Mediation vs Arbitration: Essential Contract Dispute Strategies

[00:00:00]mediation versus arbitration what every business executive and in-house Council should consider in its critical documents I am pleased to welcome my colleagues Brendan otou and Lauren Fussell Brendan is a partner based out of our Richmond office and has been with Williams Mullen for 17 years his focus is on complex federal and state commercial litigation with an emphasis on contract disputes residential Development and Construction and the defense of business tort and class action claims he also regularly defends clients in shareholder disputes and against claims brought under various consumer protection statutes he is a former law clerk for a federal judge in the eastern district of Virginia Lauren is an is a senior associate with Williams Mullen and based out of our Raleigh office she helps clients navigate complex legal issues that are often a direct threat to their ongoing operations or in some cases their Liberty her experience includes representing businesses and Executives in All Phases of complex civil litigation from fact investigation through trial she has experienced litigating claims related to contract enforcement fraud breach of fiduciary duties unfair and deceptive trade practices and intercorporate disputes for clients across Industries as diverse as telecommunications Health Care financial services and real estate brandan and Lauren take it away Brien thank you very much uh we are happy to be here hopefully give you all some knowledge about the differences between mediation and arbitration and uh more importantly uh how you can use those different Avenues to your advantage and some tools and tricks uh that we hopefully can impart on on you all today uh that will help you with your contract Drafting and what to expect as the either mediation or arbitration process unfolds uh we're going to start with Lauren who's going to talk a little bit about the basics of mediation morning everyone um if you are a litigator or tangentially involved in litigation you have probably heard about mediation maybe you've participated in one but before we start this program Brennon and I thought it would be helpful to make sure you know really what is mediation what is arbitration so that you can make an informed decision about what is best for you and how to appropriately write or revise your contracts as needed so most of this will be a reminder hopefully but mediation is um where we have a third party neutral who facilitates a resolution discussion between the two disputing parties to keep our uh State bars happy for C Credit I'm going to mention um that mediation uh is generally governed by State Statute both North Carolina and Virginia have statutes defining mediation um as a process where the mediator facilitates communication but does not decide issues does not impose Solutions um but enables both of the parties to mutually understand the other side's uh position and their resolution position um mediators are impartial thirdparty neutrals that may be selected by agreement or particularly in North Carolina if you do not come to an agreement about your mediator you may be assigned one from a random list of people who have been certified uh both Virginia and North Carolina have standards for mediators before they can be certified these standards are promulgated by the various State Supreme Courts but generally require the mediators to go through training do a number of observations of mediation do some Hands-On practice um and make sure they are aware of their obligations and their ethical rules um as a reminder and often I find it helpful to remind my clients as we are preparing for mediation especially if they haven't done this very much before mediators do not decide issues the mediator is not going to come in and call balls and Strikes the mediator is not going to come in and say um will miss Fussell and your client um I agree with you 100% you are winning this case congratulations you have won they AR going to do it they aren't going to decide issues they are also not going to impose requirements on the parties to produce information or disclose something they can't require parties to make offers and they can't require any type of settlement or particular solution um what they do is strictly facilitate discussion between the parties as a reminder uh parties can agree through contract or otherwise to submit their dispute to a preit mediation um we can talk about a little bit about this later on of the timing of mediation and when it's appropriate but you can do this before you even get to a full-blown dispute that goes to litigation or arbitration and sometimes that can be really helpful and really beneficial to clients um whether or not you do a pruit mediation at least in North Carolina if a lawsuit is filed you are then going to be ordered to mediation on almost without exception uh if you are litigating against the government or very few other exceptions that don't come up very often in business civil litigation you are going to be ordered to mediation by the North Carolina State Court or the federal court uh so be prepared for that it should not be a surprise when you get a standard order coming out of those courts telling you to select a mediator and go to mediation at some point my understanding is that it's a little bit different in Virginia and you may have some Avenues to to maybe not be automatically ordered to mediation uh but it also happens in Virginia and you should be prepared in the event it does uh so I think we're going to go to our very first uh official polling question this morning after brien's practice so if we could bring up the first polling question um before we turn to allowing Brendan to explain what arbitration is we want to get to know a little bit more about the arbitration contracts and Provisions you might be dealing with so poing question number one we'd like to get to know more about your business's contract Provisions related to arbitration before we get started which of the following is most true for you option one our standard contracts do not include a mandatory arbitration provision but our counter parties have mandatory arbitration clauses that we consent to option two our standard contracts include a mandatory arbitration provision or option three I don't know whether our standard contracts or our counterparties contracts include an arbitration provision you have a little over 30 seconds left to answer this polling question there is no right or wrong answer this is a gimme but to get clle credit we do ask that you respond to each of the polling questions including this one uh I make no promises that Brendan won't ask you harder polling questions as the clle continues this one should be easy enough all right here are our our results about 43% of you uh said that your contracts have a mandatory arbitration provision um 31% said your counterparties do and about 26% of you said well I don't