Tag: Mediation

Mediation vs. Arbitration Provisions in a Contract

All provisions of a contract are relevant, no matter how innocuous they appear to be and no matter how many times you are told that they are “just boilerplate.” Mediation and arbitration provisions often are deemed to fall in the “boilerplate” category, but the impact of these provisions cannot be understated.

Taking a step back, in the event of a dispute between contract counterparties, the underlying contract often provides an avenue for resolution of such dispute, which may require that the parties pursue such matter in court, through arbitration or by other means, including mediation. While most parties are familiar with the concept of litigation, the differences between mediation and arbitration are less well-known. Among the many relevant factors distinguishing between mediation and arbitration, the following three factors should be considered:

  1. Mediation in the United States is non-binding, meaning that a party is not obligated to follow the determination of a mediator. Arbitration, on the other hand, may be binding.

  2. From a timing standpoint, the mediation process is more expeditious, often being completed anywhere from one to three months after the process is initiated, depending upon the complexity of the issues and the parties’ agreements. Arbitration proceedings often last as long as a lawsuit with a formal discovery process and other formalities that commonly would be part of a lawsuit.

  3. From a cost perspective, mediation is more economical, largely due to the speed of the process and less legal formalities. This generally bodes well for the parties if they agree to abide by the determination of the mediator or view such decision as indicative of how an arbitrator or judge ultimately would rule on a matter. But since mediation is non-binding, parties may view this process as an unnecessary delay and waste of resources.

© 2023 Chuhak & Tecson P.C.

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Important Considerations for Mediation

“You can’t always get what you want. But if you try sometimes, well, you just might find, you get what you need.” – Mick Jagger and Keith Richards

Successful Mediation. Unlike the regular adjudication of a legal dispute, in mediation there is no “decision-maker” to determine who is “right” or “wrong.” No final order or judgment is issued. Instead, a good mediation will result in a resolution created by both parties that satisfy both parties’ interests or concerns. Mediators are not looking to find fault or assign blame – rather, a mediator works with the parties to problem solve and find creative solutions and proposals.

Selecting a Mediator. In some court programs there is a list of “pre-approved” mediators. The mandatory Alternative Dispute Resolution program in the Western District of Pennsylvania has such a list. In the Allegheny County Court of Common Pleas there will be no such guidance on preferred mediators. Pennsylvania does not have any national or statewide organization that certifies mediators. However, there is training available and basic mediation training is generally a 40-hour course covering problem solving, conflicts, communication skills, ethics and practical skills in role plays and other exercises. Mediators should have attended at least a basic mediation training course as well as have experience in mediating civil cases.

Article By Kathryn L. Clark of Strassburger McKenna Gutnick & Gefsky

For more arbitration and mediation legal news, click here to visit the National Law Review.

©2022 Strassburger McKenna Gutnick & Gefsky

US Supreme Court Holds That Airline Cargo Loaders Are Exempt From Arbitration

The US Supreme Court has held that airline cargo loaders who load and unload cargo from planes that travel across state lines are exempt from the Federal Arbitration Act (FAA) because they belong to a “class of workers engaged in foreign or interstate commerce” under § 1 of the FAA. Southwest Airlines Co. v. Saxon (June 6, 2020).

Background

Latrice Saxon worked for Southwest Airlines and was responsible for training and supervising teams of ramp agents who load and unload airplane cargo on Southwest planes that travel across state lines. Saxon brought a collective action alleging failure to pay proper overtime wages FLSA in the Northern District of Illinois. However, Saxon had signed an arbitration agreement requiring her to arbitrate her wage disputes, and Southwest moved to dismiss the lawsuit and to compel arbitration under the FAA.

