Articles Posted in Arbitration

It is not at all uncommon for a company to require individuals to agree to its Terms of Use when they sign up for an online service or when creating an account on a website or mobile app. It is also not uncommon for that service, website, or app to incorporate technology from multiple different providers. Such was the case in a case recently decided by the federal Seventh Circuit Court of Appeals. In its opinion, the Seventh Circuit rebuffed arguments by a technology company that it should be entitled to enforce certain arbitration provisions in a user agreement between OfferUp and its users.

Onfido owns and licenses the TruYou facial recognition software, which is marketed as software aimed at helping online resellers verify their identity. OfferUp, an online marketplace for buying and selling used items, uses the TruYou software in its mobile app to verify the identities of its users.

One of OfferUp’s users, Fredy Sosa, sued Onfido, alleging that its TruYou software violated the Illinois Biometric Information Privacy Act (BIPA). Sosa signed up to become a verified user on OfferUp’s mobile app. The identity verification process involved uploading photographs of his driver’s license and face. OfferUp’s verification process allegedly involved using Onfido’s TruYou software to extract and store biometric identifiers contained in the uploaded photos to verify that the face in the photograph matches the face on the driver’s license. Sosa subsequently filed a putative class action lawsuit against Onfido alleging that the company violated the BIPA by failing to provide him with a biometric data retention policy or to advising him whether and when it will permanently delete the biometric identifiers that it derived from his face. Sosa additionally alleged that Onfido violated the BIPA by failing to require him to sign a written release allowing it to “collect, use, or store his biometric identifiers derived from his face.”

After Onfido removed the case to an Illinois federal court, it sought to have the lawsuit dismissed and to compel arbitration of Sosa’s claims. The company relied on an arbitration provision in OfferUp’s Terms of Service which Sosa agreed to when signing up as a user of the OfferUp marketplace as the basis for seeking to compel arbitration of Sosa’s claims. The district court denied Onfido’s motion to stay Sosa’s complaint and compel individual arbitration, finding that Onfido cannot enforce the arbitration provision because it wasn’t a party to the agreement between OfferUp and its users. Continue reading ›

After a spectator at a Chicago Cubs game, who was hit in the face by a baseball, sued, the team and MLB moved to compel arbitration. The Illinois trial court rejected the motion, finding that the arbitration provision was procedurally unconscionable and therefore unenforceable. The Illinois appellate court agreed, pointing to the fact that the fine print on the back of the ticket failed to include all of the arbitration terms and conditions, and that expecting a ticketholder to access a separate website to view the full terms and conditions while navigating the commotion of a baseball game was so onerous that it could not be said that the plaintiff had fairly agreed to the conditions.

Laiah Zuniga was hit in the face by a foul ball while attending a Chicago Cubs baseball game at Wrigley Field. Zuniga obtained entry to the ballpark by presenting a paper ticket created by the Cubs’ ticket office. Zuniga had been given the ticket earlier that day by her father, who won it in a raffle at his workplace. The front of the ticket contained artwork depicting one of the Cubs players; information about the opponent, the date and time of the game, the seat location, the ticket price, a barcode, and small print that stated that the ticket was subject to terms/conditions on the reverse side.

On the back of the ticket was an advertisement as well as six paragraphs of fine print. The fine print made reference to terms and conditions available either on the Cubs’ website or available at the Cubs administrative office. The ticket did not specify where the administrative office could be found. The fine print contained a warning that baseballs could be hit into the stands and that spectators should stay alert and disclaimed liability for any injuries resulting from such occurrences. The final paragraph specified that any disputes would be resolved by binding arbitration. Continue reading ›

Major League Baseball’s efforts to end a lawsuit filed by a woman struck by a foul ball at Wrigley Field hit a snag when an Illinois appellate court ruled recently that the injured fan can move ahead with her lawsuit. In its ruling affirming the decision of the trial court, the First District appellate court held that the plaintiff was not required to arbitrate her case with the MLB per the terms of the arbitration agreement printed on the back of her ticket.

