Supreme Court deals possible blow to arbitration

[nobk4me]

According to this article:

https://www.msn.com/en-us/news/crime/scotus-just-handed-workers-who-sue-their-employers-a-surprising-unanimous-win/ar-AAXFsyA?ocid=mailsignout&li=BBnb7Kz

 

Note that the tone of the article is anti-arb, claiming it is always biased against consumers.  What do folks here think of this?

[BackFromTheDebt]

16 hours ago, nobk4me said:

According to this article:

https://www.msn.com/en-us/news/crime/scotus-just-handed-workers-who-sue-their-employers-a-surprising-unanimous-win/ar-AAXFsyA?ocid=mailsignout&li=BBnb7Kz

 

Note that the tone of the article is anti-arb, claiming it is always biased against consumers.  What do folks here think of this?

In general arbitration agreements were put in to benefit the corporations with the agreements.  For example, the credit card arbitration agreements prohibit class action suits.  The corporations choose the permitted venues, giving them even more power. 
 

In the old days credit card companies used NAF, which was a total scam.  It was an arbitrator whose sole purpose was to railroad alleged debtors.  
 

When NAF was put out of business, there was now a loophole which in some situations made arbitration unpleasant for the creditors.  They had to deal with the more expensive, and more fair, AAA and JAMS.  For a while some states even oversaw the arbitration verdicts and judges were permitted to throw out verdicts which they felt violated state laws.  When I went into arbitration with Cap 1, the court case was overseen by an extremely consumer friendly judge.  If Cap 1 had paid the fees and won, the judge could have overturned the verdict. These protections have been eroded by federal courts in later years.  
 

Tl;dr  arbitration is usually a scam against consumers and employees but in some cases is a powerful weapon  consumers may use. 

[BackFromTheDebt]

16 hours ago, nobk4me said:

According to this article:

https://www.msn.com/en-us/news/crime/scotus-just-handed-workers-who-sue-their-employers-a-surprising-unanimous-win/ar-AAXFsyA?ocid=mailsignout&li=BBnb7Kz

 

Note that the tone of the article is anti-arb, claiming it is always biased against consumers.  What do folks here think of this?

In general arbitration agreements were put in to benefit the corporations with the agreements.  For example, the credit card arbitration agreements prohibit class action suits.  The corporations choose the permitted venues, giving them even more power. 
 

In the old days credit card companies used NAF, which was a total scam.  It was an arbitrator whose sole purpose was to railroad alleged debtors.  
 

When NAF was put out of business, there was now a loophole which in some situations made arbitration unpleasant for the creditors.  They had to deal with the more expensive, and more fair, AAA and JAMS.  For a while some states even oversaw the arbitration verdicts and judges were permitted to throw out verdicts which they felt violated state laws.  When I went into arbitration with Cap 1, the court case was overseen by an extremely consumer friendly judge.  If Cap 1 had paid the fees and won, the judge could have overturned the verdict. These protections have been eroded by federal courts in later years.  
 

Tl;dr  arbitration is usually a scam against consumers and employees but in some cases is a powerful weapon  consumers may use. 

[WhoCares1000]

In reading the story, it sounds like the plaintiff did not request arbitration until after 8 months of litigation had passed. What we tell people here is that if you are going to claim arbitration trumps the courts, to do it as early in the judicial process as possible to avoid the MTC being denied. I think that is what SCOTUS is saying. You cannot try to bring up arbitration because you are losing your case in court. It is on equal setting when it comes to the rules of civil procedure, not a trump card to play when things are not going your way.

[texasrocker]

It doesn't mention what state this was rooted in but it brings forth the main reason for the rules of most states and courts stating that arbitration should not be allowed after litigation has already begun.

[WhoCares1000]

1 hour ago, texasrocker said:

It doesn't mention what state this was rooted in but it brings forth the main reason for the rules of most states and courts stating that arbitration should not be allowed after litigation has already begun.

Looking at Sundance's corporate information, it looks like the only state they operate in that is within the 8th circuit is Iowa so my guess is that is where the case came out of. I still say that this ruling is not a blow to arbitration but simply something that we have been saying on this board all along, bring it up early.

[BV80]

It is not a blow to arbitration.  Sundance had filed for arbitration 8 months after the lawsuit was filed.  The 8th Circuit ruled that the plaintiff (Morgan) had to show that she was prejudiced by the delayed filing.  Absent a show of prejudice, it wasn’t a problem that the filing was delayed.  Sundance’s MTC was granted.

The Supreme Court reversed.  The reason is because the FAA makes no mention whatsoever of “prejudice”.  The SCOTUS specifically references Section 6 of the FAA.

