commercial arbitration class 10

under a broad formulation, any issue of contract construction is arbitratble. any dispute as to conduct undertaken with respect to performance, un/lawful not/permitted, is embraced. so you have to go far to contemplate something that is not within the clause, such as a merger agreeement where the CEO of one company didn't drop off the other's laundry.

sometimes, it's hard to deal with arbitrability under a broad clause. there's a temptation to get into issues of contract interpretation and construction, such as the claim in the nationwide insurance case, where the court has to decide things on the merits, because either the contract doesn't/provides for the claim in which case it is/not arbitrable. but the court doesn't care about whether or not the issue is meritorious or that there's a claim of action. 

however, notice that even thought his is hte most practial solution, this is ianother reason that arbitrators can run amuck cause they can decide cases on things that would have been dismissed for lack of pleading a case/merits. tribunals are very careful about pre-trial motions. FINRA has a rule that arbitrator cannot throw a case out unless the wrong individual was sued!!

despite the test for a broad clause, the minute the parties attempt something like in choice hotels, to have apparently made an attempt to segregate out in the arbitration clause what is/not arbitrable, we know that broad clause approach is in conflict with the principle that parties cannot be forced to arbitrate.

how does this work out in practice?
1. maybe the clause only segregates out one item for arbitration because it would be complicated for a court (like a complicated accounting issue); the court will resort to purpose construction -- "is this the type of thing that an arbitrator (ie expert) was wanted for by the parties?"
2. maybe the court will resort to horsesense and a dictionary, like in choice hotels (difference between a debt and claim)
3.

denihan and denihan
shareholder's agreement: usually used in small corps, where there need to be agreements to thingst hat aren't necessarily covered under genral corp provisions. include provisions like first refusal, when/where money is distributed, "super majority provisions" to protect the minority shareholders. they also typically cover sale and/or assets of the company. and family corps make family members hate each other.
para 4 of the shareholder agreement between the brothers is supposed to protect the minor shareholder: can't sell or merge unless he's protected his full 25% interest in the company.
reasonable relationship test.

teradyne.
many circuits grant relief, but some don't. so if you're in this jurisdiction, even more reason to put something in the arb clause. you'll also often see getting an injunction in aid of the arbitration clause, which will overcome judicial reluctance.

commercial arbitration class 9

see notes in chapt 4.

case review of shaffer

case review of cole

armandariz: most important thing out of this type of case is that where there is an overt attempt to exclude remedies that would/should be available by statute, it is unlawful to use arbitration to exclude a remedy that is available by statute (for example,  attorney fees, limit remedy in a reinstatement employee case, recovery of backpay, emotional injury)

"only can pay type of expenses an employee would have to pay in court" - very limited and strict

have tried to set up in a jurisdiction that is not well known, like the floss case. the EE agree to bring their cases to this tribunal and the ER would be a 3dPB. usually tehse types of tribunals would not have the kind of protective policies that FINRA and AAA have.

due process protocol for EE/ER arb: joint work of the ABA and the AAA. ducks the issue of whether EEs should be held to mandatory arb of certain claims. but do discuss arb, keeping fees down, discovery, depositions (which the AAA actually didn't have anything about), neutral roster of trained arbitrators who know and are bound by applicable statutes

previously, in our study there was no duty to comply with the law. but still there's only limited judicial review, so there's still not a full adherence requirement to the law. arbitrators *should* apply the statutes at issue.

as we'll see it's not very thorough. but review the data, taht work place discrimination doesn't fair better or worse in or out of court than in arbitration.

MONDAY NOV 22 - review with arely!!!!!!

commercial arbitration class 7

continuing fed preemption

whether it's an agency, etc, signalling out a claim as non arb in the state -- no good

even if it involves an exercise of state policy and the fed courts have said that if arb is under a statute then they're not going to allow

treatment of contract provisions are no good

other issues that one way or another effect arb like waiver: pro arb make it difficult to waive right to arb, but state standards for waiver that are more lax get preempted.

under FAA s. 10, the grounds are very limited, but say nothing about the merits.

when we did the intro chapter, we saw that while there's manifest disregard, it basically means so totally F off the wall that the arb's must have ignored on purpose. and more fund, when people arb commercially, they aren't willignly submitting to equity instead of strict legal applications.