The case stems from events that took place during the Chicago Cubs’ August 27, 2018 home game, where the plaintiff, Laiah Zuniga, was hit in the face by a foul ball while at the game played at Wrigley Field, the Chicago Cubs home ballpark. Zuniga received her ticket on the day of the incident from her father who won it in a raffle at his workplace. The paper ticket would be familiar to anyone who has attended sporting or entertainment events. The front of the ticket included artwork depicting one of the Cubs players; information about the opponent, the date and time of the game, the seat location, and ticket price; a barcode; and small print that stated, “Event date/time subject to change. No refund. No exchange. Subject to terms/conditions set forth on the reverse side.”

A large portion of the back of the ticket was taken up by an advertisement. Next to the advertisement were six paragraphs of fine print. The first paragraph provided that by using the ticket, the individual “agrees to the terms and conditions available at www.cubs.com/ticketback (the ‘Agreement’), also available at the Chicago Cubs administrative office. Key terms of the Agreement are summarized below (the Agreement controls in the event of any conflict).” The third paragraph included a sentence in all capital letters stating that baseballs might be hit into the stands, that spectators should stay alert, and that the Cubs and other entities would not be liable for resulting injuries.

Important to the plaintiff’s lawsuit, the fifth paragraph of text stated, in regular type, “Any dispute/controversy/claim arising out of/relating to this license/these terms shall be resolved by binding arbitration, solely on an individual basis, in Chicago, Illinois.” Zuniga attested in an affidavit that she never read the fine print or visited the URL printed on the back of the ticket where the terms and conditions supposedly accompanying her ticket could be viewed. Had she done so, she would have found a much longer and more detailed arbitration agreement, which the Court reproduced verbatim and which spanned more than 3.5 pages of the Court’s opinion. Continue reading ›

Two corporations agreed to arbitrate a dispute in front of a foreign arbitration panel in Birmingham, England, under the terms of their agreement. After they agreed to arbitrate, one of the parties filed an ex parte application to a U.S. district court asking the court to issue a subpoena compelling a third company to produce documents for use in the arbitration. The district court initially granted the motion, but later quashed it after the defendant objected. The plaintiff appealed, and the appellate panel determined that the district court did not err. The appellate panel found that private arbitration panels did not qualify for the kind of discovery assistance provided for foreign state-sponsored tribunals under §§ 1781 and 1782 of Title 28.

Rolls-Royce PLC manufactured and sold a Trent 1000 aircraft engine to the Boeing Company for incorporation into a 787 Dreamliner aircraft. In January 2016, Boeing tested the new aircraft at its facility near the Charleston International Airport in Charleston, South Carolina. A piece of metal became lodged in an engine valve, restricting the flow of fuel to the engine. As Boeing employees attempted to fix the problem, the engine caught fire, damaging the aircraft. Boeing demanded compensation from Rolls-Royce, and in 2017 the companies settled for $12 million. Rolls-Royce then sought indemnification from Servotronics, Inc., the manufacturer of the valve. Continue reading ›

In a unanimous opinion, the U.S. Supreme Court recently ruled that allowing nonsignatories to an international arbitration agreement to compel arbitration through domestic equitable estoppel doctrines does not conflict with the signatory requirement of the U.N. Convention on the Recognition and Enforcement of Foreign Arbitral Awards (known as the New York Convention).

That case, GE Energy Power Conversion France SAS v Outokumpu Steamless USA, LLC, stems from a 2007 contract between a contractor and steel manufacturer for the construction of mills in the manufacturer’s steel plant. The plaintiff, an international subsidiary of the global power company, General Electric, had been subcontracted by the contractor to produce nine motors for the mills. Outokumpu Stainless USA, LLC (which acquired ownership of the plant), and its insurers sued GE Energy after the motors allegedly failed.

GE Energy moved to dismiss the case and sought to compel arbitration by enforcing the arbitration clauses in the contract between the contractor and steel manufacturer. A Federal District Court granted the motion to dismiss and compel arbitration. The Eleventh Circuit Court of Appeals reversed, holding that the New York Convention: (i) requires parties seeking to compel arbitration to be signatories of the arbitration agreement, and (ii) precludes the use of state-law doctrines of equitable estoppel to compel arbitration in conflict with the Convention’s signatory requirement. In reversing the Eleventh Circuit, the Supreme Court held that use of state law doctrines of equitable estoppel to compel arbitration by nonsignatories to an international arbitration agreement was not barred by or conflict with the New York Convention.

