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Latest Effort Underway to Remake Arbitration Law in Conn.

Submitted by Amaris Elliott-Engel on Sat, 03/04/2017 - 18:34

My latest piece for the Connecticut Law Tribune:

Legislation that would provide a wholesale update to Connecticut arbitration law for the first time in a half-century, an effort that's failed several times already, recently received a hearing in the General Assembly and appears ready to gain traction.

Advocates of adopting the model "Revised Uniform Arbitration Act" (RUAA) are hoping that 2017 will be the year the legislation will finally be passed.

By the count of Barry Hawkins, the bill has been introduced four times since the National Conference of Commissioners on Uniform State Laws promulgated the law in 2000.

Hawkins, a partner with Shipman & Goodwin who testified in favor of the bill on Monday on behalf of the Connecticut Bar Association's Alternative Dispute Resolution Section, said proponents of the bill have made tweaks to address concerns of the groups that were opposed to the bill in the past.

For example, labor unions were concerned that the proposed law would affect their collective bargaining agreements and their grievance processes, Hawkins said. The proposed law makes it clear that collective bargaining agreements are excluded, he said.

Other opponents were concerned that the law would pre-empt punitive damages, but advocates have made clear that—just like Connecticut's current arbitration law—judges and arbitrators still have the ability to award punitive damages if the law provides for it, said Hawkins, who also is a member of the Uniform Law Commission and helped draft the RUAA.

"Hopefully all the opposition has been satisfied," Hawkins said.

Houston Putnam Lowry, a lawyer with Polivy, Taschner, Lowry & Clayton who also testified in favor of the RUAA, said he thinks the legislation may have legs this year because House Rep. William Tong, one of the co-chairmen of the Judiciary Committee, has expressed an interest in enacting legislation to make the state's legal environment friendlier to businesses.

Tong previously introduced an omnibus bill that proposed adopting a version of the Delaware Rapid Arbitration Act, but the Bar Association's ADR section asked Tong to consider support for the RUAA instead, Lowry said.

The Delaware law prevents parties from designing the arbitration process they want to use, while the RUAA fills in the gaps in arbitration agreements that parties have already agreed on in principal, Lowry said.

Tong did not respond to a request for comment.

Harry N. Mazadoorian, an arbitrator and a senior fellow at Quinnipiac University School of Law's Center on Dispute Resolution, said the time is ripe to reform Connecticut's arbitration law because the state is in a fiscal crisis and Connecticut courts are facing budget cuts.

"This is the one time we don't want to discourage arbitration as an alternative to our courts," Mazadoorian said.

One of the advantages of the RUAA is that it would explicitly put on the books that arbitrators are empowered to grant preliminary relief, including provisional remedies, Lowry said. Right now, prejudgment remedies are authorized only by case law, which has put a "judicial gloss on the statute," Lowry said.

The law also would require arbitrators to disclose "facts which might call the arbitrator's impartiality into question," Lowry said in his written testimony.

The RUAA also provides default positions if parties have not already addressed those positions in their arbitration agreements, Mazadoorian said.

The bill enforces arbitration agreements contained in electronic documents, he added.

Raphael L. Podolsky, public policy advocate for Connecticut Legal Services, proposed an amendment to the RUAA that would prevent the use of "rights enforcement disabling clauses" in all consumer contracts, whether they are enforced through the courts or arbitration.

Podolsky said in his written testimony that such clauses restrict consumers from getting punitive damages, fail to provide for the waiver of fees and costs for consumers who can't afford them, and force consumers into forums that are geographically distant and more costly than their home state courts.

Podolsky also said applying the amendment to consumer contracts that are enforceable through arbitration or through the courts would avoid a Connecticut version of the RUAA being deemed pre-empted by the Federal Arbitration Act.

The proposed amendment is based on something similar in New Mexico, Podolsky said.

Hawkins and Mazadoorian both said they think the proposed amendment Podolsky raised would run afoul of the FAA itself.

Most alternative dispute providers have built-in protocols against unfair consumer arbitration provisions, Mazadoorian said. For example, many providers won't accept consumer cases requiring consumers to travel from Connecticut to Washington in order to pursue their dispute, or won't accept cases requiring substantial sums in arbitration fees, he said.

If enacted, the RUAA would go into effect Oct. 1.

Eighteen states and the District of Columbia have enacted the RUAA.


Court Rejects Debt-Relief Firm's Arbitration Clause

The Montana Supreme Court has ruled that a plaintiff can pursue a lawsuit against the company that promised to help her with credit-card debt relief, the Montana Standard's Kathleen J. Bryan reports. The plaintiff alleges that Global Client Solutions used '“deceptive and fraudulent representations to solicit her participation in an illegal debt settlement plan.”'

The Supreme Court held that the plaintiff's contract with debt-relief firm Global Client Solutions included an arbitration clause that lacked mutuality and was therefore unenforceable, Bryan reports.

Supreme Court Rejects Another Consumer Class Action

The U.S. Supreme Court, 6-3, has rejected another class action. This time, the majority of the court ruled this week that a class action cannot proceed against DirecTV over early-termination fees because those fees have to handled by private arbitration, The Washington Post's Robert Barnes reports.