SCOTUS -- whether parties in agreement by contract could broaden the standard of review.

for instance could a reviewing court vacate as to a matter of law, as a district court would?

given that there's so much in the fed law of arb as it beign a creature of contracts, expectation that the SCOTUS would say "fine, if that's what the parties want" but the court didn't do that based on teh wording of the statute. said the stat didn't allow courts to overturn except for the reasons set forth in the statute. but if parties want to agree to broader review, they can maybe do under state law of arb which presents an interesting issue:

if you have an FAA case, can you still adopt the state rule of arb principles of review of awards?

this is important because at state/common law, there's recognition that parties can broaden the standeard of review.

but scotus is saying that there may not be any preemption. if state law permits the parties to broaden the standard of review, that kind of law wouldn't be preempted.

remember, one of the benefits of arb is that you don't have broad review, making the process more efficienct. so weiskopf finds it surprising that preemption doesn't go to matters of reviewing awards.

arb are common in certain types of transactions. usually, they are in adhesion contracts, and very often, form contracts involving sale of goods. and very common in the computer industry. for better/worse, there's some issues:
2-207 battle of the forms of merchants

usually, the seller wants arbitration. usually the buyer makes the offer. the seller sends out some type of writing with an arb provision. the buyer says nothing and the transaction is completed. are the arb clauses accepted? YES (last shot doc, which by the way, 2-207 was designed to change)

with 2-207: the merchant buyer sends a printed purchase order that says nothing about arbitration. the seller sends a form that says the seller will ship etc and on the back in small print, there's an arb clause

is the arb clause important and materially altering? it depends.

the point is to avoid unfair surprise.
why might a forum definitely allow the arbitration? prior dealings, industry custom,

dorton: no battle of the forms, because the order was made over the phone. there's a certain logical appeal to that. but they still apply 2-207 because they're both merchants.

what if it was that a contract formed over the telephone, and then the seller sent out the form afterwards. does this change the circumstance? NO -- the last form doc still applies, because the courts don't want to have to figure out the tricky details of this timing under the code.

2-207 is pretty stupid is because all it does is change the last shot doc to the first shot doc: the fortuity of going last is just now the fortuity of going first.

under 2-207, if you don't want any possibility of someone changing your offer, you can say that your acceptance has to be completely conditioned on subsequent changes.

like the itoh case --

no gap filler for arbitration in the code, so you would lose the right to arbitrate.

shutz v. carnival cruise lines may have been a little extreme with the court's enforcement of the arb clause.

hill v. gateway: so long as there's some relatively uncomplicated way of returning the item, 2-207 doesn't apply because the parties are not both merchants, and that under 2-204, you have a flexible approach to contract formation and the courts have

the statute requires that the arb clause must be written - doesn't say a damn thing about it being signed!!!

common law arbitration, which is a different beast because it's not under statute...

you do sometimes see courts say, this person didn't sign the writing with the arb clasue. signature is a sign of assent. some relationships will bind you, like EE/ER relationship, even though you never sign the arb agreement.

non-signatory third parties, non-privy parties can be bound by arbitration clauses in the contract.

piercing the corp veil: there's all types of finagles. remember that the point of the corp is to shield indivs from personal liability. what if you have a single-held corp and/or a parent company that just uses the corp as a shell? one way is that

if X and Y have a contract, and Z is a 3d party beneficiary under the contract, Z can push the arb clause too.

see the Shaffer case.
if companies are good, they will have a provision that makes the client arb with the parent and brokerage clearance company.

commercial arbitration class 6

recap:

if the claim went beyond the arbitration clause to the rest of the contract, this was not a matter for the arbitrator.

conflict between the federal and state rule. but SCOTUS says that erie doesn't apply because the roots of FAA are in the commerce clause which authorizes the fed to regulate interstate commerce under the supremacy clause. federal principles govern whenever an arbitration is under interstate commerce.

this begins the idea that in a diversity case, if the federal law of arbitration and state law conflicted the FAA would control, and the state rule would not apply despite Erie.

this still leaves a more fundamental question: given that federal court juris over federal matters involving interstate commerce would only exist in situations wehere a federal stat claim was involved, the practicality is that the vast majority of arbitratble matters involving interstate commerce will wind up in state and not federal court --- what if the state had rules concerning arbitration that are different than the case law principles articulated by the FAA? what if those differences impacted on arbitrability with the state principle being more restrictive than the federal rule? how could the state law be in violation of the federal policy?

