Justia U.S. Supreme Court Opinion Summaries

In 2016, a hacker tricked an employee into disclosing tax information of about 1,300 Lamps employees. After a fraudulent federal income tax return was filed in the name of Varela, he filed a putative class action on behalf of employees whose information had been compromised. Relying on the arbitration agreement in Varela’s employment contract, Lamps sought to compel arbitration on an individual rather than a classwide basis. The Ninth Circuit affirmed the rejection of the individual arbitration request, authorizing class arbitration. Although Supreme Court precedent held (Stolt-Nielsen, 2010) that a court may not compel classwide arbitration when an agreement is silent on the availability of such arbitration, the Ninth Circuit concluded that Stolt-Nielsen did not apply because the Lamps agreement was ambiguous, not silent, concerning class arbitration.The Supreme Court reversed, Under the Federal Arbitration Act, 9 U.S.C. 2, an ambiguous agreement cannot provide the necessary contractual basis for concluding that the parties agreed to submit to class arbitration. Arbitration is strictly a matter of consent. Class arbitration, unlike the individualized arbitration envisioned by the Act, “sacrifices the principal advantage of arbitration—its informality—and makes the process slower, more costly, and more likely to generate procedural morass than final judgment.” Courts may not infer consent to participate in class arbitration absent an affirmative “contractual basis for concluding that the party agreed to do so.” Silence is not enough and ambiguity does not provide a sufficient basis to infer consent. View "Lamps Plus, Inc. v. Varela" on Justia Law

Oliveira is a driver for a trucking company, under an agreement that calls him an independent contractor and contains a mandatory arbitration provision. Oliveira filed a class action alleging that the company denies its drivers lawful wages. The company invoked the Federal Arbitration Act, arguing that questions regarding arbitrability should be resolved by the arbitrator. The First Circuit and Supreme Court agreed that a court should determine whether the Act's section 1 exclusion applies before ordering arbitration. A court’s authority to compel arbitration under the Act does not extend to all private contracts. Section 2 provides that the Act applies only when the agreement is “a written provision in any maritime transaction or a contract evidencing a transaction involving commerce.” Section 1 provides that “nothing” in the Act “shall apply” to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” The sequencing is significant. A “delegation clause,” giving the arbitrator authority to decide threshold questions of arbitrability is merely a specialized type of arbitration agreement and is enforceable under sections 3 and 4 only if it appears in a contract consistent with section 2 that does not trigger section 1’s exception. Because “contract of employment” refers to any agreement to perform work, Oliveira’s contract falls within that exception. At the time of the Act’s 1925 adoption, the phrase “contract of employment” was not a term of art; dictionaries treated “employment” as generally synonymous with “work," not requiring a formal employer-employee relationship. Congress used the term “contracts of employment” broadly. View "New Prime Inc. v. Oliveira" on Justia Law

Archer sued Schein, alleging violations of federal and state antitrust law and seeking both money damages and injunctive relief. The contract between the parties provided for arbitration of any dispute arising under or related to the agreement, except for actions seeking injunctive relief. Schein argued that because the rules governing the contract provide that arbitrators have the power to resolve arbitrability questions, an arbitrator—not the court—should decide whether the arbitration agreement applied. The Fifth Circuit affirmed the denial of Schein’s motion to compel arbitration. A unanimous Supreme Court vacated. Under the Federal Arbitration Act, arbitration is a matter of contract. Courts must enforce arbitration contracts according to their terms. The parties may agree to have an arbitrator decide not only the merits of a particular dispute but also “gateway” questions of “arbitrability.” When the parties’ contract delegates the arbitrability question to an arbitrator, a court may not override the contract, even if the court thinks that the arbitrability claim is wholly groundless. The Court declined “to redesign the Act” and noted that the Act contains no “wholly groundless” exception. Arbitrators are capable of efficiently disposing of frivolous cases and deterring frivolous motions; such motions do not appear to have caused a substantial problem in Circuits that have not recognized a “wholly groundless” exception. The Fifth Circuit may address whether this contract actually delegated the arbitrability question to an arbitrator on remand. View "Henry Schein, Inc. v. Archer & White Sales, Inc." on Justia Law

