Civ Pro 2 Notes 11/17/04

Arbitration

Here’s another form of ADR. The distinguishing characteristics of arbitration are that a decision is made by decision-makers in arbitration, whereas that action is not the end result of processes such as mediation and settlement. The arbitrator decides the dispute and issues an oral or written decision. The main reason people use arbitration is because the parties can decides the rules of the game. They can make up their own procedure, rules, and substantive law. They can be as similar or dissimilar to “real” law as you want. Many arbitration agreements restrict or forbid discovery, pre-trial motions, knowing who is arbitrating the dispute, and the application of the rules of evidence. Arbitration is also usually faster, cheaper and more confidential than litigation.

What happens when courts get involved at looking at arbitration decisions? There are two places that this happens. Courts ask at the front end: when is it appropriate for a court to enforce an arbitration clause? When should they stop a lawsuit that has started from going forward or compel a party to go to arbitration? At the back end, when will a court review and possibly undo an arbitration award?

Floss v. Ryan’s Family Steak Houses, Inc.

There are lots of cases against the steakhouse! What were the facts here? Floss is suing under the Fair Labor Standards Act. Floss didn’t want arbitration, but wanted to go to court instead. Ryan’s insisted on going to arbitration. There’s also an ADA claim by Daniel. They both signed an arbitration agreement when they agreed to work at Ryan’s. But did the plaintiffs really think about this provision when they signed up to work at Ryan’s? They probably just wanted a job. What’s the benefit to Ryan’s? It’s cheaper, faster, and reduces bad publicity. But this agreement indicates a specific arbitration forum: EDSI. It turns out that in the Sixth Circuit, they won’t uphold this arbitration clause, but in the Eighth Circuit they will.

The Sixth Circuit asks whether EDSI is suitable for the resolution of statutory claims. What made EDSI suspect to the Sixth Circuit? How they appoint the arbitrators is a concern: one of the arbitrators is a manager of a company that has an arbitration agreement with EDSI! They’re worried about bias. The other two arbitrators are an employee and a lawyer, judge or “other professional”. So the court is worried about this. The court is also worried about a bias due to EDSI’s financial relationship with Ryan’s. Their business depends on getting and keeping business clients. Also, the employee had to pay for half of the costs of the arbitration. In court, the costs would be based upon who won. But ultimately, the court decides that the contract is invalid: there’s no consideration because the terms are “fatally indefinite”.

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