A. LEGISLATION AND RULES
The United States has arbitration-related legislation at both the federal (national) and state levels. The Federal Arbitration Act (FAA) of 1925 continues to be the controlling federal arbitration statute and reflects a well-established national policy that strongly favors arbitration as an alternate means of dispute resolution.
There was one significant change to the FAA this past year. The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFASASHA) was passed by Congress on 10 February 2022 and signed into law by President Biden on 3 March 2022. EFASASHA amends the FAA and allows employees to invalidate mandatory arbitration agreements relating to claims of sexual harassment and sexual assault, giving victims of workplace harassment the right to sue their employer in court. EFASASHA also invalidates any pre-dispute agreement that prohibits or waives an employee’s right to participate in a joint, class, or collective action in court, arbitration, or any other forum that involves a pre-dispute sexual assault or sexual harassment claim. \s “sexual assault dispute” is defined by EFASASHA as a dispute involving a nonconsensual sexual act or sexual contact and defines a “sexual harassment dispute” as a dispute relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law.
On 11 February 2021, and in connection with a hearing held by the Subcommittee on Antitrust, Commercial, and Administrative Law, the U.S. House of Representatives reintroduced the Forced Arbitration Injustice Repeal (FAIR) Act. The FAIR Act, if passed, would ban mandatory pre-dispute arbitration agreements in cases of employment, consumer, class antitrust, and civil rights disputes, as well as pre-dispute joint-action waivers for those disputes in any forum. Likewise, the Protecting the Right to Organize (PRO) Act was reintroduced and passed by the House on 9 March 2021. Among its many pro-union and pro-employee provisions, the PRO Act would overturn Supreme Court precedent concerning arbitration and would make it an unfair labor practice for any employer to use class action waivers (not just unionized employers). Additionally, on 22 April 2021, two congresswomen reintroduced the Fairness in Nursing Home Arbitration Act, which, would prohibit long-term care facilities from requiring or soliciting residents to enter into pre-dispute, mandatory, binding arbitration agreements.
Some states have passed statutes curtailing or prohibiting arbitration in certain contexts. For example, state legislatures in California, Maryland, New Jersey, New York, Vermont, and Washington have passed statutes over the years limiting employers’ ability to require arbitration of sexual harassment and (depending on the state) other claims. However, such state statutes have typically been preempted by the FAA in the past. In New Jersey, a federal court ruled on 25 March 2021 that the New Jersey Law Against Discrimination, passed in 2019, is preempted by the FAA. In California, the legislature signed Assembly Bill 51 (AB 51) into law in 2019, prohibiting employers from requiring an employee to waive rights provided by the Fair Employment and Housing Act (FEHA), including the right to file a complaint for alleged discrimination. Before AB 51 could become effective on 1 January 2020, a district court judge enjoined the law’s enforcement on the grounds that it was likely to be preempted by the FAA. On 15 September 2021, a three-judge panel of the Ninth Circuit Court of Appeals partially vacated that injunction and ruled that the California law was not preempted by the FAA aside from its criminal penalties and civil liability provisions.
Government agencies issue rules and guidance from time to time that concern arbitration. For example, on 7 October 2021, the Biden Administration published in the Federal Register its second interim final rule implementing the No Surprises Act, which seeks to resolve the issue of “surprise billing,” that is, when patients receive large medical bills after unknowingly receiving care from out-of-network providers. A rule implemented by several federal agencies, the Centers for Medicare and Medicaid Services (CMS) and the Department of Health and Human Services finalized a rule on 13 July 2021 that allows skilled nursing operators to use arbitration agreements with their residents. In April 2021, the Financial Industry Regulatory Authority (FINRA) issued regulatory guidance to its member firms concerning pre-dispute arbitration agreements for customer accounts.
A.2 Institutions, rules and infrastructure
The major arbitral institutions in the US include JAMS, the International Institute for Conflict Prevention and Resolution (CPR), the American Arbitration Association (AAA) and the International Center for Dispute Resolution (ICDR), which is the international arm of the AAA.