Before announcing its holding, the Court first analyzed the two primary authorities at issue in the case, the Federal Arbitration Act (“FAA”) and the New York Convention. The Court began it discussion by noting its previous holdings that the FAA permits a nonsignatory to rely on state-law equitable estoppel doctrines to enforce an arbitration agreement. Generally, in the arbitration context, the Court explained “equitable estoppel allows a nonsignatory to a written agreement containing an arbitration clause to compel arbitration where a signatory to the written agreement must rely on the terms of that agreement in asserting its claims against the nonsignatory.” Continue reading ›

Delivery drivers for an online food delivery service sued the platform alleging violations of the Fair Labor Standard Act for failing to pay overtime. The delivery service sought to compel arbitration, which the drivers had agreed to in their employment agreements. The workers attempted to argue that they were engaged in foreign or interstate commerce and therefore were exempt from the Federal Arbitration Act, though the district court disagreed. The appellate panel found that the plaintiffs had completely ignored the governing framework and that being “engaged in commerce” and “involved in commerce” were two completely different concepts. The panel found that the § 1 exemption of the FAA was therefore narrowly tailored and that it was not unusual that the employment agreement failed to meet § 1’s more stringent requirement while still meeting the far broader requirements of § 2. The panel determined that the plaintiffs were not entitled to the exemption and it affirmed the decision of the district court

Grubhub is an online and mobile food-ordering and delivery marketplace. Grubhub provides a platform for diners to order takeout from local restaurants, either online or via its mobile app. When a diner places an order through Grubhub’s app, Grubhub transmits the order to the restaurant, which then prepares the diner’s meal. Once the food is ready, the diner can either pick it up themselves or request that Grubhub dispatch a driver to deliver it to her.

Grubhub considers its drivers to be independent contractors rather than employees. Several drivers who worked in cities including Chicago, Portland, and New York filed two suits against Grubhub, alleging violations of the Fair Labor Standards Act for failing to pay overtime. The suits hit a roadblock, however, as the drivers had signed agreements compelling arbitration. The workers attempted to argue that they were engaged in foreign or interstate commerce and therefore were exempt from the Federal Arbitration Act. The district courts disagreed and compelled arbitration. The plaintiffs then appealed, and the 7th Circuit consolidated the appeals. Continue reading ›

There are so many changes that are made in accounting, auditing, tax and consulting standards that the overlooking of how disputes are solved is a very real possibility.  This is why users and providers of these services should be familiar with the benefits and disadvantages of the various different Alternative Dispute Resolution (ADR) Services.  We will, therefore, suggest that ADR clauses be used in the engagement of services contracts.

CPAs have to consider the wording of any ADR clause approved by a professional liability insurer and legal counsel. These days, most professional liability insurers advocate for the use of non-binding forms of dispute resolution and some may even require this in order to reap the benefits of insurance.

The most common ADR methods available are mediation and arbitration. These are also governed by the AAA’s Accounting and Related Services Arbitration Rules and Mediation Procedures. The process is fair and impartial. To ensure that the ADR clause does not affect a CPA’s independence, the wording must be drafted carefully and in line with the   AICPA Code of Professional Conduct  Rule in Section 1.228.  This gives a generic guide on the use of dispute resolution forums and liability limitation clauses. The inclusion of such clauses does not absolve liability of being unable to meet professional standards.  CPA’s may also need to be required to report a judgment in excess of $25,000 whether granted in court or arbitration.  This amount varies from jurisdiction to jurisdiction.  For that reason, knowledge of the rules is important.

Negotiation

The first step in the settlement of a dispute must always include negotiation.  Parties must make an effort to resolve in the best and least expensive way possible.  Sometimes, ego can come into play and undermine the process.  However, if parties are able to manage their emotions, it will be the most economic outcome, utilizing less time and money.  Negotiations can never take place in bad faith.  If so, involve an attorney that can carefully oversee and draft the proper terms.  They can also intervene on your behalf.  Continue reading ›

Despite plenty of evidence to the contrary, certain business advocates continue to insist that arbitration bans hurt individual consumers and employees more than they help them. They are not bothered by the facts, such as:

