challenges the arbitration agreement specifically or in conjunction with other terms of the contract containing such agreement. . . .   Proposed Section 2(c) would breed litigation over the extent to which, if at all, the Act abrogates two well-settled principles of commercial arbitration law in disputes between sophisticated commercial entities: The doctrine of severability, which allows arbitrators to decide enforceability and validity challenges to the contract as a whole, including the arbitration clause; and The rule that arbitrators may decide arbitrability questions if the parties clearly and unmistakably so agree, with their decisions on those matters subject only to the deferential standards of review applicable to all other arbitration awards (the “Own Jurisdiction Rule”). In a multi-part post in the Loree Reinsurance and Arbitration Law Forum (available here), we explained in great detail why the Arbitration Fairness Act will generate litigation between commercial entities and how the Act might be interpreted in domestic cases falling solely under Chapter 1 of the FAA and in nondomestic cases falling under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (a/k/a the “New York Convention”) One interpretation of the Act would abrogate the doctrine of severability and the Own Jurisdiction Rule in all cases falling solely under Chapter 1 of the FAA, whereas another would abrogate that doctrine and rule only where one of the parties to the dispute alleges that the predispute arbitration agreement requires arbitration of a consumer, employment, franchise or statutory civil rights dispute, and is thus unenforceable under Proposed Section 2(b). We concluded, among other things, that the drafters have done the commercial and industry arbitration community a disservice by not clearly expressing their intent concerning the doctrine of severability and the Own Jurisdiction Rule. We also touched briefly on two potential problems the Arbitration Fairness Act may create as respects agreements and awards falling under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which are governed by Chapter 2 of the FAA. First, while it appears that Proposed Section 2(b) of the Act was not intended to apply to agreements falling under Chapter 2, the matter is not entirely free from doubt. That may, for example, raise a question concerning the enforceability of an arbitration clause in an employment agreement between a U.S. citizen and a company headquartered abroad. Second, while it appears that Proposed Section 2(c) was not intended to abrogate the doctrines of severability and the Own Jurisdiction Rule in cases falling under Chapter 2, that proposition, too, is not entirely free from doubt. These uncertainties do not foster international comity and the strong federal policy in favor of international arbitration. And they apply equally to agreements and awards falling under the Inter-American Convention on Commercial Arbitration (a/k/a the “Panama Convention”), which are governed by Chapter 3 of the FAA. The Proposed Solutions Let us consider how the drafters might address these problems. As a threshold matter, they should give serious consideration to whether they intend to abolish the severability and Own Jurisdiction Rule in cases involving only commercial entities. It is not clear to us that they subjectively intend the Arbitration Fairness Act to have such far-reaching consequences. One of the Act’s findings suggests (but does not clearly state) that the drafters did not intend […]

[Ed. note: see guest blog post here] Disputing will be honored to have guest blogger Philip Loree, Jr. Phil will be sharing insightful comments and will propose some solutions to the problems that the Arbitration Fairness Act of 2009 will likely create in disputes between commercial entities. (see past coverage of the Act here and here) Phil is a partner at the boutique law firm of Loree & Loree, where he focuses his practice on reinsurance litigation and arbitration and commercial and industry arbitration, and blogmaster of the Loree Reinsurance & Arbitration Law Forum, which is a forum for critical analysis of issues pertinent to reinsurance dispute resolution and commercial and industry arbitration. Prior to forming Loree & Loree, Phil was a partner in the Litigation Departments of Cadwalader, Wickersham & Taft LLP and Rosenman & Colin LLP, and a shareholder in the Litigation Department of Stevens & Lee, P.C.. He is admitted to practice in the State of New York and various federal courts. You can access his CV here. We are hoping that Phil Loree will become a regular guest blogger at Disputing. If you are interested in guest blogging at Disputing please let us know. Technorati tags: arbitration, ADR, law, April 29,