JAMS is headquartered in Irvine, California, but maintains offices in 27 locations throughout North America and the United Kingdom. JAMS revised its Comprehensive Arbitration Rules, effective June 2021. The major changes include:
- Rule 2(c): the revised rule changes standard for granting emergency relief by eliminating the word “irreparable.”
- Rule 5(a)(iv): the revised rule clarifies that JAMS may determine that it can proceed with administration even if the parties’ arbitration agreement does not name JAMS or the JAMS Rules. However, if the respondent objects timely to JAMS’ administration, JAMS may only proceed with administration if JAMS or the JAMS Rules are specified in the parties’ arbitration agreement.
- Rule 6(e)(i): the revised rule clarifies JAMS’ authority to consolidate any number of a party’s multiple arbitration filings into a single proceeding by adding the words “two or more of.”
- Rule 12(c): This new rule allows an arbitrator (or tripartite panel) to withhold approval of any intended change in party representation where the change could compromise the ability of the arbitrator (or panel) to continue to serve or the finality of an award.
- Rule 17(e): This new rule makes explicit that in a consumer or employment arbitration, the parties may take discovery of third parties with the approval of the arbitrator.
- Rule 18: The revised rule provides that an arbitrator may permit a party to file a motion for summary disposition of a claim or issue only if the arbitrator determines the party has shown that the motion is likely to succeed.
- Rule 22(k): The revised rule maintains a party’s ability to arrange for a stenographic record but eliminates its ability to arrange for “other” types of records of the hearing absent party agreement or the direction of the arbitrator.
The AAA, headquartered in New York, has not changed its rules over the past year. However, the ICDR, likewise headquartered in New York, amended its International Dispute Resolution Procedures, including its Mediation and Arbitration rules, with the change becoming effective 1 March 2021. First, the introduction to revised ICDR Rules includes guidance on when a case will be deemed “international,” now relying on UNCITRAL Model Law’s definition of an international arbitration as “international” in nature. These revisions may be critically important where an arbitration agreement does not make clear which AAA rules the parties intend to apply, as the ICDR rules will be applied to “international” disputes. Under the revised rules, arbitration may be considered “international” where any of the following apply:
- The parties to an arbitration agreement have their places of business in different countries.
- The place where a substantial part of the obligations of their commercial relationship to be performed is situated outside the country of any party.
- The place with which the subject matter of the dispute is most closely connected is situated outside the country of any party.
- The place of arbitration is situated outside the country of any party.
- One party with more than one place of business (including parent and/or subsidiary) is situated outside the country of any party.
Other major changes to the ICDR rules may be found on the AAA website.
B.1 Ninth Circuit Court denies motion to compel arbitration under federal equitable estoppel law, holding that claims were not clearly intertwined with the partnership deed that provided for arbitration. 
In 1999, brothers Balkrishna and Nagraj Setty signed a partnership deed agreeing to a joint ownership interest in their late father’s incense manufacturing company Shrinivas Sugandhalaya (SS). The brothers then created competing incense manufacturing companies in separate Indian cities, Balkrishna in Bangalore (“SS Bangalore”) and Nagraj in Mumbai (“SS Mumbai”). Plaintiff-Appellees Balkrisnha and SS Bangalore sued SS Mumbai and its U.S. distributor for allegedly obtaining SS-related trademarks in the U.S. by falsely stating no other persons, including Balkrishna or SS Bangalore, were authorized to use the marks. Defendant-Appellant SS Mumbai moved to compel arbitration and stay the litigation pursuant to an arbitration clause contained within the partnership deed.
A Ninth Circuit panel reviewed SS Mumbai’s motion to compel arbitration twice. The first time, SS Mumbai argued that Plaintiff-Appellees should be equitably estopped from avoiding the arbitration clause present in the partnership deed. The district court denied the motion, applying general Ninth Circuit estoppel doctrine. Rather than affirm on the merits of the equitable estoppel claim, the Ninth Circuit held instead that non-signatory SS Mumbai was barred from compelling arbitration under the New York Convention. The Ninth Circuit interpreted the New York Convention to require that the parties actually sign an agreement to arbitrate their disputes in order to compel arbitration.
