- [Bob] Hello out there, I'm Bob Fitzpatrick. Today, we're gonna talk about a quintet of arbitration decisions that were handed down by the Supreme Court in its last term, the 2021-22 term that ended June/July of 2022. And as I say, we're gonna talk about a host of arbitration decisions. Five is quite a lot for the court in one term. And as you'll see as we work through the five, there is one in particular that I think is a game changer. This is my bio. Suffice it to say, I've been doing this employment law for a long, long time. And my long deceased mother insists that the bio be up on every program that I do. This is the disclaimer of all liability and responsibility. I'll give you the simple version of what all this legal goog-ly-gack means. I am, contrary to what some people may say, I happen to be a human being. And like all human beings, I make mistakes. Voila. And I may have made a mistake in some of these slides. There may be a miscitation what have you, or I may put my foot in it during my presentation of these five cases and may say something that is just dead wrong, or bum advice to the extent I give any advice. And if you are, forgive the words, but if you are stupid enough to rely upon me or any advice I may give, it is your nickel, I have no responsibility, no liability whatsoever for anything I say and any reliance you may put on anything I say. Having said that, as I said at the start, I have been doing this for a long time and I do have a fairly inflated view of myself and think that pretty much everything I will say about these cases and whatever advice I may give is probably worth at least your listening to. But certainly independently run it to ground and make sure you're comfortable with. All right, let's move on the next slide. And this is my email address, and there is a lovely picture of self. If you have any questions about any of these cases, criticisms, I'm very thick skinned, please email me. Any suggestions you might have for how I might better do this program or future programs that you would like to see done, please email me. Trust me, I read my emails and I will respond to you. All right, let's get into the meat and potatoes and let's start with the first case, which is the Badgerow case. Very, very important case. This is not the game changer, but this is a very important case. It's an eight-one decision written by Justice Kagan. The lone dissent may have been his last or next to last dissent written by the now retired Justice Breyer. He is, as I say, the sole dissenter in this case. Let me jump ahead just so you know they're there. And I'll come back to this slide. You need to know, be familiar with Section 4 of the Federal Arbitration Act. And you need to be familiar to understand this case with the Vaden decision of the Supreme Court back in '09. And you will need to be familiar with Sections 9, 10, and we don't have it up on your screen, but section 11 also of the Federal Employment Ac. All right, let tell you the facts first of Badgerow. Badgerow worked for a financial services company in Louisiana and she is a Louisiana resident. During the onboarding, during the hiring process, at the financial services firm that she worked for, she signed an arbitration agreement and agreed also in that agreement that it would be governed by the Federal Arbitration Act, the FAA. Because she worked for a financial services company, any arbitration claim from her would be governed by the Financial Industry's Regulatory Authority, FINRA, and a FINRA arbiter or panel of arbiters would rule upon her case. Her case goes to decision before the arbiters. And I think there is a panel in this case. And in any event, she loses. So we have an employee in Louisiana, has an arbitration agreement, takes her claims to arbitration, and loses. Like all good losers, she moves to vacate the decision by the arbitration panel, the decision which she lost. And she files a motion to vacate in a Louisiana state court and moves to vacate under the Louisiana arbitration statute. Now, the Louisiana arbitration statute is, I'm told, not materially different on a motion to vacate than the federal arbitration vacatur where a petition or motion to vacate would be filed under Section 10 of the FAA. So now we have our losing plaintiff. But mind you, no lawsuit has been filed. And this, as we work through this, may be critical in future cases. She moves to vacate under Louisiana statute. The defense now moves to remove the case to federal court. The defendants are all also Louisiana citizens, residents of Louisiana. So there is no diversity of citizenship. Mind you, we're now in federal court. And in federal court, they file, the defendants after removal, a motion pursuant to Section 4 of the FAA to compel. She, Badgerow, opposes removal, opposes the motion to compel and argues that there is no federal jurisdiction. And as you may know, the courts have repeatedly said that the FAA, the Federal Arbitration Act, is not a jurisdictional statute. But an exception had been made years ago in Vaden, which was a Section 4 motion to compel. And there, the Vaden court adopted the so-called look through doctrine. In its simplest terms, the look through doctrine is that to find a federal jurisdictional hook to grant a, or deny, a motion to compel under Section 4, you look at the language of Section 4. And you look at that first sentence. You should have it up on your screen. And in that first sentence is the key phrase "save for such agreement." The Supreme Court