The majority opinion, written by Justice Stephen Breyer, struck down a California law that makes class-action bans in contracts unenforceable.

Barnes further notes the ruling continues the trend of strengthening the authority of companies to channel consumer complaints into arbitration.

PA Supreme Court Voids Nursing Home Arbitration Agreement

Earlier this month, the Pennsylvania Supreme Court voided a nursing home arbitration agreement, The Legal Intelligencer's Ben Seal (my former colleague) reports. The court reasoned that agreements that rely on the National Arbitration Forum code are unenforceable because the NAF no longer accepts arbitration cases.

Nursing home attorneys, however, told Seal that nursing home companies have now "largely stopped identifying sole arbitrators or administrators in their form contracts ... so the impact of the court's narrow ruling on the NAF clause will be contained to a relatively small subset of agreements still utilizing a similar clause."

Arbitration-Skeptical California Supreme Court Takes Up Cases

The Recorder's Marisa Kendall reports on the ebb and flow between arbitration and class actions and the U.S. Supreme Court and the California Supreme Court. The U.S. Supreme Court's ruling in AT& T Mobility v. Concepcion led to class actions drying up; the justices found that the Federal Arbitration Act pre-empted California's ban on class arbitration. As a result, companies shielded themselves with agreements providing that disputes with customers and employees must be resolved through arbitration.

But the California Supreme Court has agreed to review whether consumers seeking injunctive relief under California law can be forced into arbitration. The California justices also will hear a case that will "potentially lay out new grounds by which courts can reject unfair or one-sided arbitration agreements." In the latter case, the Kendall reports the California Supreme Court is likely to use the case to clarify what makes an arbitration agreement too one-sided or unfair to enforce.

Consumer Financial Protection Bureau Criticizes Mandatory Arbitration Agreements

The Consumer Financial Protection Bureau has conducted a study of mandatory arbitration for consumers, finding that less than 10 percent of consumers won awards in cases with American Arbitration Association neutrals, The National Law Journal's Jenna Greene reports. In contrast, consumers won 1,200 individual lawsuits in court, and consumers won $2.7 billion in cash, in-kind relief, expenses and fees through class actions.

The agency also found no evidence that arbitration clauses led to lower prices for consumers, Greene further reports.

The study could lay the groundwork for the agency to regulate arbitration agreements in the financial-services sector, Greene also reports.

U.S. Supreme Court Rejects Petition Over Secret DE Arbitrations

The U.S. Supreme Court has rejected a petition of certiorari from the Delaware Court of Chancery to consider reinstating secret arbitrations in corporate litigation exceeding $1 million, The Legal Intelligencer's Jeff Mordock reports. Lower courts said the law violated the right of the public to access court proceedings.

Opinion: Supreme Court Should Reject DE Arbitration Program

Yale Law Professor Judith Resnik opined in the New York Times against Delaware's effort to fight against the growing market in private dispute resolution by allowing litigants to use Delaware's chancery judges for secret arbitrations if the businesses had at least $1 million at stake, paid $12,000 in filing fees and paid $6,000 per day: "The Delaware legislation is a dramatic example of rich litigants using their resources to close court systems that taxpayers support and constitutions require. But the problem goes beyond Delaware. To honor constitutional commitments that 'all courts shall be open,' the court should refuse the Delaware judges’ request, and Congress should restore rights to public courts for consumer and employment disputes." A split Third Circuit ruled against the constitutionality of the program, and the Delaware Court of Chancery is seeking certiorari with the U.S. Supreme Court.

DE's Confidential Arbitration Program Doesn't Merit U.S. Supreme Court Review, Open Advocates Argue

The Delaware Coalition for Open Government is arguing to the U.S. Supreme Court that it should not take up a case in which the Delaware Court of Chancery is trying to reinstate its secret, confidential arbitration program, my former colleague, Delaware Business Court Insider's Jeff Mordock, reports. "'Judicial arbitrators are deciding the substantive legal rights of the parties,'" the coalition's attorney argued, DBCI reports. "'That is a core basis for the First Amendment right of public access.'" The chances of the petiton being granted are 3.8 percent, DBCI concludes.

Corporate Guru Leo Strine Won't Forget Family Court On the DE Supreme Court, Defends Secret Arbitration Program

Delaware Business Court Insider's Jeff Mordock reported this week on Leo E. Strine Jr.'s confirmation as the chief justice of the Delaware Supreme Court. While Delaware is a preferred forum for America's corporations, one thing that struck me about Jeff's coverage is that Strine said he plans to focus on family court, which is an often overlooked area of law: "'One of the things I never forget is how important Family Court is. The Justice of the Peace Court comes into contact with more Delaware residents than any other court. The challenge of delivering the high-quality justice our court has done with limited resources is a daunting one and I'm committed to giving my all to do that. My background has positioned me well to understand the challenges of my colleagues in the other courts."'

Strine also defended the Court of Chancery's confidential arbitration program against the argument that it violates the First Amendment. Delaware is appealing to the U.S. Supreme Court in a last-ditch attempt to reinstate the program after the Third Circuit struck it down.


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