The Supreme Court vacated that decision and remanded the case in light of its decision in GE Energy Power Conversion France SAS v. Outokumpu Stainless USA, LLC. In that case, the Supreme Court held that the equitable estoppel doctrines permitted under Chapter 1 of the FAA did not conflict with the New York Convention and that the New York Convention did not prohibit enforcement by non-signatories.
In its second review of SS Mumbai’s motion to compel arbitration, the Ninth Circuit panel again affirmed the district court’s ruling. The Ninth Circuit first rejected SS Mumbai’s claim that Indian law should apply. The court explained that the Indian choice of law provision was in the partnership deed, but the question of whether SS Mumbai could enforce the partnership deed as a non-signatory was a threshold issue for which the court would not look to the agreement itself. The court further noted that the partnership deed applied to disputes “arising between the partners” and not to third parties such as SS Mumbai. Finally, the court distinguished cases applying relevant state contract law, because those cases involved state law claims and relied on the court’s diversity jurisdiction. Here, the case involved federal claims and turned on the court’s federal question jurisdiction. The court, therefore, declined to apply Indian law and instead applied federal substantive law and ordinary contract and agency principles.
The court explained that, under federal substantive law and ordinary contract and agency principles, “equitable estoppel precludes a party from claiming the benefits of a contract while simultaneously attempting to avoid the burdens that contract imposes.” Yet, for equitable estoppel to apply, it is essential that the subject matter of the dispute be intertwined with the contract providing for arbitration. Here, the court held that the trademark and other claims at issue were not sufficiently intertwined with the partnership deed to trigger the agreement’s arbitration clause. Accordingly, the Ninth Circuit again affirmed the district court’s decision to deny SS Mumbai’s motion to compel arbitration.
B.2 Second Circuit affirms arbitration award while confirming continuing applicability of manifest disregard of law.
On 18 August 2002, the Seneca Nation of Indians (“Nation“) entered into a Compact with the State of New York for gambling activities in the Western District of New York. The Compact was for an initial 14-year term with an automatic renewal period of seven years. It required the Nation to pay New York a percentage of revenue in exchange for the exclusive right to maintain certain gaming machines (“State Contribution“) but did not specify any State Contribution during the 7-year renewal period.
Shortly before the end of the initial term, the Nation contacted the Department of Interior (DOI) regarding its understanding of revenue sharing during the renewal period, and the DOI issued a technical assistance letter stating that the Compact contained 14 years of revenue sharing in exchange for 21 years of exclusivity. Neither party objected to the renewal, which went into effect on 9 December 2016, and the Nation subsequently notified New York that it would not be making any State Contribution during the renewal period.
New York objected and, after negotiations failed, initiated arbitration with the AAA before a three-person tribunal, pursuant to the Compact’s dispute resolution provision. After New York initiated arbitration, the DOI rescinded its technical assistance letter. A majority of the tribunal found that the contract provision regarding renewal was ambiguous. After looking to extrinsic evidence, the majority determined that it would be commercially unreasonable and against common sense to extend the Nation’s exclusivity without obliging the Nation to pay any consideration to New York.
The Nation argued that the tribunal could not approve additional payments without DOI’s approval pursuant to the Indian Gaming Regulatory Act (“IGRA”). The majority agreed that it had no legal authority to usurp DOI’s approval authority, but determined that it was simply interpreting the Compact that had already been approved—not amending or adding terms. The dissent considered that the Compact was unambiguous and did not provide for any State Contribution during the renewal period. Further, the dissent argued that if the Compact was ambiguous, then DOI “cannot be said to have considered and reviewed or approved this key [renewal] provision ….”