in the Vaden case focuses on that phrase, "save for such agreement," and says, "Oh, well, Section 4, by virtue of that language, is conferring jurisdiction upon the federal courts to enforce a motion to compel. And so the defense, in our case, Badgerow versus Walters, argues, "Okay, well, we are moving in this removed case." And forgive me there, I think I said a moment ago they filed a motion to compel, they filed a motion to confirm, because it already been at arbitration, they're not asking to go back to arbitration. They're filing a motion to confirm, not vacate, but confirm the award, a non-award that was made by the FINRA arbitration panel against Ms. Badgerow. And so the issue then becomes before the court, in our case Badgerow, is Section 9 of the FAA. And if you look carefully at Section 9, you will see that that "save for such agreement" language is not there. And Ms. Badgerow in the removal case, she moves to remand, but she also moves under Section 10 of the FAA to vacate the arbitration award. But once again, if you look at Section 10, that "save for" language that was seized upon from Section 4 in the Vaden case, the look through case, it is not there. It's not there in Sections 9, 10, and while section 11, which is a petition motion to modify an arbitration award, section 11 is not before court 'cause it wasn't invoked by either of the parties. But section 11, just like 9 and 10, doesn't have the "save for" language that is in section 4. So any decision coming out of this Badgerow case that deals with textualism of Sections 9 and 10 would also apply to Section 11. And that is precisely what the court does in Badgerow over the dissent of Justice Breyer. It seizes on the absence of the "save for" look through hook that was contained in Section 4 and seizes on the fact that it is nowhere found in Sections 9 and 10. And the court, therefore, concludes that the look through doctrine does not apply, there is no federal jurisdiction. And the consequence of that, in this case at least, is that it gets remanded back to the fifth, and from the fifth probably to the district, and then from the district back to the state court under state arbitration law to either confirm, vacate, or I guess modify, under state law. The court says this is simply, there being no federal jurisdiction, this is simply a contractual matter and is to be decided under state law. Now, let me just add one observation here. Several terms back, the court had a case called State Street. And it dealt with and it was kind of, one could say it's a textual, another textualism case. And it looked at bases that can be used to set aside an arbitration award and manifest disregard of the law, which is a phrase that had been much used prior to State Street by courts to challenge arbitration awards and say, "Well, this arbitration award does or does not manifestly disregard the law." Because that manifest disregard is not contained in the statute, in, for example, Section 10 that's before you, the courts subsequent to State Street have debated is manifest disregard still a basis that one can use to set aside an arbitration or not? Courts are split. Some say yes, some say no, and some say, "Well, manifest disregard's really just another way of saying what's contained in Section 10, and, therefore, we the particular court, we're not saying yes or no, we're just saying it's another way of phrasing what's contained in Section 10." But now you are in state court. And you're in state court on competing motions to confirm and vacate. And depending on what state you're in, it may explicitly allow or explicitly reject, for example, manifest disregard. I am told that some state statutes, arbitration statutes, even allow the state court to reassess the facts and the law. I haven't run the ground which state or states have such language, but I'm told that there are state arbitration statutes out there, they permit that. If you write your arbitration agreement to provide what state one gets bumped to on a post-arbitration decision, motion to confirm, motion to vacate, motion to modify, and you can realistically pick a state that the defense management has some relationship to, if it's a state that mirrors the FAA, maybe that's where you wanna go. Maybe if it's a state that goes beyond the FAA, maybe that's a state you wanna go to also. These are drafting decisions. Seems to me the council now need to look at their client's arbitration agreements and discuss what their client, "What state do we want be the state that confirms, vacates, modifies an arbitration award?" Justice Breyer dissents. And it's a lone dissent, but it's an interesting dissent. I'd call it Justice Breyer at the height of his common sense jurisprudence. He basically says, and this is my translation, "This is really stupid, guys. Arbitration, the Federal Arbitration Act was created in 1925 to basically bless arbitration because the courts for years before had not liked arbitration, had been very hostile to it. And we blessed it because it was supposed to be a simpler, more expeditious way to resolve disputes. And you've now turned it into, made it more complex, not more simple, more complex, lengthier and more expensive, because we now end up in state court with all the vagaries that go with being in state court." So he basically says, "Just because the Congress didn't write that "save for" language in 9, 10, 11, Sections 9, 10, 11, we ought to read Vaden's look through doctrine . And then he says, "What if this was