2. state law must be applicable to all contracts
because section 2 of the FAA says that the defense must be inapplicable to contracts in general, and not just one that singles out arbitration.
this suggests that if a state legislature provides in a statute that a certain statute and the claims under it would not be subject to arbitration, then this might not be something a state can do. under state case law, if there were restrictions as to arbitrability, this might be something that states can't do. and remember that the vehicle to get before SCOTUS is under 28 USC that would allow them to take a case from the highest court of the state if it believes the court would offend SCOTUS principles.

keating.
not arbitratble if the FAA says so, or if federal determined that the status would be undermined by arbitration. the issue is, should the states have the same latitude that congress would have? the only basis for a negative answer would be that
the state does not have this power -- the idea that there is such a strong federal pro arbitrability, the states can't limit under their statutes! this is almost mind-boggling!!

the argument is that the only reason the congress put interstate into the Act is because otherwise the federal court might not have jurisdiction. is this a good argument?

remember citizen's bank, where scalia/thomas wrote that the FAA application is wrong.

even if you do have preemption in the state courts, you don't have necessarily preemption of public policy and so if the fed can't say (.... ) why can't the states? weiskopf doesn't know either.

what if there's a federal statute that exempts certain franchises from arbitrations, but then a state has a similar law that comports with the federal but that both are opposed to the FAA?

what about the forum shopping concerns? under Erie, you would apply state law if outcome determinative. but in a

see s. 2 -- you can interpret if you're using an enforcement recognized? what about public policy???

doctor's associates --

the tougher it is to waive the right, the more pro arbitratable it is.

but also, the more you can waste court time, it can be a problem, no matter how pro arbitrable you are.

affirmatively pleading arbitrability - you can compel. which is wacky. but the theory is that a motion to dismiss doesn't go to the merits of the case. going for summary judgment is different.

arbitrability also has to do with how the arbitration clause is construed -- the state court uses the FAA proarbitrability to give strange basis for claims. plus, the interpretation of contract is a matter of state law. so the way this turnes out -- the state law principles of contract construction can be used unless you use a result that is anti arbitration.

where are states free to impose thier own rules on arbitrable process without running afowl of preemption?

in many states including NYS, the tendency is to resolve arbitration cases on paper.

as long as it an arbitratbility issue in court, then they're done. that's pretty pro-arbitration.
the federal system doesn't have that in the FAA. if you don't use the CPLR 5-03(c), you run the risk that you proceede and if the opponent is against it, a year after, a challenge to the award can raise the arbitrability issue. a baiss for throwing out the award is that the powers were exceeded.

the parties contractual choice gives way.

the bulk case

see the housing case in the notes
not so broad that the parties couldn't adopt them.

can't award punitive damages garry. the problem?
brokerage firms and employers would say in the contract that disputes were governed by new york law in the hop tht arbitrator could throw out of court. after a while, the

not only is the contract held to new york law, but the courts have held that it's a no-no for a party to attempt to withold the remedies that would be available in court under statutory claims.

commercial arbitration class 5

recap from last class:
9th circ is anti-arb, and still used to compel arb of employment cases
CA district courts weren't doing so and SCOTUS believes the claims
are arbitrable even without a square holding
the courts have taken a significant interest in trying to provide safeguards
that govern arbitration in these types of claims
part of that has been done under an unconscionability rubric, bc
arb is subject to state law to the extent all contract provisions are.
DP protocol - a joint effort of ABA and AAA, which has various safeguards
and very important is that in the protocol, there's a specific provision
that arbitrators are supposed to apply the statute:

the general AAA code, has stuff about fairness but nothing about
adhering to the law.
the cases are still very restrictive to overturning awards that find an
absence of discrimination, even where there's very strong evidence of
discrimination. there's two reasons for this:
1. the "manifest disregard" concept, which applies only to errors of
law and not errors of fact
2. manifest disregard is something taht arbitrators deliberately refuse
to follow

some ways, the most important issue is that not all forums are as
neutral as the AAA. when the forum is more structured for the
employer's purpose, then they're worthy of special scrutiny.