”Any application to the court hereunder shall be made and heard in the manner provided by law for the making and hearing of motions, except as otherwise herein expressly provided.”  9 U.S. Code § 6 

SCOTUS then stated:

”A directive to a federal court to treat arbitration applica- tions ‘in the manner provided by law’ for all other motions is simply a command to apply the usual federal procedural rules, including any rules relating to a motion’s timeliness. Or put conversely, it is a bar on using custom-made rules, to tilt the playing field in favor of (or against) arbitration. As explained above, the usual federal rule of waiver does not include a prejudice requirement. So Section 6 instructs that prejudice is not a condition of finding that a party, by litigating too long, waived its right to stay litigation or compel arbitration under the FAA.”

The prejudice requirement that many courts have used is a “made-up” rule.  It’s not in the FAA.  Just because the FAA favors arbitration does not mean a court can create a new rule to make sure arbitration is granted.

”Our sole holding today is that it may not make up a new procedural rule based on the FAA’s ‘policy favoring arbitration.’”

The SCOTUS merely interpreted the FAA as it is written.  As @WhoCares1000said, file early, and it won’t be an issue.

 

[Bulldoger]

3 hours ago, BV80 said:

The prejudice requirement that many courts have used is a “made-up” rule.  It’s not in the FAA.  Just because the FAA favors arbitration does not mean a court can create a new rule to make sure arbitration is granted.

From my first Memorandum of Points: 

A party may waive its right to insist on arbitration if the party `so substantially utiliz[es] the litigation machinery that to subsequently permit arbitration would prejudice the party opposing the stay.'" Id. at 250 (quoting Maxum Founds., Inc. v. Salus Corp., 779 F.2d 974, 981 (4th Cir.1985)). "But even in cases where the party seeking arbitration has invoked the `litigation machinery' to some degree, `[t]he dispositive question is whether the party objecting to arbitration has suffered actual prejudice.'" Id. (quoting Fraser v. Merrill Lynch Pierce, Fenner & Smith, Inc., 817 F.2d 250, 252 (4th Cir.1987)). Neither the mere filing of pleadings nor delay will suffice by themselves to establish waiver; instead, the opposing party has to show some real, tangible prejudice. 

United States Court of Appeals, Fourth Circuit

Apr 28, 1987

817 F.2d 250 (4th Cir. 1987)

Holding that the defendant had waived arbitration after "eight discovery motions, four of which were made by [the defendant,] . . . two motions in limine, one motion for partial summary judgment, . . . three motions to dismiss, . . . four status conferences, five hearings on pending motions, . . . two pretrial conferences [t]wo trial dates [which] were cancelled prior to the arbitration motion hearing date"

here are some other summaries finding prejudice:

Summary of this case from Connell v. Apex Sys., LLC

Finding actual prejudice when the party opposing arbitration had to respond to multiple dispositive motions and "prepare repeatedly for trial rather than for arbitration"

Summary of this case from Forrester v. Penn Lyon Homes

Finding prejudice arising from the fact that non-movant "had to respond to a number of potentially damaging motions, including a motion for partial summary judgment and three motions to dismiss"

Summary of this case from Patten Grading & Paving, Inc. v. Skanska USA Bldg., Inc.

Finding default where the nonmoving party was required to make, argue, or defend against at least eight discovery motions

Summary of this case from Capps v. Harris

Finding prejudice when the party opposing arbitration "had to respond to . . . a motion for partial summary judgment and three motions to dismiss"

Summary of this case from Smiley v. Forcepoint Fed., LLC

Finding that the defendant's four-and-one-half year delay in moving to compel arbitration supported a finding of actual prejudice

Summary of this case from Innotec LLC v. Visiontech Sales, Inc.

Finding prejudice where three motions to dismiss and a motion for summary judgment had been filed

Summary of this case from Bronco Constr., Inc. v. Schotten Fenster, LLC

Finding sufficient prejudice to support waiver where brokerage firm delayed four-and-one-half years before seeking arbitration, two trial dates passed, and opposing party was required to respond to two motions for partial summary judgment and three motions to dismiss

Summary of this case from Haddock v. Quinn

Affirming district court's denial of motion to compel arbitration when Merrill Lynch waited over four years before seeking to compel arbitration; the district court had considered eight discovery motions, four of which were made by Merrill Lynch; and Merrill Lynch had filed two motions in limine, one motion for partial summary judgment, which was granted, and three motions to dismiss

Summary of this case from Rota-McLarty v. Santander Consumer USA, Inc.

Reaching the same conclusion where several of the plaintiff's claims were defeated on summary judgment over two years before the defendant demanded arbitration

 This verdict appears to correct an error made by lower court of appeals, IMO, nothing really has changed. Credit card companies were aware of this as in my current suit the contract specified a 90 day window after being served wherein you can file a motion to compel arbitration.  Thus eliminating any need to consider prejudice. 

It has and is still the advice here to file MTC as early as possible with the answer if possible. 

 

 

[BackFromTheDebt]

30 minutes ago, Bulldoger said:

 

It has and is still the advice here to file MTC as early as possible with the answer if possible. 

 

 

As everyone has been saying, this changes nothing and just reinforces what we have been advising for a long long time.