a Section 5 matter?" Section 5 allows the judge to appoint, if the parties can't agree, and it happens sometimes, can't agree on who the arbitrator's gonna be, then the judge is empowered to select the arbiter. Well, Section 5 doesn't have that "save for" language. Breyer says, "Do you really seriously mean that now they have to go to a state judge to figure out who gets selected as the arbiter? That's nuts." I think if we ever get a Section 5 case with that issue, I think it can be readily solved by the words in Section 4 and Section 5. Both talk about the court. And I think you can read four and five together and avoid this Badgerow problem. Now, query, and I think this now takes me to my giving advice, if I haven't already, if there was a lawsuit filed with federal question jurisdiction, I do employment law, so if there was a Title VII of the Civil Rights Act and a disability case under the ADA, a Family and Medical Leave Act case, if there was a case with federal jurisdiction where, 'cause we'll get to it in a couple of minutes, where the defense, or even the plaintiff, it may make sense for the plaintiff to file suit and quickly move to compel under Section 4. If there's an arbitration agreement, there's no significant dispute about the enforceability, the applicability of the arbitration agreement. Keep in mind, on applicability, the new federal statute that went into effect March 3rd, the end forced arbitration of sexual harassment and sexual assault cases, where the option is now given to those who claim sexual harassment or sexual assault, even though there is an arbitration agreement to litigate those cases. Going back to my point, if there is an underlying federal case, federal question case, and this is an open question, Second Circuit, one of the justices in the Bissennetto case, B-I-S-S-E-N-N-E-T-T-O I think is the correct spelling, and watch that case, there was a decision which was then, back in, oh, March or May I forget, of this year, 2022, which was then amended in September. And the panel wrote, each judge on the panel wrote an opinion. And one of the opinions highlights the point that I'm making that maybe that lawsuit, federal question lawsuit, is that jurisdictional anchor for Section 9, 10, 11 motion to confirm, vacate, modify, is an open question, was not one of the facts in the Badgerow case, and it may be the simple solution to those who don't wanna get kicked to state court. Now, maybe you as a plaintiff wanna get kicked to state court. So as a plaintiff, you gotta think this through. Do you file suit, or just like Badgerow go straight to arbitration? There will be issues like there historically always have been over the 75,000 in controversy. Let's assume there was diversity of citizenship in Badgerow, which there wasn't, everybody was in Louisiana. Let's assume there was, you know, somebody was in Texas. You gotta meet the $75,000 threshold. No money was awarded by the panel of arbiters in this case. Those who oppose diversity jurisdiction would say, "Eh, there's no money. No 75,000." Lots of case law on how you calculate the look at what they sought, et cetera. I'm not gonna get into that. I'm gonna take us to our next case, which is Southwest Airlines versus Saxon. And Justice Thomas writes for a unanimous eight-justice court. Justice Barrett doesn't participate at all in this case. She recuses herself because while she was on the Seventh Circuit, she was involved in Wallace versus Grubhub, which raised one of the issues that the court had to address here in the Saxon case. In Saxon, once again, you need to be familiar with Section 1 of the FAA. You need to be familiar with Circuit City versus Adams and New Prime versus Oliveira, a 2019 case. Let me tell you the facts quickly in Saxon. Saxon is an overtime pay case filed in federal court. No union involved. This is Southwest Airlines. The plaintiff is a supervisor. She supervises the airline's so-called ramp agents. The ramp agents load and unload Southwest planes. Now, this is probably critical, I think, certainly critical to arguments that are being made in scores of cases after the Saxon, and before the Saxon decision for that matter. Ms. Saxon is a supervisor. But she frequently, and I think that word may be critical, she frequently physically did the job of a ramp agent. She, with frequency, physically loaded and unloaded, the court never says, I think I'm correct, anywhere in the opinion and never refers to bags, refers to loads and unloads cargo off of Southwest airplanes. I assume that they are loading and unloading, for the most part, passengers' bags. But they used the phrase cargo, which may or may not be of significance. I don't personally think so. So the issue in this case, and this is where you need to know Section 1 and the Circuit City case and the Oliveira case, Section 1 has an exemption in it from arbitration. And if you are a seaman and work in the maritime industry, and there is some disputes as to who are and aren't, I'm not gonna get into that, or a railroad worker, and there's some disputes as to who is and who isn't a railroad worker. And let me just take you to Section 1. Down at the bottom, you'll see "But nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." In Circuit City, the court, Justice Kennedy writing the opinion, said that language or any other class of workers doesn't mean any other workers, it means any other transportation workers engaged in foreigner or interstate commerce. That decision has been much criticized. It's