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“Infinite” Arbitration Clauses

Tue, 2019-07-09 13:59

Prof. David Horton of the University of California, Davis, School of Law has posted a provocative article scheduled to be published by the University of Pennsylvania Law Review. Titled “Infinite Arbitration Clauses,” it collects and comments upon purported arbitration “agreements” pursuant to which one party seeks to obligate another party to arbitrate, rather than litigate, a wide scope of facets of their past, current or future relationship — irrespective of whether those claims arise from a “container contract” in which the arbitration agreement appears.

Adding to the concern is the growing enforceability of “delegation clauses,” by which courts increasingly recognize parties’ intention that arbitrators, not courts, determine whether a dispute is subject to arbitration. Several courts have determined that the mere selection of AAA Commercial Rules is sufficient to divest courts of the power to determine whether a dispute is arbitrable. (Rule 7 of the AAA Commercial Rules provides in part that “[t]he arbitrator shall have the power to rule on his or her jurisdiction, including any objections to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.”)

Prof. Horton cites some arbitration “agreements” that purport to wrest from judicial control all claims of any sort that one party might bring against another:

“All disputes, claims or controversies whether based on any prior, current or future agreement,… event or occurrence, whether individual, joint or class in nature, including contract and tort disputes and any other matter at law or equity… shall be resolved by arbitration.”

“Any dispute between us shall be submitted to arbitration.”

“I agree that any claim dispute or controversy between myself and the Company shall be submitted to and determined exclusively by arbitration.”

“[The obligation to arbitrate] survives the termination of your services with us [and] is indefinite.”

Section 2 of the Federal Arbitration Act restricts the enforceability of arbitration agreements under federal law to “provision[s] in .. a contract… to settle by arbitration a controversy arising out of such contract or transaction….” Prof. Horton raises the question, however, whether such a restriction is jurisdictional in federal courts, or whether it even exists under state arbitration law.

Promising to arbitrate personal injuries arising from a motor vehicle accident that has not yet occurred? Promising to arbitrate future claims of negligence? Barring class claims of injury resulting from unsafe products?The whole thing reminds me of one of my favorite “arbitration agreements:

Good old American Mediation Association — you can count on them!

New Jersey Statute Regulates Settlement Agreements

Thu, 2019-03-21 10:47

New Jersey Governor Murphy has signed into law
P.L.2019, c.39, which declares unenforceable any “provision in any… settlement agreement which has the purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment.”

Moreover, the new law provides that every settlement agreement addressing such claims “shall include a bold, prominently placed notice that although the parties may have agreed to keep the settlement and underlying facts confidential, such a provision in an agreement is unenforceable against the employer if the employee publicly reveals sufficient details of the claim so that the employer is reasonably identifiable.”

Many New Jersey mediators consider it their responsibility to encourage parties’ counsel, when drafting an MOU memorializing a settlement agreement at the end of a mediation, to include words to the effect that, while further documentation is contemplated, the parties agree to be bound by the terms in the MOU. This is in compliance with the New Jersey Supreme Court’s requirement, in the Willingboro Mall case, that mediated settlement agreements must be in writing to be enforceable.

Is it now best practice in New Jersey for mediators to alert parties settling harassment claims that a non-disclosure provision that was bargained for is in fact illusory? What if they understand that principle but don’t write the acknowledgement into the MOU? What if they write it in, but not in “Bold, prominently placed” language? Should the mediator intervene or would that constitute rendering legal advice? Does a no-disparagement clause fall into the scope of the law, requiring bold, prominent notice that it is unenforceable?

And what if one of the counsel understand perfectly well what they’re doing but purposely omit the language because they intend to enforce it in a state other than New Jersey?

Finally, what if — like most New Jersey mediators — you are completely unaware of this new law?