The Federal Arbitration Act ("FAA") (1) "was enacted in 1925 in response to widespread judicial hostility to arbitration agreements." (2) It is evident from a number of decisions issuing out of Florida courts that this judicial hostility endures. A frequently stated goal of arbitration is the fast and efficient resolution of disputes, (3) but decisions that refuse to enforce such agreements undermine predictability and embroil the litigants in court proceedings that delay and drive up the cost of deciding disputes.
During the last two years, the arbitration profession has gained five staunch supporters. They also comprise a majority of the United States Supreme Court: Chief Justice John G. Roberts, along with Justices Antonin Scalia, Anthony M. Kennedy, Clarence Thomas, and Samuel A. Alito. With the latest trilogy of cases, (4) the Court has emphatically promoted the use of arbitration and undermined attempts to invalidate contractual commitments that obligate the parties to arbitrate their disputes. This article will examine this trilogy of cases, (5) and will contrast how courts in Florida have reacted, ignored, or interpreted federal decisions to spurn the U.S. Supreme Court's efforts to streamline this alternative to courtroom litigation.
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BACKGROUND
The FAA was enacted to "revers[e] centuries of judicial hostility to arbitration agreements," (6) and was designed to allow parties to avoid "the costliness and delays of litigation" and to place arbitration agreements "upon the same footing as other contracts[.]" (7) The Act provides that arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." (8) "English courts [had] traditionally considered irrevocable arbitration agreements as 'ousting' the courts of jurisdiction, and [have thus] refused to enforce such agreements." (9) Until the adoption of the FAA, American courts uncritically adopted this view as part of the common law. (10) As the U.S. Supreme Court stated in Dean Witter Reynolds, Inc. v. Byrd, (11) "[t]he preeminent concern of Congress in passing the Act was to enforce private agreements into which parties had entered," (12) a concern which "requires that we rigorously enforce agreements to arbitrate[.]" (13)
The first trilogy is known as the Steelworkers Trilogy, (14) whose continuing validity was reaffirmed by Justice Byron White in AT&T Technologies, Inc. v. Communications Workers of America. (15) The cases established certain precepts: first, "arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit"; (16) second, the question of arbitrability is an issue for judicial determination; (17) and third, where the contract contains an arbitration clause, there is a presumption of arbitrability. (18)
To appreciate the latest trilogy of cases from the U.S. Supreme Court, we need to examine the second trilogy of cases, (19) which were decided in the mid-1980s, because these cases established the FAA as a source of "federal substantive law of arbitrability." (20) In Moses H. Cone Memorial Hospital v. Mercury Construction Corp., (21) the Court stated:
Section 2 is a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary. The effect of the section is to create a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act. (22) The significance of this is that it allowed the Court to make the FAA applicable to the states as well as federal courts. (23) Thus, in Southland Corp. v. Keating, (24) the Court held that the California Franchise Investment Law, which invalidated certain arbitration agreements covered by the FAA, violated the Supremacy Clause. (25) Since then, the Court has repeatedly asserted a strong pro-arbitration imperative in a variety of contexts, such as the Sherman Antitrust Act, the Racketeer Influenced and Corrupt Organization Act, the Securities Act of 1934, and statutory employment discrimination claims. (26)
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THE LATEST TRILOGY
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STOLT-NIELSEN S.A. V. ANIMALFEEDS INTERNATIONAL
The first case in the third trilogy is Stolt-Nielsen S.A. v. AnimalFeeds International Corp. (27) In an opinion authored by Justice Alito, the Court was presented with a dispute between two commercial parties raising the question of whether imposing class arbitration on parties whose arbitration clauses were "silent" (28) on that issue was consistent with the FAA. Petitioners were shipping companies serving customers such as AnimalFeeds International. (29) These customers shipped their goods pursuant to a standard contract containing an arbitration clause. (30) A Department of Justice criminal investigation revealed that petitioners were engaging in an illegal price-fixing conspiracy. (31) When AnimalFeeds learned of this, it brought a putative class action against petitioners. (32) The parties entered into an agreement providing for the question of whether class arbitration is to be submitted to a panel of three arbitrators who were to follow the rules of the American Arbitration Association ("AAA"), developed after the decision in Green Tree Financial Corp. v. Bazzle. (33) The Bazzle Court had been presented with the issue of class action arbitration and a plurality determined that such a proceeding was permissible under the FAA.
