U.S. Supreme Court to Rule on Various Issues in the Field of International Litigation and Arbitration
The United States Supreme Court (the Supreme Court) will likely be placed in the spotlight in the next couple of weeks, as the new U.S. President Donald Trump will soon have the opportunity to appoint a nominee to replace the late Supreme Court Justice Antonin Scalia.
Meanwhile, I wanted to share with you an overview and a short discussion on a series of cases in the field of international litigation and arbitration that have recently been granted certiorari by the Supreme Court and that are likely to draw the attention of arbitration and international litigation practitioners.
Kindred Nursing Centers Limited Partnership e.a. v. Clark
On 28 October 2016, the Supreme Court granted certiorari in the case of Kindred Nursing Centers Limited Partnership v. Clark. This case deals with the issue of whether the Federal Arbitration Act (FAA) pre-empts a state-law contract rule that singles out arbitration by requiring that a power of attorney expressly refer to arbitration agreements before the attorney-in-fact can bind his or her principal to an arbitration agreement.
The facts of the case were the following. The petitioners were nursing homes and rehabilitation centers who had entered into arbitration agreements with their residents for the resolution of mutual disputes. Two residents, who subsequently passed away, had conferred authority (by means of power of attorneys) to the respondents to sign the paperwork on their behalf, including the arbitration agreements with the nursing homes.
Following the death of their principals, the respondents brought suit against the nursing homes and the rehabilitation centers before local courts for – among other things – wrongful death and personal injury. In each case, the nursing homes and the rehabilitation centers moved to dismiss or stay the lawsuits, seeking to compel arbitration based on the arbitration agreements.
The local state courts, however, refused to enforce the parties’ arbitration agreements considering that the attorneys-in-fact who signed those agreements lacked the authority to enter into arbitration agreements. More specifically, they held that only an express mention of arbitration agreements in the power of attorney permits an attorney-in-fact to bind his or her principal to an arbitration agreement.
Before the Supreme Court, however, the nursing homes and the rehabilitation centers argue that the position of the state courts directly conflicts with the case law of the Supreme Court, which has repeatedly held that the FAA preempts state-law rules that discriminate against arbitration agreements.
A hearing in this case is scheduled for 22 February 2017.
Water Splash, Inc. v. Menon
This case (for which the Supreme Court granted certiorari on 2 December 2016 but did not yet set a date for hearing) raises the issue of whether the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the Hague Service Convention) authorizes service of process by mail.
The case involves a manufacturer of aquatic playground systems (Water Splash, Inc.) who sued a Canadian citizen in courts in the United States for unfair competition and tortious interference. After it was served by certified mail, the respondent failed to appear in court and a default judgment was rendered. The respondent subsequently filed a motion for a new trial to set aside the default judgment, arguing that “service had not been accomplished consistent with the requirements of the Hague Service Convention“.
Given the fundamental issue at stake and the potentially crucial implications that it might have, international private law practitioners should closely follow this case.
NLRB v. Murphy Oil USA, Inc.; Ernst & Young LLP v. Morris; Epic Systems Corp. v. Lewis
Finally, on 13 January 2017, the Supreme Court granted certiorari in three virtually similar cases, all of which concern the issue of whether class action waivers in employment arbitration agreements are enforceable.
More specifically, the Supreme Court is asked to rule on whether employment arbitration agreements, which prohibit employees from seeking adjudication of any work-related claim on a class or collective basis, are enforceable in light of Section 7 and 8 of the National Labor Relations Act, which provides that employees shall have the right to form, join, or assist labor organizations and to bargain collectively through representatives of their own choosing.
The Supreme Court will therefore be asked to draw a line between the FAA (which establishes a presumption in favour of enforcing arbitration agreements) on the one hand, and the National Labor Relations Act, on the other hand.
Importantly and as it stands, American courts have a divided and contradictory position on this matter. Some courts have already stood for the enforceability of arbitration provisions, while other courts and the National Labor Relations Board have found these agreements unenforceable due to their restrictive nature affecting substantive rights of employees.
Note that the Supreme Court still needs to consider a fourth petition for a writ of certiorari on essentially the same issue (see Patterson v. Raymours Furniture Company, Inc.).
The International Litigation Blog will of course keep you posted on any further developments.