know uh Brendon and I are going to talk to you a little bit about why we think um you should find out if your contracts have mandatory arbitration provisions and what those arbitration Provisions say if we can go to the next slide so that that polling question was really interesting uh because uh there are plenty of folks on the call who do not have mandatory arbitration there's some that do there's some who do not and their opponents do and some who aren't quite sure if they do or they don't um so you're at the right clle we're going to help help you get these issues sorted out and decide whether arbitr is something that you should consider incorporating into your contracts to either level the playing field or to make it more advantageous for you when a dispute does arise so so what is arbitration um Everybody agrees uh essentially when a dispute comes up to have a neutral third party that's the arbitrator hear their case during the arbitration hearing each side lays out their points presents evidence that they have but unlike the typical courtroom setting the procedures are a bit different and the arbitr ation proceedings stay confidential uh any transaction that touches on interstate commerce is governed by the federal arbitration act Virginia has the Virginia uniform arbitration act North Carolina has an arbitration statute South Carolina has an arbitration statute you may be saying well what is what is something that touches on interstate commerce how would I know whether my State uh arbitration statute or the federal arbitration statute um controls well think of a dispute between two North Carolina companies and uh individuals who also reside in North Carolina and the dispute concerns the construction of a commercial building in North Carolina in that situation the North Carolina revised uniform arbitration act would likely govern that dispute rather than the FAA for you to get into arbitration you got to have an agreement there's got to be an agreement to resolve the dispute by arbitration and the arbitration provision has to cover the dispute if you don't have an agreement to arbitrate there's no obligation uh to arbitrate and so what do you do if you do have that agreement you move to compel arbitration and the federal and the state arbitration statutes all say that the court must direct the parties to proceed to arbitration if there is an agreement to arbitrate now there are some certain exceptions I can't cover all of those exceptions today um but there are situations where you even may have a binding you think it's a binding arbitration agreement but it's not enforcable all of us remember the me too movement uh that was um around 2020 2021 in 2022 President Biden signed the ending forced arbitration of sexual assault and sexual harassment Act of 2021 which made it unenforcable for pre-dispute arbitration agreements regarding any sexual assault or sexual harassment dispute unless that's something that the claimant desires to do um so that was something that was taken off the table in Virginia where I practice uh you can't have an arbitration agreement between um the Commonwealth and its employees um controversies regarding the employment are terms of conditions of employment between Virginia and its employees are not subject to arbitration what about the rules in the arbitration context well the good thing about arbitration is in a in a contract you can decide what you want the rules to be do you want the American Arbitration Association rules to control do you want construction rules to control employment rules to control do you want jams consumer rules do you want to have the federal rules control something else you get to decide in your contract which rules uh you want to have apply arbitrators are people who are typically trained and appointed through commercial arbitration organizations um or they can be people agreed to by the parties they can be lawyers lawyers who specialize in in a certain area uh they can be retired judges one of the big things about arbitration no juries you don't run the risk of having uh a number of people who you've never met before figure out if your case is a a winner or a loser one interesting fact in in kind of preparing for this presentation I found was that in Virginia a party has the right to be represented by an attorney at any proceeding or hearing under the Virginia arbitration statute I didn't know that um I imagine a lot of people also may not have known that I'd never seen that enforced before but it's something interesting to keep in mind that everybody has the right to an attorney in a Virginia uniform arbitration proceeding um what happens once the arbitrator makes a decision uh they get an award just like any other award it's only as good as the paper that it's written on um so what you have to do is you've got to take that award and get it confirmed uh by a court so that it can be enforceable um there's not a lot of discretion that courts have on confirming an award unless there's some really extreme reason to not confirm the award and I can tell you um once you get a decision it's normally a One-Shot deal and you're done they're not very many appellant rights uh in arbitration so whatever the arbitrator does you're pretty much that's pretty much the result you have to live with win or lose um and it's very very difficult to overturn an arbitration award it's it's just next to Impossible it's the way that I I would describe it there are specific statutory grounds but they're really extreme like the arbitrator was corrupt um the arbitrator was partial um the arbitrator exceeded his or her delegated powers but it's not you don't get to vacate an arbitration award just because you don't like the result or even because you think that the arbitrator didn't apply the law correctly um or totally whiffed on on a legal principle that's not going to be enough to vacate uh an arbitration award so that's that's a little bit of the background with that let's let's go to the next slide now that we've covered some of the basics all right recent cases that have interpreted arbitration uh Clauses and statutes by the Supreme Court of the United States um these are important um want to get to these because arbitration has been Central focus of the business community and the consumer community in and I'd say probably the last 15 years almost every single term within the last 15 years there's been some major US Supreme Court case that has decided various aspects of arbitration one of those that is the most important and and that I think is practical to to folks on this call is um if I've got an arbitration agreement um how soon do I have to try to invest provoke it if somebody has filed a lawsuit against me and I want to arbitrate do I have to move to compel arbitration immediately can I wait a little while and do it do it later that's what this case Morgan versus Sundance addressed in 2022 and the bottom line with that is when when you've got an arbitration