reaffirmed in Saxon. I don't think there is any appetite on the part of this court to overrule Circuit City. There probably are three votes to overturn it, but I don't think there's anywhere near five votes to overturn that decision, even though it is heavily criticized. Part of the criticism is a textualist criticism of Justice Kennedy's invention that that phrase really means transportation workers. But that's the law. What is a transportation worker? And then along comes Oliveira. And Oliveira stands for the proposition that Section 1 doesn't exempt just employees, it exempts also independent contractors, workers. So the issue in Saxon is, is Ms. Saxon who frequently physically loads and unloads cargo from Southwest airplanes, is she exempt from being compelled to arbitration? Justice Thomas who writes the opinion, there's a lot of language in his opinion that maybe gives some hints as to where the court will go in future cases, but the bottom line is what was the holding on these facts on the issue before the court. And on the issue before the court, the court held that Ms. Saxon was a transportation worker under Circuit City's reading of Section 1 of the FAA, and, therefore, exempt from arbitration. Many, many issues left unresolved in the Saxon case. I could eat up the rest of our time just talking about those issues. Let me just refer to a couple of them. There is a lot of litigation ongoing right now over Section 1 and hints or lack thereof in the Saxon decision. The gig economy is hugely affected potentially by Section 1. And the Oliveira, it covers independent contractors. Are ride-hailing companies, Uber, Lyft, covered by the act? I think it's fair to say that so far Uber and Lyft have been, as companies, have been winning those cases that their drivers, they're not a class of workers engaged in foreign or interstate commerce. But that issue may filter up to the court. Amazon delivery drivers, are they? Truck drivers seem to clearly be covered by the statute if they cross state lines. There may be a frequency issue there as to how frequently they cross. So suffice it to say, and forgive me, I'm skipping over a lot, I could talk about Saxon. If you have any client that is close to, in your mind, a transportation worker, you need to immerse yourself in this Section 1 and Saxon and Saxon's progeny. And frankly also the cases that were handed down before Saxon. All right. Morgan versus Sundance. I'm looking at the clock, and we're not even halfway through our cases. Morgan versus Sundance, This little opinion, I think, is the game changer. It's nine-nothing, written by Justice Kagan, no concurrences, no dissents. This is a compromise in a sense. If you listen to the oral argument, you will see that there is a raft of issues that the court does not decide. And I'll just leave it to you to see the issues not decided, the issues that will be the subject of future litigation. But what to me is critical in Sundance is for years and years, management had seized on language that said the FAA favors arbitration. And many courts have repeated back that language, saying, "Essentially if it's a close call, we should favor arbitration." And to Sundance court, which has, and let me just quickly tell you the facts, the issue before the court was only after eight months of litigation a motion to , Morgan file suit. It's a motion to dismiss. Motion to dismiss is denied. And then there is a mediation. Mediation is not successful. Eight months have transpired since Morgan filed suit, and Sundance hasn't said a peep about arbitration. They've been in litigation. And when mediation fails, then Sundance files a Section 4 of the FAA, motion to compel arbitration. And the court says, "Okay, we'll compel arbitration because Morgan hasn't demonstrated and he prejudiced by eight-month delay. Therefore, there's no waiver of the Section 4 motion to compel because the federal courts have pretty universally adopted a prejudice standard in arbitration cases where the motion to compel is filed, like in this case, pretty long period of time after litigation was initiated. Kagan, Justice Kagan, writing for the court, says, "No, that language that we have thrown around for years about favoring arbitration only means, looking at the history back in 1925 when the act was enacted, it only means that arbitration shouldn't be a stepchild anymore. It shouldn't be disfavored. It should be treated the same way as any contract is treated under the applicable state law. It is the equal treatment principle that that language refers to. It doesn't mean that we favor arbitration. If this is a contractual issue under District of Columbia contract law, then it's just a pure contractual dispute and there is no favoring a contract to arbitrate over any other contract. That's all that we meant by that language." And, therefore, the special rule, special waiver rule, that the courts created for arbitration cases requiring that there be a demonstration of prejudice is not giving equal treatment level playing field to the agreement to arbitrate. It has created a special rule favoring arbitration and that you're not supposed to do. And then the court sends it back, and you'll see the last sentence or two of Morgan talks about the court below can decide whether this is a waiver or a forfeiture situation. And you may scratch your head and say, "Why did she say that?" Go back to the briefs and the oral argument. There's a huge dispute that the court simply doesn't, and it just kicks the