Saxon opposed the motion, invoking § 1 of the FAA, which exempts “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” She argued that ramp supervisors, like seamen and railroad employees, were an exempt “class of workers engaged in foreign or interstate commerce,” but the district court agreed with Southwest and found that only employees involved in “actual transportation,” not those who merely handle goods, fell within § 1 of the FAA. On appeal, the Seventh Circuit Court of Appeals disagreed with the District Court’s decision, holding that “[t]he act of loading cargo onto a vehicle to be transported interstate is itself commerce.” The Seventh Circuit’s decision conflicted with an earlier decision of the Fifth Circuit, Eastus v. ISS Facility Services, Inc., 960 F. 3d 207 (2020), and the Supreme Court granted certiorari to resolve the conflict between the two circuits.

The Supreme Court’s Decision

In a unanimous decision, the Supreme Court held that loaders who load and unload airplane cargo that travels intrastate play a direct role in the interstate transportation of goods and therefore belong to a “class of workers engaged in foreign or interstate commerce” under § 1 of the FAA. The Court engaged in a two-step analysis. First, it considered how to define the relevant “class of workers.” The Court rejected Saxon’s argument that the “class of workers” should be defined as virtually all airline employees, which would include shift schedulers or those who design Southwest’s website. Rather, the Court held that the inquiry must focus on the job duties of the employees themselves, rather than the employer’s business and that Saxon “belongs to a class of workers who physically load and unload cargo on and off airplanes on a frequent basis.”

Next, the Court considered whether that class of airplane cargo loaders “engaged in foreign or interstate commerce.” It determined that “one who loads cargo on a plane bound for interstate transit is intimately involved with the commerce of that cargo” and that workers like Saxon who load and unload airplane cargo that travels in interstate commerce are exempt from the FAA.

Takeaway for Employers

Though the Court did find a class of workers exempt from the Federal Arbitration Act, it expressly rejected the assertion that this exemption should apply to all employees of an employer engaged in foreign or interstate transportation. It went on to provide examples of positions that would not satisfy the exemption, such as workers engaged in the sale of interstate asphalt or workers who supply janitorial services to a corporation engaged in interstate commerce.

Employers engaged in interstate or foreign transportation commercial should consult legal counsel if they plan to utilize arbitration agreements as part of their dispute resolution process.

Article By John P. Zaimes and Natalie C. Kreeger of ArentFox Schiff LLP

For more arbitration legal news, click here to visit the National Law Review.

© 2022 ArentFox Schiff LLP

Look at Me, Not Through Me: Supreme Court Limits Federal Jurisdiction for Post-arbitration Award Petitions

On 31 March 2022, the United States Supreme Court in Badgerow v. Walters limited federal subject matter jurisdiction over post-arbitration award petitions under the Federal Arbitration Act (FAA) §§ 9 and 10. After years of widening disagreement between circuit courts regarding when a federal court may exercise jurisdiction to confirm or vacate an award, the Supreme Court weighed in and held that federal courts may only exercise jurisdiction to confirm or vacate an award if the face of the application supports diversity or federal-question jurisdiction. One of the implications of this ruling is that many more post-arbitration proceedings to confirm or vacate an arbitration award may be channeled into state courts.

BACKDROP: FAA SECTIONS AT ISSUE

Section 4 states that a party seeking to compel arbitration can file suit in any court that, “save for” the arbitration agreement, would have federal jurisdiction over the underlying dispute.1

Section 9 provides that parties may apply to confirm an arbitration award in the United States court “in and for the district” where the award was made.2

Section 10 provides that parties may apply to vacate an arbitration award in the United States court “in and for the district” where the award was made.3

PRELUDE: VADEN

In its 2009 decision in Vaden v. Discover Bank, the Supreme Court found that federal-question jurisdiction could exist under a “look-through” approach in a § 4 petition to compel arbitration.4 In that case, two questions were presented: (1) whether a district court, when asked to compel arbitration, should “look through” the petition and compel arbitration if the court originally would have had federal jurisdiction; and (2) if so, may the court exercise jurisdiction over the § 4 petition when the original complaint rests on state law but the counterclaim rests on federal law?

