Arbitration Clause

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Parties to an arbitration agreement sometimes choose to include a delegation clause, which is a provision that delegates to the arbitrator—rather than a court—gateway questions of arbitrability, such as whether the agreement covers a particular controversy or whether the arbitration provision is enforceable at all. See Caremark LLC v. Chickasaw Nation.

In Holley-Gallegly v. TA Operating, LLC, the Ninth Circuit recently reinforced the Supreme Court’s decade-old distinction between the analysis needed to determine whether a dispute is subject to arbitration on the one hand, and whether an arbitrator has been legally delegated the authority to make that threshold determination on the other. The decision provides important lessons to practitioners litigating disputes regarding the enforceability of delegation clauses.

The Ninth Circuit recently issued an opinion that could shape how companies draft and revise two oft-encountered types of contracts: terms of service agreements (“TOS”) and arbitration clauses.

In Jackson v. Amazon.com, Inc., the Ninth Circuit affirmed the district court’s order denying Amazon.com, Inc.’s motion to compel arbitration in a case brought by a proposed class of “Amazon Flex” drivers. Amazon Flex is a delivery program run through a smartphone app that Amazon uses to engage individuals to make Amazon deliveries in their personal cars. 

The global pandemic has brought about countless changes, including, for many households, increased reliance on online retail and delivery services, such as Amazon.

When consumers sign up for these services or place their orders, they are likely to see a notice regarding terms and conditions, which may include an arbitration agreement pursuant to which the consumer agrees to arbitrate disputes arising from the use of the service, rather than pursue their claims in court. Recent decisions underscore the importance of the terms of these agreements and the challenges consumers may face if they wish to avoid arbitration of disputes with service providers, especially when they continue to rely on those services.

On June 1, 2020, the U.S. Supreme Court delivered a unanimous opinion regarding the relationship between domestic equitable estoppel and the enforcement of arbitration agreements. In GE Energy Power Conversion France SAS, Corp., Converteam SAS v. Outokumpufka Stainless USA, LLC, et al., (“GE Energy Power”), the Court addressed the question of whether the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U. S. T. 2517, T. I. A. S. No. 6997 (the “New York Convention” or “Convention”) conflicts with domestic equitable estoppel doctrines that permit the enforcement of arbitration agreements by nonsignatories. Writing for the Court, Justice Clarence Thomas explained that it does not.

A recent decision of the New Jersey Appellate Division considered the enforceability of arbitration agreements by non-signatories. In Foti v. Toyota Motor Sales, U.S.A., Inc., the plaintiff filed a putative class action complaint against defendant alleging violations of New Jersey’s Truth-In-Consumer Contract, Warranty and Notice Act (“TCCWNA”), as well as the state’s Lemon Law (N.J.S.A. 56:12-29 to -49). The panel determined, among other things, that by signing a lease agreement, plaintiff agreed to arbitrate her dispute not only with the underlying signatories of the lease, but with any of its affiliates.