Despite employment contracts providing for individualized arbitration to resolve employment disputes, employees sought to litigate Fair Labor Standards Act claims through collective actions. The Federal Arbitration Act generally requires courts to enforce arbitration agreements, but the employees argued that its “saving clause” removes that obligation if an arbitration agreement violates some other federal law and that the agreements violated the National Labor Relations Act (NLRA). The National Labor Relations Board ruled that the NLRA effectively nullifies the Arbitration Act in such cases. The Supreme Court disagreed. The Arbitration Act requires courts to enforce the arbitration terms the parties select, 9 U.S.C. 2-4. The saving clause allows courts to refuse to enforce arbitration agreements only on grounds that exist for the revocation of any contract, such as fraud, duress, or unconscionability. The NLRA, which guarantees employees “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively . . . , and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” 29 U.S.C. 157, does not mention class or collective actions nor indicate a clear and manifest wish to displace the Arbitration Act. The catchall term “other concerted activities” should be understood to protect the things employees do in exercising their right to free association in the workplace. The Board’s interpretation of the Arbitration Act, which it does not administer, is not entitled to Chevron deference. View "Epic Systems Corp. v. Lewis" on Justia Law

Kentucky ruling that authority to bind a principal to arbitration must be explicitly stated in power of attorney violated the Federal Arbitration Act.When the patients moved into Kindred’s nursing home, their relatives used powers of attorney to complete necessary paperwork, including an agreement that any claims arising from the patient’s stay at Kindred would be resolved through binding arbitration. After the patients died, their estates filed suits alleging that Kindred’s substandard care had caused their deaths. The trial court denied Kindred’s motions to dismiss. The Kentucky Supreme Court affirmed, finding the arbitration agreements invalid because neither power of attorney specifically entitled the representative to enter into an arbitration agreement. Because the Kentucky Constitution declares the rights of access to the courts and trial by jury to be “sacred,” the court reasoned, an agent could deprive her principal of such rights only if expressly provided in the power of attorney. The U.S. Supreme Court reversed. The Kentucky Supreme Court’s clear-statement rule violates the Federal Arbitration Act, 9 U.S.C. 2, by singling out arbitration agreements for disfavored treatment. The Act preempts any state rule that discriminates on its face against arbitration or that covertly accomplishes the same objective by disfavoring contracts that have the defining features of arbitration agreements. The FAA is concerned with both the enforcement and initial validity of arbitration agreements. View "Kindred Nursing Centers, L. P. v. Clark" on Justia Law

DIRECTV and its customers entered into service agreements that included a binding arbitration provision with a class-arbitration waiver. It specified that the entire arbitration provision was unenforceable if the “law of your state” made class-arbitration waivers unenforceable. The agreement also declared that the arbitration clause was governed by the Federal Arbitration Act, 9 U.S.C. 2. After California customers entered into the agreement, the Supreme Court held that California’s rule invalidating class-arbitration waivers was preempted by the Federal Act. When California customers sued, the trial court denied DIRECTV’s request to order the matter to arbitration. The California Court of Appeal affirmed, finding the entire arbitration provision unenforceable under the agreement because the parties were free to refer in the contract to California law as it would have been absent federal preemption. The U.S. Supreme Court reversed. The California court’s interpretation does not place arbitration contracts “on equal footing with all other contracts,” as required by the Act. California courts would not interpret contracts other than arbitration contracts the same way. The language the court used to frame the issue focused only on arbitration. View "DIRECTV, Inc. v. Imburgia" on Justia Law

Before suing for employment discrimination under Title VII of the Civil Rights Act of 1964, the Equal Employment Opportunity Commission (EEOC) must “endeavor to eliminate [the] alleged unlawful employment practice by informal methods of conference, conciliation, and persuasion,” 42 U. S. C. 2000e–5(b). Nothing said or done during conciliation may be “used as evidence in a subsequent proceeding without written consent of the persons concerned.” After investigating a sex discrimination charge against Mach Mining, EEOC determined that reasonable cause existed to believe that the company had engaged in unlawful hiring practices and invited the parties to participate in informal conciliation. A year later, EEOC sent Mach another letter stating that conciliation efforts had been unsuccessful, then filed suit. Mach alleged that EEOC had not attempted to conciliate in good faith. The Seventh Circuit held that EEOC’s statutory conciliation obligation was unreviewable. The Supreme Court vacated, noting a “strong presumption” that Congress means to allow judicial review of administrative action. EEOC’s argument that review is limited to checking the facial validity of its two letters falls short of Title VII’s demands; the aim of judicial review is to verify that the EEOC actually tried to conciliate. The Court rejected Mach’s proposal for specific requirements or a code of conduct as conflicting with the wide latitude Congress gave EEOC and with Title VII’s confidentiality protections. A sworn affidavit from EEOC that it informed the employer about the specific discrimination allegation and tried to engage the employer in a discussion to give the employer a chance to remedy the allegedly discriminatory practice should suffice. Should the employer present concrete evidence that the EEOC did not provide the requisite information or attempt to engage in conciliation, a court must conduct the fact-finding necessary to resolve that limited dispute. View "Mach Mining, LLC v. Equal Emp't Opportunity Comm'n" on Justia Law

