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Effects on Securities Arbitration of Dodd Frank and Supreme Court Cases
Effects on Securities Arbitration of Dodd Frank and Supreme Court Cases
Effects on Securities Arbitration of Dodd Frank and Supreme Court Cases
Effects on Securities Arbitration of Dodd Frank and Supreme Court Cases
Effects on Securities Arbitration of Dodd Frank and Supreme Court Cases
Effects on Securities Arbitration of Dodd Frank and Supreme Court Cases
Effects on Securities Arbitration of Dodd Frank and Supreme Court Cases
Effects on Securities Arbitration of Dodd Frank and Supreme Court Cases
Effects on Securities Arbitration of Dodd Frank and Supreme Court Cases
Effects on Securities Arbitration of Dodd Frank and Supreme Court Cases
Effects on Securities Arbitration of Dodd Frank and Supreme Court Cases
Effects on Securities Arbitration of Dodd Frank and Supreme Court Cases
Effects on Securities Arbitration of Dodd Frank and Supreme Court Cases
Effects on Securities Arbitration of Dodd Frank and Supreme Court Cases
Effects on Securities Arbitration of Dodd Frank and Supreme Court Cases
Effects on Securities Arbitration of Dodd Frank and Supreme Court Cases
Effects on Securities Arbitration of Dodd Frank and Supreme Court Cases
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Effects on Securities Arbitration of Dodd Frank and Supreme Court Cases

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This presentation discusses the effects on securities arbitration of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Supreme Court cases including Rent-A-Center v. Jackson and …

This presentation discusses the effects on securities arbitration of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Supreme Court cases including Rent-A-Center v. Jackson and Stolt-Nielsen v. AnimalFeeds Int’l Corp.

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  • 1. Recent Arbitration Cases in the U.S. Supreme Court Stephen J. Ware Professor of Law University of Kansas
  • 2. Rent-A-Center v. Jackson, 130 S.Ct. 2772 (2010) • Jackson signed an arbitration agreement as a condition of his employment with Rent-A-Center. • Jackson filed an employment discrimination claim against Rent-A-Center in federal district court. Rent-ACenter moved to stay or dismiss and compel arbitration. • Jackson opposed the motion on the ground that the arbitration agreement was unconscionable and, thus, unenforceable.
  • 3. Federal Arbitration Act § 2 "written provision . . . to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."
  • 4. Prima Paint Corp. v. F&C Mfg. Co., 388 U.S. 395 (1967) •Arbitration clause in contract between Prima and F&C. •Prima did not make payments required by contract with F&C. •Prima alleged F&C fraudulently induced Prima to sign contract.
  • 5. Prima Paint Corp. v. F&C Mfg. Co., 388 U.S. 395 (1967) F&C sought arbitration and Prima sued to rescind contract (due to fraud). SCT: court may not address fraudulent misrep. argument. Result: Prima must arbitrate whether it formed enforceable arb. agreement.
  • 6. Prima Paint Case applied “Separability Doctrine” holding that “arbitration clauses as a matter of federal law are „separable‟ from the contracts in which they are embedded, and that where no claim is made that fraud was directed to the arbitration clause itself, a broad arbitration clause will be held to encompass arbitration of the claim that the contract itself was induced by fraud.”
  • 7. After Prima Paint Most challenges to arbitration agreements go to arbitrators because these arguments apply to the contract containing the arb. clause. Unconscionability is one of the few challenges often directed specifically to the arb. clause and thus heard by courts.
  • 8. Rent-A-Center v. Jackson (2010) Jackson argued that his employment arbitration agreement was unconscionable because “it contained one-sided coverage and discovery provisions and a provision specifying that the arbitrator's fee was to be equally shared by the parties. Jackson also argued that the Agreement was procedurally unconscionable because the form contract was presented to him as a nonnegotiable condition of his employment.”
  • 9. Rent-A-Center v. Jackson (2010) “The Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement including, but not limited to any claim that all or any part of this Agreement is void or voidable.”
  • 10. Class Actions (outside the securities context) • Businesses (typically defendants) often argue that, by agreeing to arbitrate, plaintiffs waived their right to bring a class action in either litigation or arbitration. • However, many courts have held unconscionable arbitration clauses prohibiting class actions. • So many businesses drafted clauses silent on whether classwide relief is permitted or prohibited.
  • 11. Class Actions (non-securities), part 2 • Stolt-Nielsen v. AnimalFeeds Int’l Corp., 2010 WL 1655826 (U.S. April 27, 2010), which interpreted an arbitration clause silent on whether class actions are permitted as prohibiting them. • Will courts hold silent clauses unconscionable?
  • 12. Class Actions (non-securities), part 3 AT&T Mobility LLC v. Concepcion, 584 F.3d 839 (9th Cir.), cert. granted, 2010 WL 303962 (U.S. May 24, 2010). Does the FAA “preempt*+ States from conditioning the enforcement of an arbitration agreement on the availability of particular procedures – here, class-wide arbitration – when those procedures are not necessary to ensure that the parties to the arbitration agreement are able to vindicate their claims.”?
  • 13. Class Actions in the securities context • FINRA Customer Rule 12204 prevents enforcement of arbitration agreement “against a member of a certified or putative class action . . .”. Accord FINRA Industry Rule 13204. • An earlier version of this rule (NASD Rule 10301) has been interpreted to prevent enforcement of an arbitration clause purporting to waive class actions. Good v. Ameriprise , 2007 WL 628196, at *2 (D. Minn.). See also Clark v. First Union, 64 Cal. Rptr. 3d 313 (Ct. App. 2007)(interpreting rule as agreement to litigate, rather than arbitrate, class claims).
  • 14. Will these recent SCT cases impact securities arbitration? From ADR BRIEFS, 28 Alternatives to High Cost Litig. 146 (2010): If the Rent-a-Center and AT&T Mobility decisions cut off judicial determinations of ADR fairness, there could be a backlash. The result would be a boost to the chances of enactment for the Arbitration Fairness Act, a 2009 bill in committee that would outlaw mandatory predispute arbitration agreements in consumer and employment contracts. See, e.g., Marcia Coyle, “Arbitration Showdown Looms Between Congress, Supreme Court,” Nat'l Law Journal (June 14, 2010). “If they were to buy the most sweeping arguments,” predicts Deepak Gupta, director of Public Citizen's consumer justice project, “then Congress would step in.” Gupta represents respondent Concepcion.
  • 15. Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-___ (2010) § 921 amends Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o), by adding: “(o) AUTHORITY TO RESTRICT MANDATORY PREDISPUTE ARBITRATION.—The Commission, by rule, may prohibit, or impose conditions or limitations on the use of, agreements that require customers or clients of any broker, dealer, or municipal securities dealer to arbitrate any future dispute between them arising under the Federal securities laws, the rules and regulations thereunder, or the rules of a selfregulatory organization if it finds that such prohibition, imposition of conditions, or limitations are in the public interest and for the protection of investors.
  • 16. Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-___ (2010) § 964 requires the Comptroller General of the United States to submit “a report that includes an evaluation of the oversight by the Commission of national securities associations . . . with respect to— … (4) the arbitration services provided by the national securities associations; …
  • 17. Stephen J. Ware Professor of Law University of Kansas ware@ku.edu 785-864-9209

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