provision you got to use it or you lose it it's hard for you to litigate on the merits of a case and then say well wait wait wait sorry judge I don't really like where this is going uh so so I've got this arbitration provision and I think you need to send the case to arbitration um the facts of the case Morgan was an hourly employee at Taco Bell when she applied she signed an agreement to arbitrate any employment dispute and she ignored that agreement filed a nationwide Collective action against Taco Bell saying that she and other similarly situated employees had been denied overtime pay under the fair labor standards act Taco Bell initially defended the case they filed a motion to dismissed they participated in mediation 8 months after the plaintiff had filed her lawsuit Taco Bell did an about face and moved to stay the litigation and compel arbitration and so was did Taco Bell the question that I have did Taco Bell um wave its right to arbitrate and we don't have a polling question for this but you might be surprised to learn that there was a unanimous opinion by Justice Kagan she said the answer is maybe maybe they they waved it that's often the the answer in with legal questions but the bottom line here was that the lower courts applied the wrong analysis and so they sent the case back for further fact development and the key holding is that you can wave your right to arbitrate by first litigating claims even if the other side is not prejudiced by the conduct so Prejudice to an opponent plays no role in determining whether there's been a waiver of the right to arbitrate um so the key takeaways from this case are one the Supreme Court has made it easier to find a way to find that a party has waved its right to arbitrate because you don't focus on what the opposing party has the effect on the opposing party Supreme Court has told us you use use your right to arbitrate or you lose it when it comes to arbitration rights and the second part the second important takeaway from this case is it effectively abrogated and overturned 50 years of fourth circuit precedent that required Prejudice to show waiver of the right to arbitrate so you don't have to show Prejudice let's go to the next slide and see how the lower courts have applied Sundance this was a fourth circuit case that was decided about a month ago it's called SZ y Holdings versus Garcia um and I I thought it was it was important that we see how the lower courts are applying this whole waiver concept after the Morgan decision uh this was a case that concerned contracts to supply a hand sanitizer at the beginning of the pandemic the contract had an arbitration clause in November 2021 I call it it's s zy but I'll call it sizzy sizzy sued the defendants didn't respond so sizzy got a default judgment in March of 2022 month later the defendants move to set aside the default judgment and argued in part that proper venue was arbitration the default judgment was set aside so Cy filed an amended complaint now we're in June of 2022 so we're about six months now excuse me nine months uh after and the defendants moved to dismiss on the basis of quote preemption based on a binding arbitration agreement and they moveed to dismiss on other grounds and at the hearing the defendants asked for the case to be sent for arbitration but they still hadn't formally moved to compel arbitration yet a month later the trial court denied the motion the defendant sought reconsideration and then this time for the very first time they moved to compel arbitration which was also denied nine months passed between the defendants the time between the time the defendants were sued and when they formally moved to compel arbitration and so it's time for our second well the next polling question so in light of these facts did the defendants wave their right to arbitrate yes or no we going to open up that polling and again this is a situation where the defendants waited nine months before they formally moved to compel arbitration and knew that they had an arbitration agreement did they wave the right to arbitrate all right a few more seconds and let's see what those results are so almost 70% of you said yes they wave their right to arbitration and about 30% of you said no uh well you would be surprised like I was that the answer is no the defendants did not wave their right to arbitrate before The Supreme Court's decision in Sundance the court likely would have held the arbitration wave because the nine-month delay of course prejudiced sizzy the plaintiff but here although the defendants knew of their right to arbitrate they didn't act according to the four circuit inconsistently with their right to arbitrate they consistently requested arbitration without formally moving to compel they argued improper venue due to arbitration preemption due to arbitration asked for the matter to be sent to arbitration in their 12 B6 uh so the fourth circuit said uh no they had not waved the right to arbitrate and they sent the case back um many of you are probably thinking well what how far can you go before you trigger the right uh before you wave your right to arbitrate I can tell you that the fourth circuit has said that filing an answer uh to a complaint does not wave arbitration uh generally it doesn't generally filing some sort of a responsive pleading uh like an answer or a counter claim is not necessarily inconsistent with the intent to pursue arbitration what about a situation where you misplaced the arbitration agreement or didn't find it until later in the the litigation even that may be okay to preserve the right to arbitrate uh courts within the force circuit have granted motions to compel even where the arbitration agreement wasn't found until the discovery phase of the case and where the defendant was had already filed responsive pleadings so really the bottom line is when it comes to waiver it's very fact dependent um I looked at a case that was from the Virginia court of appeals decided just last year there was only a three-month delay between the time that the party was served with the complaint and the time that they moved to compel arbitration the Virginia court of appeals in that case said they had waved the right to arbitrate so it really is fact dependent on whether um whether you've waved the right to arbitrate or not and we're ready for the next slide tried to warn you that Brendan was going to ask harder polling questions uh than I would uh but we're going to keep talking about some recent Supreme Court cases um this uh slide is regarding a stay pending arbitration so these situations are where there is um a case generally filed and say the a federal district court uh to compel arbitration and what happens to that district court case whenever a matter um is ordered to arbitration so the the person seeking to compel arbitration wins and it goes to arbitration what happens to the court case and then in the event in the second case we'll talk about if that uh party seeking to compel