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The Ten Arbitration Trends Of 2017

By Liz Kramer | December 12, 2017 in Year In Review

2017 was a big year in arbitration law.  We went from a country that seemed on the verge of banning arbitration in most consumer and employee contracts to a country whose federal policy embraces arbitration in nearly every context.  From my vantage point, here are the ten top developments in the last twelve months:

  1. Regulation Reversal.  At the end of 2016, federal agencies were proposing rules to ban arbitration in various settings (student loans, nursing home agreements, consumer financial contracts).  Today, all of those have been reversed.  Most were reversed by the agencies themselves (CMS, Dept of Ed.), but in the big CFPB story, it was Congress that did the reversing.
  2. New Preemption Case from SCOTUS: Kindred Nursing Ctrs v. Clark, 137 S. Ct. 1421 (May 15, 2017).  This case found Kentucky had developed a rule for analyzing “power of attorney” documents that stood as an obstacle to arbitration.  What should state supreme courts learn from this decision?  To avoid FAA preemption, don’t insult SCOTUS, don’t worship the jury, and you really should be able to cite to a case where you’ve applied the same rule outside the arbitration context.  (Read the postscript.)
  3. Arbitration on Trial.  The public discourse in 2017 was hostile to arbitration.  Arbitration was literally on trial in a case against JAMS (for an arbitrator’s alleged resume-padding), but also was figuratively on trial as a contributor to the problem for sexual harassment victims and an obstacle for consumers impacted by the fake accounts at Wells Fargo and Equifax data breaches.  However, the level of public interest in this issue does not seem high enough to capture the interest of Congress (see vote on CFPB in #1), and one primary arbitration critic in the Senate, Al Franken, will resign shortly.
  4. Waiting for NLRB.  This fight between the NLRB and the courts has been brewing for so long!  My first post about the NLRB’s decision that class action waivers in employment agreements violated the federal labor laws, and the federal courts’ disagreement with that decision, was in 2013.  This year, the drama heated up as not only did SCOTUS take the case and hear argument in October, but the Dept. of Justice shifted its support from one side to the other shortly before the argument.
  5. Circuit Split on “Wholly Groundless.”  Should courts do any spot check on arbitrability before enforcing a delegation clause?  Until this year, the only answer was yes, and that came from three circuits (Fed, 5th, 6th), but in 2017, two circuits said “no way!” because it violates SCOTUS’s precedent (10th, 11th).  This could end up on SCOTUS’s docket soon.
  6. Small Claims Court Confusion.  A number of cases took up the issue of whether a company’s effort to collect a debt in small claims court (usually pursuant to a carve out in the arbitration clause) waived its right to later enforce arbitration when that consumer sued about the debt collection effort.  E.g., Cain v. Midland Funding, LLC, 156 A.3d 807 (Md. Mar. 24, 2017). The case outcomes were inconsistent.
  7. Statutory Preclusion.  Attempting to avoid arbitration by holding up a statute that appears to require a claim to be heard in court is always a solid argument (but usually unavailable).  This year it came up often, but not successfully.  See McLeod v. General Mills, Inc., 854 F.3d 420 (8th Cir. 2017).
  8. Non-Signatories Get Divergent Results.  Another perennial favorite topic is defendants who want to compel the arbitration clause in a plaintiff’s contract with someone else.  This came up often again this year, but with notable losses and generally inconsistent results.  (Teaser for an upcoming post…)
  9. Clarifying That Awards Don’t Get Vacated For Trivial or Old Relationships. One area of law that courts seem to be trying to clean up this year is the standard for what types of relationships are significant enough that the award could be vacated.  What’s not enough?  Having decided a different matter with the same expert, and having been colleagues with counsel for one party 15 years before are two examples of what is not enough.
  10. Are There Exceptions To The Three Month Window For Vacating Awards?  The Ninth Circuit said yes (in the case of fraud), but the Nebraska Supreme Court found no exceptions available.  Given that this statute has been in place since 1925, this seems like the kind of thing that would have been settled by now…

 

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