The Nation filed a petition to vacate the award, and New York cross-petitioned to confirm. The Nation argued that the arbitral tribunal manifestly disregarded IGRA’s requirement that the Secretary review and approve compact obligations or amendments because when the panel concluded that the contract was ambiguous, it necessarily held that the DOI did not approve payments for the renewal term. The district court rejected that argument and confirmed the award, reasoning that the arbitral tribunal “was not [deciding] whether the Secretary [of DOI] explicitly approved State-Contribution payments during the renewal period, but, rather, whether the terms of the Compact that the Secretary did approve provide for payment of the State Contribution during that term.” The district court thus held that the tribunal did not manifestly disregard a clearly governing legal principle because it considered and appropriately rejected the argument that the Nation offered.
On appeal, the Second Circuit reviewed de novo the district court’s application of the manifest disregard standard to the arbitration award. The court first stated that manifest disregard of law remains a valid ground for vacating an arbitration award, as a “judicial gloss” on the specific grounds for vacatur set out in section 10 of the FAA. But the court noted that a litigant seeking to vacate an award on this ground bears a heavy burden, which requires “showing that the arbitrators knew of the relevant legal principle, appreciated that this principle controlled the outcome of the disputed issue, and nonetheless willfully flouted the governing law by refusing to apply it” as well as that “the disregarded legal principle was ‘well defined, explicit, and clearly applicable.'”
In this case, the Second Circuit found that “far from flouting or disregarding IGRA’s established requirement that the Secretary approve Compact terms, the arbitral panel openly discussed and applied it.” Indeed, the majority specifically acknowledged the requirement and explained that it was interpreting the terms already approved. The court determined that the Nation was actually positing a novel legal proposition: “that secretarial approval is required for an arbitrator’s interpretation of a gaming compact’s terms which is based on extrinsic evidence that was not before the Secretary at the time of the compact’s approval.” This novel theory does not reflect the law, and therefore the arbitral tribunal did not disregard a clear, controlling legal principle. The court also rejected the Nation’s arguments that the arbitral panel’s interpretation of the renewal provision, even though resorting to extrinsic evidence, somehow created a term in the Compact that the DOI had not approved. Instead, the court agreed that the panel’s decision meant that the majority had concluded that the existing term, previously approved by DOI, required the payments, which was within the purview of the tribunal’s authority.
B.3 Fifth Circuit affirms order enforcing arbitration award, holding that the tribunal’s decision to relocate the arbitration to a different location from the venue in the parties’ agreement did not “manifestly disregard” the parties’ agreement or the law.
A little over a year before Hugo Chávez came to power in Venezuela, Huntington Ingalls entered into a USD 315 million contract with the Ministry of Defense of the Republic of Venezuela (“Ministry“) to repair two Venezuelan Navy warships at Huntington Ingalls’s shipyard in Mississippi. The agreement contained a mandatory arbitration provision, designating Caracas, Venezuela as the exclusive arbitral forum. Years later, a substantial disagreement arose over cost overruns. The Ministry refused to pay for certain work, and Huntington Ingalls filed suit in the Southern District of Mississippi seeking damages and to compel arbitration.
The parties thereafter engaged in a series of protracted disputes over where the arbitration should be seated. Huntington Ingalls believed that the hostile political landscape in Venezuela, under Chávez’s leadership, made Venezuela an unreasonable venue for arbitration—particularly one involving a branch of the Venezuelan government. Huntington Ingalls submitted a number of expert declarations, including from a variety of American and Venezuelan lawyers and law professors, each testifying that the Venezuelan judiciary was subject to significant political pressure and other undue influence from Chávez, and was unwilling to enforce arbitral awards against government entities. The district court twice held (as did two different arbitral tribunals) that present conditions made it impracticable to arbitrate in Venezuela, in a way that was unforeseeable at the time the parties entered the contract and that essentially deprived Huntington Ingalls of its “day in court.”
The arbitration was ultimately transferred to and conducted in Rio De Janeiro, Brazil, ending in an award of over USD 128 million in favor of Huntington Ingalls. Huntington Ingalls requested that the federal court in Mississippi enforce the award, which it did, rejecting the Ministry’s argument that the court had manifestly disregarded the parties’ agreement and the law in ordering arbitration outside of Venezuela.