later we'll get to whether collective bargaining requires union members
to arbitrate certain kinds of claims.

thombly.

some employment cases lend themselves to arbitration and others really
don't.

establishing that the person was doing a good job, the other people
didn't have higher ratings, etc.
both cases are readily presentable in arbitration.
unlike court, the employee isn't inundated with lots of procedure,
and there's often "smoking guns" in the files, so it doesn't really
hurt that discovery is more limited and arbitration allows an
employee to go forward who might not have been able to afford
court procedings.
especially in race cases, there's an important issue of
"disparate impact" -- no overt impact, but sometimes more
incidious, what looks on its face to be neutral but is instead
in practice hugely disparate on members of a particular race, or
sometimes sex or age group. that type of case is on the claimant
to show, usually by stat analysis, what the impact of the practice is
and then the burden shifts to the employer to establish a business
necessity for the practice.
but if the plaintiff can show that there's a less discriminatory means
of getting to the objective, then there's a disparate impact case.
these are not good arbitration cases, because you
1. need more discovery
2.

how many employees can bring a class action to arbitration?
they're caput.

wright:
though SCOTUS said that these claims are arbitrable under a
general clause in shirk, etc.

2009: pent clausa decision, overturns precedent against the holding
without admitting it!
so the first thing that j.Thomas writes is that the 80s cases' issue is
"does arbitration bind a later court" where here the question is different....
as long as stat claims are held to, (hear recording...)

weiskoft thinks the different isn't distinguishable.

SCOTUS hasn't been content to extend arbitrability to fed stat claims
that would otherwise be heard in federal court.
basically, the pro-arb policy has been cramed down the states' throats.
see Federal Arb stat. s. 2, which discusses teh enforcability of arbitration
in the cases that involve interestate commerce. there's only two cases that
don't fall in the commerce clause: lopez and morrison.

right of actions. the fed must bring it's own cases for arbitration.
only other way is that it's a federal question or complete diversity.
do you only enforce this when a case happens to wind up in federal court?
or does it mean that for any case involving interstate commerce,
the state courts have to adhere to the federal arbitrability principles
ennunciated by SCOTUS? -- the federal laws of arbitration and
federal case law preempts the state law that is deemed to be anti-arbitrability:

for instance, a state - even under one of its own statutes - cannot effectively
provide in the statute that claims in the statute cannot be arbitrated, for
any issue involving interstate commerce.

for example, a state has other types of provisions which are seen
FAA s. 3/4: stay of the case
state courts have a lot of latitude, so long as they're not hostile to
arbitrability.
so to figure out if something is prempted, we have to go through the
substance procedure distinction under erie.
and then, we have the issue where the parties rights contractually
can create precedent even over the state's laws and that may conflict
with the FAA (because of choice of forum, etc)

if a state court doesn't apply FAA, what can the court do?
tehre's a provision that allows SCOTUS to give judgment
over a state's highest court in art. III s. 2.

prima paint:
weiskopf thinks the principle is right, but thinks it's interestng that the
state rule, even state rule with substance that are supposed to apply
under erie, are preempted because of FAA: so state court rules can't apply
even if it's something necessary!

how does the court explain? if the fed gov't under const analysis,
then the federal courts can make the rules over arbitration over the rules
of interstate commerce, and keep that regulatory power from the states.
this means that federal courts can make the rules as to how that power
may be exercised:
in a diversity case, the state rule doesn't apply and the claim of fraud
and inducement goes to the arbitrator. and the state court must apply
the same rule in an arbitration case.

preemption is coextensive with the FAA -- state courts deal with FAA
cases unless they involve a federal question or diversity.

