USA Trends and Developments Contributed by: Matthew H. Kirtland, Timothy Tyler, Katie Connolly and Taylor LeMay, Norton Rose Fulbright
laws. But the starting point of its reasoning was strict adherence to the FAA’s mandate that federal courts enforce arbitration agreements on equal footing with other contracts. Drafting and structuring arbitration agreements against the backdrop of US class actions in court The use of arbitration to seek to reduce class-action or collective-action litigation has become more common in the last decade. The relative novelty of this strata - gem and the high stakes of such litigations have led to more frequent Supreme Court cases. The context in which the cases arise – employment relations and business-to-consumer transactions – raise largely US domestic concerns. Nonetheless, despite the domes - tic context, and consistent with its decisions inter - preting the scope of the FAA, as discussed above, the Supreme Court has repeatedly emphasised that arbitration agreements under the FAA are to be inter - preted on equal footing with other contracts. In 2011, more than a decade ago, the Supreme Court held in AT&T Mobility LLC v Concepcion that the FAA pre-empted California state case law had invalidated as unconscionable agreements barring class arbitra - tion. In DIRECTV, Inc. v Imburgia (2015), DIRECTV and its customers entered into service agreements that included an arbitration agreement, a class-action waiver, and an agreement that the entire arbitration agreement was unenforceable if the law of the cus - tomer’s state invalidated class-action waivers. A Cal - ifornia court, relying on the state’s pre- Concepcion case law, found that the entire arbitration agreement was invalid. The Supreme Court reversed, extending its previous holding that Section 2 of the FAA embod - ies a national policy placing arbitration agreements on equal footing with other contracts. The Court found that the California court’s reasoning would not have been applied the same way in a non-arbitration con - text and therefore violated the FAA. Then, in Lamps Plus, Inc. v Varela (2019), relying on its previous holdings that class arbitrations are inherently different from bilateral arbitrations, the Supreme Court held that an arbitration agreement that was ambigu - ous as to the availability of class arbitrations lacked the consent required by the FAA to subject the par - ties to arbitration. The Court overturned a California
court’s holding that applied California case law to interpret an ambiguous provision against the drafter, who here sought to avoid arbitration, again finding that the doctrine was pre-empted by the FAA as it treated arbitration agreements differently than other contracts. These cases have raised issues relevant to structuring and drafting dispute resolution provisions in interna - tional business-to-consumer transactions in the inter - national context, such as form terms and conditions in e-commerce. Drafting and structuring arbitration agreements: delegation of arbitrability to arbitrators In its arbitrability-related decisions of the past dec - ade, the Supreme Court reinforced that courts must respect parties’ delegation of arbitrability to arbitra - tors, but must first determine if the FAA applies and which arbitration agreement controls before compel - ling the parties to arbitration. In Henry Schein Inc. v Archer & White Sales Inc. (2019), the Court unani - mously rejected certain courts of appeals’ attempts to circumvent parties’ delegations to arbitrators of arbitrability questions under Sections 3 and 4 of the FAA by the courts’ own weighing of the merits of the arbitrability question. In particular, the Court struck down the Fifth Circuit’s judicially created “wholly groundless” exception. Under that exception, a court itself could summarily deny sending a dispute to arbi - tration – even if there was a delegation clause – if the court found the request for arbitration to be “wholly groundless” on the delegation of arbitrability. Then, in New Prime Inc. v Oliveira (2019), just days after the Henry Schein opinion, the Supreme Court unanimously held that federal courts must first deter - mine whether the FAA applies to an agreement before compelling it to arbitration, even if it contains a del - egation clause enforceable under Section 3 and 4. In New Prime , the Court determined that an independent contractor’s employment agreement was a “contract of employment” that fell within the exceptions to the FAA and thus could not be compelled to arbitration under the FAA. Finally, in Coinbase, Inc. v Suski (2024), the Supreme Court unanimously held that a court must decide
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