arbitration loses the motion and wants to appeal it again what happens to that district court case where you might have dueling litigation so the first case is Smith versus spazer this was a case that came out from the Supreme Court in May of this year uh and the setup is this a company that's a party to an agreement containing an arbitration Clause files a lawsuit for breach of a contract the defendant wants to invoke the arbitration clause in the contract and files a motion to compel the matter to arbitration should we're going to say we're in federal court here should the federal district court stay the law lawsuit pending arbitration or dismiss the lawsuit entirely well this turns on the language of section three of the FAA uh this Smith versus Bazi matter really came down to a statutory interpretation argument um and how the courts should apply congress's words so section three of the FAA provides that the court shall on application of one of the parties stay the trial of the action until such arbitration has been had in ordance with the terms of the agreement however there was a circuit split about whether or not the FAA in that language permitted a court to dismiss the lawsuit instead of staying it when all of the claims are subject to arbitration because as the district court is looking at things if everything from this case is going to arbitration why am I going to keep a case on my docket state or not why keep it here most of the circuits held that when a party requests a stay pending arbitration the FAA requires the court to stay the lawsuit a minority of Courts held otherwise and gave the courts discretion of whether or not to dismiss the lawsuit um scotus stepped in to resolve this circuit split in May of this year through Smith versus speri um and to no one's surprise or it shouldn't have been a surprise shall means shall in the FAA that is what Justice Soto myor when she was writing for the court tells us she said when a federal court finds a dispute is subject to arbitration and a party has requested a stay of the Court proceedings pending arbitration the court does not have discretion to dismiss the suit on the basis that all of the claims are subject to arbitration uh I will tell you I have I have been um on the other side of this before Smith versus Bazi in May of this year came out I've actually litig this issue we brought a lawsuit uh the other side the defendant moved to compel us to arbitration um we uh initially had some some dispute about whether or not the arbitration provision applied to the lawsuit but eventually concluded it did and we said um you know we'll go to arbitration but District Court please stay this litigation um while we do it maybe we need to come back to enforce it maybe there are going to be issues with the arbitration who knows but please stay it don't dismiss our claims and while we do arbitration um over our request for a Stay The District Court dismissed our lawsuit um now with Smith versus speri coming out I think that probably would have a very different uh result or at least I hope it would but the Supreme Court stepped in to resolve that circuit split so that that's what happens to the district court case if the motion to compel arbitration is granted what about if the motion to compel arbitration is denied maybe the district court finds the parties had not actually entered into an arbitration agreement or there were limitations on the arbitration agreement that limited the types of claims that were subject to arbitration or uh as Brendan just talked about maybe the party had waved their arbitration agreement in some way or waved their right to arbitrate so the district court um as we're going to talk about in coinbase versus bilski which is a 2023 Supreme Court decision um it's essentially the same facts as above there's a a district court case the defendant wants to compel arbitration but in coinbase versus bilsky The District Court denied the motion to compel arbitration the defendant filed an interlocutory appeal of the denial so coinbase versus bilsky stepped in to provide clarity about what the appeal of a denial of aemotion of compel means for the district court litigation does the district court stay it or does the matter continue to proceed through litigation through pleadings and Discovery while the appeal is also pending the Supreme Court tells us from 2023 that when the motion to compel is denied and appealed The District Court proceedings should be automatically stayed pursuant to section 16 of the FAA so again interpreting congress's words in the FAA Supreme Court tells us you have to automatically Stay The District Court proceeding while the interlocutory appeal proceeds for any of our pellet practitioners out there most of you know that interlocutory appeals are disfavored and they are generally not allowed to appeal inter intermediate orders if it doesn't fully resolve the case an emotion at compel or denial of emotion at compel is considered an in allocator order so it's not ordinarily allowed a right to an automatic appeal however section 16a of the FAA provided a statutory exception to that rule and specifically allows for interlocutory appeals of a denial of a motion to compel arbitration this is so the Supreme Court came in and clarified look District Court If you deny a motion to compel arbitration the grieved party is given the statutory right to an immediate appeal and you cannot continue the litigation here and that makes sense right because the appeal is about whether or not the case should proceed in District Court and if the district court requires you to keep litigating the case in District Court and the appellant court ultimately agrees with the party seeking to compel the matter to arbitration you've essentially nullified the appeal and nullified section 16a of the FAA so the Supreme Court tells us we can't do that we'll move to the next slide we're going to talk about another coinbase AC uh coinbase is involved in a lot of litigation regarding arbitration um and this is coinbase versus Susy this is a 2024 decision from the Supreme Court um so came out in May of this year and and here's generally the setup and it's something that I think probably a lot of you may find familiar um in your businesses or maybe in your your personal life whenever you are signing all sorts of terms and conditions uh in apps and agreements that you personally entering into but here's the setup when parties have agreed to two contracts the first sending disputes about whether the matter is subject to arbitration or whether a matter is um the arbit arbitrability decision uh that decision is going to the arbitrator in the first contract there is a second agreement between the parties that sends the arbitrability disputes to the court so does the court or the arbitrator in that case decide which contract governs and I think giving you a little bit of the factual background here is helpful to to to put in your mind how this could happen um to you or to