The Supreme Court answered the first question affirmatively. In doing so, it emphasized that a “federal court may ‘look through’ a § 4 petition to determine whether it is predicated on an action that ‘arises under’ federal law; in keeping with the well-pleaded complaint rule.”5 However, the Court found that the district court could not exercise jurisdiction over the petition presented in that case, because the complaint was “entirely state-based” and “federal-court jurisdiction cannot be invoked on the basis of a defense or counterclaim.”6

Since Vaden, circuit courts have been divided over whether the “look-through” approach also applies to applications to confirm or vacate awards under FAA §§ 9 and 10. For example, the Fifth Circuit acknowledged the circuit split in Quezada v. Bechtel OG & C Constr. Servs., Inc., noting that the Third and Seventh Circuits decline to apply the look-through approach for confirmation, vacatur, or modification of arbitration awards, but the First, Second, and Fourth Circuits permit the look-through approach.7

Ultimately, a divided Fifth-Circuit panel in Quezada agreed with the majority and held that the Vaden look-through approach applies to applications to confirm or vacate arbitration awards.

OPENING ACTS: BADGEROW V. WALTERS IN THE LOWER COURTS

Badgerow v. Walters followed, implicating the Supreme Court’s Vaden decision and the Fifth Circuit’s Quezada decision on the issue of whether a federal court has subject-matter jurisdiction to review an application to confirm or vacate an arbitration award when the underlying dispute presents a federal question.

The plaintiff in Badgerow initiated arbitration against her former employer’s principals, alleging violation of federal employment law. The arbitration panel dismissed all of her claims, so she filed an action in state court to vacate the arbitration award. The defendants removed the action to the United States District Court for the Eastern District of Louisiana and filed a motion to confirm the award. Plaintiff moved for remand to state court, arguing that the district court did not have jurisdiction over the award; however, the district court denied remand and granted defendant’s motion to confirm the award.8

On appeal, the Fifth Circuit held that it was bound by its precedent in Quezada and applied the look-through approach.9 The Fifth Circuit thus affirmed the district court’s decision to exercise jurisdiction over the dispute.

Plaintiff filed a petition for writ of certiorari, which the Supreme Court granted on 17 May 2021.10

FEATURE: THE SUPREME COURT’S DECISION

In an 8-1 decision,11 the Supreme Court reversed and remanded the case, holding that FAA §§ 9 and 10 lack § 4’s “distinctive language directing a look-through” approach. Thus, without statutory language directing otherwise, “a court may look only to the application actually submitted to it in assessing its jurisdiction.”12 Noting that Congress could have replicated § 4’s look-through language in §§ 9 and 10 but chose not to, the Court held that a federal court only has jurisdiction over an application to confirm or vacate an arbitration award when the face of the application demonstrates diversity or federal-question jurisdiction.

Applying the new rule to the facts of plaintiff’s appeal, the Court explained that the parties were not contesting the federal employment dispute at this stage; rather, the parties were contesting enforcement of the arbitration award. Therefore, the Court held that federal jurisdiction was not appropriate because enforcement of the award, which was “no more than a contractual resolution of the parties’ dispute,” did not amount to federal-question jurisdiction and the parties were not diverse.

SOUVENIR: THE KEY TAKEAWAYS

Following the Supreme Court’s decision in Badgerow limiting federal subject matter jurisdiction over arbitration awards, counsel and parties seeking to confirm or vacate arbitration awards must analyze whether their application, on its face, supports an independent basis for federal subject-matter jurisdiction if they wish to bring their application in federal court. Without the “look-through” approach for §§ 9 and 10 petitions, and in particular where the parties to arbitration provisions are citizens of the same state (and thus lack diversity jurisdiction), state courts will more likely be the primary venue for post-award petitions.

FOOTNOTES

1 9 U.S.C. § 4.

2 9 U.S.C. § 9.

3 9 U.S.C. § 10.

4 Vaden v. Discover Bank, 129 S. Ct. 1262, 1268 (2009) (“A federal court may ‘look through’ a § 4 petition and order arbitration if,” notwithstanding the arbitration agreement, “the court would have jurisdiction over ‘the [substantive] controversy between the parties.’” (citations omitted)).