On appeal, the Fifth Circuit considered whether Huntington Ingalls had sufficiently established all the requisite elements to avoid enforcement of an arbitral forum selection clause on impracticability grounds, namely:
- Whether the conditions in the country made arbitration in Venezuela impracticable.
- Whether Huntington Ingalls could not have foreseen these conditions when it entered into the contract.
- Whether the venue provision was severable from the remainder of the arbitration provision.
As to the third point, the Fifth Circuit noted that severability had been already determined on an earlier appeal, and was thus “law of the case,” and would not be reconsidered here.
In determining the impracticability of an arbitration in Venezuela, the court considered whether such arbitration would be “so gravely difficult and inconvenient” that Huntington Ingalls would be “for all practicable purposes deprived of its day in court.” The court confirmed this element was met, citing the district court’s conclusions that such arbitration would likely have been affected by political influence and that Huntington Ingalls would likely have been unable to prevail against the Venezuelan government in any related court proceedings, regardless of their merits. Next, the court considered whether Huntington Ingalls had shown that it could not “reasonably have foreseen” the adverse conditions that created this impracticability at the time it entered its contract with the Ministry. Finding that Huntington Ingalls could not have reasonably foreseen these conditions, the court cited the declarations from law professors indicating that the Bolivarian Revolution—which rose to prominence after the contract was executed—was the spark that made the Venezuelan judiciary a significant obstacle to impartial arbitration.
For each of these reasons, the court ultimately held that the arbitral tribunal had not “manifestly disregarded the parties’ agreement or the law” in transferring the arbitration to Brazil, and affirmed the district court’s enforcement of the arbitration award.
B.4 District court refuses to vacate award annulled at the seat of arbitration because it would offend basic standards of justice.
In 2005, Compañía de Inversiones Mercantiles S.A. (CIMSA), Grupo Cementos de Chihuahua, S.A.B. de C.V. (“GCC S.A.B.“) and GCC Latinoamérica, S.A. de C.V. (“GCC Latinoamérica,” and collectively “GCC”) executed a shareholder’s agreement under which they each obtained a right of first refusal of shares in a mutually held Bolivian cement company. In late 2009, GCC communicated its intention to sell its shares in the cement company. After lengthy negotiations regarding CIMSA’s purchase of GCC’s shares, GCC claimed that CIMSA’s attempts to exercise its right of first refusal were invalid, and sold its shares to a Peruvian company instead.
In 2011, CIMSA initiated arbitration against GCC. The arbitration was conducted pursuant to the Inter-American Commercial Arbitration Commission (IACAC) Rules, applying Bolivian law, before a three-person tribunal. The Tribunal issued a merits award in 2013, and an approximately USD 36 million damages award in 2015, both in favor of CIMSA.
Although the relevant agreement expressly waived any appeal of the arbitration award, GCC nonetheless applied to the Bolivian courts to annul the award through a series of overlapping court proceedings, including a number of amparos. The merits award was ultimately upheld by the Plurinational Constitutional Tribunal (PCT), Bolivia’s highest constitutional court. The damages award was initially annulled, but that decision was then overturned by the PCT, which remanded the case for further proceedings. For several years, through court delays and various delay tactics, a final decision on the damages award languished at the trial court level.
Meanwhile, CIMSA petitioned the U.S. District Court for the District of Colorado to confirm the foreign arbitral awards. On 26 March 2019, the district court entered a judgment confirming both awards, which the Tenth Circuit Court of Appeals affirmed on 17 August 2020.
After the district court’s decision, during a period of political turmoil that resulted in new elections in Bolivia—in which CIMSA’s principal served as the vice-presidential running mate for the losing party—GCC brought new challenges in the Bolivian courts. Shortly after those elections, the Bolivian courts suddenly changed course, reversed several of their prior decisions, and ultimately reinstated the October 2015 decision to annul the damages award.
Arguing that the Bolivian courts’ 2020 orders meant there was no longer any arbitral award to enforce and no basis for a judgment enforcing such an award, GCC asked the district court to vacate its judgment. The court declined to do so. The court explained that there is a pro-enforcement bias to the New York Convention. Although a court may refuse to enforce an award if it has been set aside in the primary jurisdiction—the country in which, or under the law of which, that award was made—courts have applied a narrow public policy exception when enforcement of an arbitral award is necessary to “vindicate fundamental notions of what is decent and just in the United States.”