Sutter provided medical services to patients insured by Oxford under a fee-for-services contract that required binding arbitration of contractual disputes. Sutter filed a purported class action in state court, claiming that Oxford failed to fully and promptly pay him and other physicians. The court compelled arbitration. The arbitrator concluded that the contract authorized class arbitration. The district court rejected Oxford’s motion to vacate, which asserted that the arbitrator had exceeded his authority under the Federal Arbitration Act, 9 U.S.C. 1. The Third Circuit affirmed. After the Supreme Court held that an arbitrator may employ class procedures only if the parties have authorized them, the arbitrator reaffirmed his conclusion. Oxford unsuccessfully renewed its motion to vacate and the Third Circuit affirmed. A unanimous Supreme Court affirmed. The arbitrator’s decision survives the limited judicial review allowed by section 10(a)(4) of the Act. The parties bargained for the arbitrator’s construction of their agreement, so the arbitral decision must stand, regardless of a court’s view of its merits. The arbitrator twice did what the parties asked: considered their contract and decided whether it reflected an agreement to permit class proceedings. To overturn his decision, a court would have to find that he misapprehended the parties’ intent; section 10(a)(4) bars that.View "Oxford Health Plans LLC v. Sutter" on Justia Law

An investment treaty between the U.K. and Argentina authorizes a party to submit a dispute to “the competent tribunal of the Contracting Party in whose territory the investment was made,” and permits arbitration if, 18 months after such submission, the tribunal has not made a final decision. BG, a British firm, had an interest in MetroGAS, an Argentine entity licensed to distribute natural gas in Buenos Aires. At the time of BG’s investment, Argentine law provided that gas tariffs would be calculated in U.S. dollars and would be set at levels sufficient to assure gas distribution firms a reasonable return. Argentina later changed the calculation basis to pesos. Profits became losses. BG sought arbitration, which was conducted in Washington, D. C. BG claimed that Argentina had violated the Treaty, which forbids expropriation of investments and requires each nation to give investors fair and equitable treatment. Argentina denied the claims and argued that the arbitrators lacked jurisdiction because BG had not complied with the local litigation requirement. The arbitration panel concluded that Argentina’s enactment of laws that hindered recourse to its judiciary excused compliance and that Argentina had not expropriated BG’s investment but had denied fair and equitable treatment. The district court confirmed the award. The District of Columbia Circuit vacated, holding that the arbitrators lacked jurisdiction. The Supreme Court reversed. The local litigation requirement was a matter for arbitrators to interpret and apply; courts should review that interpretation with deference. Courts presume that the parties intended arbitrators to decide disputes about application of procedural preconditions to arbitration, including claims of waiver, delay, defense to arbitrability, time limits, notice, laches, or estoppel. The provision is procedural; it determines when the contractual duty to arbitrate arises, not whether there is a duty to arbitrate. It is a claims-processing rule. The fact that contract is a treaty does not make a difference. The Treaty contains no evidence that the parties had intentions contrary to the ordinary presumptions about who should decide threshold arbitration issues. View "BG Group plc v. Republic of Argentina" on Justia Law

An agreement between American Express and merchants who accept American Express cards, requires that all of their disputes be resolved by arbitration and provides that there “shall be no right or authority for any Claims to be arbitrated on a class action basis.” The merchants filed a class action, claiming that American Express violated section 1 of the Sherman Act and seeking treble damages under section 4 of the Clayton Act. The district court dismissed. The Second Circuit reversed, holding that the class action waiver was unenforceable and that arbitration could not proceed because of prohibitive costs. The Circuit upheld its reversal on remand in light of a Supreme Court holding that a party may not be compelled to submit to class arbitration absent an agreement to do so. The Supreme Court reversed. The FAA reflects an overarching principle that arbitration is a matter of contract and does not permit courts to invalidate a contractual waiver of class arbitration on the ground that the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery. Courts must rigorously enforce arbitration agreements even for claims alleging violation of a federal statute, unless the FAA mandate has been overridden by a contrary congressional command. No contrary congressional command requires rejection of this waiver. Federal antitrust laws do not guarantee an affordable procedural path to the vindication of every claim or indicate an intention to preclude waiver of class-action procedures. The fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy. View "Am. Express Co. v. Italian Colors Rest." on Justia Law