1. illustrates hoe preemption works
2. SCOTUS says theres a distinction between affecting and involving commerce
3. parties had reason to contemplate interstate activity tho contract was intrastate

preemption doctrine isn't created by congress really.

what if SCOTUS wanted the s.2 construed broadly, then s.1 should construe
the employment clause narrowly as possible.
the court says that the impetus for arbitrability is the taft-hartley

for next class, we'll finish c.3:
argument is whether there should be preemption, and whether FAA
was ever intended to apply to state court. J.O'Connor was the leader
that it shouldn't apply, though Scalia and Thomas were the ones who
said it should, but now they think that it shouldn't.... very possible that
when this issue comes up again, the decision at state level will put out
preemption



mcdonald v. douglass

basic principles of preemption

severability

broad reach of preemptive effect
narrowness of employee exclusion s.1
federal preemption based on subject matter

commercial arbitration class 4

no jurisdiction over interstate commerce for arbitration statute!
you only end up in federal court to compel arbitration if a dispute
includes either
1. federal question
2. diversity, where one party invokes right to fed court

so in a typical commercial case, anything with arbitration goes to
state court:
does state court apply the principals of arbitration by federal or
state court? FEDERAL COURT!

the breadth of the pro-arbitrability movement under SCOTUS is
enormous. arbitration was largely a creature of trade deals with
europe and involved specialized commercial matters that unless
that kind of arbitration was engaged in arbitrarily, this country
refused to enforce even those types of disputes. then, statutes that
follow instruct the courts that these are enforceable as any other
contract. and then starting with the itnernational cases of the 70s,
for the first time, SCOTUS decides that, within limitations, all
federal question cases are arbitrable as common law is.

what objections were overcome?
1. the fact that congress told the courts that they couldn't protect
their own jurisdictions in private business cases didn't mean
that they wouldn't fight for commercial arbitration. plus the thought
was that even if you got judges who weren't as clear on the law,
they would have more expertise about certain trades and usages of
an industry and that would leave them better equipped to handle
certain contractual issues.
2. statutory claims -- why does congress pass a securities statute?
in part to give individuals a right to sue and to protect certain interests.
but the statutes are also for the prtoection of society at large, and
have to do with administrative agencies with enforcement rights
to go into courts, conduct investigations, etc. more of an impetus
in making sure that these claims were decided correctly. if parties
wanted to kowingly leave a private dispute to arbitrators, fine. but
parites can take away from the power of the courts the right to
decide public interest statutory claims [without regulation]. these
statutes were also thought to require a specialized understanding of
the law.

trade is getting increasingly internationalized. SCOTUS ultimately
holds that sophisticated business entities are absolutely free to
designate which laws they want to control their disputes and are
free to designate which forum they want to have control the dispute --
even if the country has nothing to do with the dispute! there's an
increased realization that foreign entities will be very unwilling to
submit themselves to the jurisdiction of their adversary (very often
the foreign entity you're dealing with is governmental, too). since
the entities are free to litigate under the forum and law they want,
things are ridic. then in 1988, after wilko, the UN convention is
enacted. the statutes require companies to give up sovereignty
unless there's adherence to a "reciprocity provision". the only basis
to refuse a foreign award is public policy and some courts have
said that you can't not enforce an award for disregard.

so unless there's a treaty...
it's an issue of commity.
so they're elevated from an enforcement standard even more than
international court judgments.

but what do you give up?
1. for example: US company agrees with foreign company to arbitrate
in foreign country and in foreign law, what happens with statutory
rights in regards to foreign operation? sometimes it matters, and
sometimes it probably won't, and wouldn't you know that SCOTUS
picks cases that pose the fewest problems to create precedence.

shirk 417 US 506
it will be arbitrated in paris under the laws of IL.
the claims being asserted
the federal securities statutes involvement?
there was a sale of corporate stock which gave ownership of IP
but if you didn't have the protections you would have chaos
with the parties trying to find different jurisdictions to
review the matter!

what would work as examples of not enforcing per public policy?
it would have to be huge, for example, something like trafficing
human slaves.

