Today the Supreme Court gave a powerful tool for employers to avoid collective and class actions when it overturned the 9th Circuit's decision in ATT Mobility LLC v. Concepcion (4.27.11) [pdf]. Justice Scalia writing for a sharply divided court, split on the now familiar lines, rejected attempts by states (in this case California) that would prohibit arbitration agreements which prohibit class treatment of claims.
Here, it was a consumer agreement under a system that could hardly be called unfavorable to the individual, in fact the district court had found that the individual couple who were attempting to lead a class action over the purchase of a phone, were undoubtedly better off in arbitration than as members of a class action that would last several years and likely result in a nominal payment to class members. Still to be fair, it is also hard to argue with the point made by Justice Breyer in dissent that it is unlikely that many lawyers would have been interested in taking such a case on an individual basis.
On first blush, given the rage of FLSA collective actions and the desire for larger systemic class actions reflected by the Dukes v. Walmart case, every company that does not have in place a requirement that all disputes be settled by arbitration, and in that arbitration agreement, a provision that prohibits class treatment, will now be considering it again.
This is not to say that arbitration is a panacea ---the cost advantage is being lost as more and more arbitrations are proceeding just like a lawsuit that is being litigated in court, and the lack of any ability to effectively appeal the decisions is a serious danger, both of which have to be weighed against the risk of large collective or class actions. What today's decision permits is a re-calculating those odds with more certainty that you can accomplish the aim of defusing collective/class action liability if you are willing to pay the price of accepting the downsides or arbitration in individual cases.
Everyone has and continues to wait with concern the Court's decision in Dukes v. Walmart, which offers the Court an opportunity to put parameters on broad scale class litigation if it wishes. It might be argued that today's decision augurs well for the employer community on how that case may turn out. Many employers may well wait until July when that shoe drops to do the recalculation between barring class/collective actions via arbitration or continuing to take their chances in the court system. Assuming the Court decides that case fully, it should at a minimum give even more certainty when making that calculation.
Besides companies engaging in that rebalancing, the other thing that is likely to happen is renewed talk about passage of the Arbitration Fairness Act, which would ban pre-dispute arbitration agreements between employers and employees (and also with consumers and in franchise agreements.) It seems unlikely that bill will pass during this Congress, but the there will surely be more discussion.
If the American Arbitration Association were a traded stock today, its price would be soaring.
Court of Appeals Decides Rubin v. Islamic Republic of Iran
The matter of Rubin v. Islamic Republic of Iran continues to wind its way through the federal court system. On March 29, 2011 the Seventh Circuit Court of Appeals issued a 41 page ruling in this complex case.
Deadly terrorist attacks in Jerusalem injured Jenny Rubin and several other Americans in 1997. Hamas carried out three bombings, receiving support from Iran. The American plaintiffs sued Iran in federal district court in Washington, DC and won a $71.5 million default judgment after Iran failed to appear in the case. Since then, there has been an effort by the plaintiffs to recover the judgment.
To retrieve the multi-million award, the plaintiffs filed legal paperwork in Illinois—through a process known as attachment—to seize two collections of antiquities located at the University of Chicago’s Oriental Institute. The cultural property includes the Persepolis and Chogha Mish Collections. The Oriental Institute excavated these Persian artifacts during the 1930s and 1960s, and it has maintained possession of them through a long-term academic loan. The museum says that it is ready to return the Chogha Mish objects to Iran. The plaintiffs also seek to attach a collection located at the Field Museum of Natural History in Chicago known as the Herzfeld Collection. The Field Museum purchased the Herzfeld objects in 1945, but the plaintiffs say that these artifacts were stolen from Iran during the earlier part of the twentieth century before their sale. The Field Museum continues to assert ownership of these antiquities while Iran does not make any claim to them.
The case triggered a dispute about how the federal Foreign Sovereign Immunity Act (FSIA) works. That law declares that a foreign state’s property located in the United States is immune from attachment. However, proving a statutory exception can defeat this immunity. If immunity is lifted, then a plaintiff can attach a foreign state’s property to satisfy a court judgment. The FSIA’s passage in 1976 was both a codification of and limitation on the longstanding legal principle that foreign nations are generally immune from court actions.
The plaintiffs litigated the case in the federal district court of the Northern District of Illinois, and Iran remained absent from the proceedings. When the magistrate judge ruled that only a foreign nation can claim sovereign immunity to its property under the FSIA--not a museum--Iran entered the case as a party to claim immunity. Together the Oriental Institute, the Field Museum, and Iran argued that the plaintiffs could not attach the cultural property contained in the three collections because of the immunity protections afforded by the FSIA.
After Iran entered the case as a party, the plaintiffs filed a motion for discovery to compel Iran to detail all its assets held in the United States, not just the cultural property located in Illinois. Iran objected to this request, but the district court magistrate judge sided with the plaintiffs. Iran filed an appeal with the Seventh Circuit Court of Appeals as a result, prompting the United States government to enter the case as a friend of the court (amicus curiae) in support of Iran’s position.
The Seventh Circuit considered the following questions.
