SCOTUS Set To Hear At Least One Arbitration Case This Term

by Stinson Leonard Street - Arbitration Nation

ArgentinelogoThe U.S. Supreme Court has been knocking out blockbuster arbitration opinions annually in recent years.  2010?  Stolt-Nielsen and Rent-a-Center.  2011?  Concepcion.  2012? CompuCredit (Okay, that does not qualify as a blockbuster.) 2013? AmEx and Sutter.  At this point, SCOTUS has accepted roughly half of the cases it will hear this year, and only one arbitration case is on the docket, with two other petitions having been denied.

The case it will hear (on December 2) is BG Group v. Republic of Argentina.  (ScotusBlog’s case page here.)  That case, according to Petitioner, presents this question: “In disputes involving a multi-staged dispute resolution process, does a court or instead the arbitrator determine whether a precondition to arbitration has been satisfied?” 

The Argentina case arises out of the economic crisis in Argentina in the late 90s, and the measures the government took to address that crisis.  The Petitioner is a British company that invested in an Argentinian natural gas company.  It claimed that the Argentine measures “destroyed its investment and restricted it from both pursuing judicial relief and benefiting from the renegotiation process.”  The parties participated in UNCITRAL arbitration and Argentina lost.  Most important to the appeal, Argentina argued that the arbitrators lacked authority because the Bilateral Investment Treaty between the U.K and Argentina requires 18 months of litigation in an Argentine court before the arbitration could proceed, and the no litigation had taken place in Argentine courts.  The arbitration panel determined it had jurisdiction to hear the case and ruled for the investor.

Argentina then moved to vacate the award, and the district court denied its motion.  The D.C. Circuit, however, reversed that decision and vacated the arbitration award.  It found the Panel had “rendered a decision wholly based on outside legal sources and without regard to the contracting parties’ agreement establishing a precondition to arbitration.”

It will be interesting to see if SCOTUS deals with this case based purely on its deferential standard of review, a la Sutter, or whether it takes the opportunity to clarify which issues are “gateway” issues for courts to decide.

SCOTUS denied cert in these two other arbitration cases on Monday:

Toyota Motor Corp. v. Choi, an appeal from this Ninth Circuit decision.  (Case page at ScotusBlog here.)  The Petitioner framed the question presented as:

“The parties to a contract agreed to arbitrate any claim or dispute arising out of the contract, including disputes over the arbitrability of the claim itself. Plaintiffs sued a non-signatory to the contract, and that non-signatory defendant sought to compel arbitration to determine whether the plaintiffs’ claims are arbitrable. The question presented in this case is whether the non-signatory defendant can compel arbitration of the arbitrability of the plaintiffs’ claims.”

In other words, can non-signatories use a delegation clause to get an arbitrator to decide whether equitable estoppel applies?  That issue will have to develop further in the district and circuit courts.

Bakoss v. Certain Underwriters at Lloyd’s of London, an appeal from this Second Circuit decision.  (Case page here.)  The Petitioner framed the question presented as two-fold:

“1. By electing not to define the term ‘arbitration,’ did Congress evince an intent to respect relevant state-law definitions of ‘arbitration,’ so long as applying them would not undermine the FAA’s policy goals?

2. If it is proper to disregard relevant state-law definitions of ‘arbitration’ in favor of one created by federal judges, should that definition exclude ADR that does not necessarily (a) resolve the plaintiff’s entire cause of action (b) through an adversarial process?”

I could hardly believe SCOTUS didn’t bite on the very definition of arbitration!  (Of course, I was biased, having authored an amicus brief in favor of cert.)

There is still time to get cases on the Court’s Spring calendar, but at this point, the Argentina case is the only arbitration law SCOTUS will be deciding.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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