can down the road as to whether this gives rise to the doctrine of forfeiture under contract law or waiver. And we don't need to get into that, but that will come up in the future. All right. Real quick, two consolidated cases. The case you have before you. And it's consolidated with another. They had, they being the court, had a Servotronics, if I'm pronouncing it correctly, S-E-R-V-E-T-R-O-N-I-C case against Rolls-Royce. They had accepted , argument was scheduled for the 5th of October in 2021. About a month before oral argument, the court had to dismiss the case from its docket because it's settled. That case, the Servotronics case had the issue as to what is the scope of 28 U.S.C section 1782, the language that it allows, a party to go into a federal district court in the United States after a third party for discovery from the third party for use in an arbitration before a foreign or international tribunal. And as I say, Servotronics settles, so they take it off the docket. They almost immediately take these two cases, consolidate them to decide that question. One of the cases is basically ad hoc arbitration between two private parties that use the German arbitration, or use a German arbitration provider, I guess I should say. So this is just like two private parties saying, "We'll use JAMS in the United States to arbitrate this case." And that's the easy of these two cases. The court says, "That's not a foreign or international tribunal," and resolves a circuit split. I think the Fourth and the Sixth Circuits had said that in that circumstance they would deem it to be a foreign or international tribunal. Those two circuit, there were three that went the other way. The law now of those two circuits is that that is not a foreign or international tribunal. The somewhat more difficult case was, and let me make sure I got the facts right, it's an investor-state arbitration case. There's a Lithuanian bank that is nationalized and has a deal with the Russian Federation. So it's a government against a nationalized Lithuanian bank. They agree to use UNCITRAL to resolve, to, you know, the UNCITRAL, U-N-C-I-T-A-L, system to arbitrate. And the court holds that this is not imbued with governmental authority, and, therefore, it's not a foreign or international tribunal. Uses the phrase imbued with governmental authority. The issue that those who do international arbitration think that is very much at issue in the future is where the International Center for Settlement of Investment Disputes is used. And that is a World Bank Group organization that adjudicates some investor state matters. And it arguably may be imbued with governmental authority. That will be the litigation issue going forward. Backing up to the two consolidated cases that were decided, certainly, counsel for anyone involved in international arbitration, you need to look at your arbitration agreement, or going either amending or new ones going forward in the future to see if you can write around this decision so that federal courts in the United States would be empowered to grant discovery against third parties for use in those cases. And I think this will largely be a drafting issue. Our last case, I'll be real quick on this because we're over time, is the PAGA case out of California. This is the Private Attorney General Act. And it's an interesting opinion in that whole sections of the decision are rejected by some of the justices in the majority. The majority opinion written by Justice Alito. Somewhat surprising decision. The eventual holding is that there can be an enforceable arbitration agreement to compel the individual PAGA person to have to arbitrate under the FAA. And then the courts interprets California law on standing and says, "Now no longer being able to be a PAGA plaintiff relator, California party's arguing that this is, PAGA cases are like qui tam False Claims Act cases. Now that the relator has to go to arbitration and can't pursue the PAGA case, they don't have standing anymore to bring the PAGA action. Suffice it to say, that that was, if you will, an open invitation to California to simply change its law on standing. And lo and behold, the California Supreme Court just a little while ago took a case where they may decide just that issue and hold that the individual does have standing even though they, under Viking River, they have been compelled to arbitrate. The fat lady, as they say, has not sung yet in Viking River. The battle goes on over PAGA cases which have been much used, some would say abused, I take no opinion, by plaintiffs too in California, skirt around the Federal Arbitration Act. And with that, I think we are done covering the five, the quintet of arbitration cases before the supreme. Once again, you have my email address up on the screen before you. As I say, I welcome your comments, criticisms, whatever. We could've talked about these five cases for far, far longer than we have and I may have spent an undue amount of time on Badgerow up at the front. I do think that Badgerow is very important. I hope for those of you in California that I spent enough time on the PAGA case, at least to whet your appetite for the battles in the future. I hope I've been of some little help to you on these five cases. We can be sure that there will be many disputes in the lower courts. And I hope I've gone a little distance towards equipping you to be able to advise your clients on the latest arbitration cases from the Supreme Court. Have a wonderful day. Bye-bye.