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"ADR Prof Blog" - 5 new articles

  1. FINRA Reverses Hearing Panel in Schwab Enforcement Case: Class Action Waiver Violates FINRA Rules
  2. Strong on Class, Mass, and Collective Arbitration discussed at ITA-ASIL Conference
  3. General Mills Reverses Course — Comments from Imre Szalai
  4. Booklist from the ABA DR Annual Meeting
  5. Call for papers: Transnational Dispute Management
  6. More Recent Articles
  7. Search ADR Prof Blog
  8. Prior Mailing Archive

FINRA Reverses Hearing Panel in Schwab Enforcement Case: Class Action Waiver Violates FINRA Rules

In a stunning but hoped-for reversal (based on am amicus brief I co-authored in the case), FINRA’s Board of Governors reversed a disciplinary hearing panel decision in the FINRA v Schwab enforcement action. (See some of my previous blog posts on the subject, herehere and here.) That hearing panel had held, among other things, that Schwab’s class action waiver in its standard customer agreement’s pre-dispute arbitration clause violated FINRA rules but those rules could not be enforced under the Federal Arbitration Act.

FINRA reversed that aspect of the hearing panel decision, and held that the Securities Exchange Act constituted a sufficient Congressional command to overcome the FAA’s mandate to courts to enforce arbitration agreements as written.  Since the Exchange Act delegated to the SEC, which in turn delegated to FINRA, the authority to regulate broker-dealers’ arbitration agreements for the protection of investors, FINRA’s rules barring class action waivers and mandating that investors be able to bring class claims in court were enforceable.

This is the precise argument I spelled out in my article with Professor Barbara Black, Investor Protection Meets the Federal Arbitration Act, 1 Stan. J. Complex Litig. 1 ­­(2012).

In my view, this is the right result, both under the law and for investors.


Strong on Class, Mass, and Collective Arbitration discussed at ITA-ASIL Conference

Stacie Strong (Missouri) sends this dispatch from the recent Institute of Transnational Arbitration – American Society of International Law (aka ITA-ASIL) conference in Washington D.C.


The last few years have seen a significant number of judicial opinions concerning class arbitration in the United States, both from the U.S. Supreme Court (American Express Co. v. Italian Colors Restaurants, Oxford Health Plans LLC v. Sutter, AT&T Mobility LLC v. Concepcion, and Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp.) and the lower federal and state courts.  These developments have received a great deal of attention, both in the United States and abroad.  However, much less attention has been paid to other countries’ experience with large-scale arbitration, a situation that was remedied by a recent conference co-sponsored by the Institute of Transnational Arbitration (ITA) and the American Society of International Law (ASIL) and held in Washington, D.C.

The conference focused on class claims in the international and comparative context as well as mass claims in the international investment setting.  Although the discussion addressed the challenges currently facing class claimants in the United States as a result of recent Supreme Court jurisprudence, the presentations went beyond the standard domestic analysis and instead provided a number of new insights into how large-scale claims might be addressed in arbitration.

Many of the proposed solutions come from outside the United States, although a few have also been seen in the U.S., albeit in small numbers.  Thus, for example, it was noted that parties to large-scale disputes could avoid restrictions on class waivers by filing large numbers of individual bilateral arbitration in order to drive respondents to the settlement table.  This approach has been used in the United States on several occasions.  Another alternative that was discussed involved legislation that takes corporate respondents’ concerns about large-scale arbitration into account.  When considering this possibility, speakers noted that Spain has adopted an innovative but extremely promising statutory scheme allowing for collective consumer arbitration.  Finally, panelists indicated that parties could choose to pursue large-scale arbitration on a collective (i.e., non-representative basis), thereby sidestepping certain problematic elements of the recent Supreme Court decisions.

This final type of large-scale proceeding has not only been seen in contract-based forms of arbitration, it has also been seen in the context of treaty-based arbitration, most notably in the ground-breaking case of Abaclat v. Argentine Republic.  In that matter, 60,000 Italian bondholders brought a single investment arbitration to address injuries suffered as a result of Argentina’s 2001 default on its sovereign bonds.  Although the dispute has not yet been decided on the merits, a preliminary award on jurisdiction has confirmed the propriety of what is being called a “mass” procedure, and a second investment tribunal (in Ambiente Ufficio S.p.A. v. Argentine Republic) has also rendered an arbitral award on jurisdiction adopting much of the reasoning found in Abaclat.

Carolyn Lamm, former President of the ABA and lead advocate in Abaclat v. Argentine Republic, acted as keynote speaker at the conference.  The event also featured presenations from Michael Waibel of the University of Cambridge, Samuel Wordsworth of Essex Court Chambers in London, Geneviève Saumier of McGill University in Montreal, and Deepak Gupta, of Gupta Beck PLLC in Washington, D.C.  Chris Drahozal of the University of Kansas and S.I. Strong of the University of Missouri co-chaired and moderated the event.

Papers from the conference will be published in an upcoming issue of World Arbitration and Mediation Review.


General Mills Reverses Course — Comments from Imre Szalai

I learned this morning that General Mills retracted its arbitration policy in the face of considerable criticism. See

Imre Szalai comments on the reversal:
“You have probably seen the news that general mills reversed itself this weekend after the public outcry over GM’s recently-implemented arbitration policy. I’m glad this 180 degree reversal occurred. I believe GM’s arbitration policy was one of the most aggressive, expansive, overreaching examples of an arbitration policy I have seen. Although section 1 of the agreement seemed to link the agreement to the use of GM’s website (which I believe is the correct way to interpret the agreement), the agreement also contains very broad phrases that a docket-clearing judge could have taken out of context in order to enforce the agreement through the mere purchase of a product from a grocery store, without the customer going online or even being aware of the agreement. Then, by ordering arbitration and staying the court proceeding, a judge can in effect preclude an immediate appeal on the order compelling arbitration in some jurisdictions. In my mind, GM’s policy was an attempt to suppress claims, not resolve claims.”


Booklist from the ABA DR Annual Meeting

At the recent ABA DR Annual Meeting, we had our second installment of the “What I’m Reading” panel. I promised a reading list from panelists and participants; here it is:

  • Americanah (Chimamanda Ngozi Adichie)
  • Shop Class as Soulcraft: An Inquiry into the Value of Work (Matthew B. Crawford)
  • Nine Lives: In Search of the Sacred in Modern India (William Dalrymple)
  • The Selfish Gene (Richard Dawkins)
  • Mindwise: How We Understand What Others Think, Believe, Feel, and Want (Nicholas Epley)
  • The Improbability Principle: Why Coincidences, Miracles, and Rare Events Happen Every Day (David J. Hand)
  • Thinking Fast and Slow (Dan Kahneman)
  • Dissident Gardens (Jonathan Lethem)
  • Homesick (Eshkol Nevo)
  • Join the Club: How Peer Pressure Can Transform the World (Tina Rosenberg)
  • The Goldfinch (Donna Tartt)

Call for papers: Transnational Dispute Management

The Transnational Dispute Management Journal has issued a Call for Papers for its upcoming special issue on “Dispute Resolution from a Corporate Perspective.” Proposals due no later than July 31, 2014. Details here.


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