your business clients so coinbase is a crypto exchange platform and it has users execute two agreements in this case the first one is a user agreement to say in order to use our platform here are essentially our terms and conditions for you as a user in that user agreement it provided that the arbitrator would decide all arbitrability disputes there was a second contract that coinbase entered into with a subset of its users and those were official rules for a sweep Stakes that users voluntarily entered into on the website and in the official rules coinbase included a forum selection Clause that gave sole jurisdiction over sweep Stakes related disputes to California Court the users filed a class action in California alleging various problems with the sweep Stakes under California law coinbase moved to compel arbitration relying on the arbitration arbitration clause in the first contract in the user agreement The District Court ultimately denied the motion and held that the Forum selection Clause governed the dispute and the appeals of this went up to the Supreme Court in a unanimous decision by Justice Jackson the Supreme Court clarified and told courts that a court not an arbitrator should decide if an arbitration agreement containing a delegation Clause was narrowed by a later contract providing for disputes to be decided in court so before a court is going to refer a matter and whether or not the matter is uh arbital to the arbitrator the court must first determine what the parties agreed to including as here whether the parties had agreed to arbitrate arbitrability for sweep Stakes related disputes so what the Supreme Court really told us here and told the courts here is courts it is your job in the first instance to really decide the scope of that arbitration provision if there's any question about whether or not a court or an arbitrator should decide that certainly your contract may say very clearly any questions or any disputes about arbitrability are Ed by the arbitrator clear enough but where you have a second agreement in this case or where you have some other question about whether or not the arbitrator or the court is required to decide the issue the court has to in the first instance determine the scope of that arbitration clause and whether or not the arbitrator should in fact make that arbitrability decision I will say in practice at least in the districts that I'm in um a lot of times courts are very reluctant to want to step on the toes of an arbitrator there is an arbitration agreement if it conceivably gives the question of whether or not the matter is subject to arbitration and gives that decision to the arbitrator courts are very often happy to say oh we can't do it this isn't our this isn't our question take it to the arbitrator you know maybe we'll see you later maybe we won't and I think that this coinbase versus Susy matter really um makes us uh makes the courts look into that or question it so um the takeaway is also to be um consistent with your arbitration Provisions if you have multiple agreements and be aware of this so we'll go to the next slide right um I don't know if everybody is is familiar with what a click wrap agreement or a browse wrap agreement is um so basically any kind of an Internet contract where you have to scroll through and you click submit or I accept or okay or whatever to the terms of conditions um and and so th this next topic that we're going to get into is critical um if you've ever done work with a bank um taking your kids to to an indoor trampoline park used Zoom like we're using today taken an Uber bought tickets to a concert or an NFL game online or as we we're going to touch on later bought tickets to the Disney theme parks you have encountered these online terms and conditions and almost all of them have arbitration Provisions buried somewhere in those terms and conditions remember what Lauren just talked about at its most basic level you've got to have an agreement to arbitrate what did the parties intend that's the critical analysis everything used to be done on paper but technology has changed the way we form contracts um this next case this Georgetown Hospital case from again basically a month ago uh is one of the most important arbitration cases that they have decided that I can remember um and it's going to apply to every single person's business that's probably on this Zoom call um little factual background the plain if applied for employment in 2016 checked an online box on the application agreeing to arbitrate any dispute with the hospital everybody agreed that this was a valid arbitration agreement she couldn't submit her application until scrolling through the statement that included an a quote agreement to arbitrate and at the very end was a box to be checked and the words I accept and by checking the Box the language said I accept by clicking the I accept button I'm agreeing to the employment statement which contains an agreement to arbitrate now this this individual had to take an Agility Test she she failed it she wasn't hired she was not finished she came back four years later 2020 but this time the application process was a little bit different as a returning user of the online application system her P prior information was already prepopulated into the current application at the top of the web page was a submit button and the top also said this application is subject to arbitration pursuant to South Carolina law but only by scrolling down the page would a returning applicant like this plaintiff see the pre-populated acceptance of the arbitration agreement if she had scrolled all the way down before clicking submit she would have seen her 2016 agreement with the I accept box already checked and her name and the date of when she had previously signed it but as a returning applicant she wasn't required to scroll all the way down the page in order to submit her new application the plaintiff went through the Agility Test again was rejected she didn't get the job she turned around and filed a class action alleging the test discriminated against women and the disabled the hospital turned around and said no you you have to arbitrate you signed in 2016 and in 2020 you click submit and we put the information out there that is subject to arbitration so the question is did the plaintiff agree to arbitrate in 2020 and I thought in looking at the factual background and kind of knowing the way that that I read through this stuff none of us read all these terms and conditions we always just kind of scroll through click I accept or I submit or whatever and the four circuit said no they found the planet didn't have adequate notice that the 2020 application was subject to arbitration the court said that it wasn't enough that she could have scrolled down to see the arbitration agreement she wasn't on notice that subsequent screens included the arbitration provision she could have clicked the submit button since everything was pre-populated without