CIMSA asserted that the unfavorable 2020 decisions did not merit comity because they were the product of corruption in the judiciary and bias against CIMSA’s principal, and were issued in flagrant violation of Bolivian constitutional law. While the court did not find the 2020 orders themselves to be “repugnant to fundamental notions of what is decent and just” in the United States, the court determined that applying the 2020 orders to vacate the awards “would rise to that unacceptable level.”
The court specifically found that allowing these proceedings to continue without end would be “repugnant.” When the court issued its original decision enforcing the awards, the Bolivian PCT had also appeared to have reached a final decision in favor of enforcement. Despite this, GCC continued to prolong proceedings as much as possible, and, while the PCT may have reversed its prior decision, there was no guarantee the Bolivian courts would not change course again. The court noted that “[p]ublic policy dictates that there be an end to litigation.” The court further emphasized that this value was expressed in the parties’ agreement, where the parties specifically waived any appeals to the award, and the IACAC Rules provided that there would be no appeals. Therefore, five years after the damages award was issued, the court held that “the interests in finality overshadow those of comity.”
The court explained that its decision to uphold its earlier order was “reinforced by GCC’s inequitable conduct throughout this litigation.” First, GCC waited until its efforts to defend against enforcement in the U.S. were unsuccessful to then bring new challenges in Bolivia, thereby sleeping on its rights. Second, GCC unreasonably frustrated service while also participating in the litigation and refused to carry out the award without delay. Finally, GCC repeatedly asked for stays while also refusing to post bond, even though the company did hundreds of millions of dollars of business in the U.S.
For these reasons, the court denied GCC’s motion to vacate the court’s previous order confirming the arbitral awards.
B.5 Fourth Circuit upholds arbitration agreement provision waiving appellate review of arbitration award.
Dr. Rami Abumasmah was an oncologist formerly employed by Beckley Oncology Associates (BOA). Dr. Abumasmah had signed an employment agreement with BOA that required arbitration of any employment dispute and stated that the arbitrator’s decision “shall be final and conclusive and enforceable in any court of competent jurisdiction without any right of judicial review or appeal.”
When Dr. Abumasmah terminated his employment with BOA, he sought arbitration of his bonus claims. The arbitrator ultimately awarded Dr. Abumasmah USD 167,030, to prevent the unjust enrichment of BOA and to compensate Dr. Abumasmah for the extraordinary revenue he generated during his employment. BOA responded by filing a complaint in federal district court seeking to vacate the arbitration award.
The district court first found that the clause in the arbitration agreement foreclosing judicial review of the award was unenforceable under the FAA because enforcing such clauses would upset the balance between the FAA’s mechanisms for enforcing arbitration awards and permitting courts to substantively review the arbitral process and associated awards. But the court upheld the arbitrator’s award because nothing in the ruling suggested that the arbitrator had refused to heed a clearly defined legal principle or deliberately disregarded the contract language.
BOA appealed this decision to the Fourth Circuit, which considered the threshold issue of whether the parties had validly waived any right of appeal following the district court’s confirmation of the award. The court explained that a party’s right to seek appellate review of a district court’s confirmation of an arbitration award was wholly a creature of statute. Section 16(a)(1)(D) of the FAA provides that “[a]n appeal may be taken from … an order … confirming or denying confirmation of an award.” However, nothing precludes a party from waiving appellate review of that decision.
The court cited an analogous case from the Tenth Circuit, which had allowed waiver of appeal, reasoning that a provision prohibiting appellate, but not district court, review is “a compromise whereby the litigants trade the risk of protracted appellate review for a one-shot opportunity before the district court.” The Tenth Circuit found such waiver provisions consistent with the fundamental policy behind the FAA to reduce litigation costs by providing a more efficient forum. The Fourth Circuit concurred, noting that outside the arbitration context—in plea agreements, for example—courts routinely enforce agreements waiving appellate review of district court decisions.
