Understanding the Electronic Signature Lawfulness for Arbitration Agreement in United States

How to eSign a document: electronic signature lawfulness for Arbitration Agreement in United States

arbitration is a tool that can be used by defendants particularly but also by plaintiffs so you may sue a debt collector sue a credit card company and they may say hey now we want to force you into arbitration or you may choose if you've been sued by a debt collector or a credit card company to force them into arbitration well what we're going to look at in this case this is the Morgan versus Sundance case from the U.S Supreme Court we're going to look at this idea of has a defendant waited too long before saying okay now I want to force arbitration have they waived or given up their right to arbitration and is there a requirement to for the court to say Hey you waived your right is there a requirement that the other side be Prejudiced and just to give this away the answer is no on the Prejudice and almost every federal court got this wrong and here we have the U.S Supreme Court saying in a unanimous decision think about that not very often that at least we hear about that in the news we always hear about these like bitter divided opinions by the U.S Supreme Court all justices said hey there is no requirement of prejudice so I want us to look at this in case we are suing a debt collector a mortgage company sometimes we still see arbitration agreements with mortgage companies a credit card company a car dealer and somebody is now bringing up the idea of arbitration or maybe we have been sued and we want to use arbitration or maybe we want to sort of offensively use arbitration it's important to know kind of the lay of the land to understand what we're dealing with here and this also shows us how even though courts may say for many many years this is the law it may be that they're wrong and this is an example so this came out May of this year and we'll skip down here to we've got Justice Kagan unanimous Court here and so here's a federal arbitration act that's the law that says you know we're going to ignore each individual state law that may or may not approve of arbitration we're just making a uniform Federal standard and it entitles the defendant to file an application to stay the litigation if you saw the video from a few days ago from the 11th circuit this is what is normally done the defendant says hey stop the litigation stay the litigation make the plaintiff the one that sued me go to arbitrary it says but the fitness do not always seek that relief right away sometimes they you know do litigation before deciding they would fare better in arbitration here's the question has the defendants request to switch to arbitration come too late so very simple question spring Court's asking and courts have held that a party can wave its arbitration right by litigating only when its conduct is Prejudice the other side so that's what all the courts have said and now the U.S Supreme Court is saying is that proper is that actually what the law is and so they say it does not let me see here make him make this a little bit bigger here okay so what happened was Morgan is an hourly employee at a Taco Bell franchise and he brings a collective action under the fair labor standards act so typically that's going to be you didn't pay me proper overtime or you didn't count the the breaks correctly and so here we have pay overtime work more than 40 hours in a week and Sundance initially defended itself as if no arbitration agreement existed so they filed an answer that said uh said nothing about arbitration but then later eight months later they changed course and Sundance says hey we want to stop or stay the litigation and compel arbitration and so this happened in the eighth Circuit Court of Appeals and so the courts below applied eight circuit precedent to decide the waiver issue now here's a way to think about I've got you know this very fancy writing here on the side waiver is saying let's look at the defendant did you do something inconsistent with choosing arbitration in other words did you wait a long time have you given up or waved your right and then they added this requirement of there has to be Prejudice to the plaintiff so waiver is looking at it from the perspective of the defendant and prejudices well did that harm the plaintiff so if you remember from the 11th circuit case we did a few days ago there was a the question about arbitration was compelled and the plaintiff went to jams arbitration and the defendant refused to pay that and they said ah you you can get a AAA instead and the court said hey defendant you waved your right and you Prejudice or harm the plaintiff well we're going to learn from this case we don't need that prejudice anymore so it makes waiver easier to find that's good if you have a defendant trying to compel arbitration against you if you're the defendant you got to be careful of that okay so let's look here Prejudice requirement is not a feature of federal law of waiver law generally so just saying in general like forget about arbitration just the the law of waiver we don't have to find Prejudice so why is that built into arbitration and so it says the eighth circuit adopted it because of the federal policy favoring arbitration and so District Court found the Prejudice requirement satisfied but the court of appeals disagreed and sent the case to arbitration and so again let's make sure we're on the same page The District Court the trial court said you know what I found you waived it and you prejudiced the plaintiff so there's no arbitration but the court of appeals says no no no we don't think that there's any Prejudice so you have to go to arbitration and so this was a split decision two judges ruled in favor of the defendant one disagreed or dissented so the majority reason party's not yet begun formal Discovery or contested a matters going to the merits and then we have this judge culitan dissenting or disagreeing and said he raised doubts about the Prejudice requirement that's not needed