ever scrolling down to the actual arbitration agreement and if she could have completed her business by clicking submit on that one screen there was no reason to presume that she would scroll to subsequent screens just because they were there one of the questions that I had was well what about an obligation to read the terms of a contract don't we all have an obligation to read the terms of the contract yes we do have that Duty and with paper contracts you're rarely unaware that you're agreeing to a contract you're rarely excuse me unaware that you're agreeing to a contract or its terms but when it comes to internet contracts the duty to read is a little bit different and according to the four circuit they said the duty doesn't change into a duty to faret out contractual Provisions when they're contained in inconspicuous hyperlinks or can be found only by scrolling down through additional screens so the big takeaways from this case this Georgetown Memorial Hospital case is make sure that if you've got an applicant for employment or you're asking somebody to sign any kind of a contract with an arbitration provision make sure the applicant is aware of the arbitration provision and that they specifically agree to it and again like I said earlier I I get it nobody look at all this stuff on their computer on their their phone when they're buying tickets to a commander game or going to the symphony uh and buying your tickets from Ticket Master but this case makes clear you have to require the person to scroll through the agreement in order to reach a submission button require the person to acknowledge by a signature specifically that they're aware of and agree to the arbitration agreement that's really important and state in the agreement that it applies to the current agreement and that Georgetown probably could have fixed the issue if they said this applies to the current agreement as well as to any future applications for employment that that person may have filled out and then finally you want to use broad language if you really want to try to make everything arable any kind of dispute arising out of or related to uh you know this contract or agreement is something that should be arbitrated language that's something like that um so this was a critical case it it's in kind of a new technology space and um is really important for everybody involved all right go to the next one case just uh confirmed my um my very much dislike of requiring me to scroll through the entire terms and uses before I agree uh but nonetheless that is what the force circuit told us to do um this slide is for my fellow um federal court jurisdiction enthus iasts as I will call it I there's probably not a lot of you but I will happily agree um and admit to being one of them the question is jurisdiction of federal courts when you're looking to compel arbitration or you're looking to confirm or vacate an arbitration award um so that everyone is aware just because you are bringing a petition to compel arbitration pursuant to section three of the FAA that does not automatically give you federal court subject matter jurisdiction if seems like it should because it is a question that is arising under a federal law uh but the Supreme Court in a 2008 decision told us that isn't true the FAA doesn't itself establish Federal subject matter jurisdiction so in 2009 uh Vaden versus Discovery Bank the Supreme Court gave us some insight into this and they said well what you can do is you can look through the petition for arbitration um and see if the underlying question meaning the underlying dispute involves a federal question and if so you have Federal question sub Federal subject matter jurisdiction through Federal question jurisdiction so if your underlying dispute is um potentially a title 7 claim or fimla or Ada or copyright or patent something like that if you can look through the petition and find Federal question jurisdiction um that's fine uh and of course if you have complete diversity that's a separate basis to get into federal court but that Vaden decision left open issues about whether or not federal courts should have jurisdiction to confirm or vacate award so in 2022 in the badgro decision uh the Supreme Court in distinguishing Vaden actually said that if you were looking to confirm or modify an arbitration decision that's already been made that lookth through process that you could use on the front end to compel arbitration no longer applies when you are looking just to confirm an arbitration award because in fact the underlying question the underlying dispute of ADA or fimla or patent actually merges with the arbitration award and the only thing the federal court is deciding at that point is whether or not to enforce an agreement to arbitrate when they're looking to confirm it so just want you to be aware of those jurisdictional issues that may come up um and frankly May create some in deficiencies in your litigation where you may seek to compel arbitration in one court and confirm or vacate arbitration in a second Court from a practical standpoint Lauren that it it just makes little sense I get interpreting the statute the way that it's written um but from a practical standpoint when the Supreme Court has said when you move to compel arbitration and it sends a case to arbitration it has to stay the case in the district court um when you get an award and you come back to confirm it or try to vacate it you can't come back to that same case that was stayed you've got to basically now go to a state court uh and start all over to try to confirm or vacate the award is that kind of your takeaway that's generally my takeaway and that's certainly um the possibility unless you have you know diversity jurisdiction is is the reason that you're bringing um this the suit to confirm and compel an arbitration award so if you've got complete diversity between the parties and $75,000 you're you're golden in federal court you get to stay but this 2022 decision calls into question if you're solely there on some sort of federal question jurisdiction which again is is hard to get based on uh the lookth through method um you you may sort of lose your Venue you may lose your federal court jurisdiction when trying to confirm an award um I agree it is inefficient and seems to um it doesn't really Square in my mind with with making efficient litigation um um for parties it seems to me it's just creating additional expense uh and problems and unfortunately I don't have a good way to square those decisions for you all but I do want you to be aware of that so that you don't get surprised um in the event the court says um well I would like to confirm your arbitration award but I do not have subject matter jurisdiction over this thank you goodbye go see a state court and you are essentially starting a whole new lawsuit so we'll go on now to talk about um which one is right for your business we've talked about mediation we've talked about arbitration so let's talk