Justice Alito in Stolt-Nielson was thus confronted with the Bazzle precedent and a decision by the arbitrators concluding that the arbitration clause allowed for class arbitration. (34) He then "conclude[d] that what the arbitration panel did was simply to impose its own view of soundpolicy regarding class arbitration." (35) Contrary to the arbitrators' interpretation of Bazzle, Justice Alito declared that, given the parties' stipulation that the agreement was silent as to class action arbitration, there could be no basis upon which to authorize such a proceeding. (36) He wrote that "the opinions in Bazzle appear to have baffled the parties in this case." (37)
After noting "the FAA imposes certain rules of fundamental importance, including the basic precept that arbitration 'is a matter of consent, not coercion,'" (38) Justice Alito posited that "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." (39) By stipulating that the agreement was silent on class action arbitration, he concluded that the parties had reached no agreement on that issue.
This is so because class-action arbitration changes the nature of arbitration to such a degree that it cannot be presumed the parties consented to it by simply agreeing to submit their disputes to an arbitrator. In bilateral arbitration, parties forgo the procedural rigor and appellate review of the courts in order to realize the benefits of private dispute resolution: lower costs, greater efficiency and speed, and the ability to choose expert adjudicators to resolve specialized disputes.... But the relative benefits of class-action arbitration are much less assured, giving reason to doubt the parties' mutual consent to resolve disputes through class-wide arbitration. (40) Justice Alito then reviewed the differences between bilateral arbitration and class action arbitration. In a class action arbitration, the arbitrator would no longer be resolving a single dispute between the parties to a single agreement, but instead would be resolving many disputes between hundreds, or perhaps even thousands, of parties. (41) The "presumption of privacy and confidentiality" applicable to bilateral arbitrations would be lost in class arbitrations. (42) The arbitrator's award would no longer just adjudicate the rights of the parties, but also the rights of absent parties. (43) And while the high stakes of class action litigation would also apply to class arbitrations, the scope of judicial review would be much more limited. (44) The Court thus concluded that "the differences between bilateral and class action arbitration are too great for arbitrators to presume, consistent with their limited powers under the FAA, that the parties' mere silence on the issue of class action arbitration constitutes consent to resolve their disputes in class proceedings." (45)
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RENT-A-CENTER, W., INC. V. JACKSON
The next two trilogy opinions were authored by Justice Scalia for a five-member majority that included the Chief Justice Roberts, along with Justices Kennedy, Thomas, and Alito, with four justices dissenting. (46) We are no longer dealing with two commercial parties, but with employees and consumers. In Rent-A-Center, West, Inc. v. Jackson, (47) the Court dealt with a dispute between an employee and his employer. The Court framed the issue as whether, under the FAA, "a district court may decide a claim that an arbitration agreement [was] unconscionable, where the agreement explicitly assign[ed] that decision to the arbitrator." (48) But the decision had much greater reach than the issue stated.
The opinion first reinforced an important doctrinal principle--the doctrine of severability. (49) As early as 1967, in Prima Paint Corp. v. Flood & Conklin Manufacturing Co., (50) the Court had based its decision on the notion that an arbitration clause must be considered separately from the underlying contract. (51) Prima Paint had alleged fraudulent inducement into a consulting agreement containing an arbitration clause. The Court ruled that arbitration clauses are "separable from the contracts in which they are embedded, and that where no claim [was] made that fraud was directed to the arbitration clause itself, a broad arbitration clause will be held to encompass arbitration of the claim that the contract itself was induced by fraud." (52) Therefore, fraud in...
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