The court also found that the permissible waiver of appellate review was severable from the impermissible waiver of district court review. The employment agreement contained a severability clause, and in any event, unenforceable provisions of arbitration agreements are severable if they do not go to the essence of the contract.
The court thus found no cause to reject the parties’ agreement to waive appellate review and dismissed the appeal.
B.6 Second Circuit holds that incorporation by reference of procedural rules into an arbitration agreement does not, per se, demonstrate clear and unmistakable evidence of the parties’ intent to delegate threshold questions of arbitrability to the arbitrator.
DDK Hotels, LLC, DDK/WE Hospitality Partners, LLC, and DDK/WE Hotels Management, LLC (collectively “DDK“) entered into a joint venture with Williams-Sonoma, Inc. (“Williams-Sonoma“) and Williams-Sonoma Stores, Inc. (“West Elm“) to develop a line of boutique hotels that would complement West Elm’s home furnishing business. Despite a promising start, disagreements over the vision for the project soon arose. As a result, West Elm began seeking other business partners for the project, allegedly in violation of the parties’ joint venture agreement.
DDK subsequently filed suit against Williams-Sonoma and West Elm in the U.S. District Court for the Eastern District of New York, asserting claims for breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, and unjust enrichment. West Elm brought an action in the Delaware Court of Chancery, seeking to dissolve the joint venture.
The Delaware court dismissed West Elm’s action, concluding that dissolution of the joint venture was not warranted. In response, DDK filed a supplemental complaint in the Eastern District of New York, asserting an additional claim for breach of the prevailing party provision of the joint venture agreement, and seeking the reasonable costs, charges and expenses incurred in the Delaware action. West Elm moved for arbitration on this claim.
The joint venture agreement incorporated by reference to the AAA Commercial Rules, including rule 7(a), which provides that “[t]he arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement.” Yet the district court rejected West Elm’s assertion that incorporation of the AAA Commercial Rules was alone sufficient to evince the parties’ clear and unmistakable intent to delegate questions of arbitrability to the arbitrator.
Because the joint venture agreement provided that the only arbitrable issues were “Disputed Matters,” which the agreement defined narrowly, the district court held that this language rendered the parties’ intent to delegate arbitrability to the arbitrator “neither clear nor unmistakable.” The district court then itself decided that DDK’s supplemental claim did not fall within the scope of the joint venture agreement’s alternative dispute resolution clause and denied West Elm’s motion to compel arbitration.
On appeal, the Second Circuit explained that “threshold questions of arbitrability,” such as whether an arbitration agreement applies to a particular dispute, “presumptively should be resolved by the court and not referred to the arbitrator.” For this reason, the courts do not assume that the parties agreed to arbitrate arbitrability unless there is “clear and unmistakable evidence that they did so.” This rule is designed to guard against the risk of forcing parties to arbitrate a matter they may well not have agreed to arbitrate.
The Second Circuit noted that, in determining whether the court or the arbitrator is to resolve the arbitrability of a dispute, the arbitration agreement is determinative. Where the parties explicitly incorporate procedural rules that empower an arbitrator to decide issues of arbitrability, that incorporation may serve as such “clear and unmistakable intent.” However, context matters. Incorporation of procedural rules into an arbitration agreement does not, per se, demonstrate clear and unmistakable evidence of the parties’ intent to delegate threshold questions of arbitrability to the arbitrator, where other aspects of the contract create ambiguity as to the parties’ intent.
The Second Circuit reasoned that the surrounding circumstances should be taken into account. Where the agreement is broad and expresses an intent to arbitrate all aspects of all disputes, this—coupled with the incorporation of a procedural rule like AAA Commercial Rule 7(a)—constitutes clear and unmistakable evidence of the parties’ intent to delegate the question of arbitrability to the arbitrator. Conversely, where the arbitration agreement is narrower, vague, or contains exclusionary language suggesting that the parties consented to arbitrate only a limited subset of disputes, the incorporation of rules that empower an arbitrator to decide issues of arbitrability, standing alone, does not suffice to establish the requisite clear and unmistakable inference of intent to arbitrate arbitrability.