about a little bit of the pros and cons of these so you can think about which one is right for your business or maybe both so we'll talk about the mediation Pros um we've got them listed up here one of the main ones is confidentiality I just need to I am obligated to remind folks on this that um everyone thinks that as soon as you walk into mediation everything a party says or does is subject to confidentiality this is my warning to you that under North Carolina and Virginia Statute and the Rules of Evidence under both of those States and the federal rules of evidence that is not automatically true the statutes prevent mediators from disclosing things there's a federal rule of evidence 408 you've probably seen splashed across all sorts of settlement Communications between you or your clients and opposing parties that say the settlement offer is subject to 408 confidentiality um note that 408 is a rule of evidence and a rule of evidence Pro prohibits the use of evidence in a civil litigation trial for certain purposes and so um what I encourage everyone to do is ensure on the front end if you are going to mediation um if you're going to mediation make sure you have an explicit agreement that everything said and done in that mediation is confidential it will promote parties to really come to the table it will promote them to um exchange their thoughts freely and you're likely to have a better outcome um but get that agreement explicitly in writing do not rely on the commonly understood belief that everything is confidential because it may not be a couple of other quick Pros we'll one will run through is mediation gives the parties control you're not waiting on a a third party whether an arbitrator or a court to make a decision so it allows the parties to come to a win-win agreement making everyone at least somewhat happy as opposed to um a win- lose agreement like you might find in court or what often happens is lose lose no one is happy with the court or arbitrator's decision um I think particularly useful mediation can be is allowing for Creative or non-traditional resolutions so if the if your dispute is over something other than just how much money um I may be owed or I may o for a set number of widgets um mediators can be extremely helpful in crafting non-traditional resolutions this is especially true where you may be in an ongoing relationship with your counterparty perhaps they are a really important vendor to you or perhaps you have other agreements with this counterparty and you're having to a dispute over one or you have some sort of Master Services agreement where you're going to continue working with this counterparty and having a business relationship with them after this dispute is resolved one way or the other um a really good mediator can help the parties get to kind of the Crux of the business issues before them and develop a solution that may be something like um amendments to an agreement or changes to agreement Provisions that benefit someone in the long run over the business relationship but thinking about that on the front end is really important um and then of course speed and cost can be a a nice um perk of mediation generally speaking mediations are a day you are just paying the mediator's fees which aren't too terribly um high for the most part we'll go to the next slide and talk a little bit about the cons um the cons here are that settlement is entirely voluntary um parties have the ability to in May withhold information or may withhold um you know their best and final offer they may not make any offer at all to settle and they may not really participate in the mediation process fully um and the mediator because there are no formal rules has no way to compel the parties to do that um and that can be extremely frustrating for clients who feel like they have just wasted their time to sit in a room with a counterparty um that isn't really they in good faith um that's frustrating for lawyers it's especially frustrating for clients feeling like they have wasted they have wasted the time so just um a quick thought on um when I think it is a really good idea to mediate again if you were looking for a creative solution where you were working with the counterparty um particularly I think it's helpful if you were in a small community um where uh it is it's helpful to amicably resolve these sort of disputes through mediation and through um something that's confidential those two um those two issues can make it really beneficial to go ahead and go to mediation and resolve these through the confidential process uh so we have our final polling question that we have got to ask for your CLE credit so this is going to talk a little bit about arbitration my company's arbitration clause includes a class action waiver so my company cannot be compelled to arbitrate any class action claims is this true or is this false as a reminder for Cle credit we do ask that you um answer all of the polling questions um and respond uh here you have a little under 30 seconds remaining all right so it looks like our results are um about 27% of you said that that is true about 73% of you said that it is false um I will tell you that that was a little bit of a trick question on my part but Brendan is gonna explain to you on the next slide um the answer to that all right so let's go to the the next slide arbitration pros and cons we're going to get to the class action waiver uh aspect in just a second one of the pros is you've got significant control you get to pick the arbitrator um you you don't have to use an arbit rtion organization but it's probably advisable that you do you can choose do you want to have one decision maker do you want to have a panel of decision makers um and there's no risk of a jury trial they generally are more efficient you have a quicker resolution I mean I've got cases that I'm scheduling now for trial in late 2025 if you want to have a trial and arbitration in the next three months you can do that and arbitrators likely have fewer cases than their federal and state trial court counterparts um costs generally thinking generally speaking I think a lot of people believe that arbitration is cheaper than litigation uh because the parties can limit Discovery and pre-trial matters and things of that nature we're going to talk about that a little bit in a second you're not really bound unless you put it in the arbitration agreement by The Rules of Evidence or procedure uh the arbitrators aren't necessarily Bound by like formal civil rules of procedure and so that can be useful to get to a quicker decision uh when with all the relevant information before the decision maker without much of a fight or moving to exclude things and stuff like that um and one of the big big uh wins for arbitration fans is privacy arbitration proceedings are not conducted in the public where the parties file documents briefs and stuff that's presumptively available for anybody and anyone to examine and look at and of