mitsubishi v. soler
you still get anti-trust cases all over. there's one currently on
whether the NFL can get exclusive right to sell team uniforms
to fans.
a manu causes a distrib or retailor to not sell below a certain price.
this is vertical restraint. 
so now we see recommended retail price
rule of reason -- the court uses it for anti-competitive processes
which are not per se unreasonable

there's essentially nothing that he SCOTUS is going to do:
not a matter of SMJ or IPJ - the alleged acts are committed in US
this case is that there's an arbitration agreement and the UN convention
and there's precedent that arbitration extends, particularly in
international cases, to statutory claims. the dissent says that the
parties agreed to arbitrate what comes out of the contract.
but the statutory issues in this case didn't arise from the contract!

unlike in shirk, the us company here DID have a possible remedy
but for the arbitration clause.

chang v. mc ginn, smith.
if this had gone to court, would probalby not have been a
compromise. and the arbitrators seemed to have understood the
results better than a judge would have been able to. about half
of these claims win at arbitration, but for the cost of the loss,
taking into account the loss of the market. there's usually a
finding of shared fault.

adhesion contract, is not enough to invalidate.
the burden is on the claimant to show what's against public
policy -- that it is against the face of or legis history of a
statute, or there must be something inherently inconsistent with
the purpose of the statute and arbitration.

not looking at the facial neutrality of this. this is used more
in racial cases, and is harder because it needs a class action,
needs lots of discovery, needs a lot of expert testimony, etc.
and there's nothing new. unless the statute or the legislative
history says otherwise or there's something inherent in the
statute that makes arbitration improper. this is an industry
dispute, not a customer dispute. so there will be an industry
arbitrator and SEC forum, instead of federal court -- where
would you rather be? the public perception would be that
you want to be in court.

it so happens that in the past several years, the SEC has
changed the rules so you don't have to arbitrate. a lot of the
pressure to change was based on the perception, since many
cases are harrassment and are glass ceiling.

knocking out anti-discrimination.
SCOTUS has held that employees subject to mandatory
arbitration that doesn't stop the EEOC post judgment and doesn't
stop them from seeking relief. what it does is it stops them from
participating in later claims. so if you want EEOC protection, you
don't have to file. but you should if you want to leave them free to
work with you!

if age discrimination claims are arbitrable, then title 7 discrimination
laws are arbitrable. only the 9th circuit takes issue with, and relies on
some statutory language to take exception.

arbitrator must be trained in the law, must be written (but not necessarily
reasoned), neutrality, and a joint set of principals (due process protocol)
including provisions like
- can't be anything that limits remedy

commercial arbitration class 3

neutral v. designated arbitrator. 
who makes the decision that the arbitrator might not serve?
usually the tribunal.

every once in a while, a party may want to get rid of an
arbitrator.

when is this likely to happen?
in AAA, the parties chose the neutral from a selection.

more than one arbitrator, all neutral, in securities. and someone
may trump up a minor infraction to get rid of someone.

disclosure isn't limited just to arbitrators

arbitrators should be even more careful than judges to keep clear of the
parties. but posner said that the arbitrators are chosen in light of their
familiarity and knowlegde of an area, so the more specialized the more
likely an arbitrator has dealt with a party in the past.

arbitration process.
statement of claims -- can be letters, or something more or less formal,
usually more discriptive than court pleadings. the core issue is set forth
the issue of the pleading. sometimes its better to do it in a textual way.
and sometimes its not.
after pleadings are exchanged, then there's pre-hearing conferences
to have the arbitrators do whatever is necessary to facilitate discovery.
except in very complex cases, a main difference between arbitration and
court is that there's not depositions/ interrogatories, etc but just an
exchange of documents at this point. and if parties can't agree, they
go to the arbitrator to order exchange. occasionally, there's a need for docs
from third parties and arbitration courts as well as arbitration attorneys have
subpoena power.
order of preclusion -- issue preclusion is not unusual and is a pretty effective
sanction.