Here, the Second Circuit recognized that the arbitration clause at issue was not broad and did not cover all disputes. Instead, it covered only “Disputed Matters,” which were narrowly defined in the agreement. For this reason, the Second Circuit agreed with the district court that the arbitration agreement did not “clearly and unmistakably” delegate arbitrability to the arbitrator, and affirmed the district court’s order denying West Elm’s motion to compel arbitration.
Other noteworthy cases summarized elsewhere:
B.7 Federal Circuit finds that arbitrability should be determined by the arbitrator, and not the district court, where there was clear and unmistakable evidence of the parties’ intent to delegate the issue to the arbitrator.
Click here for a summary of this case.
B.8 District court refuses to enforce foreign arbitration award where the underlying arbitration agreement was not valid under the New York Convention.
Click here for a summary of this case.
B.9 District court confirms interim arbitral award granting injunctive relief. 
Click here for a summary of this case.
B.10 Sixth Circuit holds that, where the arbitration clause delegated questions of arbitrability to the arbitrators, the trial court erred in determining that the claims at issue were non-arbitrable.
Click here for a summary of this case.
B.11 District court enforces arbitral award against Venezuela, denies request for attorneys’ fees and awards post-judgment interest at the statutory rate even though award included a rate that was to apply until the award was paid.
Click here for a summary of this case.
B.12 District court vacates award where tribunal failed to acknowledge or otherwise address repeated objections to the arbitrability of the dispute and jurisdiction of the tribunal.
Click here for a summary of this case.
 New Jersey Civ. Just. Inst. v. Grewal, No. CV 19-17518, 2020 WL 4188129 (D.N.J. July 21, 2020).
 Chamber of Commerce of the United States v. Becerra, 438 F. Supp. 3d 1078 (E.D. Cal. 2020).
 Chamber of Commerce v. Bonta, 13 F.4th 766 (9th Cir. 2021), available at, https://cdn.ca9.uscourts.gov/datastore/opinions/2021/09/15/20-15291.pdf.
 Publicly available at https://www.law360.com/articles/1195270/attachments/1.
 A full list of changes is available on JAMS’s website, at: https://www.jamsadr.com/files/Uploads/Documents/JAMS-Rules/2021-Summary-of-Comprehensive-Rules-Changes.pdf.
 See https://go.adr.org/rs/294-SFS-516/images/AAA343_International_Dispute_Resolution_Procedures.pdf.
 Setty v. Shrinivas Sugandhalaya LLP, No. 18-35573 (9th Cir. Jan. 20, 2021).
 Seneca Nation of Indians v. State of New York, No. 19-4022 (2d Cir. Feb. 22, 2021).
 Northrop Grumman Ship Systems, Inc. v. The Ministry of Defense of the Republic of Venezuela, No. 20-60347 (5th Cir. Mar. 10, 2021).
 Compañía de Inversiones Mercantiles S.A. v. Grupo Cementos de Chihuahua, S.A.B. de C.V., No. 1:15-cv-02120-JLK (D. Colo. Apr. 30, 2021).
 Rohm Semiconductor USA, LLC v. Maxpower Semiconductor, Inc., No. 21-1709 (Fed. Cir. Nov. 12, 2021).
 Jiangsu Beier Decoration Materials Co. v. Angle World LLC, No. 2:21-cv-02845 (E.D. Pa. Oct. 28, 2021).
 Vital Pharmaceuticals, d/b/a VPX Sports v. Pepsico, Inc., No. 20-CIV-62415-RAR (S.D. Fla. Dec. 21, 2020).
 Swiger v. Rosette, No. 19-2470 (6th Cir. 2021).
 Tenaris v. Venezuela, No. 18-cv-01373 (D.D.C. Feb. 24, 2021) .
 Copragi S.A. v. Agribusiness United DMCC, No. 20 Civ. 5486 (LGS) (S.D.N.Y. Mar. 15, 2021) .