After three trips to the Second Circuit, and after almost ten years (yes, ten years!) of litigation and arbitration, the Second Circuit finally affirmed an arbitrator’s decision that a dispute cannot be arbitrated.
The case of Emilio v. Sprint Spectrum LP, No. 14-732 (2d Cir. Nov. 12, 2014) (click here for a copy of the Second Circuit’s recent order), involved a Sprint wireless customer whose agreement contained an arbitration clause with a class action waiver. The customer claimed that a New York tax was intended to be imposed solely on Sprint, and Sprint unlawfully passed along this tax to its customers. The plaintiff customer filed a demand for class arbitration before JAMS for this allegedly unlawful imposition of the tax.
The arbitrator’s award in this case, which was issued prior to the Supreme Court’s Concepcion decision, found that the class action waiver provision was not enforceable under state law because the state consumer protection statute at issue prohibited the waiver of the right to seek class relief. Hence, the customer could not be forced to bring a claim individually. Also, the arbitrator held that Sprint could not be compelled to engage in class arbitration in light of the Supreme Court’s 2010 decision in Stolt-Nielsen, apparently because Sprint had never explicitly agreed to class arbitration. In sum, the underlying dispute regarding the imposition of the tax was not arbitrable, either as a class or as an individual claim.
The Second Circuit’s summary order, which confirmed the arbitrator’s decision, recognized the extremely narrow standard of review applicable to an arbitrator’s award. Under this narrow standard of review, a court cannot easily vacate an arbitrator’s award, even if the arbitrator committed an error, or even if the court disagreed with the arbitrator’s construction of the arbitration agreement.
Under an efficient system of dispute resolution, a decision about who will be the ultimate decision-maker should not take ten years and several trips to court to resolve. In looking over the history of procedural reform in the United States, I see a pattern involving procedural law that is originally enacted with good intentions to simplify practice, but over time, the procedural law needs to be significantly overhauled. The FAA, which was enacted by sincere reformers in a good faith effort to resolve simple contract disputes, is so outdated and so misinterpreted and applied so expansively beyond its original intent that it is long overdue for an overhaul.