1. Was the foreign state absolutely required to appear in federal court to activate the immunity protections given by the FSIA?
2. Does the FSIA protect a foreign state from broad discovery requests requiring it to give an accounting of all its foreign assets in the United States?
The district court answered yes to the first question and no to the second question. But the federal appeals court strongly criticized the lower court’s decision, calling its ruling “seriously flawed.” The Seventh Circuit wrote:
“The district court’s approach to this case cannot be reconciled with the text, structure, and history of the FSIA. Section 1609 of the Act provides that 'the property in the United States of a foreign state shall be immune from attachment' unless an enumerated exception applies. (Emphasis added.) This section codifies the longstanding common-law principle that a foreign state’s property in the United States is presumed immune from attachment. This presumptive immunity, when read with other provisions of the FSIA, requires the plaintiff to identify the specific property he seeks to attach; the court cannot compel a foreign state to submit to general discovery about all its assets in the United States. The presumption of immunity also requires the court to determine—sua sponte if necessary—whether an exception to immunity applies; the court must make this determination regardless of whether the foreign state appears.”
The case has been sent back to the district court, and the lower court must now handle the case consistent with the decision by the court of appeals.
The complete opinion can be found at http://www.ca7.uscourts.gov/fdocs/docs.fwx?caseno=08-2805&submit=showdkt
Deadly terrorist attacks in Jerusalem injured Jenny Rubin and several other Americans in 1997. Hamas carried out three bombings, receiving support from Iran. The American plaintiffs sued Iran in federal district court in Washington, DC and won a $71.5 million default judgment after Iran failed to appear in the case. Since then, there has been an effort by the plaintiffs to recover the judgment.
To retrieve the multi-million award, the plaintiffs filed legal paperwork in Illinois—through a process known as attachment—to seize two collections of antiquities located at the University of Chicago’s Oriental Institute. The cultural property includes the Persepolis and Chogha Mish Collections. The Oriental Institute excavated these Persian artifacts during the 1930s and 1960s, and it has maintained possession of them through a long-term academic loan. The museum says that it is ready to return the Chogha Mish objects to Iran. The plaintiffs also seek to attach a collection located at the Field Museum of Natural History in Chicago known as the Herzfeld Collection. The Field Museum purchased the Herzfeld objects in 1945, but the plaintiffs say that these artifacts were stolen from Iran during the earlier part of the twentieth century before their sale. The Field Museum continues to assert ownership of these antiquities while Iran does not make any claim to them.
The case triggered a dispute about how the federal Foreign Sovereign Immunity Act (FSIA) works. That law declares that a foreign state’s property located in the United States is immune from attachment. However, proving a statutory exception can defeat this immunity. If immunity is lifted, then a plaintiff can attach a foreign state’s property to satisfy a court judgment. The FSIA’s passage in 1976 was both a codification of and limitation on the longstanding legal principle that foreign nations are generally immune from court actions.
The plaintiffs litigated the case in the federal district court of the Northern District of Illinois, and Iran remained absent from the proceedings. When the magistrate judge ruled that only a foreign nation can claim sovereign immunity to its property under the FSIA--not a museum--Iran entered the case as a party to claim immunity. Together the Oriental Institute, the Field Museum, and Iran argued that the plaintiffs could not attach the cultural property contained in the three collections because of the immunity protections afforded by the FSIA.
After Iran entered the case as a party, the plaintiffs filed a motion for discovery to compel Iran to detail all its assets held in the United States, not just the cultural property located in Illinois. Iran objected to this request, but the district court magistrate judge sided with the plaintiffs. Iran filed an appeal with the Seventh Circuit Court of Appeals as a result, prompting the United States government to enter the case as a friend of the court (amicus curiae) in support of Iran’s position.
The Seventh Circuit considered the following questions.
1. Was the foreign state absolutely required to appear in federal court to activate the immunity protections given by the FSIA?
2. Does the FSIA protect a foreign state from broad discovery requests requiring it to give an accounting of all its foreign assets in the United States?
The district court answered yes to the first question and no to the second question. But the federal appeals court strongly criticized the lower court’s decision, calling its ruling “seriously flawed.” The Seventh Circuit wrote:
“The district court’s approach to this case cannot be reconciled with the text, structure, and history of the FSIA. Section 1609 of the Act provides that 'the property in the United States of a foreign state shall be immune from attachment' unless an enumerated exception applies. (Emphasis added.) This section codifies the longstanding common-law principle that a foreign state’s property in the United States is presumed immune from attachment. This presumptive immunity, when read with other provisions of the FSIA, requires the plaintiff to identify the specific property he seeks to attach; the court cannot compel a foreign state to submit to general discovery about all its assets in the United States. The presumption of immunity also requires the court to determine—sua sponte if necessary—whether an exception to immunity applies; the court must make this determination regardless of whether the foreign state appears.”
The case has been sent back to the district court, and the lower court must now handle the case consistent with the decision by the court of appeals.
The complete opinion can be found at http://www.ca7.uscourts.gov/fdocs/docs.fwx?caseno=08-2805&submit=showdkt
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