Adr Update

• Jurisdiction: United States,Federal,Arizona,California
• Author: Ramit Mizrahi
• Citation: Vol. 37 No. 4
• Publication year: 2023

ADR UPDATE

AUTHOR^*

Ramit Mizrahi

IN CIRCUIT SPLIT, NINTH CIRCUIT HOLDS THAT DISTRICT COURT CAN DISMISS ACTION WHEN ALL CLAIMS SUBJECT TO ARBITRATION

Forrest v. Spizzirri, 62 F.4th 1201, 1203 (9th Cir. 2023)

Delivery drivers sued their employer for violations of Arizona and federal wage and hour laws. The employer removed the case to federal court, then moved to compel arbitration and to dismiss the case. The plaintiffs conceded that all of their claims were subject to arbitration but sought to have the case stayed rather than dismissed. They argued that the Federal Arbitration Act (FAA), requires that a district court stay a case pending arbitration. Section three of the FAA provides that a court, "upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement" (so long as the party is not in default in proceeding with arbitration). 9 U.S.C. § 3 (emphasis added). The district court rejected this argument and granted the employer's motion, compelling arbitration and dismissing the case without prejudice. The plaintiffs appealed.

The Ninth Circuit affirmed. Established Ninth Circuit precedent provides that, when all claims are subject to arbitration, "notwithstanding the language of [section three], a district court may either stay the action or dismiss." Forrest, 62 F.4th at 1204-025 (quoting Johnmohammadi v. Bloomingdale's, Inc., 755 F.3d 1072, 1074 (9th Cir. 2014)). The court explained that, "[a]s a three-judge panel we are compelled to apply circuit precedent unless it is clearly irreconcilable with the reasoning or theory of intervening higher authority." Id. at 1205 (cleaned up). Thus, the district court did not abuse its discretion in dismissing rather than staying the case.

In a concurrence, Judge Graber (joined by Judge Desai) encouraged the Supreme Court to take up the issue to resolve a circuit split. She further encouraged the Ninth Circuit to take the case en banc in the meantime so that it could follow what she viewed to be required by the FAA.

ARBITRATOR COULD NOT BE DISQUALIFIED BASED ON INFORMATION CONTAINED IN VOLUNTARY DISCLOSURE

Sitrick Group, LLC v. Vivera Pharmaceuticals, Inc., 89 Cal. App. 5th 1059 (2023)

This non-employment, non-consumer case reaffirms the established principle that a party cannot disqualify an arbitrator based on a disclosure that is not legally required. Sitrick Group, a crisis management company, sued a pharmaceutical company client (Vivera) that hired it to help address negative publicity but failed to pay its $292,773.32 bill. Sitrick filed its demand for arbitration with Judicial Arbitration and Mediation Services (JAMS), and soon after the parties selected an arbitrator in the matter. Days later, the arbitrator issued a disclosure checklist that provided that he would entertain future offers of employment or new professional relationships from parties or lawyers in the matter. The checklist provided that, in non-consumer matters (as this case was designated), the arbitrator would not inform the parties of any such offers or new matters. It further provided that that these disclosures constituted a waiver of any further disclosure requirements regarding subsequent employment involving the same parties, lawyers, or law firms. Vivera did not object.

The following year, the arbitrator agreed to serve as the arbitrator in another matter involving...