course you know there's no there's no public trial another aspect is finality it's really like I said earlier it's really hard to overturn an arbitration award and usually there is very little appellate availability and so getting to this topic that that Lauren alluded to can can you limit class action claims generally yes parties can wave the right to proceed as a class action as part of an arbitration agreement um and if if you take nothing else away put a class waiver in your contracts um so that you're not class actions are incredibly expensive incredibly high risk um so put a class waiver in there if if you want to to give you an idea though of how um class actions can be uh limited um there are almost 60 million workers in the United States that are subject to mandatory arbitration agreements for employment related disputes meaning the employer requires as a condition of employment that the employee wave their right to sue in court and in 2018 scotus held the Supreme Court held that such Agreements are enforcable but there's a new trend uh that's threatening class waivers and it's called mass arbitrations and this is where plaintiff's firms or uh their firm will file tens or hundreds or tens of thousands of virtually identical arbitration claims effectively creating a class action that's why we kind of said you can have a class waiver sort of and it's made it incredibly costly even if a claim is frivolous or a series of claims are FR frivolous because it basically renders the class action waiver uh virtually useless uh let's go to the next slide arbitration cons people think it arbitration is cheaper that's not necessarily true filing fees are I I've had won $2,000 federal court complaints $400 initial retainers thousands of dollars you pay the arbitrator fees I had an arbitrator recently whose rate was $1,000 an hour what if I'd had a panel of arbitrators you don't you're obviously not paying the judge in court in consumer arbitrations you're responsible for all of the costs of arbitration that's obviously not in the the court the case in court um so things can be much more expensive than um than you might otherwise think there's a little bit of a lack of transparency arbitrators have a lot of discretion on how proceedings are conducted there's not a ton of oversight the way that there is in a public uh court of law it's harder to research an arbitrators prior case decisions some of that stuff's available but not that much because it's all private um other than some mandatory disclosures about potential bias there's little that prevents an arbitration from taking many from an arbitrator from taking a bunch of cases related to the the same party um so you may feel like you're not getting your day in court and then is it is it really confidential well what happens when you confirm or or vacate an award then it has to become public and then you're kind of at the mercy of the arbitrator um you know sometimes arbitrators are unwilling to control the timetable and the party's conduct for fear of a challenge to a subsequent award and sometimes arbitrators because they know they're not limited by the rules of evidence they try to make a decision that's quote more fair rather than the outcome that the law uh requires and then the final con is limiting appeal rights um that's that's they're just very limited options when it comes to trying to challenge an arbitration award um there are some some things that jams and tripa have done to try to combat Mass arbitrations I'm not going to get into all of that right now but there are some things things they've done to try to combat um Mass arbitrations from being uh filed and trying to limit the costs so we can go to the next slide tips and tricks go to the next slide please um we'll be brief with this we know we're running short on time uh number one know your contracts don't be surprised by an arbitration or mediation provision in your own agreement don't run the risk of waiver that we highlighted in the the Morgan versus Sundance case and like Lauren said if you've got successive agreements acknowledge the prior ADR provision and explicitly state that it's been superseded make sure there's an agreement to arbitrate have a clear statement upfront informing the person that disputes are governed by arbitration explain the difference between litigation and arbitration and what the arbitration agreement covers put it in bold put it in all caps make it conspicuous make sure people agree to arbitrate or to the arbitration provision remember that click wrap agreement that I that I mentioned earlier from the four circuit case require somebody to scroll all the way to the bottom require affirmative acceptance on the with the terms and conditions this area of the law is evolving uh you may recall or have seen in the news uh an issue with Disney a guy's wife got sick from an allergic reaction at a Disney restaurant the husband filed a wrongful death CL de death case Disney said you got to arbitrate based on something that the guy signed for his Disney Plus agreement years earlier um and so Disney tried to enforce that arbitration agreement the guy said what are you talking about I'd signed up for a Disney Plus account to watch Mulan with my kid and now I can't file a lawsuit in court on behalf of my dead wife who ate something that she was allergic to at one of your restaurants Disney ultimately backed off because of the public backlash but they had some decent arguments in there that that click wrap agreement did Cover the claim that that father had tried to bring um so those are some of the the tips and tricks with arbitration remember to make it broad if you want to have everything encompassed under the the agreement but this is there's some some nuances with this and of course Williams Mullen Lauren and I and others are always to help you put those agreements together next that's right Brendon and just briefly I will say sort of as the final trips tick and trick tips and tricks point is arbitration provisions and mediation ADR Provisions are not one- siiz fits-all so I do not recommend you take an arbitration provision from your user license agreement and just stick it into some specialized contract you may be negotiating with a new vendor who you're going to have a long-term Master Services agreement really think about what Brennon and I have talked about and try to tailor your ADR Provisions to the type of arbitration or mediation that you want um I think we are all out of time today we really appreciate everyone sticking with us through this we hope that this was helpful and talking to you a bit about um some ADR options you may have if you asked a question we didn't get to today um we will try to reach out after this program and follow up with you directly certainly if you have any questions you would like to talk with us about our information is on the screen or on the Internet and we are happy to talk about these issues with you at any point thanks for joining us