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AAA’s Eric Tuchmann Offers Arbitration Update to Garibaldi Inn of Court

October 15, 2019

The American Arbitration Association’s Senior V.P. and General Counsel, Eric Tuchmann, addressed the October 10 meeting of the Justice Marie L. Garibaldi American Inn of Court for ADR

The Inn was founded in 1998 and named in honor of Justice Garibaldi, the first woman appointed to the New Jersey Supreme Court. It is the first Inn of Court devoted exclusively to alternative dispute resolution. Mr. Tuchmann provided a thoughtful update on case law and statutory developments in the law of arbitration, on both the federal and state levels. 

Recent Developments in Arbitration Law

Efforts to enforce or restrict the application of agreements to arbitrate inspired most of the developments that were discussed.

GE Energy v. Outokumpu, now awaiting argument in the U.S. Supreme Court, will decide whether the New York Convention permits a non-signatory to an arbitration agreement to compel arbitration based on the doctrine of equitable estoppel.

Atalese v. U.S. Legal Services Group and Itzhakov v. Segal established and applied the principle that an agreement to arbitrate cannot bind a consumer unless it clearly and unambiguously notifies the consumer that he or she is waiving the right to seek relief in a court of law. 

Latif v. Morgan Stanley compelled arbitration of an employment discrimination claim, holding that a recent New York statute barring arbitration of such claims is preempted by the Federal Arbitration Act.

The FAIR Act (H.R. 1423), passed by the House of Representatives on September 20, 2019, would prohibit pre-dispute arbitration agreements in future employment, consumer antitrust and civil rights disputes.

NJ A-584 would prohibit any state agency from entering into a contract with a business entity that requires any person, as a condition of doing business with that entity, to give up any right or remedy provided by the laws of New Jersey.

NJ A-4972 would establish certain consumer protections related to arbitration organizations, primarily aimed at potential financial conflicts of interest.

What Are the Takeaways?

These cases and proposed legislation are consistent with several themes that have emerged in arbitration law. For proponents of arbitration, there is good news and bad news. First the bad news.

Some courts and many legislatures are marching to the steady drumbeat of a call to abolish or severely limit the use of arbitration as an alternative to litigation in many circumstances. The primary focus is on consumer, employment and civil rights cases, but the potential scope of the restrictions proposed could be quite broad. Further, such restrictions rest on assumptions about arbitration’s “unfairness” that are often exaggerated. Acceptance of these assumptions damages the credibility of arbitration generally.

The good news exists in two forms.

Courts generally remain respectful of the broad application of the Federal Arbitration Act, and its well-established intent to preempt state laws that purport to render unenforceable otherwise valid arbitration agreements (e.g., Latif). While efforts to restrict the FAA remain stalled in Congress, recent state legislative efforts attempt to end-run the FAA by avoiding use of the word “arbitration” in their text, but achieving the desired effect (e.g., NJ A-584). It remains to be seen how this tactic will play out in the courts.

Where courts have successfully created judicial limitations on the enforceability of arbitration agreements, they have established some fairly clear guidance. In Atalese, the New Jersey Supreme Court held that an arbitration clause in a consumer contract would not be enforceable unless it clearly and unambiguously notified the consumer that he or she is waiving the right to seek relief in a court of law. Consumer contracts can be drafted to include language to this effect when providing for the arbitration of disputes.

About the Garibaldi Inn

Mr. Tuchmann’s presentation was the latest example of the educational and collegial discussions that occur at the Garibaldi Inn’s monthly meetings. Upcoming meetings will address:

  • Managing Emotions Under High Pressure: A Crisis Negotiation Training Program
  • Joint Meeting with Justice Pollack Environmental Inn of Court
  • Joint Meeting with NJSBA DR Section and NJAPM
  • Cybersecurity for ADR Proceedings
  • International ADR Update
  • Third Party Funding – Guidelines for Dispute Resolution Professionals

Membership is open to anyone with an interest in alternative dispute resolution. Attendance as the guest of a member is permitted. Anyone interested should contact the Inn’s current President, Theo Cheng, or the Executive Director, Bob Margulies

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