AAA is non-profit. increasingly there's for profit arbitration, such as JAMS.
there's many retired judges that are on the roster of neutrals, and they
tend to command pretty high fees. then there's FINRA - which gets a lot of
flack, but is regulated by the SEC which wants investors to know they can get
a fair shake from the finra arbitrators.

difficulty for FINRA - suitability claims (monday morning quarterbacking)
which are often brought under securities statutes
brokers must report (what?) and forms that contain this information are
public. so if someone wants the

the state AG has to be allowed to enter the dispute. all of this is a strong
incentive for brokers to *not* settle cases.

arbitration of statutory claims.

see peripheries of arbitration materials:
- anytime a contract delegates out certain types of determinations,
loosely, you can call it arbitration: a neutral is brought in to make
some kind of determinations.
- earlier forms of arbitration usually fell into ethnic sects that
wanted to preserve certain customs against what might have been
perceived as a hostile legal environment.

what happens in post-award proceedings in regards to the award?


arbitration in the past: business disputes based in common law,
usually breach of contract where arbitrators would sort out any
factual issues and apply the laws agreed to and reach a result.
arbitrators were often appointed by agreement of the managers and
unions to regulate/bargain between employers and employees. the
fact a laborer could go to an arbitrator and get a judgment for the
employers to do something was considered a quid pro quo right to
strike. the commercial arbitor awards are not precedent and have
nothing to do with stare decisis. this is part of why people feel that
arbitration has more opportunities for equity.

fraud, tort claims... not so much. these are typically merchantile
disputes. the fact that arbitrators aren't lawyers doesn't matter too much
because they know the custom/usage of the industry and they know
business such as to understand how to read a contract, etc.

instead, over past 25 years, there's an explosion to formal arbitration,
mainly lead by SCOTUS.

wilko v. swann - a customer arbitrating is waiving the fundamental statutory
protections because it's essentially remnant of the ouster of the court.
adhesion contracts aren't by nature unenforceable unless there's something
wrong with the contract. the arbitrator can still be held accountable if
it manifests disregards - more than mere legal or factual error.

so wilko is pro-arbitration but it doesn't mean that actions under the
securities laws are mandatory securities arbitration. and implicit to this
is that certain statutory rights are public and for the protection of
every citizen (every citizen has an interest in preventing employers from
discriminating, in keeping brokers from misconduct, etc). the dissent says
that the failure to observe the law is grounds to vacate the law. file this case
away and see later if it turns out to be true.

at this time, the courts had to be sure that arbitrators would adhere to laws.

why do you think that SCOTUS picked shirk?
1. international company, because many international companies have
sovereignty issues
2. a major corporation and it knows what games its playing

for next week:
- wright case

commercial arbitration class 2

federal arbitration statute (see appendix 2)

if there's a written agreement, the court can only refuse to enforce
if it's on the same grounds that render any contract invalid.

courts decide whether the language falls within the scope of the arbitration --

arbitability means 2 things:
1. whether a dispute falls within the description of disputes covered
    by the arbitration clause
2.

NYCPL s. 7501 see appendix 1
the court isn't supposed to consider the meritability of the dispute.
meaning, even stupid claims are supposed to be handled by the arbitrators
not the court.

what if a party is recalcitrant about an arbitration?
a party to the contract can file a court action, but the other says that it
should go to arbitration.

"where a party is aggrieved by failure to arbitrate, the party seeking
arbitration can get the court to stay a court action and enter an order that
the case has to go to arbitration."  -- without this kind of provision,
treating a contractual arbitration agreement wouldn't have much sway....

if you have an award, it's not worth anything if it's not voluntarily
complied with or its turned into a judgment. both state and fed
have confirmation procedures:

see section 9 - 11 of federal arb stat, which deal with how to grant the
award or to deny the award under stat basis (award conferred by
corruption, fraud, misconduct, unfair hearing, excess of arbitrator's powers)

but again, there's nothing to suggest that errors of fundamental law or fact
create a basis to deny an award. there are limited public policy reasons to
refuse to confirm that we will explore later (for example sending a heroin
addict back to work at a power plant), and amicus disregard.

