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Holding: The Federal Arbitration Act does not permit courts to invalidate a contractual waiver of class arbitration on the ground that the plaintiff's cost of individually arbitrating a federal statutory claim exceeds the potential recovery.

Judgment: Reversed, 5-3, in an opinion by Justice Scalia on June 20, 2013. Justice Kagain filed a dissenting opinion in which Justice Ginsburg and Justice Breyer joined. Justice Sotomayor took no part in the consideration or decision of this case.

To Read Cornell University Law School Law Institute discussion of the opinion click here 

Notice 12-30 Click Here 

In a decision that confirms arbitrators' broad discretion to not only fashion remedies, but also fashion sanctions, the Minnesota Court of Appeals held that an arbitrator did not exceed his power by issuing a severe sanction: denying one party the right to defend against certain claims after finding that party had fabricated evidence relating to those claims. Seagate Technology, LLC v. Western Digital Corp., __N.W.2d __, 2013 WL 3779231 (Minn. Ct. App. July 22  , 2013).

The case involved Seagate's claims that one of its former employees had taken multiple trade secrets to a competitor, Western Digital Corporation. The arbitrator found that after the employee went to Western Digital, he had added slides to old PowerPoint files he had created at Seagate in order to falsely suggest that three of the trade secrets at issue had been publicly disclosed during his time at Seagate. Because the arbitrator concluded that Western Digital was complicit in the fabrication of evidence, the arbitrator determined that "severe sanctions" were in order. The arbitrator precluded Western Digital and the employee from presenting any defense to Seagate's claims about those three trade secrets and entered judgment against them for misappropriation and use of the trade secrets. As a result of that judgment on the three trade secrets, and his conclusion that the employee breached his employment contract, the arbitrator awarded Seagate $634 million (including $109 million in interest).

• Leonard, Street and Deinard
• Liz Kramer

Do arbitrators have authority to undertake independent legal research without authorization by the parties? Or, are they prohibited from doing so, as many arbitrators believe? These are vexing questions. For answers, this

article looks for guidance in the Federal Arbitration Act (FAA), state arbitration statutes, case law, and the rules of several arbitration institutions, as well as the Code of Ethics for Arbitrators in Commercial Disputes. The takeaway is that if an arbitrator wants an award that will withstand an attack based on "evident partiality," "misconduct" or the "exceeding of powers," there are good reasons to refrain from unauthorized legal research. This may seem counter intuitive. Arbitration is a creature of contract and the implications that flow from that conclusion heavily impact the answers to the questions being proposed.  

•  Paul Bennett Marrow  
• New York Law School   

To Download the Complete Article Click Here 

Analyzing the scope and enforceability of an arbitration award, the Illinois Supreme Court in Griggsville-Perry Unit School Dist. No. 4 v. The Illinois Educational Labor Relations Bd., et al., 2013 IL 113721 (Feb. 22, 2013), opined that the award was binding on the parties because the arbitrator applied a standard of arbitrariness to the District's decision to non-renew a paraprofessional, which drew its essence from the negotiated contract language.

 

Brief Fact Summary

 

The School District was party to a collective bargaining agreement ("CBA") with its paraprofessional staff. The CBA did not have a "just cause" termination provision, but did include certain due process procedures if an employee was required to appear before the Board of Education concerning a disciplinary matter.

 

Paraprofessional, Angela Hires' ("Hires"), was verbally counseled by the Building Principal about her negative attitude and interaction with students. These concerns were noted in the Principal's personal notebook and, unbeknownst to Hires, in her personnel file. Ultimately, the Board of Education (the "Board") voted to non-renew Hires' employment based upon the Principal's noted concerns. Hires addressed the Board regarding the non-renewal recommendation.

Significance of the Court's Opinion

 

The Court's decision reminds parties of the scope of an arbitrator's authority when addressing a contract dispute involving interpretation of a specific contract provision. That said, it is clear that the decision of the arbitrator, IELRB, and Illinois Supreme Court was based on the alleged lack of notice and opportunity to respond to the reasons identified by the District for Hires' non-renewal and to the documents placed in her personnel file, and the timing of the Board's initial decision in support of non-renewal. As such, it is important to ensure that fundamental due process is afforded to employees before termination.

• Catherine R. Locallo, Robbins Schwartz 

• Howard S. Suskin,, Jenner & Block  

When a forum selection clause is invalid because the forum organization that was designated does not exist, the forum selection clause may be severed  from the rest of the arbitration agreement and arbitration can be compelled. Control Screening LLC v. Technological Application and Prod. Co., 687 F.3d 163 (3d Cir. 2012). The parties' mutual mistake as to the non-existent forum rendered the forum selection clause null and void; as a result, the arbitration agreement was treated as if it did not select a forum. Pursuant to Section 4 of the Federal Arbitration Act, a district court is empowered to compel arbitration only within its own district; accordingly, the new forum for the arbitration was required to be in the forum in which the petition to compel arbitration was filed.