5 Id. at 1273.

6 Id. at 1269.

7 Quezada v. Bechtel OG & C Constr. Servs., Inc., 946 F.3d 837, 841 (5th Cir. 2020) (“After Vaden, a circuit split developed regarding whether the same look-through approach also applies to applications to confirm an arbitration award under section 9, to vacate under section 10, or to modify under section 11.”).

8 Badgerow v. Walters, — S. Ct. —-, 2022 WL 959675, at *3 (2022).

9 Badgerow v. Walters, 975 F.3d 469, 472–74 (5th Cir. 2020).

10 Badgerow v. Walters, 141 S. Ct. 2620 (2021).

11 Justice Breyer in dissent wrote that although the Court’s decision “may be consistent with the statute’s text,” practical application would create curious consequences, artificial distinctions, and results that are “overly complex and impractical.” Badgerow, 2022 WL 959675, at *10 (Breyer, J., dissenting).

12 Badgerow, 2022 WL 959675, at *3.

Copyright 2022 K & L Gates
For more articles about Supreme Court cases, visit the NLR Litigation section.

EEOC and Cracker Barrel Sign National Mediation Agreement

Recently posted in the National Law Review an article by U.S. Equal Employment Opportunity Commission regarding Cracker Barrel Old Country Store signing of a National Universal Agreement to Mediate:

WASHINGTON – Cracker Barrel Old Country Store, Inc. and the U.S. Equal Employment Opportunity Commission (EEOC) today announced the signing of a National Universal Agreement to Mediate (NUAM) to streamline the handling of employment discrimination claims.

With the signing of this agreement, Cracker Barrel joins more than 200 national and regional private sector employers, including several Fortune 500 companies, who have made similar arrangements with the EEOC. This agreement provides the framework for both organizations to informally resolve any workplace issues that may arise from time to time through Alternative Dispute Resolution (ADR) rather than through a traditional lengthy, formal EEOC investigation or potential litigation. The NUAM includes all Cracker Barrel locations.

“Nationwide mediation agreements like this are a classic win-win,” said Nicholas Inzeo, Director of the EEOC’s Office of Field Programs. “NUAMs are a non-adversarial and efficient way for companies to handle discrimination charges using the EEOC as a partner and advisor. EEOC mediation encourages a positive work environment, and the company saves time and money. Everyone benefits. We are gratified that a major employer such as Cracker Barrel has joined the growing ranks of companies that are making use of this innovative system.”

Cracker Barrel Vice President and General Counsel Michael J. Zylstra said, “Cracker Barrel is committed to providing a fully inclusive workplace, where diversity is welcomed and everyone is treated with courtesy and respect. This innovative agreement builds upon our existing policies and procedures to effectively and fairly resolve employee concerns and demonstrates our shared goal to create a bias-free workplace. We look forward to developing an even stronger relationship with the EEOC.”

Under the terms of the NUAM, any eligible charges of discrimination filed with the EEOC in which Cracker Barrel is named as an employer/respondent will be referred to the EEOC’s mediation unit. The company will designate a corporate representative to handle all inquiries and other logistical matters related to potential charges in order to facilitate a prompt scheduling of the matter for EEOC mediation.

Expanding mediation is a key component of the EEOC’s efforts to improve operational efficiency and effectiveness. The EEOC has entered into 233 national and regional Universal Agreements to Mediate (UAMs) with private sector employers, including several Fortune 500 companies. Additionally, EEOC district offices have entered into 1,743 mediation agreements with employers at the local levels within their respective jurisdictions. Since the full implementation of the EEOC’s National Mediation Program in April 1999, more than 136,000 charges of employment discrimination have been mediated, with nearly 70 percent being successfully resolved.

Cracker Barrel Old Country Store, Inc. (Nasdaq: CBRL) was established in 1969 in Lebanon, Tenn., and operates 604 company-owned locations in 42 states. For more information, visit www.crackerbarrel.com.

The EEOC enforces federal laws prohibiting employment discrimination. Further information about the EEOC and its mediation program is available on its web site at www.eeoc.gov.