but part of the ouster concept and reluctance to arbitration was the idea that
people going to arbitration wouldn't have the protection of the appellate level.
but if parties are submitting to arbitration, either by honoring the clause or
by agreeing to arbitrate post-dispute, once the award was entered, it was
good and courts would rarely interfere with the award. the only time courts
would revoke would be times where parties would complain. parties can also
always settle a dispute, and courts do not get into the fairness of settlements or
consideration. history of these policies is pretty choppy.

these statutes were created to deal with merchantile arbitration. but whether the terms
of the enactments of 1925 were sound or not, congress was not thinking of arbitrating
securities or civil rights.

additionally, the statute talks about interstate commerce -- in 1925, congress
meant boats, trains, and shipments from state to state. nowadays, you don't
have to intend interstate commerce or for activity to take place in multiple
jurisdictions. this clause has huge impact, because you can arbitrate ginormous
claims!

when you go to arbitration you give up right to trial by jury. juries have
always been waivable by both parties. but some people argue that it is a
knowing act to waive the right to jury, and the common place use of
arbitration clauses creates a question of what does "knowing waiver" means?
why should we expect that people understand what arbitration is?

under choice of law principles, why not arbitrability? in a law suit involving
people from all over and a court different from where the court sits, why doesn't
that change to have the court invariably turn to its own rules to govern procedure?

procedure is at least somewhat linked with remedies -- therefore, what remedies
are available to a wronged party? early thinkers talked about arbitration
as a remedy (keeping in mind, one for which there was no jury).
because of this, arbitration didn't run into constitutional obstacles
because state constitutions would set up types of jurisdictions, and if arbitration
had been seen as a type of court, then it would have been difficult for the legislature
to establish it by statute.

are arbitrators required to apply the law?

commercial arbitration class 1

exam: "give a fair shake, you wont' have a problem."
tele ext. 6008
room 4-10


right to a jury trial, though this could be waived in a contract.

late 19th cent/ early 20th cent arbitration:
something about the right to go to court unless you really, really, really don't want to.
when court was faced with an arbitration agreement, it became an issue of whether or not the court handled it or gave it to an arbitrator.

"ouster of jurisdiction": the courts were very protective of their dockets -- simply put, a lot of judges didn't want to be put out of business. and also, most judges had a feeling that arbitrators couldn't handle cases as well as they did. many courts would hold that you couldn't even settle cases by arbitration. so the arbitration clauses proved fairly useless.

1920s -- the NY arbitration statute restructured this.
see NYCPL s. 7501

after this came the federal arbitration statute, largely modeled on the NYS one. over the years, all states incorporated similar statutes to deal with enforcement of arbitration clauses in contractual disputes.

now, the arbitration clause can be interjected and administered as the parties see fit in the confines of the contract.

arbitral tribunal: place where you go to conduct arbitration. simplified procedural rules, but still the assumption is that once you select a tribunal, you will be incorporating their rules.

commercial rules of the american arbitration association.

financial industry regulatory authority (finra).


enforcement -- what does that mean?
basically, that if someone is not cooperating, then you should be able to go to court with an injury that can be addressed in court and be remedied.

each of the statutes allows for creating an award that settles a dispute.

there's nothing in the statutes that discuss whether or not an appellate can review de novo/reverse a decision *only if the tribunal arbitrator is wrong* (this is a concern in the consumer and the brokerage areas), but the standard is that for errors or law or fact -- generally is not a review.

are arbitrators supposed to apply the law? SCOTUS says "arbitrators are supposed to stay faithful to the statutes" but what does this mean???

the US has been super gung-ho arbitration over the past 20 years. but when these statutes were written, there weren't anti-discrimination acts, securities acts, anti-trust acts... these are based on common law issues! the federal courts deal with other types of statutory claims because of federal question/diversity. SCOTUS has knocked down a lot of case law that said stat claims were not

there's frequently motions in congress to cut back on arbitration of commercial/consumer disputes. and obama banned federal contracts that have employee arbitration clauses.

arbitration -- a sense that there's more flexibility to do equitable remedies. but it's hard to say how far that goes....

integral elements:
1. at least one neutral arbitrator
2. fundamental right to put in a case. rules of evidence don't apply. must let material into the record.
3. procedures that are fundamentally fair. such as procedures for selection of arbitrators, neutrals, etc.
4.