for waiver and so he argues that hey guys we got it wrong so the U.S Supreme Court always gets to choose whether to take a case so they agreed to take it and they say nine circuits and you know we have the first circuit all the way through the 11th circuit then we have the federal circuit and so you know this is a pretty big percent image of the number of court of appeals nine have invoked the strong federal policy favoring arbitration and so they require Prejudice two circuits rejected that rule we do too so just an example as I've written over here the majority can be wrong okay now you have to live with it until it gets changed but just understand the majority of Courts can be wrong so they say we're deciding a single issue and that's all we're deciding is this idea of prejudice it says Court appeals including the eighth circuit have generally resolved cases like this as a matter of federal law using terminology a waiver we consider only the next step in their reasoning that they may create arbitration specific variants of federal procedural rules like those concerning waiver based on the federal arbitration acts policy favoring arbitration and the the court says you can't do that you got it wrong and so it gets into a little bit of detail here but I think if you're interested in arbitration this will be interesting to you so outside of arbitration context we don't ask about Prejudice we just say look all we're looking at is for the waiver did you intentionally relinquish or abandon a known right so our sort of Imagine The the cameras pointed solely at the defendant that's all we're asking about to decide whether waiver has occurred the court focuses on the actions of the person who held the right so this would be the defendant the court seldom considers the effects of those actions on the opposing party and then they cite to this judge in that dissenting opinion the eighth circuit a waiver normally is effective without proof of detrimental Reliance it'd be kind of a similar way of saying prejudice and so the eighth circuit applies the law found nowhere else consider it a bespoke ruler like a specific rule just for arbitration they say that's just wrong so this derives from a decades-old second circuit decision that's from 1968. so think about that 1968 50 years would be 2018. so we're talking 54 years this has been in the law and the U.S Supreme Court in a unanimous decision everybody conservative liberal everybody's saying guys you got it wrong so they say here's what the second circuit's talking about an overriding federal policy favoring arbitration waiver of right to arbitrate is not to be lightly inferred mere delay without some resultant Prejudice cannot carry the day and then that rule and its reasoning spread circuit after circuit just by adopting a Prejudice requirement based on the liberal National policy favoring arbitration and here's where the Supreme Court goes guys you've missed this the policy favoring arbitration does not authorize federal courts to invent special arbitration preferring procedural rules they say it's merely an acknowledgment to overrule the judiciary's long-standing refusal to enforce agreements to arbitrate so let me just stop there Most states most courts before the federal law came into effect said we just have a policy that arbitration binding arbitration mandatory arbitration is not allowed in our state Alabama certainly had that and so the FAA that Federal arbitration Act is just simply saying hey we want a Level Playing Field but it's not to make arbitration special or to give enhanced benefits to arbitration it just says don't treat it differently than any other contractual provision so policies make arbitration as enforceable as other contracts but not more so Court must hold the party to its arbitration contract just as Court would any other kind Court may not devise novel rules to favor arbitration over litigation and it says if you have an ordinary procedural rule whatever that is I like how the court puts this weather of waiver forfeiture or what have you with counsel against enforcement then so be it the federal policy is about treating arbitration contracts like all others not about fostering or encouraging or favoring arbitration and they say you know the text of the FAA makes that clear and then we can come down to this part here it's a stripped of its Prejudice requirement the eighth circuit's current waiver inquiry focus on sundance's conduct it's Sundance knowingly relinquish the right to arbitrate by acting inconsistently the court of Hills May resolve that question or determine different procedural framework is appropriate our soul holding today is that it may not make up a new procedural rule based on the federal arbitration acts policy favoring arbitration so they vacate the judge so they're saying we're not telling you what answer to reach we're just saying if you're going to use waiver and basically every Court uses the idea of waiver here then that's all you ask did the defendant waive their right to arbitrate you don't get into and did that hurt the plaintiff did a Prejudice a plan if you don't do that so again I want you to see this because arbitration for consumers is becoming a very very powerful rule defendants still use arbitration when we sue them they still sometimes want to force us into arbitration but more and more consumers and consumer lawyers are recognizing the power of arbitration even when we offensively are going after an abusive debt collector a credit card company that is mistreating us or doing false credit reporting and so it's really important to understand what exactly are the rules in arbitration in this opinion that we just went over change would we say 54 years of law in the United States so hope you found that interesting if you like this type of stuff we'll continue to put out these case videos and just you know hit the Subscribe button and and then you should be notified maybe hit the notification Bell and that way you'll you'll know it better so you guys have a great day and I will talk to you tomorrow bye-bye