Federal Arbitration Act (FAA)

Arbitration provisions can be an important tool to add more certainty to the dispute resolution process and potentially reduce costs. In Virginia, employers should carefully consider whether and how to craft arbitration agreements in the wake of groundbreaking new laws passed last year creating new employment rights that will be litigated in state courts. Reed

In 2010, the United States Supreme Court struck a blow to class action plaintiffs subject to Federal Arbitration Act (FAA)-covered arbitration agreements when it concluded that a court may not compel class arbitration when the agreement is silent regarding the availability of such proceedings. Stolt-Nielsen SA v. AnimalFeeds Int’l, 559 U.S. 662 (2010). “[A] party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” Id. at 684.

On April 24, 2019, the Court went one step further, holding that “[l]ike silence, ambiguity does not provide a sufficient basis to conclude that parties to an arbitration agreement” consented to class arbitration. Lamps Plus, Inc. v. Varela, Case No. 17-988 (Apr. 24, 2019) (Lamps Plus). The Court reversed the Ninth Circuit decision, which found that contractual ambiguity coupled with state contract law requiring courts to construe ambiguities against the drafter created a contractual basis for class arbitration. See Varela v. Lamps Plus, Inc., 701 Fed. Appx. 670, 673 (9th Cir. 2017). The Court held that the FAA preempted the state contract law doctrine as applied by the Ninth Circuit because it “manufactured [class arbitration] by state law rather than consen[t].” When an arbitration agreement is ambiguous regarding class proceedings, the Court will “not seek to resolve the ambiguity by asking who drafted the agreement.” Rather, the FAA provides the default rule that class arbitration is not available when the contract is ambiguous.Continue Reading Class arbitration requires contractual clarity

On Tuesday, January 15, 2019, the U.S. Supreme Court found that truck drivers classified as independent contractors cannot be compelled to arbitrate their claims under the Federal Arbitration Act (FAA). See New Prime, Inc. v. Oliveira, No. 17-340, 2019 WL 189342 (U.S. Jan. 15, 2019).

This decision has significant ramifications for transportation industry companies that previously utilized arbitration agreements with their independent contractor drivers. Given the court’s ruling, those independent contractor drivers can no longer be compelled to arbitrate their claims under the FAA.

The plaintiff, Dominic Oliveira, worked as an independent contractor driver for a trucking company, New Prime Inc. As part of his contract with New Prime, Olivera agreed to arbitrate all disputes. In contradiction to this agreement, Oliveira brought a claim in court against New Prime on behalf of himself and thousands of other independent contractor drivers. Oliveira alleged that he and the other drivers were misclassified as independent contractors, and that they were actually employees of the company.Continue Reading High court finds independent contractor truck drivers excluded from FAA

2013 is shaping up to be the year that that party ended for state evasion of the Federal Arbitration Act. States have traditionally relied on a number of stratagems to avoid the preemptive force of the FAA’s “liberal federal policy favoring arbitration.” (Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 [1983]). One was to hide behind the FAA’s “savings clause,” which permits states to refuse to enforce arbitration agreements on “such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The savings clause preserves generic contract defenses such as fraud, duress or unconscionability, and ensures that they are not preempted. States made liberal use of the savings clause to avoid the FAA’s enforcement mandate by deploying a veneer to generality to save rules aimed at limiting the enforcement of arbitration agreements.Continue Reading 9th Inning, Two Outs, None On for California State Courts That Ignore Federal Arbitration Act

In AT&T Mobility v. Concepcion, U.S., No. 09-893, 4/27/11, an ideologically divided U.S. Supreme Court held that the Federal Arbitration Act (FAA) trumped California law to uphold class action waivers in arbitration. 

According to the majority opinion authored by Justice Antonin Scalia, a blanket prohibition on arbitration provisions requiring individual arbitration in favor of