  1. Arbitration does not allow multiple plaintiffs to combine their claims into a class action or collective action. This effectively blocks consumer lawsuits from ever seeing the light of day because an individual’s claims are often smaller than the cost of filing a lawsuit or pursuing the dispute in arbitration.
  2. There is no explanation for why an arbitrator ruled the way they did and no opportunity to appeal the decision.
  3. The arbitration process is kept private, which means the results, and even a customer filing for relief for a complaint, are never made public. The transparent nature of the courts is an inherent ingredient to justice and accountability. By keeping all the proceedings private, other consumers with identical or similar complaints will not even know that they have a valid complaint.
  4. Arbitration is not always neutral. While some arbitrators have a good reputation for neutrality, others are less trustworthy, and many arbitration clauses give the company the power to choose the arbitrator. Because arbitration is a business, many arbitrators tend to be tempted to rule in favor of the side that brings them a lot of business.

Despite all these facts, and extensive research conducted by the Consumer Financial Protection Bureau (CFPB) showing how arbitration clauses harmed consumers, the U.S. House of Representatives and Senate both voted to overturn a CFPB rule that would prohibit banks from putting arbitration clauses in their consumer contracts. Continue reading ›

Despite claiming it’s ready to make amends to its customers after multiple scandals involving things like opening bank accounts and lines of credit for its customers without their notice or consent, overdraft fees, and fraudulent car loans, Wells Fargo’s CEO, Timothy Sloan, recently testified before the Senate Banking Committee to defend the bank’s use of arbitration agreements.

This is in spite of the fact that the bank has said it will not enforce its arbitration agreements with the class of consumers seeking compensation for the money lost and damage done to their credit ratings as a result of the false accounts the bank opened on their behalf. Without the option to file a class action lawsuit against the bank, each customer would have been forced into individual arbitration, the cost of which would likely have caused many to abandon the case if the costs of filing were more than their claims were worth.

Most cases never make it through arbitration because of the cost, the inability to file as a class or collective action, and the private nature of arbitration that prevents people from becoming aware of legal actions with claims similar to theirs. And yet banks and Big Business advocates continue to insist that arbitration benefits consumers more than class action or collective action lawsuits.

Sloan even cited a study conducted by the Consumer Financial Protection Bureau (CFPB) that Sloan claimed proved consumers received more redress from arbitration than collective actions or class actions. Continue reading ›

Alternative Dispute Resolution (ADR)  processes such as Arbitration an alternative to turning to courts to resolve potentially costly commercial disputes. A preference for ADR lies within attempts to focus on the solution, ADR allows us to bypass a number of costly things.

Most Litigation teams, including this firms’,  has noticed that courts are struggling with budget cuts; an increase in fees and a decreased level of service.  However, this has not decreased the use of litigation.  Litigation is normally the last resort and costs much more than many parties anticipate.

This is one reason, for which, businesses look to arbitration, a private form of dispute resolution which can be used to resolve commercial disputes, instead. Most businesses would also agree that business is about avoiding friction, getting to the right result with less friction. That’s what ADR provides.

Astute attorneys will make the correct recommendations for their clients and will make all attempts to ensure that effective measures are in place in order to service their clients most effectively.  Hence, an approach requires the balancing of a preference for alternative dispute resolution with judgment on when a dispute simply needs to be fought out in court. One truly must be skilled enough to know the implementation of the strategy and of when to fight. That is why the incorporation of arbitration agreement clauses in contracts, leans towards ensuring that a dispute resolution process is ‘in-built’ into contracts, allowing both parties to continue to do business while an issue is resolved. What’s more, is that these clauses are easy to draw for those who have working knowledge and experience.  Arbitration simply isn’t used as often as it should be and sometimes attorneys are unfamiliar with the process, so it may not be considered.

Mediation is an area many are familiar with, but with arbitration, there is no need to offer a concession to those with whom the business is in dispute. A party may wish to negotiate, but can’t be compelled and a binding decision can be reached without the consent of the opponent.  Other advantages it has to offer include it being private, far more flexible, with a certain outcome reached by utilizing an expert in the sector the parties operate in.  The judgment is also not public, nor is the trial.  Courts only become involved if the losing party fails to comply with the arbitrator’s decision.  Continue reading ›

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